A Duty Of Care In The Digital Government Era

Brian Lee-Archer

panama-street-1024x768There is a longstanding principle of individual ministerial accountability within governments that follow the Westminster System. The Westminster System is a democratic system of government modelled on the United Kingdom, where the minister bears the accountability for the actions of their ministry or department even if they have had no direct involvement in those actions. While many countries around the world follow different models of democratic government, such as the U.S. and continental Europe, similar principles of responsibility apply to ministerial and/or senior appointed officials for the actions of the responsible government agencies.

This principle of ministerial or senior official responsibility has a significant bearing on the administration of the social protection system. With programs within the social protection system targeted at population cohorts such as the aged, people with disabilities, and the unemployed, the administering agency is responsible for how these programs impact the lives of individuals. The minister or the senior official relies on the competence of the social protection agency to ensure programs are delivered according to the law and within the spirit of the intent of lawmakers; i.e., achievement of desired social outcomes that satisfy individual and collective state needs. Accountable ministers and senior officials rely on the exercising of a duty of care to individuals by the responsible administrators. Administrators have a duty to ensure that all people within a social program cohort are treated fairly and equitably within the law, with legally supported recourse when things go wrong.

As the administration of the social protection system moves deeper into the digital world, there are new issues to consider with exercising this duty of care. At the World Social Security Forum to be held 14-18 November in Panama City, I am speaking on the subject of service quality innovation. I will be highlighting the rapidly advancing trend towards empowering people to self-serve within the social protection system, enabled by mobile platforms.

But this welcome change in the balance of power from the hands of the state to the individual comes with some risk. The good news is this risk is one a digital government can address by leveraging its data assets. As social protection agencies transform their service delivery models in line with digital government mandates by empowering people to self-serve, they potentially put at risk some of the very people they are there to serve.

Social protection by definition is serving people who can be experiencing various forms of social disadvantage throughout their lives. Empowering people through access to knowledge, information, and services via channels that are simple and convenient are all part of the multi-pronged approach to addressing social disadvantage undertaken by enlightened social protection agencies.

The ubiquitous spread of mobile platforms and smartphones around the world, both in developed and developing nations, is providing significant new capabilities to address social disadvantage. But in an environment where a social protection agency may no longer need to have any (or regular) personal or face-to-face contact with an individual, how does the agency exercise its duty of care to ensure people are not experiencing any additional or new vulnerabilities?

To illustrate this point, suppose an unemployed person is fulfilling their compliance obligations with their social protection agency via a mobile platform. As time goes on and they meet their statutory obligations through the digital platform, they become detached from the labour market as they become disillusioned at not finding a job, leading to an increased risk of long-term unemployment. When and how there should be interventions, including perhaps an old-fashioned non-digital approach such as an office-based interview, to keep the person engaged?

As more social protection servicing goes online, it is expected that administrators will apply the duty of care principle by looking out for people left behind; i.e., addressing the digital divide. However, they need to also look out for people operating exclusively in the digital world, who may appear to be capable of self-managing but who are vulnerable to social disadvantage.

So what can social protection administrators do? The banking sector provides a clue. A major issue for retail banks is churn—i.e., people switching banks and the bank not realising it until it is too late to do anything about it. By analyzing online transaction behaviour of people who have churned, they can identify patterns to predict the likelihood of customers becoming a churn statistic. And what is one of the leading indicators? Perhaps not surprisingly, a marked drop-off in online transactions with significant periods of no activity leading up to the decision to switch banks.

The lesson for social protection administrators is to be on the lookout for people whose transaction behaviour starts to change, and in particular those people who start to fade away, as this might be an indicator of a new and emerging vulnerability to social disadvantage; e.g., an unemployed person giving up on looking for a job.

More importantly, undertake the research and start analysing your data to identify the indicators of potential vulnerability for people self-managing within the digital world. Your accountable minister or senior official will be grateful for this practical digital government response to exercising the state’s duty of care to its vulnerable citizens in the digital world.

To find out more about the SAP Institute for Digital Government visit www.sap.com/sidg, follow us on Twitter @sapsidg or email us at digitalgovernment@sap.com.

The photo in this blog is a street scene, taken November 13, in San Felipe Panama City. Panama City is the host city for the World Social Security Forum.


Brian Lee-Archer

About Brian Lee-Archer

Brian Lee-Archer is director of the SAP Institute for Digital Government Global (SIDG). Launched in 2015, SIDG is a global think tank that aims to create value for government by leveraging digital capability to meet the needs of citizens and consumers of government services. In collaboration with government agencies, universities and partner organizations, SIDG facilitates innovation through digital technology for deeper policy insight and improved service delivery.

How To Invest With Social, Environmental, And Economic Impact

Christine Susanne Mueller and Nastassia Ostrowski

Many companies, including SAP, are participating in the new Livelihoods Carbon Fund to help protect the climate, restore ecosystems, and improve people’s lives.

Peru: At night, temperatures in the Andes plummet, and it is bitterly cold. Fireplaces can produce toxic smoke, which can have disastrous effects on people’s lungs and eyes. They also consume a lot of wood, which accelerates deforestation in the region. Since the Livelihoods Carbon Fund’s collaboration with the Instituto Trabajo y Familia (Institute for Work and Family, or ITYF) in 2016, 30,000 families have been given more efficient stoves, enabling them to heat their homes and cook meals using 60% less wood while also reducing smoke and emissions. The 14-year project will help approximately 150,000 people, save 1 million tons of CO2, and create jobs. Arqímedes Huamani, project supervisor and bricklayer for ITYF, says, “It makes me proud to improve the daily lives of so many families.”

Indonesia: During the last 20 years, wide areas of the coastal forest in North Sumatra been cleared for palm oil plantations and rice fields, making the coastal villages vulnerable to climatic hazards like the tsunami in 2004. The Livelihoods Fund supports reforestation of the mangroves, which provide natural shelter from cyclones, tidal waves, and floods. The ecological benefits of the project – to plant trees that absorb CO2 and protect biodiversity – are complemented by educational activities and credits for locals to set up businesses that use products derived from mangrove plants. The project has planted 5,000 hectares of mangrove forest and 18 million trees, to capture 2 million tons of CO2 over 20 years. The local economy benefits from the increase of shrimps, fish, and crabs. The project has improved the lives of 20,000 people in 39 villages, whose incomes have grown by around 20%.

Kenya: The region around Mount Elgon is home to 2 million people. Deforestation and farming have increased erosion of fertile land. Farmers are caught in a vicious cycle, applying ever more exhaustive methods while continuously earning less with lower yields. The Livelihoods Fund has partnered with Vi Agroforestry and Brookside Dairy to train farmers in agroforestry and crop diversification, leading to a 30% rise in crop yields. The effort also anticipates a 30x increase in the amount of milk produced after five years. Brookside, a major dairy in the region, has committed to purchase the milk during the next ten years. Farmer Christine Musasia says, “In the future, I expect big things. To educate my children and become self-reliant.”

Projects in agroforestry, mangrove restoration, and rural energy not only help reduce carbon emissions, they also bring income and meaning to the lives of thousands of people in the regions most affected by climate change.

1 million beneficiaries; 130 million trees planted; 10 million tons of CO2 eliminated; 9 active projects in Africa, Asia, and Latin America; and 40 million euro invested: These are only some of the successful numbers of the Livelihoods Carbon Fund. Created by 10 European companies, the fund aims to finance large-scale development projects, improving livelihoods of communities directly exposed to the consequences of climate change and helping them restore and preserve their ecosystems.

The Livelihoods Fund’s innovative business model connects communities by creating win-win situations for both investors and fund beneficiaries. It leverages the carbon economy to create social impact and thus contributes to the 17 United Nation Global Goals for Sustainable Development, including “Good Health and Well-Being” (UN SDG 3), “Decent Work and Economic Growth” (UN SDG 8), “Live Below Water” (UN SDG 14), and others.

Companies involved in the fund, such as Crédit Agricole SA, Danone, La Poste, Hermès, Michelin, and SAP, do not receive a financial return on investment, but rather carbon credits to offset their carbon emissions. Livelihoods Carbon Fund, therefore, is a great opportunity for companies to compensate those carbon emissions they can neither avoid nor reduce and become a carbon-neutral company. It also is a great way for companies to contribute to UN Global Goals such as UN SDG 13: “Climate Action,” UN SDG 7: “Affordable and Clean Energy,” UN SDG 15: “Live on Land,” and UN SDG 10: “Reduced Inequalities.” Because of its high social and environmental value, the projects funded are also supported by many governmental and nongovernmental development organizations, such as the French Development Agency (AFD) and the International Union for Conservation of Nature (IUCN).

Motivated by the outcome of the first fund, eight companies involved in the Livelihoods Carbon Fund decided to establish a second Livelihoods Carbon Fund. Partnering with other companies has always been key to the Livelihoods concept, as it helps to scale the impact and share investment risks – heading for long-term success and even bigger impact. The new fund aims to improve another two million lives in developing countries in Africa, South America, and Asia, and prevent 25 million tons of CO2 within the next 20 years. It will also encourage other companies and investors to join, with the goal of collecting 100 million euro starting in 2018. Like the first project, the resulting carbon credits will be certified by the Gold Standard (created by the WWF) and the Verified Carbon Standard.

At the launch of the second Livelihoods Carbon Fund on December 11th, 2017, Brune Poirson, Secretary of State to the French Minister for Ecological and Inclusive Transition, highlighted the great solitary and environmental value of the innovative investment model, “giving sense to money” and accelerating the combat of climate change.

To learn more about Livelihoods Funds, visit www.livelihoods.eu
Twitter: @livelih00ds


Christine Susanne Mueller

About Christine Susanne Mueller

As Global Sustainability Transformation and Change manager at SAP SE, Christine Susanne Müller is responsible for sustainability related change initiatives, stakeholder management and employee engagement. She coordinates and aligns SAP's contributions to the UN Sustainable Development Goals. Since 2001, Christine Susanne has worked in various change management and communications roles at SAP on a local, regional, and global level.

Nastassia Ostrowski

About Nastassia Ostrowski

Nastassia Ostrowski joined the sustainability team as an intern in October 2017. In her role, she co-organizes the Sustainability Champions Network and supports change management and communication activities linked to SAP’s engagement for the 17 United Nation Global Goals. For more information, see also www.sap.com/unglobalgoals.

Air Cover For The Endangered

Rick Price

David Allen sits in a semi-dark trailer, eyes on a computer screen. He is scanning an image from an aerial drone skimming the treetops at the Dinokeng Game Reserve in South Africa. It is searching for elephants. A cloud of dust appears in the camera’s field of view – the plane banks toward it, and there! A big bull, ears flapping with each step, a tracking collar around his neck. The ERP Air Force has found its target, with the aim not to destroy, but to save the creature from his nemesis, the human poacher.

The link to poverty

The group behind this – a non-governmental organization called Elephants, Rhinos, & People or ERP, was founded in 2014 by groupelephant.com to preserve and protect Southern Africa’s wild elephants and rhinos through alleviating rural poverty. A look at some numbers shows the link between poverty and threats to the elephants and rhinos.

According to groupelephant.com, rhino horn is worth up to hundreds of times the per-capita income in poor rural areas of Southern Africa. On the global black market, it can fetch up to $80,000 per kilogram. Depending on the species, a rhino horn can weigh three to four kilos, so one horn can command more than $300,000 – an unimaginable fortune to most people there.

Grim statistics

The result is carnage. Wild African elephants are being killed at the rate of four an hour. At the end of 2016, the population was 352,000, according to Group Elephant. Rhinos are in far worse shape: The total population as of this writing is 19,682 Southern White Rhinos and 5,042 Black Rhinos for a total of 24,724 in all of Africa. The government of South Africa says 529 rhinos were poached in that nation alone in the first half of 2017. ERP says all in all, three rhinos are killed every day. Any effort to preserve this species must give people an alternative to poaching and a stake in the animals’ survival, through jobs and economic opportunities like tourism. Conservation initiatives also have to make the most of scarce resources, and that requires cutting-edge technology.

Covering a lot of ground

These are big animals, they can move quickly, and their stomping grounds are large. Dinokeng alone encompasses more than 45,000 acres. It would be impractical to hire enough people to keep tabs on every elephant and every rhino there every moment of every day. Inside the reserve, they are safer, but if they break out into the surrounding suburban area, just north of Pretoria, they face threats, including exposure to poachers who might not risk the reserve itself. ERP works with Dinokeng to patrol the fences and help keep the animals in, but there’s a limit to what they can accomplish. That’s where the ERP Air Force, the tracking collars, and Big Data come in.

Eyes in the sky

Back in the trailer, the GPS collar monitoring system has alerted drone pilot David Allen that the bull is getting too close to the fences. The drone follows the elephants as they approach the limits of the reserve. The operator can then direct rangers in SUVs or a helicopter to nudge the herd away from the boundary. That reduces the poachers’ ability to kill the animals – outside Dinokeng, there is less protection. The drones will also watch for poaching within the reserve, and ERP hopes to use them for other initiatives.

Big Data to protect big creatures

ERP uses cutting-edge digital technology to save these wild elephants and rhinos, both by keeping them in safe areas and by alleviating the poverty of the local population. All of that requires the ability to wrangle huge amounts of data quickly, from knowing where the elephants are, to routing the people to them. A group of technology companies, including SAP and its partner EPI-USE, have collaborated with ERP to build a system capable of collecting, organizing, storing, and retrieving that information.

Next on the roadmap is predictive analytics: As EPI-USE’s Jan van Rensburg said in May 2017, “We rely upon analytics in the background, a platform where we can predict where poaching will happen. And we use the data that we build up and store in our in-memory database so that we can more efficiently use the drones, and send them to the spots where poachers are more likely to be. And when a poacher is found by the drone, we can dispatch a ranger to deal with it.”

A weapon to save, not kill

So for ERP, Big Data and the ability to use it in real time have become a weapon in the fight to save endangered elephants and rhinos, while helping people in poverty create new ways to earn a living and turn away from poaching.

Want to know more about how ERP uses Big Data and drones to save endangered wild Elephants and Rhinos through alleviating rural poverty? Watch the video.


Rick Price

About Rick Price

Rick Price is an Emmy Award-winning journalist who now works at SAP, where he tells stories of customers' digital transformation.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!

About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

Read more thought provoking articles in the latest issue of the Digitalist Magazine, Executive Quarterly.


The Differences Between Machine Learning And Predictive Analytics

Shaily Kumar

Many people are confused about the specifics of machine learning and predictive analytics. Although they are both centered on efficient data processing, there are many differences.

Machine learning

Machine learning is a method of computational learning underlying most artificial intelligence (AI) applications. In ML, systems or algorithms improve themselves through data experience without relying on explicit programming. ML algorithms are wide-ranging tools capable of carrying out predictions while simultaneously learning from over trillions of observations.

Machine learning is considered a modern-day extension of predictive analytics. Efficient pattern recognition and self-learning are the backbones of ML models, which automatically evolve based on changing patterns in order to enable appropriate actions.

Many companies today depend on machine learning algorithms to better understand their clients and potential revenue opportunities. Hundreds of existing and newly developed machine learning algorithms are applied to derive high-end predictions that guide real-time decisions with less reliance on human intervention.

Business application of machine learning: employee satisfaction

One common, uncomplicated, yet successful business application of machine learning is measuring real-time employee satisfaction.

Machine learning applications can be highly complex, but one that’s both simple and very useful for business is a machine learning algorithm that compares employee satisfaction ratings to salaries. Instead of plotting a predictive satisfaction curve against salary figures for various employees, as predictive analytics would suggest, the algorithm assimilates huge amounts of random training data upon entry, and the prediction results are affected by any added training data to produce real-time accuracy and more helpful predictions.

This machine learning algorithm employs self-learning and automated recalibration in response to pattern changes in the training data, making machine learning more reliable for real-time predictions than other AI concepts. Repeatedly increasing or updating the bulk of training data guarantees better predictions.

Machine learning can also be implemented in image classification and facial recognition with deep learning and neural network techniques.

Predictive analytics

Predictive analytics can be defined as the procedure of condensing huge volumes of data into information that humans can understand and use. Basic descriptive analytic techniques include averages and counts. Descriptive analytics based on obtaining information from past events has evolved into predictive analytics, which attempts to predict the future based on historical data.

This concept applies complex techniques of classical statistics, like regression and decision trees, to provide credible answers to queries such as: ‘’How exactly will my sales be influenced by a 10% increase in advertising expenditure?’’ This leads to simulations and “what-if” analyses for users to learn more.

All predictive analytics applications involve three fundamental components:

  • Data: The effectiveness of every predictive model strongly depends on the quality of the historical data it processes.
  • Statistical modeling: Includes the various statistical techniques ranging from basic to complex functions used for the derivation of meaning, insight, and inference. Regression is the most commonly used statistical technique.
  • Assumptions: The conclusions drawn from collected and analyzed data usually assume the future will follow a pattern related to the past.

Data analysis is crucial for any business en route to success, and predictive analytics can be applied in numerous ways to enhance business productivity. These include things like marketing campaign optimization, risk assessment, market analysis, and fraud detection.

Business application of predictive analytics: marketing campaign optimization

In the past, valuable marketing campaign resources were wasted by businesses using instincts alone to try to capture market niches. Today, many predictive analytic strategies help businesses identify, engage, and secure suitable markets for their services and products, driving greater efficiency into marketing campaigns.

A clear application is using visitors’ search history and usage patterns on e-commerce websites to make product recommendations. Sites like Amazon increase their chance of sales by recommending products based on specific consumer interests. Predictive analytics now plays a vital role in the marketing operations of real estate, insurance, retail, and almost every other sector.

How machine learning and predictive analytics are related

While businesses must understand the differences between machine learning and predictive analytics, it’s just as important to know how they are related. Basically, machine learning is a predictive analytics branch. Despite having similar aims and processes, there are two main differences between them:

  • Machine learning works out predictions and recalibrates models in real-time automatically after design. Meanwhile, predictive analytics works strictly on “cause” data and must be refreshed with “change” data.
  • Unlike machine learning, predictive analytics still relies on human experts to work out and test the associations between cause and outcome.

Explore machine learning applications and AI software with SAP Leonardo.


Shaily Kumar

About Shaily Kumar

Shailendra has been on a quest to help organisations make money out of data and has generated an incremental value of over one billion dollars through analytics and cognitive processes. With a global experience of more than two decades, Shailendra has worked with a myriad of Corporations, Consulting Services and Software Companies in various industries like Retail, Telecommunications, Financial Services and Travel - to help them realise incremental value hidden in zettabytes of data. He has published multiple articles in international journals about Analytics and Cognitive Solutions; and recently published “Making Money out of Data” which showcases five business stories from various industries on how successful companies make millions of dollars in incremental value using analytics. Prior to joining SAP, Shailendra was Partner / Analytics & Cognitive Leader, Asia at IBM where he drove the cognitive business across Asia. Before joining IBM, he was the Managing Director and Analytics Lead at Accenture delivering value to its clients across Australia and New Zealand. Coming from the industry, Shailendra held key Executive positions driving analytics at Woolworths and Coles in the past. Please feel to connect on: Linkedin: http://linkedin.com/in/shaily Twitter: https://twitter.com/meisshaily