Blockchain Will Radically Disrupt Your Supply Chain: 4 Steps To Take Now

Susan Galer

Blockchain epitomizes network-centric business, and procurement departments must take the lead exploring its possibilities for supply chain disruption. This was the gist of a discussion I heard during an exclusive roundtable at the SAP Ariba Live 2017 event in Las Vegas entitled, “What Value Can Blockchain Bring To The Supply Chain?”

“Blockchain will radically change how we drive transactions and what procurement does as a profession,” said Robert Kain, principal consultant at Nitor Partners. “Being able to create and connect the networks that allow things like digital and mobile payments, bitcoin, data analysis, financial platforms and crowdfunding will create a much faster and secure world where who you are and who you’re dealing with are completely visible.”

Besides every day digital transactions, the distributed ledger can help support an organization’s higher purpose. When purchasers know the details about how materials are sourced, manufactured and shipped, they can do business with companies better aligned to the corporate mission.

The business value of once and done

Blockchain’s promise of faster, better, and cheaper fundamentally disrupts traditional supply chain models. Readily available information can make activities like getting a mortgage, buying a car (think Carfax), signing contracts, or onboarding new suppliers much more streamlined.

“Fast and good has always been expensive, while slow and not so good has been cheaper,” said Kain. “Blockchain says I can do this faster, cheaper, better and more securely at a lower cost. To an extent, SAP Ariba has already established how that can start to look in terms of sending a document back and forth, having that transparency, taking a contract to terms, validation of what’s happening ─ those are activities that blockchain can do.”

Blockchain will radically change what procurement does as a profession

Act now to avoid ceding control to IT

Cautioning that blockchain is immensely complex, Kain encouraged procurement departments to get educated so they can take advantage of its unique opportunity. Now is the time to understand what blockchain is, how it works, and which company transactions might be applicable to its usage.

“Because of where procurement sits in the organization – our interaction with financials, transactions, contracts, sourcing and all of the associated data – we can change the way this conversation happens within our organization before IT takes over. We can help drive procurement’s ability to influence the business.”

Opening windows to instant trust

Using blockchain, procurement would be able to evaluate supplier value and risk in real-time, profoundly changing relationship management, while reducing costs and accelerating business.

“You can see what is actually going on with your supplier the moment it happens,” said Kain. “You can understand how suppliers are performing with you and others. You can see what they’re charging other people because you can see costs across the network. Having that information immediately available can be extremely powerful, not only in driving costs down, but understanding where your costs are actually at in any part of the chain.”

Blockchain stress test

Kain recommended evaluating procurement process candidates for blockchain against four main criteria:

  • The information is on a network
  • The process requires a digital handshake to gather, receive and distribute information
  • Transaction history is extremely valuable. “If transaction history is of little value to a process, then blockchain solves a problem you didn’t have,” said Kain.
  • Security and cost reduction are extremely important

Of course, not everyone is enamored with transparency. Some businesses may not necessarily want to bare the innermost details of their interactions across their networks. “Not everybody thinks transparency is a great idea, especially applied to supply chains. This is a hurdle to overcome as blockchain evolves,” said Kain.

Ready or not, supply chain participants can look forward to a world where there’s nowhere to hide.

This blog was originally posted on SAP Business Trends.

Follow me on Twitter, SAP Business Trends, or Facebook. Read all of my Forbes articles here.


Four Essential Technologies Powering The Digital Supply Chain

Richard Howells

Growing customer expectations for personalized products and immediate service are making supply chains more complex. And as businesses extend their reach globally, processes are further complicated. We see that industry boundaries are blurring due to new business models enabled by the digital economy.

More than ever, the entire supply chain network needs access to vital information, real-time data analytics, and internal and external collaboration tools to drive this digital transformation.

So, where can businesses turn?

The evolving digital world requires innovative answers. Fortunately, technologies are emerging and converging to help address these challenges faster than ever before. Here are some examples.

Internet of Things

The Internet of Things (IoT) is generating massive volumes of data, connecting everything from the products we buy to the cars we drive to the homes we live in. With products and assets becoming more connected and intelligent, the easier it’ll be to efficiently integrate predictive, automated activities with business processes. And as functions get smarter, new business models – based on data from goods, assets, machines, and vehicles – will begin taking hold, ushering in an era of new and radically adaptable businesses.

Machine learning and artificial intelligence

The wave of Big Data flooding business is helping make assets smarter through embedded, easy-to-consume machine learning capabilities. Machine learning uses sophisticated algorithms to “learn” from, and make sense of, this data. Machine learning is the core of artificial intelligence (AI). It continuously learns and improves, every time you feed in new data by accessing, analyzing and finding patterns in Big Data in a way that is beyond any human capabilities. The ability to continuously monitor data and make precise, intelligent predictions has a massive impact on business success. Organizations are taking advantage of insights based on artificial intelligence and business analytics to support competitive capabilities such as predictive maintenance and usage-based billing.

Predictive analytics

Within Big Data is an abundance of unstructured contextual information – weather, traffic, social media trends, and demand signals – that offer companies real-time, 360-degree views of their supply chains. Businesses are using this information to identify new opportunities and mitigate risks as the entire value chain becomes more transparent. By leveraging this data to support predictive analytics, decision-makers can pinpoint trends and optimize operations faster than ever – a critical competitive advantage in today’s fast-paced environment.

Blockchain

Blockchain, though a young technology, has the potential to accelerate supply chain digitalization by securing transactions, ensuring traceability and chain of ownership, and shoring up cybersecurity. In fact, according to Gartner’s latest Hype Cycle for Supply Chain Execution (July 2017) – Blockchain was rated “transformational” but with a market penetration of “less than 1%.” The key is to identify use cases that involve improved transparency, greater traceability, enhanced performance, and secure transactions.

Laying the foundation for your digital supply chain

With innovative technologies providing a roadmap for the future, companies are beginning to see the full potential of a digital supply chain. To make this a reality, knowing when and how to use and combine these technologies to solve specific business problems is key.

IoT, for example, generates huge amounts of data. Predictive analytics and machine learning process this data to make it smarter. And by leveraging artificial intelligence, the data can be used to automate processes, with blockchain ensuring the processes remain traceable and secure.

To learn more about how to enable a smart, connected digital supply chain of one for today’s digital economy, download the IDC Info brief on  Digital Supply Chain of ONE.

Follow me @howellsrichard

This article originally appeared on Forbes SAPVoice.


About Richard Howells

Richard Howells is a Vice President at SAP responsible for the positioning, messaging, AR , PR and go-to market activities for the SAP Supply Chain solutions.

Channeling Nostradamus: Transform Your Supply Chain Enterprise Into A Predictive Business

Patrick Crampton-Thomas

Predicting the future isn’t easy – except for one man.

The prophet Nostradamus made more than 900 predictions in his lifetime, allegedly foreseeing things from catastrophic events to dangerous political figures.

For your supply chain enterprise to succeed today, you need the same predictive prowess as Nostradamus. You need to know what your customers want before they do. You need to detect and prevent asset failures before they occur.

And you don’t need supernatural powers to do it. All you need are connected products and assets and a real-time network of digital twins.

Your own digital twin isn’t good enough

By creating a virtual representation of your products or assets and capturing data from smart sensors embedded in the physical items, you can gain a comprehensive picture of the real-world performance and operating conditions of the objects.

But while your digital twin is great for collecting and analyzing product or asset data, it isn’t enough. You need an entire network of digital twins to collect, analyze, and most importantly, share data with different departments of your organization, as well as with your external partners.

Capturing Internet of Things (IoT) sensor data through your digital twin network will enable your enterprise, suppliers, manufacturers, logistics companies, service providers, and customers to collaborate throughout the entire product or asset lifecycle, from design and production through operation.

With greater real-time insight into how customers use your products and assets – coupled with machine learning capabilities – you can transform your supply chain enterprise into a predictive business, one that can improve product design, accelerate innovation, and take a more proactive approach to asset maintenance.

The product perspective: Delivering perfection to your customers

The better you understand your products, the better your business can serve consumers. By creating a network of digital twins, you can gain unprecedented insight into how your products perform in the moment. This data will empower your organization to redesign and reengineer your goods and deliver increasingly exceptional products to your customers.

Consider this example: I own a smart lawnmower. While I enjoy an ice-cold beer on the patio, this magical machine furiously hacks away at the grass around me.

All the while, the device feeds a steady stream of usage data to the manufacturer. Whether the mower runs into trouble cutting the grass around my shed or the uneven landscape in my backyard slows down the machine, the manufacturer knows.

As the business detects patterns in how its products operate, it can also predict potential future issues. The company can then collaborate with its R&D team and other partners – which already have access to this same data – to make improvements and address the problems, adding features or capabilities to new models.

I’m already in love with my smart lawnmower. But as the manufacturer continues to perfect the product and its services, I’m only going to develop a deeper devotion to the device – and the company that makes it.

The asset perspective: Providing predictive maintenance and as-a-service business models

Data generated from IoT sensors can open brand-new opportunities for your business. For one, this insight can enable your organization to take a more proactive approach to maintenance, rather than a reactive one.

By analyzing real-time data on how your assets are performing, you can predict system failures before they happen, resulting in substantial cost savings, increased quality, and elevated customer satisfaction.

Say you manage a fleet of rail cars. The data in your digital twin network highlights a sudden irregularity: Train doors are opening and closing a full second slower than they’re supposed to.

Before you notify your service provider of the issue, the company is already fully aware of what’s going on. After all, you both share access to the same data in your digital twin network, so when an issue arises, the service provider doesn’t skip a beat. Your partner can resolve the matter immediately, before it develops into a major problem that requires suspending service – leading to profit losses – and initiating expensive repairs.

IoT sensor data can also help your enterprise create new revenue streams by offering as-a-service business models.

In the past, your job as a wind turbine manufacturer, for example, would have ended once you produced your asset and installed it for your customer. Today, instead of charging a one-time purchase fee, your company can charge based on the amount of power your wind turbine generates.

You’re also responsible for maintaining the asset on behalf of your customer over its entire lifecycle. By analyzing real-time IoT sensor data through your digital twin network, you can determine the operational condition of the asset around the clock and predict when maintenance is required. The moment you detect an issue, you can develop corrective measures to ensure the asset remains online and functional. You can also order spare parts or manage your resources ahead of time.

Predictive supply chain companies have a serious competitive advantage

Some people view connected goods as a joke.

“Why do I need a smart, robotic lawnmower?” they’ll ask incredulously.

But perceptions are changing fast, and more and more consumers are beginning to recognize the power of connected products and assets.

For supply chain companies, connecting your products and assets is no laughing matter. With IoT sensors and a network of digital twins, you and your partners will have the chance to collect and analyze massive volumes of real-time data, giving you the predictive capabilities you need to gain a serious competitive advantage.

By channeling your inner Nostradamus, you can design and produce innovative products that appeal to your customers’ ever-evolving needs and maintain assets that never fail. And once you achieve that, the joke will be on your competitors.

Download this IDC Infobrief to learn more about predictive business and the digital supply chain one.


Patrick Crampton-Thomas

About Patrick Crampton-Thomas

Patrick Crampton-Thomas is Vice President of Supply Chain Solution Management at SAP, with global responsibility for the response and supply orchestration portfolio, based in the UK. This includes the strategy and go-to-market for existing and new supply chain solutions including integrated business planning solutions, supply chain control tower, and supply chain collaboration.

Hack the CIO

By Thomas Saueressig, Timo Elliott, Sam Yen, and Bennett Voyles

For nerds, the weeks right before finals are a Cinderella moment. Suddenly they’re stars. Pocket protectors are fashionable; people find their jokes a whole lot funnier; Dungeons & Dragons sounds cool.

Many CIOs are enjoying this kind of moment now, as companies everywhere face the business equivalent of a final exam for a vital class they have managed to mostly avoid so far: digital transformation.

But as always, there is a limit to nerdy magic. No matter how helpful CIOs try to be, their classmates still won’t pass if they don’t learn the material. With IT increasingly central to every business—from the customer experience to the offering to the business model itself—we all need to start thinking like CIOs.

Pass the digital transformation exam, and you probably have a bright future ahead. A recent SAP-Oxford Economics study of 3,100 organizations in a variety of industries across 17 countries found that the companies that have taken the lead in digital transformation earn higher profits and revenues and have more competitive differentiation than their peers. They also expect 23% more revenue growth from their digital initiatives over the next two years—an estimate 2.5 to 4 times larger than the average company’s.

But the market is grading on a steep curve: this same SAP-Oxford study found that only 3% have completed some degree of digital transformation across their organization. Other surveys also suggest that most companies won’t be graduating anytime soon: in one recent survey of 450 heads of digital transformation for enterprises in the United States, United Kingdom, France, and Germany by technology company Couchbase, 90% agreed that most digital projects fail to meet expectations and deliver only incremental improvements. Worse: over half (54%) believe that organizations that don’t succeed with their transformation project will fail or be absorbed by a savvier competitor within four years.

Companies that are making the grade understand that unlike earlier technical advances, digital transformation doesn’t just support the business, it’s the future of the business. That’s why 60% of digital leading companies have entrusted the leadership of their transformation to their CIO, and that’s why experts say businesspeople must do more than have a vague understanding of the technology. They must also master a way of thinking and looking at business challenges that is unfamiliar to most people outside the IT department.

In other words, if you don’t think like a CIO yet, now is a very good time to learn.

However, given that you probably don’t have a spare 15 years to learn what your CIO knows, we asked the experts what makes CIO thinking distinctive. Here are the top eight mind hacks.

1. Think in Systems

A lot of businesspeople are used to seeing their organization as a series of loosely joined silos. But in the world of digital business, everything is part of a larger system.

CIOs have known for a long time that smart processes win. Whether they were installing enterprise resource planning systems or working with the business to imagine the customer’s journey, they always had to think in holistic ways that crossed traditional departmental, functional, and operational boundaries.

Unlike other business leaders, CIOs spend their careers looking across systems. Why did our supply chain go down? How can we support this new business initiative beyond a single department or function? Now supported by end-to-end process methodologies such as design thinking, good CIOs have developed a way of looking at the company that can lead to radical simplifications that can reduce cost and improve performance at the same time.

They are also used to thinking beyond temporal boundaries. “This idea that the power of technology doubles every two years means that as you’re planning ahead you can’t think in terms of a linear process, you have to think in terms of huge jumps,” says Jay Ferro, CIO of TransPerfect, a New York–based global translation firm.

No wonder the SAP-Oxford transformation study found that one of the values transformational leaders shared was a tendency to look beyond silos and view the digital transformation as a company-wide initiative.

This will come in handy because in digital transformation, not only do business processes evolve but the company’s entire value proposition changes, says Jeanne Ross, principal research scientist at the Center for Information Systems Research at the Massachusetts Institute of Technology (MIT). “It either already has or it’s going to, because digital technologies make things possible that weren’t possible before,” she explains.

2. Work in Diverse Teams

When it comes to large projects, CIOs have always needed input from a diverse collection of businesspeople to be successful. The best have developed ways to convince and cajole reluctant participants to come to the table. They seek out technology enthusiasts in the business and those who are respected by their peers to help build passion and commitment among the halfhearted.

Digital transformation amps up the urgency for building diverse teams even further. “A small, focused group simply won’t have the same breadth of perspective as a team that includes a salesperson and a service person and a development person, as well as an IT person,” says Ross.

At Lenovo, the global technology giant, many of these cross-functional teams become so used to working together that it’s hard to tell where each member originally belonged: “You can’t tell who is business or IT; you can’t tell who is product, IT, or design,” says the company’s CIO, Arthur Hu.

One interesting corollary of this trend toward broader teamwork is that talent is a priority among digital leaders: they spend more on training their employees and partners than ordinary companies, as well as on hiring the people they need, according to the SAP-Oxford Economics survey. They’re also already being rewarded for their faith in their teams: 71% of leaders say that their successful digital transformation has made it easier for them to attract and retain talent, and 64% say that their employees are now more engaged than they were before the transformation.

3. Become a Consultant

Good CIOs have long needed to be internal consultants to the business. Ever since technology moved out of the glasshouse and onto employees’ desks, CIOs have not only needed a deep understanding of the goals of a given project but also to make sure that the project didn’t stray from those goals, even after the businesspeople who had ordered the project went back to their day jobs. “Businesspeople didn’t really need to get into the details of what IT was really doing,” recalls Ferro. “They just had a set of demands and said, ‘Hey, IT, go do that.’”

Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants.

But that was then. Now software has become so integral to the business that nobody can afford to walk away. Businesspeople must join the ranks of the IT consultants. “If you’re building a house, you don’t just disappear for six months and come back and go, ‘Oh, it looks pretty good,’” says Ferro. “You’re on that work site constantly and all of a sudden you’re looking at something, going, ‘Well, that looked really good on the blueprint, not sure it makes sense in reality. Let’s move that over six feet.’ Or, ‘I don’t know if I like that anymore.’ It’s really not much different in application development or for IT or technical projects, where on paper it looked really good and three weeks in, in that second sprint, you’re going, ‘Oh, now that I look at it, that’s really stupid.’”

4. Learn Horizontal Leadership

CIOs have always needed the ability to educate and influence other leaders that they don’t directly control. For major IT projects to be successful, they need other leaders to contribute budget, time, and resources from multiple areas of the business.

It’s a kind of horizontal leadership that will become critical for businesspeople to acquire in digital transformation. “The leadership role becomes one much more of coaching others across the organization—encouraging people to be creative, making sure everybody knows how to use data well,” Ross says.

In this team-based environment, having all the answers becomes less important. “It used to be that the best business executives and leaders had the best answers. Today that is no longer the case,” observes Gary Cokins, a technology consultant who focuses on analytics-based performance management. “Increasingly, it’s the executives and leaders who ask the best questions. There is too much volatility and uncertainty for them to rely on their intuition or past experiences.”

Many experts expect this trend to continue as the confluence of automation and data keeps chipping away at the organizational pyramid. “Hierarchical, command-and-control leadership will become obsolete,” says Edward Hess, professor of business administration and Batten executive-in-residence at the Darden School of Business at the University of Virginia. “Flatter, distributive leadership via teams will become the dominant structure.”

5. Understand Process Design

When business processes were simpler, IT could analyze the process and improve it without input from the business. But today many processes are triggered on the fly by the customer, making a seamless customer experience more difficult to build without the benefit of a larger, multifunctional team. In a highly digitalized organization like Amazon, which releases thousands of new software programs each year, IT can no longer do it all.

While businesspeople aren’t expected to start coding, their involvement in process design is crucial. One of the techniques that many organizations have adopted to help IT and businesspeople visualize business processes together is design thinking (for more on design thinking techniques, see “A Cult of Creation“).

Customers aren’t the only ones who benefit from better processes. Among the 100 companies the SAP-Oxford Economics researchers have identified as digital leaders, two-thirds say that they are making their employees’ lives easier by eliminating process roadblocks that interfere with their ability to do their jobs. Ninety percent of leaders surveyed expect to see value from these projects in the next two years alone.

6. Learn to Keep Learning

The ability to learn and keep learning has been a part of IT from the start. Since the first mainframes in the 1950s, technologists have understood that they need to keep reinventing themselves and their skills to adapt to the changes around them.

Now that’s starting to become part of other job descriptions too. Many companies are investing in teaching their employees new digital skills. One South American auto products company, for example, has created a custom-education institute that trained 20,000 employees and partner-employees in 2016. In addition to training current staff, many leading digital companies are also hiring new employees and creating new roles, such as a chief robotics officer, to support their digital transformation efforts.

Nicolas van Zeebroeck, professor of information systems and digital business innovation at the Solvay Brussels School of Economics and Management at the Free University of Brussels, says that he expects the ability to learn quickly will remain crucial. “If I had to think of one critical skill,” he explains, “I would have to say it’s the ability to learn and keep learning—the ability to challenge the status quo and question what you take for granted.”

7. Fail Smarter

Traditionally, CIOs tended to be good at thinking through tests that would allow the company to experiment with new technology without risking the entire network.

This is another unfamiliar skill that smart managers are trying to pick up. “There’s a lot of trial and error in the best companies right now,” notes MIT’s Ross. But there’s a catch, she adds. “Most companies aren’t designed for trial and error—they’re trying to avoid an error,” she says.

To learn how to do it better, take your lead from IT, where many people have already learned to work in small, innovative teams that use agile development principles, advises Ross.

For example, business managers must learn how to think in terms of a minimum viable product: build a simple version of what you have in mind, test it, and if it works start building. You don’t build the whole thing at once anymore.… It’s really important to build things incrementally,” Ross says.

Flexibility and the ability to capitalize on accidental discoveries during experimentation are more important than having a concrete project plan, says Ross. At Spotify, the music service, and CarMax, the used-car retailer, change is driven not from the center but from small teams that have developed something new. “The thing you have to get comfortable with is not having the formalized plan that we would have traditionally relied on, because as soon as you insist on that, you limit your ability to keep learning,” Ross warns.

8. Understand the True Cost—and Speed—of Data

Gut instincts have never had much to do with being a CIO; now they should have less to do with being an ordinary manager as well, as data becomes more important.

As part of that calculation, businesspeople must have the ability to analyze the value of the data that they seek. “You’ll need to apply a pinch of knowledge salt to your data,” advises Solvay’s van Zeebroeck. “What really matters is the ability not just to tap into data but to see what is behind the data. Is it a fair representation? Is it impartial?”

Increasingly, businesspeople will need to do their analysis in real time, just as CIOs have always had to manage live systems and processes. Moving toward real-time reports and away from paper-based decisions increases accuracy and effectiveness—and leaves less time for long meetings and PowerPoint presentations (let us all rejoice).

Not Every CIO Is Ready

Of course, not all CIOs are ready for these changes. Just as high school has a lot of false positives—genius nerds who turn out to be merely nearsighted—so there are many CIOs who aren’t good role models for transformation.

Success as a CIO these days requires more than delivering near-perfect uptime, says Lenovo’s Hu. You need to be able to understand the business as well. Some CIOs simply don’t have all the business skills that are needed to succeed in the transformation. Others lack the internal clout: a 2016 KPMG study found that only 34% of CIOs report directly to the CEO.

This lack of a strategic perspective is holding back digital transformation at many organizations. They approach digital transformation as a cool, one-off project: we’re going to put this new mobile app in place and we’re done. But that’s not a systematic approach; it’s an island of innovation that doesn’t join up with the other islands of innovation. In the longer term, this kind of development creates more problems than it fixes.

Such organizations are not building in the capacity for change; they’re trying to get away with just doing it once rather than thinking about how they’re going to use digitalization as a means to constantly experiment and become a better company over the long term.

As a result, in some companies, the most interesting tech developments are happening despite IT, not because of it. “There’s an alarming digital divide within many companies. Marketers are developing nimble software to give customers an engaging, personalized experience, while IT departments remain focused on the legacy infrastructure. The front and back ends aren’t working together, resulting in appealing web sites and apps that don’t quite deliver,” writes George Colony, founder, chairman, and CEO of Forrester Research, in the MIT Sloan Management Review.

Thanks to cloud computing and easier development tools, many departments are developing on their own, without IT’s support. These days, anybody with a credit card can do it.

Traditionally, IT departments looked askance at these kinds of do-it-yourself shadow IT programs, but that’s changing. Ferro, for one, says that it’s better to look at those teams not as rogue groups but as people who are trying to help. “It’s less about ‘Hey, something’s escaped,’ and more about ‘No, we just actually grew our capacity and grew our ability to innovate,’” he explains.

“I don’t like the term ‘shadow IT,’” agrees Lenovo’s Hu. “I think it’s an artifact of a very traditional CIO team. If you think of it as shadow IT, you’re out of step with reality,” he says.

The reality today is that a company needs both a strong IT department and strong digital capacities outside its IT department. If the relationship is good, the CIO and IT become valuable allies in helping businesspeople add digital capabilities without disrupting or duplicating existing IT infrastructure.

If a company already has strong digital capacities, it should be able to move forward quickly, according to Ross. But many companies are still playing catch-up and aren’t even ready to begin transforming, as the SAP-Oxford Economics survey shows.

For enterprises where business and IT are unable to get their collective act together, Ross predicts that the next few years will be rough. “I think these companies ought to panic,” she says. D!


About the Authors

Thomas Saueressig is Chief Information Officer at SAP.

Timo Elliott is an Innovation Evangelist at SAP.

Sam Yen is Chief Design Officer at SAP and Managing Director of SAP Labs.

Bennett Voyles is a Berlin-based business writer.

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

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Survey: Four Ways Machine Learning Will Disrupt Your Business

Dan Wellers and Dirk Jendroska

We are entering the era of the machine learning enterprise, in which this subset of artificial intelligence (AI) capabilities will revolutionize operating models, shake up staffing methods, upend business models, and potentially alter the nature of competition itself. The adoption of machine learning capabilities will be limited only by an organization’s ability to change – but not every company will be willing or able to make such a radical shift.

Very soon, the difference between the haves and the have-nots of machine learning will become clear. “The disruption over the next three to five years will be massive,” says Cliff Justice, principal in KPMG’s Innovation and Enterprise Solutions team. Companies hanging onto their legacy processes will struggle to compete with machine learning enterprises able to compete with a fraction of the resources and entirely new value propositions.

For those seeking to be on the right side of the disruption, a new survey, conducted by SAP and the Economist Intelligence Unit (EIU), offers a closer look at organizations we’ve identified as the Fast Learners of machine learning: those that are already seeing benefits from their implementations.

Machine learning is unlike traditional programmed software. Machine learning software actually gets better – autonomously and continuously – at executing tasks and business processes. This creates opportunities for deeper insight, non-linear growth, and levels of innovation previously unseen.

Given that, it’s not surprising that machine learning has evolved from hype to have-to-have for the enterprise in seemingly record time. According to the SAP/EIU survey, more than two-thirds of respondents (68%) are already experimenting with it. What’s more, many of these organizations are seeing significantly improved performance across the breadth of their operations as a result, and some are aiming to remake their businesses on the back of these singular, new capabilities.

So, what makes machine learning so disruptive? Based on our analysis of the survey data and our own research, we see four primary reasons:

1. It’s probabilistic, not programmed

Machine learning uses sophisticated algorithms to enable computers to “learn” from large amounts of data and take action based on data analysis rather than being explicitly programmed to do something. Put simply, the machine can learn from experience; coded software does not. “It operates more like a human does in terms of how it formulates its conclusions,” says Justice.

That means that machine learning will provide more than just a one-time improvement in process and productivity; those improvements will continue over time, remaking business processes and potentially creating new business models along the way.

2. It creates exponential efficiency

When companies integrate machine learning into business processes, they not only increase efficiency, they are able to scale up without a corresponding increase in overhead. If you get 5,000 loan applications one month and 20,000 the next month, it’s not a problem, says Sudir Jha, head of product management and strategy for Infosys; the machines can handle it.

3. It frees up capital – financial and human

Because machine learning can be used to automate any repetitive task, it enables companies to redeploy resources to areas that make the organization more competitive, says Justice. It also frees up the employees within an organization to perform higher-value, more rewarding work. That leads to reduced turnover and higher employee satisfaction. And studies show that happier employees lead to higher customer satisfaction and better business results.

4. It creates new opportunities

AI and machine learning can offer richer insight, deeper knowledge, and predictions that would not be possible otherwise. Machine learning can enable not only new processes, but entirely new business models or value propositions for customers – “opportunities that would not be possible with just human intelligence,” says Justice. “AI impacts the business model in a much more disruptive way than cloud or any other disruption we’ve seen in our lifetimes.”

Machine learning systems alone, however, will not transform the enterprise. The singular opportunities enabled by these capabilities will only occur for companies that dedicate themselves to making machine learning part of a larger digital transformation strategy. The results of the SAP/EIU survey explain the makeup of the evolving machine learning enterprise. We’ve identified key traits important to the success of these machine-learning leaders that can serve as a template for others as well as an overview of the outcomes they’re already seeing from their efforts.

Learn more and download the full study here.  

 


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.

Dirk Jendroska

About Dirk Jendroska

Dr. Dirk Jendroska is Head of Strategy and Operations Machine Learning at SAP. He supports the vision of SAP Leonardo Machine Learning to enable the intelligent enterprise by making enterprise applications intelligent. He leads a team working on machine learning strategy, marketing and communications.