APJ Firms Feel Pressure Of A Digital World, But Still Cautious

Zarina Lam Stanford

Part 7 of the series “The Road to Digital Transformation

The digital story of every Asia Pacific and Japanese (APJ) small and midsize business starts with the demands of a digital-first society. Approximately 50% of the region’s population are expected to actively purchase online by 2020, up from one-third today. India’s households are more likely to have a mobile phone than an in-home toilet or running tap water. And with the introduction of fast-changing technologies such as mobile Internet, the Internet of Things, cloud, 3D printing, and advanced robotics, gross domestic product (GDP) growth is expected to climb 30% by 2025.

Any company that doesn’t follow along with this wave will likely be left behind, or worse, forgotten. Despite the risk, the IDC Infobrief, “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Asia/Pacific,” revealed that approximately 70% of APJ firms have yet to reach a level of digital competence to take advantage of this new digital economy.

This finding is quite shocking for an environment primarily powered by family-run businesses that persist for multiple generations. In theory, family companies can invest in technology with an eye on long-term gain while allowing good ideas to prove themselves over time. Such a patient capital approach allows firms to focus on traditional differentiators – customer service excellence and aggressive growth – to engage customers on their terms and compete in international markets.

 

digital transformation self-assessment

Source: “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Asia/Pacific,” IDC InfoBrief, sponsored by SAP, 2017.  

Digital social interactions extend the APJ tradition of service excellence

The APJ culture values high attention to customer service. In fact, a two-year study conducted by my team found that most consumers are willing to pay more if it means that a brand provides a level of service that caters to their specific needs and surpasses experiences found anywhere else in the marketplace.

In response, many small and midsize businesses are leveraging social media, according to the IDC study. In fact, more than 1.5 billion people across APJ use social media with 95% accessing platforms through mobile devices. Consumer tools such as WhatsApp and Facebook which helped individuals to stay in touch with family and friends have become essential business tools for the overall customer experience.

Cloud-based strategies open the door to global expansion

Known for being highly efficient and lean, APJ companies have applied techniques – such as just-in-time production and lean methodologies such as kaizen – to the point that running highly efficient operations is a fundamental part of running a business. But small and midsize firms are taking this attribute a step further by moving to the cloud.

IDC reports that Asia Pacific firms are more likely to adopt cloud solutions than those in other regions. India (54%) and China (56%) appear to have the strongest affinity. Also, a number of executives indicated a willingness to consider cloud solutions in the near-term future.

Over the past year, I have noticed that small and midsize customers have been investigating the reality of a cloud-only arrangement, especially in Australia and Japan. Firms are beginning to realize that this path to digital transformation is the fastest and most agile. Plus, they can quickly convert capital investments into operational costs. As a result, we see high double-digit growth in this area of our business.

Going digital elevates the promise and importance of APJ firms

The promise and importance of APJ small and midsize firms lie in the conviction that they will soon become the large enterprises of tomorrow. Throughout the Asia-Pacific Economic Cooperation, these companies have become the growth engine of the entire region’s economy. They account for over 97% of all businesses, employ over 50% of the workforce, and contribute upwards of 50% to the annual GDP.

And every second, every hour, and every day, I am personally seeing how digital technology is influencing this level of performance. Small and midsize businesses are steadily becoming more bold and aggressive. But more notably, they are allowing the entire APJ economy to continue growing and emerge as an economic force.

To learn how small and midsize businesses across the APJ region are digitally transforming themselves to advance their future success, check out the IDC InfoBrief “The Next Steps in Digital Transformation: How Small and Midsize Companies Are Applying Technology to Meet Key Business Goals with Insights for Asia/Pacific,” sponsored by SAP. For more region-specific perspectives on digital transformation, be sure to check every Tuesday for new installments to our blog series “The Road to Digital Transformation.”

 

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Zarina Lam Stanford

About Zarina Lam Stanford

Zarina Lam Stanford is Head of Marketing for the Asia-Pacific Japan region at SAP.

A Modern Outlook On ERP Brings New Opportunities To Professional Services

Catherine Lynch

Part 5 of the “Intelligent ERP-Driven Industries” series

Businesses that fall under the professional services industry umbrella represent a diverse ecosystem and variety of daily challenges. But some central truths also unite them, including the need to attract and engage clients that increasingly demand the convenience and ease of today’s digital experiences.

As emerging technologies, such as artificial intelligence, machine learning, and blockchain, begin to shake up traditional practices, professional services firms are addressing client demands by rapidly developing new business models, including:

  • Outcome-based engagements: Customers pay for an outcome, not the work done to achieve it. Although the burdens of responsibility and risk are significant, businesses stand to gain more opportunity and higher profit margins if the customer’s request is delivered efficiently.
  • Increased use of talent networks: Greater reliance on contingent expertise and remote talent provides an effective staffing strategy from inside the company and across organizational boundaries. Work assignments flow through a lifecycle that includes financial processes such as payables, client billing, intercompany billing, and receivables.
  • Productization of services: As part of delivering projects efficiently, standardization of efforts and knowledge is prioritized when possible, leading to the automation of some processes.
  • Digital services delivery: Industry lines are blurring as many traditional consulting firms are offering digital services to clients and as some cloud services providers cater to the needs of professional services organizations.
  • Uberisation of services: Pockets of startups, such as legal firms, are kickstarting a wave of disruption by using artificial intelligence to automate many of the mundane, repetitive tasks previously done by young associates.

Although these emerging business models provide a variety of transformative opportunities, professional services firms are still constrained by their legacy ERP environments that, at the core, manage financials and related service delivery processes. As a result, firms cannot provide the level of real-time visibility, responsiveness, and flexibility needed to innovate and integrate new processes and offerings with the customer engagement experience.

Intelligent, cloud-based ERP unlocks constraints that hold firms back

As a first step towards digitalization, professional services firms should consider adopting an intelligent, cloud-based ERP platform as the digital core of their IT landscape. As the nerve center of the entire company, it provides everything needed to run as a real-time digital business – from end-to-end project management and workforce development to cash flow and expense processes.

By implementing a rock-solid, intelligent digital core to manage every aspect of the business, professional services firms can differentiate themselves with:

  • A real-time foundation: Built on a database designed to take advantage of the latest data-processing technology, a cloud ERP platform brings immediate transparency into real-time information. For example, by empowering organizations to confirm the time and expense dedicated towards a customer engagement, business leadership can fully understand project cost, revenue, margin, and work-in-progress position. Meanwhile, the financial controller can run a soft close that uses the same data. In essence, every decision maker can ask a question and find the answer with in-the-moment data made available immediately in the user experience.
  • An intelligent core: In the cloud, the business can take advantage of new digital technologies such as machine learning, predictive analytics, blockchain, and natural language processes by building them into the ERP platform quickly and easily.
  • A set of proven industry best practices: To make the best use of an intelligent ERP platform, firms can take advantage of end-to-end professional services processes and embedded best practices that can be applied as a fundamental part of the overall business system. They can, for example, create new projects quickly from templates to better standardize services or from scratch to offer unique and differentiated services.
  • A platform for continuous innovation: Since the technology is upgraded automatically on a quarterly basis, even the smallest firms can access the latest technology and capabilities to innovate new business models and increase process automation without disrupting core activities.

Accelerating growth while safeguarding against disruption

Professional services firms – regardless of size – are prone to disruption from their rivals and clients as long as digitalization is a mainstay in the global marketplace. By implementing an intelligent, cloud-based ERP system, businesses can help ensure that every function has the information and perspective it needs to accomplish ambitions for growth and optimized operations.

Check out how professional service providers are deepening their digital transformation with a next-generation ERP suite serving as a digital core. Access our library of keynote and session replays from the Intelligent ERP Industry Virtual Summit to hear from top customers and experts as they discuss how intelligent ERP, industry roadmaps, and implementation can guide your business throughout its digital journey.

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Catherine Lynch

About Catherine Lynch

Catherine Lynch is a Senior Director of Industry Cloud Marketing at SAP. She is a content marketing specialist with a particular focus on the professional services and media industries globally. Catherine has a wide international experience of working with enterprise application vendors in global roles, creating thought leadership and is a social media practitioner.

Purpose Matters When Building Your Long-Game Digital Strategy

Paul Kurchina

Digital transformation. It’s at the top of every boardroom agenda, prompting much debate over data management, analytics-driven decision-making, personalized user experiences, and automation. Yet, for most executives, the primary purpose and end goal of such initiatives remain, at best, fuzzy.

Rapid, proactive response to changing data, competitive conditions, and customer behaviors is undoubtedly a necessity for surviving in this increasingly hyperconnected and hypercompetitive world. However, according to Jeff Stier, co-founder of the Global EY Sinek Performance Practice for EY, businesses must do more to produce purposeful outcomes that drive life-sustaining change to everyone on our planet.

“Digitalization promises to help organizations do things well over and over again without human intervention. At the same time, we must reflect on what humans can do better. What important role will employees, partners, suppliers, and customers play in this new digital world?” said Stier during the Americas’ SAP Users’ Group (ASUG) Webcast “The Art & Science of Accelerating a Digital Transformation … with Purpose.

Why is Stier’s question relevant to your business? Simply put, your answers can mean the difference between building a revenue generator for a couple years and offering a clean, equitable, and prosperous future that outlasts us all.

Purpose sets the foundation for infinite and impactful change

Traditional change strategies have enabled businesses to acquire the skills and create the processes needed to successfully execute a digital initiative, such as implementing a new ERP system. But what companies often miss is the one thing that can turn that project into a real digital transformation: people who understand the purpose of the change and are motivated to take action and achieve desirable results.

“Short- and long-term value from any business change is accelerated by integrating purpose and motivation with traditional strategies for digital transformation,” Stier advised. “Similar to the double-helix structure of DNA, digital transformation strategies and purpose and motivation strategies must zip tightly with each other – with digital strategies running through the middle to guide innovation, inspiration, and strategic engagement toward desirable business outcomes.”

Maintaining a perfect union of motivation and purpose with digital transformation enables your company to gain a return of sustainable growth across the spectrum of the business network:

  • Inside-out: Trust in the employee relationship increases because the digital initiative delivered what business leadership promised. The workplace culture gradually embraces the change, leading to high-performing teams, better employee engagement, and continuous innovation.
  • Outside-in: Customers begin to trust your brand more now that the digital experience matches their wants, needs, and expectations. Over time, their loyalty and retention grow, while customers decide to advocate your products and services. Plus, your ties with the customer community strengthen and your sales revenue and margins significantly improve.

By combining motivation and purpose with digital transformation and digital strategies, your business can tap into the best of our human nature to move forward.

“Science tells us that we all want to be inspired, trusted, valued, and fulfilled in everything we do,” said Stier. “Leaders, organizations, and businesses that operate with an infinite mindset are always looking to optimize their motivation and purpose strategies as they understand how human beings react to the way they treat them, communicate to them, and interact with them. And ultimately, the business becomes a brand that is beloved by employees and customers alike.”

Reframe your digital transformation into an inspiring social movement of change that impacts generations to come. Get the best practices and insights you need to get started by listening to the Americas’ SAP Users’ Group (ASUG) Webcast replay “The Art & Science of Accelerating a Digital Transformation … with Purpose,” featuring Jeff Stier, co-founder of Global EY Sinek Performance Practice, EY.

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Paul Kurchina

About Paul Kurchina

Paul Kurchina is a community builder and evangelist with the Americas’ SAP Users Group (ASUG), responsible for developing a change management program for ASUG members.

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.
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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