Reimagining Business Models In Life Sciences

Jacqueline Prause

Highly regulated and strictly adherent to predictable, validated outcomes, the life sciences industry is now facing a unique disruption of its own – brought on by an explosion of data, increasing regulations, decreasing margins, industry consolidation, and digitalization.

The solution? Create new value through digitalization of the business model and accelerate innovation.

Easier said than done!

For the manufacturers of pharmaceuticals, biological products, and medical devices, digitalization is either a golden opportunity to better serve patients or a massive threat to the traditional rank and order. On a recent episode of Internet talk radio program Changing the Game with Life Sciences, special edition series of Coffee Break with Game-Changers, presented by SAP, a panel of three industry-leading experts gave their take on where the industry was headed and what opportunities they foresee for those agile and innovative enough to fill gaps in the value chain quickly.

Joining moderator Bonnie D. Graham on the panel were: Joe Miles, global vice president of Life Sciences at SAP; Shawn Brodersen, global chief technology officer of the SAP Practice at HCL Technologies; and Rasmus Nelund, vice president of Life Sciences and general manager of International Operations at NNIT A/S.

The following are just some of the observations presented during the one-hour show. For more information, listen to a complete recording of the show: Reimagining Business Models in Life Sciences

Balancing speed of innovation with commitment to the patient

Joe Miles: “It’s just a remarkable time. That’s really showing in new business models that are bringing competitive advantages for organizations, but at the same time, providing levels of care, treatments, and therapies that are attacking long-held terrible diseases. Now we actually have an opportunity to help people get back on the healthy path after dealing with some of these traumatic illnesses.”

Shawn Brodersen: “What we’re talking about is change, but we’re also talking about guarantees of outcomes. In highly regulated industries like life sciences, there’s a certain comfort and a requirement to do things in a very consistent and repeatable fashion because it’s a validated industry and we want validated outcomes. We don’t want to get the wrong drugs to the patients or the wrong devices to the patients.”

Rasmus Nelund: “Both commitment and especially imagination are needed right now in the Life Sciences industry to imagine what is in the future. Is it going to be a technology trip in the future? Are the drug producers of today going to be reduced back in the value chain and take over some platforms towards the patient? That requires a lot of imagination about how we can realize the benefits of digitalization and at the same time, the commitment to the passion for the patient.”

Patient data streams and payment models

Miles: “Similar to every other industry, life sciences is being impacted globally with digitalization, specifically from smart devices. Real-world data streams from patients’ smart devices will generate massive amounts of data, providing more accurate insights into patients’ conditions. The supply chains have to change. The manufacturing process has to change. The delivery model has to change. The interaction with the physicians and the patients has to change. Those are radical changes and digital technologies are what are really enabling that. The devices are giving us greater visibility and transparency at the patient level. But further then, the models that are coming out of that to support that process and those products are also equally as transformational.”

“Real-world data streams from patients’ smart devices will generate massive amounts of data, providing more accurate insights into patients’ conditions.”

Brodersen: “When [Joe] talks about that data stream and where that data stream comes from, you’re not just disrupting the Life Sciences industry, but you’re looking at industries around insurance models. You’re talking about industries for consumer goods, where these devices are embedded and created. There is a potential revenue stream to those companies, whether it’s Nike, Under Armour, FitBit, Apple, or Google.

From a patient’s perspective, you really have two groups that will look at this in two very different ways. One is ‘my information is my information and I’m not particularly interested in sharing.’ The other one is maybe a bit more modern, like, ‘hey, if this proactively helps me solve for future health problems, then I’m more than happy to share.’

How do we manage the data and how do we keep that confidential? How do we give the patient control over what they share and how they share it, and do that in a very personal, secure way? I think that’s one of those things that digital transformation needs to address.”

Nelund: “It is true that the whole product is changing. In the old days, we went to the doctor, who wrote the prescription for a drug. Then we went to the pharmacy, got the drug, and it worked. That’s going to change into a combination of both the drug and some hardware or software – also, all the life sciences data surrounding the patients, because a lot of the decisions we have today are also about lifestyle, and researchers are curious to understand the lifestyle of the patient and thereby make the drug more personalized.

Going back to what Shawn mentioned there about the platform, I think the winners of this industry are going to be the ones who own the patients’ data at the end. Then they can use what they’ve seen in other industries with Uber, Airbnb, and Amazon. Not to mention, if you own the data about the consumer, then you also own the market.”

Blockchain as cure-all?

Brodersen: “At its core, blockchain is simply a database, a technology, a way of restoring and sharing information in a network of commonly interested peers in a supply chain or a value chain. As a patient, if I go into a doctor’s office today, what’s the first thing they do when you sign in? ‘Please fill out these ten pages so that we know something about you.’ If I have to go to a second doctor’s appointment, they don’t share any of that information with the next doctor. A lot of that has to do with regulations and some of it has to do with it’s just the way it’s always been done.

What blockchain potentially could do is give the individual the opportunity to store that information in a very secure digital wallet, and then to decide, using cryptography and tokens, how they hand that information out in the network. There’s really, in my view, no good reason why this can’t be something that is adopted and looked at as a way to radically change the patient’s experience.”

Nelund: “I think it is a perfect example of how blockchain can be used to trail information and make it more personalized. Also, we talk about data as the most valuable asset of a company and potentially, because we used a blockchain to track the data, we would have a digital audit trail.

Imagine you are running a clinical trial in 26 countries with 5,000 patients and you get data points in every second day and you need to be capable of reproducing that study that has run for two years and have transparency for the FDA to trust the data. So, we need to have a full audit trail. That is quite cumbersome today with the computer system validation, but it’s quite necessary.”

Miles: “The example Shawn gave was very simple, yet an elegant and transparent way of how the technology could be leveraged. You can see that extended across more of the consumer experience. You can also see that taken further as we start to get into other areas where we think about data integrity. That data integrity could pertain to the integrity of a product; for example, the serial number on the product that you’re using. Is that a valid serial number? Is that a valid drug that you’re taking? Our ability to have that irrefutable data point, to know within that distributed network that we have valid information that can never be altered—that is a very valuable and a very interesting capability that can be done on a global basis and can be expanded in a variety of ways.”

Tune in to changing the game in life sciences

Join us for more episodes of Changing the Game in Life Sciences to hear how the digital economy is changing the life sciences industry. For more up-to-the minute business and technology news, listen to Coffee Break with Game-Changers broadcast live every Wednesday, 8:00 a.m. Pacific / 11: 00 a.m. Eastern Time on the VoiceAmerica Business Channel. And follow Game Changers on Twitter at @SAPRadio and #SAPRadio.

Panelists’ comments have been edited and condensed for this space.

This article originally appeared on SAP News Center.


About Jacqueline Prause

Jacqueline Prause is the Senior Managing Editor of Media Channels at SAP. She writes, edits, and coordinates journalistic content for, SAP's global online news magazine for customers, partners, and business influencers .

Digital Transformation Drives Convergence Of Platforms And Standards

Stefan Guertzgen

In mid-February, I attended the ARC Forum in Orlando, Fla. There was a strong emphasis on digital transformation as well as platforms and standards supporting it.

Within the digital transformation, a variety of platforms are emerging, such as Infrastructure-as-a-Service, IoT edge, cognitive computing, and cloud application platforms. This makes it even more important to integrate these platforms and establish a semantic layer across them to ensure they can be orchestrated towards company strategies and business goals.

To help companies in today’s world digitally transform their business, here are some trends and observations:

  • IT, operations, and engineering departments need to ensure interoperability between and across their domains. Historically, these three entities have all operated in their own silos under different standards set by different organizations with different goals.
  • More and more associations and companies are starting to collaborate and converge on open standards that support end-to-end processes, cycles, and value chains. For example, Namur Open Architecture, ZVEI Modul Type Package, and the Open Process Automation Group have a memorandum of understanding in the works to promote common standards and frameworks. Besides integration and simplification, avoidance of vendor lock-in is another key driver behind this.
  • Cloud platforms are starting to gravitate around functional needs with an underlying common IT technology (enterprise system of record platform, enterprise innovation platform, intelligent supply chain platform, operations and maintenance platform, asset network platform, product design platform, and so on).
  • Seamless, bidirectional data and information flow, supported by rules and workflow engines, are indispensable ingredients for turning data and analytics into action. This goal will be supported by an “intelligent and agile core” enhanced by a peripheral layer of microservices that can be easily consumed via APIs (IT landscape of the future).
  • The importance of the “intelligent edge” is increasing. Initially focusing primarily on reducing-data security risks, now operational issues such as analyzing and controlling devices, improving process speed, and reducing latency issues will prompt end users to get a much broader perspective on edge computing. Overall, this is driven by the ongoing need to maximize asset maintenance and production performance. Innovative models are now run on the edge, leveraging inexpensive cloud space for optimization.
  • People and processes are as important as technology for the adoption of digital transformation. In other words, machine learning, IoT, and blockchain don’t excel by themselves. They need to be embedded into industry and business contexts as well as processes. From a hiring perspective, the data engineer is an emerging species, as special skills are needed around data mining, data analysis, data orchestration, and data governance. Such data engineers need to be paired with business and process-domain experts to ensure innovative technologies unfold their true potential.
  • Change management is more important than ever before. Consistent and clear top-to-bottom communication and measuring transformation program progress by a common set of clearly defined KPIs are pivotal to successfully building relationships and trust across all enterprise entities.

What do you think? Please share your thoughts and observations with us.

For more insight on emerging tech, see Future Of Work 2018: 10 Predictions You Can’t Ignore.


About Stefan Guertzgen

Dr. Stefan Guertzgen is the Global Director of Industry Solution Marketing for Chemicals at SAP. He is responsible for driving Industry Thought Leadership, Positioning & Messaging and strategic Portfolio Decisions for Chemicals.

New Technologies And Opportunities For Professional Services CFOs

Marcus Fischer

The financial structure of a professional services company is organized from the top down, making the CFO an essential piece of the transformation puzzle. Thanks to digital transformation, the very job of the CFO is constantly evolving. Disruptive technology and shifting business strategies require the CFO to stay informed and agile because selecting the right technology at the right time enables greater agility, simplified finance processes, and adoption of new business models. This can make the difference between staying competitive or getting left behind.

“Companies with 50% or more of their revenues from digital ecosystems achieve 32% higher revenue growth and 27% higher profit margins.”

The financial challenges the professional services industry faces are unique: intangible assets such as people and intellectual property, profit margins that need to be tracked carefully, the necessity of visibility into utilization rates and projects, continuous reduction of fixed overheads, and compliance with audit and regulatory standards. The tools it needs to become more flexible are changing rapidly and include cloud platforms, blockchain, Big Data, and predictive analytics. These technologies can significantly transform financial processes – and subsequently the work of the CFO.

Challenges to modern CFOs

First, let’s take a deeper look at why digital transformation is disrupting the traditional professional services business models. The traditional model of billing consultants on a time and materials basis is being challenged by customers who expect engagements to be tied to specific business outcomes and by leaner new entrants to market with digital business models. Digitalization has enabled digital service delivery, which drives costs down and enables fees to be charged on a usage basis or subscription basis.

These developments aren’t the only disruptor; shifting economic centers and digitally enabled new entrants to the market are fueling disruption as well. And in the information age, clients have higher expectations and instant access to expert knowledge online, while firms face more and tougher competition – spurring the need to differentiate themselves more clearly and provide higher value-added services.

The automation provided by digital technologies poses a particular threat to the professional services industry. Accounting professionals, for example, can be replaced to a degree with machine learning and algorithms that automate accounting processes and technology, allowing clients to take over certain accounting services such as filing taxes.

Despite the impact that digital transformation might have on some professional services sectors, it presents a major opportunity for growth and innovation for the industry as a whole. In a recent study by SAP and the Oxford Economic Unit, 96% of industry leaders see digital transformation as a core business goal, compared to 61% of all other companies. Similarly, 94% of leaders are investing in next-generation technologies such as Big Data, the Internet of Things, and machine learning, while only 60% of all other companies are making such investments. The trend is clear: to invest in digital change is to be a leader in your industry.

For CFOs of professional services firms, digital innovation can have a significant impact on the bottom line. The same study from SAP and the Oxford Economic Unit found that 85% of leaders say that transformation efforts have increased their market share, and that they expect 23% higher revenue growth in the next two years. A full 80% of leaders say transformation has increased their profitability.

The tools CFOs need to create more responsive organizations

What are these digital technologies that leaders are investing in, and how can they help professional services firms remain competitive?

Digital core

With intelligent enterprise resource planning (ERP) software, CFOs can create a digital core to simplify finance processes. A digital core can help reinvent business models and drive new revenues by instantly connecting people, devices, and business networks. For example, an intelligent ERP can help streamline accounts payable, invoice management, cash and liquidity management, and financial planning and analysis. You can eliminate IT complexity and create a flow of real-time information with a digital core that helps you run a live, digital business.

Predictive analytics

To become a digital leader, it’s important to look to the future, not the past. Predictive analytics allow CFOs to do just that, forecasting results and revenue predictions based on customer-experience profiles and current demand, instead of comparing to previous years as most companies still do today.

With high-performance analytics, it is possible for a CFO to review, in a single dashboard, revenue and margin by country and period, utilization rates per country, revenue and margin by practice by period, headcount by practice, and utilization by practice. Armed with this detailed financial information, the CFO can make a greater contribution to strategic decisions.

Big Data and cloud platforms

Instead of using the traditional consulting business model for audits, CFOs can also rely on Big Data. The amount of data at the CFO’s fingertips is exponentially greater than in years past, but many companies don’t know how to exploit it. By using a cloud platform, CFOs gain easier access to Big Data for audits and can better analyze it for business insights.


Blockchain can be used to improve information traceability, enabling transparency while improving auditability and regulatory compliance. Blockchain technology allows companies to share important or confidential documents securely – without an intermediary. The information can be shared quickly, in a format that cannot be changed. This method has the potential to help ensure the privacy and security of shared information, which is crucial for professional services companies and their clients.

New customer experiences are constrained by the ability of companies to support microtransaction-based revenue models tied to consumption. Blockchain provides a secure approach to enabling this automation.

Only the firms that are embracing technology are expected to survive and thrive in the years to come. If you want to stay ahead of the competition and continue to move forward, the time to look at Big Data, predictive analytics, blockchain, and artificial intelligence for your financial processes is now.

For more insight on digital leaders, check out the SAP Center for Business Insight report, conducted in collaboration with Oxford Economics, “SAP Digital Transformation Executive Study: 4 Ways Leaders Set Themselves Apart.”

Peter Weill and Stephanie L. Woerner, “Thriving in An Increasingly Digital Ecosystem,” MIT Sloan Management Review, Magazine Summer 2015.

Follow SAP Finance online: @SAPFinance (Twitter) | LinkedIn | Facebook | YouTube


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.



Why Blockchain Is Crucial For FP&A: Part 1

Brian Kalish

Part 17 in the Dynamic Planning Series

In these times of almost continuous technological change, there is a natural tendency to be suspect of whatever is being heralded as the “flavor of the month” or the “next best bet.” In early 2017, I was graciously given the opportunity to speak on what I believed to be the technologies that were transforming finance and specifically, the FP&A function. The talk I ended up giving covered five areas:

  • Advanced analytics and forecasting
  • Robotic process automation
  • Cloud and Software-as-a-Service
  • Artificial intelligence
  • Blockchain

While all these topics deserve further investigation, for this article, I want to focus on blockchain. Part of the reason for diving deeper into blockchain is the lack of understanding of what it actually is and the great amount of time people in the finance function are currently spending talking about it. This has greatly changed in the past nine months.

Last March, while hosting an FP&A Roundtable in Boston, I ask a group of 25 senior FP&A professionals how familiar they were with the concept of blockchain. Out of this august group, there was only one participant who felt truly comfortable with the concept. I still get asked on a regular basis, all over the world, “Blockchain. What is it?”

Blockchain: What is it?

By allowing digital information to be distributed but not copied, blockchain technology has created the spine of a new type of Internet. Picture a spreadsheet that is duplicated thousands of times across a network of computers. Now imagine that this network is designed to regularly update this spreadsheet, and you have a basic understanding of blockchain.

Information held on a blockchain exists as a shared and continually reconciled database. This is a way of using the network that has obvious benefits. The blockchain database isn’t stored in any single location, meaning the records it keeps are truly transparent and easily verifiable. No centralized version of this information exists for someone to corrupt. Hosted by many computers simultaneously, its data is accessible to any authorized user.

Blockchain technology is like the Internet in that it has a built-in robustness. By storing blocks of information that are identical across its network, the blockchain 1) cannot be controlled by any single entity and 2) has no single point of failure. The Internet itself has proven to be durable for almost 30 years. It’s a track record that bodes well for blockchain technology as it continues to be developed.

A self-auditing ecosystem

The blockchain network lives in a state of consensus, one that automatically checks in with itself on a regular basis. A kind of self-auditing ecosystem of a digital value, the network reconciles every transaction that happens at regular intervals. Each group of these transactions is referred to as a “block.” Two important properties result from this:

Transparency. Data is embedded within the network as a whole, and by definition, is available to all authorized users.

Incorruptibility. Altering any unit of information on the blockchain would mean using a huge amount of computing power to override the entire network. In theory, it is possible; however, in practice, it’s unlikely to happen.

A decentralized technology

By design, the blockchain is a decentralized technology, so anything that happens on it is a function of the network as a whole. Some important implications stem from this. By creating a new way to verify transactions, aspects of traditional commerce may become unnecessary.

Today’s Internet has security problems that are familiar to everyone. However, by storing data across its network, the blockchain eliminates the risks that come with data held centrally. There are no centralized points of vulnerability that can be exploited. In addition, while we all currently rely on the “username/password” system to protect our identity and assets online, blockchain security methods use encryption technology.

I hope this little tutorial helps describe what blockchain is. In my next article, I’ll discuss the value of blockchain to the FP&A profession.

For more on this topic, read the two-part “Blockchain and the CFO” series and “When Blockchain Fulfills CFOs’ Paperless Vision.”

2018 will be a busy year with FP&A Roundtables in St. Louis, Charlotte, Atlanta, San Diego, Las Vegas, London, Boston, Minneapolis, DFW, San Francisco, Hong Kong, Jeddah, and many other locations around the world to support the global FP&A community.

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Brian Kalish

About Brian Kalish

Brian Kalish is founder and principal at Kalish Consulting. As a public speaker and writer addressing many of the most topical issues facing treasury and FP&A professionals today, he is passionately committed to building and connecting the global FP&A community. He hosts FP&A Roundtable meetings in North America, Europe, Asia, and South America. Brian is former executive director of the global FP&A Practice at AFP. He has over 20 years experience in finance, FP&A, treasury, and investor relations. Before joining AFP, he held a number of treasury and finance positions with the FHLB, Washington Mutual/JP Morgan, NRUCFC, Fifth Third Bank, and Fannie Mae. Brian attended Georgia Tech in Atlanta, GA for his undergraduate studies and the Pamplin College of Business at Virginia Tech for his graduate work. In 2014, Brian was awarded the Global Certified Corporate FP&A Professional designation.