Why Digital Transformation Is Not Just About Technology

Thierry Morin

What are the biggest challenges Australian and New Zealand (ANZ) companies are facing with digital transformation?

As we recently kicked off the Executive Digital Exchange community in ANZ, a consensus emerged around three topics – making sense of customer experience (CX), increasing leaders’ digital literacy, and having a strategy to digitize the entire value chain.

It’s all about CX – but what does that really mean?

There was consensus that customers’ fast-changing expectations are the major driver behind digital transformation. Digital experience has an increasing bearing on customer loyalty and advocacy, as highlighted by SAP’s latest Australian Digital Experience Report. Customer-centricity also improves the bottom line, as it requires eliminating complexity and internal frictions. With CX now front of mind, CEOs recognize they are the ones who are ultimately responsible for it.

The question is: How far do you actually go to reimagine the experience you deliver for your B2B customers, end consumers, or citizens? How well-aligned are your leadership and your employees on a tangible vision of your customers’ ideal experience?

Talking about “the customer” or customer segments is still a company-centric view of the world. Delighting customers requires leading with empathy, understanding each customer persona and their journeys, and imagining the art of the possible – something that Airbnb has been doing so well. Embracing a design thinking-led approach is critical; it is what helps companies such as Under Armour or the NHL enhance their own customers’ experience.

The leadership’s perspective – an accelerator or a major hurdle

Most executives in ANZ claim digital transformation is a priority and have embarked on the journey. Digital leaders are now urging their organizations to go bolder and faster. If you are just putting digital lipstick on, you will be experiencing the “Kodak moment” without realizing it – losing pockets of value to digital natives or new entrants from adjacent industries.

How do you create a sense of urgency for digital transformation, from the top, before it is too late?

When there is no burning platform, you should demystify digital to create inspiration. Digital technologies are now more affordable than ever; things that seemed out of reach six months ago might be within your grasp today and be the start of your transformation journey. Be receptive as an organization to what others are doing – ask yourself: Are we thinking big enough?

Artificial intelligence, machine learning and blockchain are about to revolutionize enterprise processes; every company needs to reflect on their implications and the related opportunities. Replicating best practices from your peers isn’t good enough; think about next practices that will generate a competitive edge by looking beyond your traditional industry boundaries. Explore how digital is enabling organizations to reimagine business models, reimagine business processes, and reimagine work to ensure your next move is more than just incremental.

Two-speed IT? There is only one speed – and that is fast

Our conversations also revealed that many organizations in ANZ are still trying to get their heads around IT operations in the digital age. Should you adopt a “two-speed IT” approach? Is it relevant to segregate IT budgets – frontend vs. backend, innovation vs. ERP?

Regardless of their approach, all participants agreed on one point: There is no digital enterprise without a digital core. Managing your ERP as legacy and failing to keep your architecture optimized will eventually drive up your IT costs, impair your ability to innovate, and prevent you from delivering on your promise of a relevant, personalized, timely experience for your customers.

In the digital age, cycle time is the ultimate measure of value; as pointed out in last year’s digital transformation report for Australia and New Zealand, a real-time platform is critical to support and enable your entire value chain.

My take on this: In the digital age, your organization’s culture and mindset will largely determine whether you succeed or fail. As new competition is disrupting historic oligopolies in ANZ, and Australia is looking for sustained growth in the post-mining age, organizations need to keep challenging their thinking and align their strategies to superior outcomes for each customer.

For more on setting your digital transformation strategy, see 4 Ways to Digitally Disrupt Your Business Without Destroying It.

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Thierry Morin

About Thierry Morin

Thierry Morin is helping companies in the Services industries become digital enterprises. As a member of the Industry Value Engineering at SAP team in Australia and New Zealand, he works with the broader sales and services teams to inspire customers and enable them to identify and realise value from digital innovation.

How To Profit From The Future Of Mining

Jennifer Scholze

Where is the mining industry going over the next few years? What will digitization do to the industry overall? How will mine workers adapt to these changes? Brian Fanzo and Daniel Newman, co-hosts of the S.M.A.C. Talk Technology Podcast, recently tackled that question. With guest Ruediger Schroedter, SAP’s Global Lead for Mining in the Industry Business Unit for Mill products and Mining, Brian and Daniel explored this dynamic industry. Here’s a brief look at what was discussed.

The state of the mining industry

Mining profitability is strongly tied to commodity price and efficiency. With lower commodity prices in the current cycle, mining companies are struggling to be profitable. Productivity and efficiency is the main focus. Portfolios are being streamlined to promote efficiency. The increased use of renewable energy systems has lowered demand for mined power sources such as coal or uranium. These companies’ livelihood is on the line. That’s where digitization can make a big difference to these businesses through improved efficiency and automation.

Trends and opportunities in mining digitization

The push for digitization is taking off in the mining industry because it employs technology to improve operations. Technology allows for operations to become more efficient, effective, and more productive. At the same time, it improves worker safety. It provides the option for mining companies to be proactive in the digital transformation process.

One area where mining is ahead of the curve is in autonomous driving. Ruediger said, “Technology-wise, in the last maybe 10 years or so, I think autonomous driving is probably one of the technology drivers here. Autonomous driving for trucks or other equipment is almost standard now.” He notes that it’s different than the autonomous vehicles being developed for highway use. Using autonomous vehicles helps improve efficiency in operations.

With this move towards automation, the focus has shifted from the vehicles to the workforce. Machine learning and sensors will help improve worker safety and health because these technologies enable workers to avoid hazardous areas. Vehicles and machinery can be operated autonomously or by remote control from a safe location. Sensors show what’s happening at the machine with no risk to workers.

Where edge-to-core meets mining and mill

All these aspects connect in edge-to-core computing, one area where mining is already very progressive. Technology is being increasingly used in harsh environments, where real-time data reduces connectivity pressure. This is most prevalent and profitable through the use of Internet of Things technology.

Mining involves heavy equipment, which must be reliable and operational when it’s needed. Breakdowns can cost thousands of dollars in lost productivity, repairs, and lost labor. Internet of Things sensors can provide data for analysis at the edge of the computing platform, enabling a closer focus on operations. Managers receive a notice only when a sensor reading or trend shows a failure is about to happen in a piece of equipment. This type of exception handling allows workers to proactively maintain that equipment to prevent a breakdown and shortening downtime. This takes one more level of unpredictability out of the equation. In an industry mired in uncertainty, this predictability helps promote better efficiency.

A new generation of mine employees

Digital transformation in the mining industry brings a shift in employee characteristics. The push for safety in what has traditionally been a dangerous industry is being counterbalanced by digital alternatives. Millennial employees have grown up with technology and connectivity in hand. This tech-savvy audience can now use that experience in the newly digitized mining industry.

In the podcast, Ruediger says, “Mining is characterized by an aging workforce, so they have to start looking into talent. And if you look into younger people joining the workforce, they’re all digital natives, so they are used to the iPhones. They’re used to having easy use of apps.” Mining companies are taking advantage of millennials’ comfort with digital technologies in several ways. Mining has traditionally been a dirty, heavy business, but digitization has helped move those jobs out of the mine through remote control centers. In addition, their understanding of digital systems means younger employees are easier to train and fully utilize this new technology.

Automation and machine learning

The overall theme in digitizing the mining industry is improved efficiency and automation, which frees up workers for more important tasks. However, machine learning may help improve automation even further. In the podcast, Ruediger cites the example of picture recognition, which can ensure that a customer selects the proper material or assigns it to the right contracts. This streamlines and automates the procurement process and helps to significantly reduce errors in the ordering process.

The mechanization and automation required in mining gives this industry great options in digitization. The impact of commodity pricing has already forced it into high efficiency. Autonomous vehicles and trains make it easier to automate mining operations. To address the aging workforce, tech-savvy Generation Z workers are being wooed by the technological aspect of digitization in the industry. Using Internet of Things technology will deliver better reliability in mining equipment, while machine learning helps automate the edge-to-core process.

But this is only part of the story. To learn more, check out this S.M.A.C. Talk Technology Podcast for more details with mining industry thought leader Ruediger Schroedter.

Hear the full podcast episode here. Learn how to bring new technologies and services together to power digital transformation: download The IoT Imperative for Energy and Natural Resource Companies. Explore how to bring Industry 4.0 insights into your business today: read Industry 4.0: What’s Next?

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Jennifer Scholze

About Jennifer Scholze

Jennifer Scholze is the Global Lead for Industry Marketing for the Mill Products and Mining Industries at SAP. She has over 20 years of technology marketing, communications and venture capital experience and lives in the Boston area with her husband and two children.

How Can Life Sciences Leverage Augmented Reality?

Michelle Schooff

When it comes to augmented reality and life sciences, many people think of the 144 billion steps taken by Pokemon Go players, leading to better health. But augmented reality is starting to play a much larger role in life sciences than you might be aware. From expanding children’s experience of science in the classroom to using technology to improve patient outcomes, augmented reality is already playing a key role in life sciences. Here’s a quick overview of some of the areas it’s impacting.

Augmented reality in the science classroom

Whether your life science classroom focuses on biology, health, or chemistry, augmented reality can help bring those topics to life. A wide range of options helps students better understand scientific principles and existing structures. Three-dimensional models of the human body enable students to explore anatomy without an anatomy lab.

Technology has many applications beyond anatomy. Are you trying to explain more complex portions of organic chemistry to pharmaceutical students? Virtual reality allows them to explore complex compounds in ways never imagined. Augmented reality apps allow students to combine compounds to see what potential issues may arise. It also allows them to observe microbiology interactions on a scale that would otherwise require complex microscope work.

Training the next generation of healers

Virtual reality has been used in surgical suites for the past decade. Combined with video conferencing capabilities, surgeons in remote areas can consult with experts across the country or around the world. A brain tumor patient in a remote area, for example, can have it removed close to home. As the surgery progresses, experts are available should any issues arise. MRI markers help determine the best path and approach to remove the tumor.

With 360-degree video, medical students and surgeons who want to expand their skills can use augmented reality to observe surgery, learning the process from a patient and expert surgeon who may be down the hall or across the globe. This type of training is also being used to help improve emergency response. A student can follow the actions of an emergency room doctor treating a patient. They can choose their actions and observe the potential benefits or drawbacks. When seconds count, this type of training can literally make the difference between life and death. Such training techniques are also being developed for emergency responders at the scene of an incident or accident.

Improving patient outcomes

Many of us have experienced a blood draw with multiple failed attempts. For patients who are nervous about needles, a new approach combining infrared and augmented reality helps improve success rates. The blood stands out on infrared, which is overlaid with the image of the patient’s skin. This makes it much easier to hit the vein the first time.

AR can also help reduce patient pain and anxiety levels without additional medication. Simple surgical procedures often require general anesthesia to reduce blood pressure levels related to anxiety. Some hospitals are experimenting with using virtual reality to “transport” patients to other locations, distracting them from the procedure taking place and reducing the need for anesthesia and pain medications. At the same time, surgeons can experiment with which approach will work best for a particularly complex surgery before they even touch a scalpel. Virtual reality combined with CT or MRI scans creates a virtual surgical environment, allowing surgeons to try the surgery several times to find the best possible solution for the patient.

Giving patients a new perspective on their health

It’s one thing to show a patient dry, dull statistics on their recent cardio tests. With patient medication adherence falling by half within a year of being prescribed, better tools are needed to convey the severity of a patient’s condition. One way to achieve this is by providing images of the effects certain actions can have on an individual.

Some augmented reality programs in development help patients see the physical results of specific medical decisions and procedures. Originally developed for doctors to see the results of calcium-based kidney medications on the heart, this technology has potential in many other areas. For example, it could enable smokers to see an image of current and future lung damage.

With the many areas augmented reality can be used in life sciences, it’s easy to see the advantages of this technology. Where can augmented reality take your company or organization?

Learn how to bring new technologies and services together to power digital transformation by downloading The IoT Imperative for Consumer Industries. Explore how to bring Industry 4.0 insights into your business today by reading Industry 4.0: What’s Next?

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Michelle Schooff

About Michelle Schooff

Michelle Schooff is a global marketing director in the retail and wholesale distribution industries for SAP. She is responsible for the marketing strategy, messaging and positioning for SAP solutions in the global marketplace. With over 20 years experience in technology and marketing, Michelle builds strategic marketing plans that drive growth, innovation and revenue.

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.

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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