Securing Your Digital Future: Cyber Trust As Competitive Advantage

Justin Somaini and Dan Wellers

The accepted wisdom in the cybersecurity field today is that there are two types of companies in the world: those that know they’ve been hacked, and those that don’t.

No enterprise is immune from cyber threats, and the list of big, scary data breaches continues to grow. The vast majority of companies in Europe (92 percent) have been hacked in the last five years, according to a recent survey by specialty insurer Lloyd’s of London. The average total cost of a breach is $4 million, according to a 2016 study by the Ponemon Institute.

Yet, categorized as risk to avoid rather than opportunity to pursue, cybersecurity has never been a terribly sexy topic in the C-suite. It’s an added expense—and one that slows down efforts to leap ahead technologically. The significant attention it receives tends to be of the negative variety when things go horribly wrong. Even as companies have embarked on their digital transformation efforts, security has remained an afterthought—tacked on after a big new investment in advanced analytics, cognitive systems, or Internet of Things (IoT) technology. Very soon, however, that reactive approach will seem antiquated.

A coming mind shift

Spending on IT security has been increasing in the last two years, even as overall technology budgets have been decreasing, according to 2016 report by the SANS Institute. But it’s not just a lift in spending that’s called for, but also shift in thinking.

In today’s age of rapidly developing transformational technologies, keeping on top of emerging security and privacy threats is more challenging—and more critical—than ever before. As companies collaborate with a wider network of partners and meet new demands for 24/7 operations and greater transparency with customers, cyber security risks multiply. The scope, scale, and impact of cyber attacks will grow in concert with increasing digitization:

  • 4.2 billion records were exposed in more than 4,000 known data breaches in 2016, according to Risk Based Security.
  • Cyber insurance premiums could increase tenfold to $20 billion annually by 2025, according to Marsh & McLellan.
  • The cost of data breaches will reach $2.1 trillion globally by 2019—nearly four times the estimated cost of breaches in 2015, according to Juniper Research.
  • Cyber attacks could cost the world up to $90 trillion in net economic benefit by 2030 if cyber security doesn’t keep pace with growing interconnectedness, according to a study published by the Atlantic Council and the Zurich Insurance Group
  • Cyber risk is expanding beyond the virtual world to the physical one. Hackers used highly destructive malware to bring down three Ukranian power distribution companies in 2016, for example, cutting power to 80,000 people.
  • The expanding universe of Internet of Things devices is particularly vulnerable to exploitation as companies may not update them after installation and many devices are not able to receive security update patches, according to AIG. In fact, an IoT hack took down Amazon, Twitter, Netflix, and other major sites in October 2016.
  • Connected devices pose particular concern in healthcare, an industry that already faces 340 percent more cyberattacks than the average industry and that fails to monitor 75 percent of hospital network traffic, according to a report from Raytheon and WebSense Security Labs.
  • Cyberattacks are one of the top ten global risks of highest concern for the next decade, right alongside such threats as water and food crises, natural catastrophes, social instability, and national governance failures, according to the World Economic Forum.

Just a third of companies today are sufficiently prepared to prevent a worst-case attack, according to Oliver Wyman and only a quarter currently treat cyber risk as a significant corporate risk. But as cyber risk expands and the attacks result not only in financial and reputational damage but also in physical destruction, danger, or loss of life, trust will become a competitive advantage. Therefore, those companies and organizations that want to dominate their markets will approach security as a strategic investment, proactively embedding cybersecurity strategy into business strategy.

As companies continue their digital transformations, they need to adopt more flexible and ubiquitous cyber defense measures to meet the more extreme threats they will face. Failing to do so risks unanticipated costs, operational shutdowns, reputational damage, and legal consequences.

A zero-trust approach

Unfortunately, there is no off-the-shelf solution to manage the entirety of a company’s cyber risk. As companies continue to introduce more digital innovations, they must continuously adopt and adapt cyber security measures commensurate with the growing threats they’ll face.

In a global economy, security can only be as good as the regulations, compliance, and enforcement in the countries where an organization operates—and those vary wildly around the world. What’s more, even when a company’s leaders take a more proactive approach to investing in cyber security protection and response, its partners and suppliers may not. Nearly 80 percent of companies fail to assess their customers and suppliers for cyber risk, according to a survey by Marsh & McLellan. And hackers certainly will be proactive about finding the weakest link in a value chain. Meanwhile, as enterprises adopt a growing legion of internet-connected devices and sensors, cyber security risk will be distributed even more widely.

Organizations must evolve from the attitude that perimeter security, achievable by firewalls or anti-virus protection, is enough. As interconnectivity and interdependency increases so too will the adoption of zero-trust networks. The zero-trust approach questions the assumption that a company can be made safe and sound within the confines of its own “secure” corporate network. Instead, a zero-trust approach places controls around data assets themselves and creates increased visibility into how they are used across a digital business ecosystem.

A new approach for a networked world

But, as SAP CEO Bill McDermott wrote to customers in 2016, “Information security is a journey without a destination. The security threat in the enterprise is relentless and multiplying, and the attackers are getting more sophisticated.” A zero-trust network is not enough. When the question is not if, but when, a significant breach will occur, how a company manages this inevitability becomes critical.

The key is to develop a robust approach to measuring, controlling, and responding to cyber risk. We recommend a three-pronged strategy to manage the threats in the expanding enterprise ecosystem:

  1. Prevent. This aspect of cyber security strategy remains as important as ever, and companies must evolve their preventative strategies, from their security policies and educational approaches to the actual access controls they put in place.
  1. Detect. In an evolving cyber threat environment, there is no foolproof prevention approach. Selecting and deploying appropriate intrusion detection systems for the timely detection and notification of compromises is critical.
  1. React. Detection is useless without a response. Companies that approach cyber security as a competitive advantage will put incident response plans in place in much the same way they would plan for recovery from a natural disaster.

Building trust, not walls

The Great Wall of China may have succeeded as an exercise in power or a feat of construction. But as a security strategy, it was a failure. Similarly a cyber security strategy focused on building strong enough borders around the company will fail. It’s impossible to keep all the bad guys out.

As more of a company’s data and its business processes become distributed, it’s cyber security strategy must become much more far-reaching. The good news is that even as digital technologies increase cyber security risk, they can also help mitigate it. Many cloud providers for example, are taking a more robust approach to security strategy that their customers might. New technologies like machine learning and big data analytics can strengthen security protections. Of course, the hackers can—and will—take advantage of these powerful technological advancements as well. Cyber risk experts will tell you the dark web is teeming with attack tools that enable hackers to take advantage of outdated security approaches and corporate vulnerabilities. They’ve been quick to take advantage of new automation tools in order to carry out more sophisticated and layered attacks on corporate and state assets.

Companies who embrace trust and security as competitive advantages will build security into their digital ecosystems at each layer:

  • Secure Products: Incorporating security into all applications, ensuring the protection of content and transactions.
  • Secure Operations: Investing in hardened systems, security patch management, security monitoring, end-to-end incident handling, and a comprehensive cloud operations security framework.
  • Secure Company: Creating a security-educated and aware workforce, end-to-end physical security of assets, and a comprehensive business continuity framework.

Forward-looking companies will follow these principles not only within their own organizations but expect them from their network of partners, supplier, and customers. The hackers of today and the future aren’t working alone and neither should the companies they’re targeting.

The risk of full-blown cyber catastrophes is real. The WEF has warned that large-scale cyber attacks could cause significant economic damage, geopolitical tensions, or widespread loss of trust in the Internet.

A report from the Atlantic Council and Zurich Insurance Group found as soon as 2018, there could be damage from massive cyber attacks equivalent to 1.5 percent of global GDP that is “certain to drastically increase risks and drag down net profits for companies that are most exposed to cyber-attacks..” The worst case scenario could result in a state of perpetual cyber crime and cyber warfare, increasingly vulnerable critical infrastructure, and losses of $90 trillion globally, according to the report.

A collaborative network approach will be critical to combatting such a persistent global threat with implications not just for corporate and personal data, but strategy, supply chains, products, and physical operations. Trust will be the most important currency in the digital future—one that companies will have to earn and work diligently to keep.

Read the executive brief The Future of Cybersecurity: Trust as Competitive Advantage.


Justin Somaini

About Justin Somaini

Justin Somaini heads the Global Security unit at SAP. With more than 17 years of information security experience, he is responsible for SAP’s overall security strategy, ensuring that SAP and our customers have a consistent and convenient security experience. In his role Justin develops, implements, and manages SAP’s overall policies, standards, and guidelines as well as ongoing SAP security initiatives to meet the emerging international IT and cyber security environments and data protection and privacy laws worldwide. Before joining SAP in 2015, Justin was Chief Trust Officer at Box, the world's leading enterprise software platform for content collaboration. Prior to Box, Justin held the role of Chief Information Security Officer (CISO) at Yahoo!, driving security planning and operations for the company. Prior to Yahoo!, he was CISO of Symantec. Justin holds a Bachelor's of Science degree in Management Information Systems from Drexel University, Philadelphia.

About Dan Wellers

Dan Wellers is founder and leader of Digital Futures at SAP, a strategic insights and thought leadership discipline that explores how digital technologies drive exponential change in business and society.

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.


Stefan Guertzgen

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.

The Importance Of Cybersecurity In Modern E-Commerce

Jake Anderson

Author: Meghan Sheerin

The importance of cybersecurity in modern e-commerce cannot be overstated, especially when a company like Equifax finds itself on the business end of hackers’ intentions. Personal information for some 145.5 million people was exposed due to a simple security oversight. We’re talking birth dates, addresses, driver’s license numbers, 209,000 credit card numbers, and, worst of all, Social Security numbers. This last category means just under 50 percent of the U.S. population may have had their crucial secret identifier exposed.

How are we supposed to trust anything online after that?

Trust is a must

Meanwhile, an aura of trustworthiness is one of the key factors customers look for when they access an e-commerce venue for the first time. To this end, there are several steps you can take to telegraph the security of your site to customers.

For instance, installing an SSL certificate will tell visitors their transactions are encrypted and less likely to be visible while in transit between their device and your servers. The green padlock in the address bar and the accompanying lock-sign tells users they can feel more secure about the private information they share on your website.

Securing your site

One of the most important things you can do to protect your e-commerce platform is to ingrain within your employees a sense of urgency surrounding security. In far too many cases, careless employees have introduced spyware or malware to an organization’s network. Opening suspicious emails and clicking links within them is the most common method of infection. The other area in which your employees need to be trained is maintaining robust passwords.

The best ones are made up of six or more characters using a mix of letters, numbers, and unique symbols. Further, whenever new applications or peripherals are introduced to your network, the manufacturer’s default passwords should be changed immediately. Another key measure is implementing software updates as soon as they become available. Regularly probing your system for weaknesses and shoring them up whenever they are found should be a standard operating procedure as well.

Hosting matters too

Your site is only as secure as the server on which it resides. When you’re just starting out, you might be tempted to save some cash by residing your site on a shared server. However, in that instance, your site is only as secure as the least secure site on the server. It’s like being hospitalized in a quarantined ward in the hospital when you’re there for only a minor procedure. If the germ is in the room, it’s probably going to find its way into your body. A private server is always your best option. If you can’t afford a private server, your next best choice is a virtual private server.

Hackers are lazy-ish

Hackers tend to go after low-hanging fruit, so if your e-commerce site is secured with the latest encryption and protected by a robust system of near impossible-to-crack passwords, it will likely send most cybercriminals looking for easier pickings. In other words, the more effort you put into securing your site, the less likely it is to be targeted.

The importance of cybersecurity, one of the key arbiters of e-store success, in modern e-commerce must constantly be underscored. Bearing the above advice in mind as you establish your e-commerce business will benefit both you and the industry at large.

For more on data security, see From Job Loss To Jail Sentences, Data Protection And Privacy Is No Joke.


Jake Anderson

About Jake Anderson

Awestruck by Star trek as a kid, Jake Anderson has been relentless in his pursuit for covering the big technological innovations which will shape the future. A self-proclaimed gadget freak, he loves getting his hands on every piece of gadget he can afford. Contact Jake on Twitter @_ShoutatJake.

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.



The Differences Between Machine Learning And Predictive Analytics

Shaily Kumar

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

Machine learning

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

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

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

Business application of machine learning: employee satisfaction

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

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

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

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

Predictive analytics

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

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

All predictive analytics applications involve three fundamental components:

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

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

Business application of predictive analytics: marketing campaign optimization

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

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

How machine learning and predictive analytics are related

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

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

Explore machine learning applications and AI software with SAP Leonardo.


Shaily Kumar

About Shaily Kumar

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