How Blockchain Is Driving Cloud Adoption

John Bertrand

Banks have traditionally had an aversion to cloud computing, over security fears. While just about every other industry has made the transition, banks have been one of the last to adopt cloud technology. It’s now a position that’s becoming harder and harder to justify.

Regulators have given both guidance and a green light, and ironically, modern cloud platforms are now more secure than many banks themselves. They’ve had to be. For their own survival, cloud providers have had to strive to meet every security certification and standard out there, and they are typically more secure than a bank’s own data centre.

While some factions of the financial services industry have started the move to the cloud, overall it’s been a slow-moving progression, especially for banks. But three key drivers are stepping up the pace.

First, new industry catalysts are acting as an accelerant for cloud adoption, and some of them even strengthen a bank’s security defenses when used in a cloud context. Second, many banks have finally reached the conclusion that their cloud reticence is hindering much-needed growth from new products and revenue sources. And third, digital transformation, customer expectations, and disruptive competition have redefined the definition and demands of agility.

The biggest and hottest of these catalysts, is of course, blockchain—arguably one of the best technologies for the digital age. Blockchain’s inherent strengths have been designed to increase trust and virtually eliminate fraud. Based on algorithms, blockchain technology’s advanced encryption and validation form many independent parts, providing golden distributed ledgers, recorded provenance and data lineage, as well as numerous benefits for the financial supply chain. Together, blockchain and the cloud become a powerful, secure trusted platform.

Cybercrime—a constant threat for banks and once seen as a cloud inhibitor—has now also morphed into another catalyst for cloud adoption as banks seek greater security. That’s because core banking technology was originally based on paper and customers without mobile phones, a model that’s no longer applicable or tenable. As banking customers started to use computing, security was added selectively across the bank. Each bank has its own security measures, and with minimum collaboration across the industry, fraudsters took their scams from bank to bank. Today fraud has exploded, and banks are seeking a higher grade of shelter. A 2016 Office of National Statistics study estimates that the UK loses £193 billion per annum, with 6 million people experiencing cybercrime involving their bank account.

And of course, money is not the only criminal target. Data is just as valuable. From May 2018, new regulation means banks can be fined up to four percent of their global turnover for non-compliance around data protection. But with data often duplicated across numerous business silos, data capture and management is both difficult and complicated. (One bank has more than 100 systems doing virtually the same banking activity, but none of the systems are the same). In sharp contrast, cloud computing provides a single, secure, centralised, and consolidated data infrastructure.

Of course, no discussion of the cloud would be complete without mentioning the cost benefits. Today’s sophisticated cloud technology is designed with security and functionality built in. No more ad hoc, often-undocumented custom patches to fix logic in the banking processes. Regular business updates are standard and the community verifies them.  Cloud has mobile computing and cybersecurity in place as part of its DNA.

If you’re still not yet convinced about the cloud, your customers are. They expect one continuous and congruent experience regardless of channel—ATM, mobile, online, or via a call centre. Again, this consistent, digital omnipresence across all the pieces of the digital banking jigsaw can never be achieved in silos. It’s an impossible task, and the regulators now have the Senior Manager Executive Regime rules, so failure is not an option.

The time has come for banks to digitise their processes, not simply so they can keep pace, but for their continued survival. The advent of blockchain, cybersecurity, data protection, digital agility, and cost reduction have (finally) snowballed to make a cloud-based infrastructure a business mandate for banking.

To find out more, register now for the Financial Services Forum, which will be held July 4–5, 2017, in London.

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Voxer Q&A: The “Social Graph” Is Changing The Way The World Works

Jennifer Horowitz

With the recent Congressional appearance of Facebook’s CEO Mark Zuckerberg, the question of liberating the social graph has never been more significant to social media platforms and users worldwide. In efforts to further limit public data in Facebook’s search tools, companies such as Voxer were among many major messaging communication app platforms cut off from Facebook’s Find Friends API. Voice-messaging app Voxer no longer has any access to the social graph because it qualified as a competing online messaging platform.

Voxer is a real-time, multimedia communication tool for groups or individuals with live push-to-talk audio and voice, text, photo, and location saved in a timeline. In addition, the Voxer Business app, optimized for businesses, comes with all the features of the free consumer app plus a web manager that allows users to create and manage their own Voxer network, view employees’ locations on a real-time map, and send and receive messages.

I recently interviewed Irv Remedios, CEO & head of product at Voxer, to learn more about his role and his insights on product and mobile.

Jennifer Horowitz: Hello Irv, could you tell us more about your role and your initiatives?

Irv Remedios: Voxer is used by millions of people to communicate with their colleagues and friends. I currently lead the product team at Voxer, which includes design, product management, and customer support. I have the opportunity to work with our customers and better understand their communication needs. Our team works to define and design solutions that help our customers communicate more quickly and effectively.

Jennifer: What key issues does Voxer address for its customers?

Irv: Imagine that you are walking down the street and need to get a message out to someone or a group. Texting is cumbersome. Phone calls or conference calls are clunky and impractical. With Voxer you take out your phone, hit a button, and start talking. The audio is streamed live to the recipients so they can start listening immediately. If the recipient is unavailable, the message is saved for them.

There is no dialing a number, waiting for a phone to ring, or the annoyance of retrieving voicemail that go along with regular phone calls. We also support texting, sending images, and location information. Ultimately, we make communication instant and efficient.

Voxer Business gives small and medium businesses complete control over their communication. For the first time, businesses can add or remove users in their account and set up teams for group conversations. Additionally, enterprise customers can easily onboard their employees using single-sign-on (SSO) and have access to configurable data retention policies and data APIs that fit with their business policies.

Jennifer: How does Voxer stand out when it comes to its competition?

Irv: Voxer combines the immediacy of live communication with the etiquette of a messaging app. If users are able to listen to a message immediately, they can hear it live and respond quickly. We stream audio to the recipient as the user is speaking into the phone so there is very low latency.

Alternatively, if the recipient is not able to listen immediately, the message is stored for them and they can listen to it later, just like a messaging app. Voxer works well across 2G/3G/4G networks or WiFi and across countries.

Liberating the social graph

In 2012, Voxer was one of the top messaging apps in the world. At one point, the company was even leading the charts.

Voxer successfully raised a $30 million round with its walkie-talkie business functionality and style. Facebook later went on to replicate Voxer in January 2013 by adding a voice messaging feature into its Messenger.

As Facebook restricts access to its social graph, users now question if the move has made the company anti-competitive. This has caused some to say there are valid reasons Facebook should consider lifting the ban from competitors such as Voxer.

Senator John Neely Kennedy asked Mark Zuckerberg during his Congressional hearing, “Are you willing to give me the right to take my data on Facebook and move it to another social media platform?”

Zuckerberg replied, “Senator, you can already do that. We have a Download Your Information tool where you can go get a file of all the content there, and then do whatever you want with it.”

Social media is no longer solely a marketing function. Find out How to Weave Social Media Into the Fabric of the Business.

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How The Public Sector Can Fight Fraud With Fast Data

Phil King

Fraudsters’ increasingly sophisticated methods in their intent to steal taxpayers’ money by any means necessary is an ongoing battle for legitimate businesses and organizations, and one that many are struggling to win.

More than 5 million cases of fraud and computer misuse offenses were recorded in the UK last year, according to the Office for National Statistics, while the National Audit Office revealed that fraud is now the most commonly experienced crime in England and Wales – accounting for nearly one-third of all crime (31%).

The public sector is not exempt from this, with a CIPFA report into fraud and corruption finding that over £325m worth of fraud was detected or prevented in the public sector in 2015/16. Furthermore, 97.3% of public sector workers claimed that fraud is an issue that the government needs to address – a study revealed nearly four in five employees (78.5%) believe fraud is a concern within their organization. And that’s not all – one-third of employees do not believe their organization has an effective solution in place for detecting and preventing fraud.

It’s clear that fraud is a major issue undermining the effectiveness of programmes and missions across government, and could have a major effect on building and maintaining public confidence.

That’s why countering fraud is an important priority at all levels of the public sector.

While the problems are clear, the solutions need not be. Government organizations have data, but they often struggle to use it in the right way. In this blog, I look at how the public sector can overcome these challenges and draw on data to fight fraud in real-time.

Combating the threat of fraud

One of the most vital things that public sector organizations are sometimes lacking in their attempts to combat fraud is real-time detection of attacks, which would enable them to uncover hidden trends and patterns that are unavailable with legacy technology solutions.

The aforementioned research finds that staff in public organizations are demanding more sophisticated, super-fast, data-driven capabilities – the upshot of which means embracing real-time detection and powerful big data analytics.

Australia’s Department of Human Services has done exactly that by replacing its aging legacy system with a rapid rollout of a fraud management program. Fraud was costing the Australian government around $600 million annually. Therefore, the agency, which is contacted by 1 million Australians every day regarding social benefits, replaced its archaic interfaces, databases, and workflows to help it comply with established policies.

This made the systems easier to use, provided consistent data and automated processes that made fraudulent activity easier to track. DHS employees are therefore able to monitor active cases more effectively, and ultimately are able to see more referrals result in prosecution thanks to the increased insight and enhanced data integrity and protection.

Data defeats the fraudsters

As the mountain of records and data that UK public sector organizations have on file continues to grow across disparate systems, it becomes increasingly difficult to understand and gain value from it. But the fact that they have the data in the first place is a good start. The missing piece is the ability to analyze it, see it in context and actually gain insight from it. Which is how governments can start using what they know to improve what they do.

To get this started, and to effectively combat fraudsters, it’s key to create an end-to-end strategy that covers both internal processes and external threats. This will enable better access to real-time data, which will, in turn, enable them to consolidate and work with large volumes of data sets that can be used for efficient detection, investigation, and predictive analytics. It’s also vital to clearly define employees’ duties and access to data, applications, and processes to further reduce risk across the organization and make it easier to detect and remedy violations.

Any effective fraud management process rests on identifying and assessing potential risks. It’s only when these are fully understood that the necessary policies, controls and organizational measures to monitor and mitigate them can be implemented. Governments have the data they need to do all of this. What they’re missing are the tools to turn info into insight.

For more information on how to reduce your organization’s risk of fraud and how SAP’s solutions can help you, download our whitepaper on fighting Public Sector fraud.

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Phil King

About Phil King

Drawing from his 30 years of experience in IT and public sector organizations, Phil King is the Sales Director for the Public Sector in the UK and Ireland at SAP. He is passionate about working with the public sector to drive innovation that improves people’s lives and makes the world a better place.

The Blockchain Solution

By Gil Perez, Tom Raftery, Hans Thalbauer, Dan Wellers, and Fawn Fitter

In 2013, several UK supermarket chains discovered that products they were selling as beef were actually made at least partly—and in some cases, entirely—from horsemeat. The resulting uproar led to a series of product recalls, prompted stricter food testing, and spurred the European food industry to take a closer look at how unlabeled or mislabeled ingredients were finding their way into the food chain.

By 2020, a scandal like this will be eminently preventable.

The separation between bovine and equine will become immutable with Internet of Things (IoT) sensors, which will track the provenance and identity of every animal from stall to store, adding the data to a blockchain that anyone can check but no one can alter.

Food processing companies will be able to use that blockchain to confirm and label the contents of their products accordingly—down to the specific farms and animals represented in every individual package. That level of detail may be too much information for shoppers, but they will at least be able to trust that their meatballs come from the appropriate species.

The Spine of Digitalization

Keeping food safer and more traceable is just the beginning, however. Improvements in the supply chain, which have been incremental for decades despite billions of dollars of technology investments, are about to go exponential. Emerging technologies are converging to transform the supply chain from tactical to strategic, from an easily replicable commodity to a new source of competitive differentiation.

You may already be thinking about how to take advantage of blockchain technology, which makes data and transactions immutable, transparent, and verifiable (see “What Is Blockchain and How Does It Work?”). That will be a powerful tool to boost supply chain speed and efficiency—always a worthy goal, but hardly a disruptive one.

However, if you think of blockchain as the spine of digitalization and technologies such as AI, the IoT, 3D printing, autonomous vehicles, and drones as the limbs, you have a powerful supply chain body that can leapfrog ahead of its competition.

What Is Blockchain and How Does It Work?

Here’s why blockchain technology is critical to transforming the supply chain.

Blockchain is essentially a sequential, distributed ledger of transactions that is constantly updated on a global network of computers. The ownership and history of a transaction is embedded in the blockchain at the transaction’s earliest stages and verified at every subsequent stage.

A blockchain network uses vast amounts of computing power to encrypt the ledger as it’s being written. This makes it possible for every computer in the network to verify the transactions safely and transparently. The more organizations that participate in the ledger, the more complex and secure the encryption becomes, making it increasingly tamperproof.

Why does blockchain matter for the supply chain?

  • It enables the safe exchange of value without a central verifying partner, which makes transactions faster and less expensive.
  • It dramatically simplifies recordkeeping by establishing a single, authoritative view of the truth across all parties.
  • It builds a secure, immutable history and chain of custody as different parties handle the items being shipped, and it updates the relevant documentation.
  • By doing these things, blockchain allows companies to create smart contracts based on programmable business logic, which can execute themselves autonomously and thereby save time and money by reducing friction and intermediaries.

Hints of the Future

In the mid-1990s, when the World Wide Web was in its infancy, we had no idea that the internet would become so large and pervasive, nor that we’d find a way to carry it all in our pockets on small slabs of glass.

But we could tell that it had vast potential.

Today, with the combination of emerging technologies that promise to turbocharge digital transformation, we’re just beginning to see how we might turn the supply chain into a source of competitive advantage (see “What’s the Magic Combination?”).

What’s the Magic Combination?

Those who focus on blockchain in isolation will miss out on a much bigger supply chain opportunity.

Many experts believe emerging technologies will work with blockchain to digitalize the supply chain and create new business models:

  • Blockchain will provide the foundation of automated trust for all parties in the supply chain.
  • The IoT will link objects—from tiny devices to large machines—and generate data about status, locations, and transactions that will be recorded on the blockchain.
  • 3D printing will extend the supply chain to the customer’s doorstep with hyperlocal manufacturing of parts and products with IoT sensors built into the items and/or their packaging. Every manufactured object will be smart, connected, and able to communicate so that it can be tracked and traced as needed.
  • Big Data management tools will process all the information streaming in around the clock from IoT sensors.
  • AI and machine learning will analyze this enormous amount of data to reveal patterns and enable true predictability in every area of the supply chain.

Combining these technologies with powerful analytics tools to predict trends will make lack of visibility into the supply chain a thing of the past. Organizations will be able to examine a single machine across its entire lifecycle and identify areas where they can improve performance and increase return on investment. They’ll be able to follow and monitor every component of a product, from design through delivery and service. They’ll be able to trigger and track automated actions between and among partners and customers to provide customized transactions in real time based on real data.

After decades of talk about markets of one, companies will finally have the power to create them—at scale and profitably.

Amazon, for example, is becoming as much a logistics company as a retailer. Its ordering and delivery systems are so streamlined that its customers can launch and complete a same-day transaction with a push of a single IP-enabled button or a word to its ever-attentive AI device, Alexa. And this level of experimentation and innovation is bubbling up across industries.

Consider manufacturing, where the IoT is transforming automation inside already highly automated factories. Machine-to-machine communication is enabling robots to set up, provision, and unload equipment quickly and accurately with minimal human intervention. Meanwhile, sensors across the factory floor are already capable of gathering such information as how often each machine needs maintenance or how much raw material to order given current production trends.

Once they harvest enough data, businesses will be able to feed it through machine learning algorithms to identify trends that forecast future outcomes. At that point, the supply chain will start to become both automated and predictive. We’ll begin to see business models that include proactively scheduling maintenance, replacing parts just before they’re likely to break, and automatically ordering materials and initiating customer shipments.

Italian train operator Trenitalia, for example, has put IoT sensors on its locomotives and passenger cars and is using analytics and in-memory computing to gauge the health of its trains in real time, according to an article in Computer Weekly. “It is now possible to affordably collect huge amounts of data from hundreds of sensors in a single train, analyse that data in real time and detect problems before they actually happen,” Trenitalia’s CIO Danilo Gismondi told Computer Weekly.

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials.

The project, which is scheduled to be completed in 2018, will change Trenitalia’s business model, allowing it to schedule more trips and make each one more profitable. The railway company will be able to better plan parts inventories and determine which lines are consistently performing poorly and need upgrades. The new system will save €100 million a year, according to ARC Advisory Group.

New business models continue to evolve as 3D printers become more sophisticated and affordable, making it possible to move the end of the supply chain closer to the customer. Companies can design parts and products in materials ranging from carbon fiber to chocolate and then print those items in their warehouse, at a conveniently located third-party vendor, or even on the client’s premises.

In addition to minimizing their shipping expenses and reducing fulfillment time, companies will be able to offer more personalized or customized items affordably in small quantities. For example, clothing retailer Ministry of Supply recently installed a 3D printer at its Boston store that enables it to make an article of clothing to a customer’s specifications in under 90 minutes, according to an article in Forbes.

This kind of highly distributed manufacturing has potential across many industries. It could even create a market for secure manufacturing for highly regulated sectors, allowing a manufacturer to transmit encrypted templates to printers in tightly protected locations, for example.

Meanwhile, organizations are investigating ways of using blockchain technology to authenticate, track and trace, automate, and otherwise manage transactions and interactions, both internally and within their vendor and customer networks. The ability to collect data, record it on the blockchain for immediate verification, and make that trustworthy data available for any application delivers indisputable value in any business context. The supply chain will be no exception.

Blockchain Is the Change Driver

The supply chain is configured as we know it today because it’s impossible to create a contract that accounts for every possible contingency. Consider cross-border financial transfers, which are so complex and must meet so many regulations that they require a tremendous number of intermediaries to plug the gaps: lawyers, accountants, customer service reps, warehouse operators, bankers, and more. By reducing that complexity, blockchain technology makes intermediaries less necessary—a transformation that is revolutionary even when measured only in cost savings.

“If you’re selling 100 items a minute, 24 hours a day, reducing the cost of the supply chain by just $1 per item saves you more than $52.5 million a year,” notes Dirk Lonser, SAP go-to-market leader at DXC Technology, an IT services company. “By replacing manual processes and multiple peer-to-peer connections through fax or e-mail with a single medium where everyone can exchange verified information instantaneously, blockchain will boost profit margins exponentially without raising prices or even increasing individual productivity.”

But the potential for blockchain extends far beyond cost cutting and streamlining, says Irfan Khan, CEO of supply chain management consulting and systems integration firm Bristlecone, a Mahindra Group company. It will give companies ways to differentiate.

“Blockchain will let enterprises more accurately trace faulty parts or products from end users back to factories for recalls,” Khan says. “It will streamline supplier onboarding, contracting, and management by creating an integrated platform that the company’s entire network can access in real time. It will give vendors secure, transparent visibility into inventory 24×7. And at a time when counterfeiting is a real concern in multiple industries, it will make it easy for both retailers and customers to check product authenticity.”

Blockchain allows all the critical steps of the supply chain to go electronic and become irrefutably verifiable by all the critical parties within minutes: the seller and buyer, banks, logistics carriers, and import and export officials. Although the key parts of the process remain the same as in today’s analog supply chain, performing them electronically with blockchain technology shortens each stage from hours or days to seconds while eliminating reams of wasteful paperwork. With goods moving that quickly, companies have ample room for designing new business models around manufacturing, service, and delivery.

Challenges on the Path to Adoption

For all this to work, however, the data on the blockchain must be correct from the beginning. The pills, produce, or parts on the delivery truck need to be the same as the items listed on the manifest at the loading dock. Every use case assumes that the data is accurate—and that will only happen when everything that’s manufactured is smart, connected, and able to self-verify automatically with the help of machine learning tuned to detect errors and potential fraud.

Companies are already seeing the possibilities of applying this bundle of emerging technologies to the supply chain. IDC projects that by 2021, at least 25% of Forbes Global 2000 (G2000) companies will use blockchain services as a foundation for digital trust at scale; 30% of top global manufacturers and retailers will do so by 2020. IDC also predicts that by 2020, up to 10% of pilot and production blockchain-distributed ledgers will incorporate data from IoT sensors.

Despite IDC’s optimism, though, the biggest barrier to adoption is the early stage level of enterprise use cases, particularly around blockchain. Currently, the sole significant enterprise blockchain production system is the virtual currency Bitcoin, which has unfortunately been tainted by its associations with speculation, dubious financial transactions, and the so-called dark web.

The technology is still in a sufficiently early stage that there’s significant uncertainty about its ability to handle the massive amounts of data a global enterprise supply chain generates daily. Never mind that it’s completely unregulated, with no global standard. There’s also a critical global shortage of experts who can explain emerging technologies like blockchain, the IoT, and machine learning to nontechnology industries and educate organizations in how the technologies can improve their supply chain processes. Finally, there is concern about how blockchain’s complex algorithms gobble computing power—and electricity (see “Blockchain Blackouts”).

Blockchain Blackouts

Blockchain is a power glutton. Can technology mediate the issue?

A major concern today is the enormous carbon footprint of the networks creating and solving the algorithmic problems that keep blockchains secure. Although virtual currency enthusiasts claim the problem is overstated, Michael Reed, head of blockchain technology for Intel, has been widely quoted as saying that the energy demands of blockchains are a significant drain on the world’s electricity resources.

Indeed, Wired magazine has estimated that by July 2019, the Bitcoin network alone will require more energy than the entire United States currently uses and that by February 2020 it will use as much electricity as the entire world does today.

Still, computing power is becoming more energy efficient by the day and sticking with paperwork will become too slow, so experts—Intel’s Reed among them—consider this a solvable problem.

“We don’t know yet what the market will adopt. In a decade, it might be status quo or best practice, or it could be the next Betamax, a great technology for which there was no demand,” Lonser says. “Even highly regulated industries that need greater transparency in the entire supply chain are moving fairly slowly.”

Blockchain will require acceptance by a critical mass of companies, governments, and other organizations before it displaces paper documentation. It’s a chicken-and-egg issue: multiple companies need to adopt these technologies at the same time so they can build a blockchain to exchange information, yet getting multiple companies to do anything simultaneously is a challenge. Some early initiatives are already underway, though:

  • A London-based startup called Everledger is using blockchain and IoT technology to track the provenance, ownership, and lifecycles of valuable assets. The company began by tracking diamonds from mine to jewelry using roughly 200 different characteristics, with a goal of stopping both the demand for and the supply of “conflict diamonds”—diamonds mined in war zones and sold to finance insurgencies. It has since expanded to cover wine, artwork, and other high-value items to prevent fraud and verify authenticity.
  • In September 2017, SAP announced the creation of its SAP Leonardo Blockchain Co-Innovation program, a group of 27 enterprise customers interested in co-innovating around blockchain and creating business buy-in. The diverse group of participants includes management and technology services companies Capgemini and Deloitte, cosmetics company Natura Cosméticos S.A., and Moog Inc., a manufacturer of precision motion control systems.
  • Two of Europe’s largest shipping ports—Rotterdam and Antwerp—are working on blockchain projects to streamline interaction with port customers. The Antwerp terminal authority says eliminating paperwork could cut the costs of container transport by as much as 50%.
  • The Chinese online shopping behemoth Alibaba is experimenting with blockchain to verify the authenticity of food products and catch counterfeits before they endanger people’s health and lives.
  • Technology and transportation executives have teamed up to create the Blockchain in Transport Alliance (BiTA), a forum for developing blockchain standards and education for the freight industry.

It’s likely that the first blockchain-based enterprise supply chain use case will emerge in the next year among companies that see it as an opportunity to bolster their legal compliance and improve business processes. Once that happens, expect others to follow.

Customers Will Expect Change

It’s only a matter of time before the supply chain becomes a competitive driver. The question for today’s enterprises is how to prepare for the shift. Customers are going to expect constant, granular visibility into their transactions and faster, more customized service every step of the way. Organizations will need to be ready to meet those expectations.

If organizations have manual business processes that could never be automated before, now is the time to see if it’s possible. Organizations that have made initial investments in emerging technologies are looking at how their pilot projects are paying off and where they might extend to the supply chain. They are starting to think creatively about how to combine technologies to offer a product, service, or business model not possible before.

A manufacturer will load a self-driving truck with a 3D printer capable of creating a customer’s ordered item en route to delivering it. A vendor will capture the market for a socially responsible product by allowing its customers to track the product’s production and verify that none of its subcontractors use slave labor. And a supermarket chain will win over customers by persuading them that their choice of supermarket is also a choice between being certain of what’s in their food and simply hoping that what’s on the label matches what’s inside.

At that point, a smart supply chain won’t just be a competitive edge. It will become a competitive necessity. D!


About the Authors

Gil Perez is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Tom Raftery is Global Vice President, Futurist, and Internet of Things Evangelist, at SAP.

Hans Thalbauer is Senior Vice President, Internet of Things and Digital Supply Chain, at SAP.

Dan Wellers is Global Lead, Digital Futures, at SAP.

Fawn Fitter is a freelance writer specializing in business and technology.

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

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CEO Priorities And Challenges In The Digital World

Dr. Chakib Bouhdary

Digital transformation is here, and it is moving fast. Companies are starting to realize the enormous power of digital technologies like artificial intelligence (AI), Internet of things (IoT) and blockchain. These technologies will drive massive opportunities—and threats—for every company, and they will impact all aspects of business, including the business model. In fact, business velocity has never been this fast, yet it will never be this slow again.

To move quickly, companies need to be clear on what they want to achieve through digital transformation and understand the possible roadblocks. Based on my meetings with customer executives across regions and industries, I have learned that CEOs often have the same three priorities and face the same three challenges:

1. Customer experience – No longer defined by omnichannel and personalized marketing.

Not surprisingly, 92 percent of digital leaders focus on customer experience. However, this is no longer just about omnichannel and personalized marketing – it is about the total customer experience. Businesses are realizing that they need to reimagine their value proposition and orchestrate changes across the value chain – from the first point of interaction to manufacturing, to shipment, to service – and be able to deliver the total customer experience. In some cases, it will even be necessary to change the core product or service itself.

2. Step change in productivity – Transform productivity and cost structure through digital technologies.

Businesses have been using technology to achieve growth for decades, but by combining emerging technologies, they can now achieve a significant productivity boost and reduce costs. For this to happen, companies must first identify the scenarios that will drive significant change in productivity, prioritize them based on value, and then determine the right technologies and solutions. Both Mckinsey and Boston Consulting Group expect a 15 to 30 percent improvement in productivity through digital advancements – blowing the doors off business-as-usual and its incremental productivity growth of 1 to 2 percent.

3. Employee engagement – Fostering a culture of innovation should be at the core of any business.

Companies are looking to create an environment that encourages creativity and innovation. Leaders are attracting the needed talent and building the right skill sets. Additionally, they aim for ways to attract a diverse workforce, improve collaborations, and empower employees – because engaged employees are crucial in order to achieve the best results. This Gallup study reveals that approximately 85 percent of employees worldwide are performing below their potential due to engagement issues.

As CEOs work towards achieving these three desired outcomes, they face some critical challenges that they must address. I define the top three challenges as follows: run vs. innovate, corporate cholesterol, and digital transformation roadmap.

1. Run vs. innovate – To be successful you must prioritize the future.

The foremost challenge that CEOs are facing is how they can keep running current profitable businesses while investing in future innovations. Quite often these two conflict as most executives mistakenly prioritize the first and spend much less time on the latter. This must change. CEOs and their management teams need to spend more time thinking about what digital is for them, discuss new ideas, and reimagine the future. According to Gartner, approximately 50 percent of boards are pushing their CEOs to make progress on digital. Although this is a promising sign, digital must become a priority on every CEOs agenda.

2. Corporate cholesterol – Do not let company culture get in the way of change.

The older the company is, the more stuck it likely is with policies, procedures, layers of management, and risk averseness. When a company’s own processes get in the way of change, that is what I call “corporate cholesterol.” CEOs need to change the culture, encourage cross-team collaborations, and bring in more diverse thinking to reduce the cholesterol levels. In fact, both Mckinsey and Capgemini conclude that culture is the number-one obstacle to digital effectiveness.

3. Digital transformation roadmap – Digital transformation is a journey without a destination.

Many CEOs struggle with their digital roadmap. Questions like: Where do I start? Can a CDO or another executive run this innovation for me? What is my three- to five-year roadmap? often come up during the conversations. Most companies think that there is a set roadmap, or a silver bullet, for digital transformation, but that is not the case. Digital transformation is a journey without a destination, and each company must start small, acquire the necessary skills and knowledge, and continue to innovate.

It is time to face the digital reality and make it a priority. According to KPMG, 70 percent to 80 percent of CEOs believe that the next three years are more critical for their company than the last fifty. And there is good reason to worry, as 75 percent of S&P 500 companies from 2012 will be replaced by 2027 at the current disruption rate.

Download this short executive document. 

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Dr. Chakib Bouhdary

About Dr. Chakib Bouhdary

Dr. Chakib Bouhdary is the Digital Transformation Officer at SAP. Chakib spearheads thought leadership for the SAP digital strategy and advises on the SAP business model, having led its transformation in 2010. He also engages with strategic customers and prospects on digital strategy and chairs Executive Digital Exchange (EDX), which is a global community of digital innovation leaders. Follow Chakib on LinkedIn and Twitter