For more than 43 years, SAP has been helping companies to run their mission- critical business processes across all areas of business. The challenge is, as it always has been, to do the most sophisticated things in the simplest ways. The New Economy spoke to Bernd Leukert, member of SAP’s executive board, about how the company is driving a digital transformation in business.
How important is the World Economic Forum to SAP’s history?
One of the hottest topics during the World Economic Forum in Davos last year was the global impact of the digital transformation, including the Internet of Things, on a new quality in innovation across all industries.
Davos is a unique opportunity to meet with customers, partners, and politicians to talk about ideas, visions and impact. Last year I also had the chance to speak with many leaders about their views on digital-driven innovation. They all agreed that today, technology and software are the most important key drivers of new ideas, innovation, businesses, and business models.
What do you feel are the biggest challenges facing global business?
I can narrow this down to one word: complexity. When companies started their business, it was all about one idea resulting in one promise driven by one core competency. Some ideas were so powerful that they resulted in major enterprises. And there they are now – in a big enterprise. They are there with all that comes with it: many more ideas, promises, competencies, resulting in many more products and customers. That is not all: consumer behaviors significantly changed, accompanied by an unknown global presence and the amount of data they have to deal with. They changed the face of the world with their one simple idea, with their promise. But they need to tackle what comes with it: more administration, more management – what generally makes them slower and less responsive.
We estimate that, in an average Fortune 500 company, somewhere between 25 and 30 percent of the workforce is not directly connected with the product or the customer. This does not mean that these people are not doing a fine and valuable job. It just serves as a measure how much more effort it is now to run such a company at global scale.
But these processes and standards, this complexity, makes a company rigid and constrains innovation. It makes it very hard to change things, to adapt, to create, to innovate. And this is exactly what businesses need to do in order to survive in today’s digital economy: they have to innovate, re-think their business and their business models.
How do you see the digital economy progressing in the coming years?
The digital economy is no hype; it’s a reality. You can see it everywhere. Every company will experience a much higher percentage of their value chain being delivered by IT systems than in the past. Software is dramatically changing how the idea of businesses is being lived.
Digitisation and the Internet of Things will be increasingly significant in the business world over the coming years. Enterprises will discover that solutions based on new layers of connectivity can transform their operational processes, unlocking enormous value through greater efficiency. These enterprises will also find themselves with opportunities to transform their customers’ experiences.
How is SAP driving this digital transformation of business?
With everything we do, we enable our customers to be successful in the digital economy. We want to be the enabler for our customers to win in the digital economy. Software will become the new kingmaker, and it takes three steps to make this real. First, enterprise software must enable companies to spend less time with non-value driving tasks in their business and less effort to keep the lights on. That’s why we built and run SAP S/4HANA. That is part of what we call ‘run simple’.
Today, it is all about selling outcomes rather than products. This requires the tight integration of customer, processes and products
Second, companies need to actively embrace the digital economy and build differentiating processes with software making use of big data, cloud, and the Internet of Things. That’s why we built the SAP HANA Cloud Platform. On that platform, not only SAP, but also partners and customers will build new-edge applications. These edge applications will be interwoven with the new, flexible core – SAP S/4HANA.
Third, we are on a journey to lead the digitisation of our customers’ industries. We want to ensure that they emerge as industry leaders who are creating disruption around them, not becoming victims to it. Digitisation is driving the modernisation of the work landscape, which will transform the experiences of people across all different walks of the business, whether it is someone doing repairs, the person managing a retail store, or a sales associate just about to walk into a customer meeting. Every one of these roles needs to be rethought as digital experiences that are real-time and highly contextual.
Achieving this mission will be an industry effort. It is not just SAP and our end-to-end solutions that will drive this digital transformation; it will take a broader ecosystem of customers and partners to rethink and reengineer all those experiences. This means that there has to be a strong development platform in play, not just for SAP to build its own software, but a platform that can serve the entire ecosystem.
What role does SAP see itself as playing in the digital economy?
With 74 percent of the world’s transaction revenue touching an SAP system, in my opinion we play a crucial role. I would even say we serve as key innovation enabler for our customers in the digital transformation.
One of the major drivers of digitisation is the Internet of Things, a technology trend with particularly high business potential that influences society and changes our daily lives. The Internet of Things has the power to optimise existing business processes to achieve bottom line results in the short term, while completely transforming businesses in the long-term to create new products and revenue models in a fully connected world. It is the biggest opportunity to not just renew the existing business, but to build new business as a leading innovator.
Our solutions for the Internet of Things enable customers to continuously generate data-driven intelligence from connected things that allow them to link core business processes to new business models and customer experience. They bring together two worlds: the world of technology, sensors, and machine data with existing business processes, applications, and practices to further drive automation. They bring together the real and the virtual world.
Helping our customers put the Internet of Things to work for their businesses requires us to work with a host of new partners. Never before have so many different types of vendors been required to support new ways of doing business. While our technologies and applications will play a critical role in this environment, we have a deep appreciation for members of our community that will help us create this new value for our customers.
What have been SAP’s biggest achievements in recent years?
Once in a while, you not only have the chance to reinvent your own business, but to reinvent a whole market by reinventing ourselves.
We have reinvented our platform and have led the IT market into an in-memory based platform, where structured and unstructured data can be processed on one platform. We have also reinvented the core application business with SAP S/4HANA and our entire solution portfolio in the digital framework by enhancing the digital core with software as a service line of business solutions like SuccessFactors in human capital management; and SAP Cloud for customer and hybrid commerce in customer relationship management (CRM). When we founded the software category ERP, it basically was the electronic form of keeping your books, controlling your warehouse. It virtually documented what was happening in an enterprise. You still see these roots clearly in applications today.
Software can do so much more. Software can add so much more value: it can work intelligently with the data in the entire company – it can help solve problems and it ensures transparency as we can connect this virtual enterprise with real-world data. It can transform from a system of records towards a decision support system, where options are simulated and business impact is calculated for end users. You can say that the brain of end users is integrated into the system via software algorithms.
Let’s take production planning as an example. In the past, the systems identified a problem and offered all the transactions to solve them. But the actual work, the intelligence, had to be accomplished by the user – figuring out how to best solve the problem, whether that be to delay a shipment, source raw materials from another vendor or plant or similar. Now the software can actually propose solutions that have been evaluated for their financial impact – or even get executed automatically. And that’s what SAP S/4HANA is all about.
SAP S/4HANA crosses any silos in a company. It is like the crystal ball for a company. You can flexibly, easily access data from any function in your company and make real sense out of it – and obviously in real-time. It makes the whole value chain transparent.
How is SAP helping companies engage better with their customers?
Today, we see increasing amounts of data, generated in the last few years. This is where the digital transformation starts. In fact, about 90 percent of all global data has been generated in just the past two years. The worldwide amount of data is to increase tenfold until 2020.
In the digital age, the customer is the epicentre of change. Again, consumer behaviours have significantly changed. They expect the ability to interact with companies anywhere and anytime. Making the customer experience and interaction seamless across all channels is more crucial than ever. Addressing consumers at all points of their journey, on the right device, at the right time, with the right, personalised offer, is key to success.
Every customer is engaging differently – across a range of channels and touchpoints – and this changes every time customers engage with a business. This creates significant complexity for the enterprise. Companies need to develop a new understanding of consumers: by gaining real-time insights into the context of consumers, they can deliver highly individualised and convenient customer experiences across all channels.
We are also talking about highly individualised products here. If companies really want to be successful in an environment, they need to make sure to tackle it end-to-end. It is highly inefficient to have different solutions for different products. That’s why we offer customers the platform and the applications, and not only one or the other.
This means that we have redefined CRM. For example, with the solutions we announced in fall 2015, we are going beyond traditional CRM, encompassing marketing, sales, service, and omnichannel commerce – all integrated. We are supporting end-to-end customer engagement in a way that none of our competitors can.
In what ways are working conditions being transformed by increased connectivity and flexibility?
Increasing digitisation implies new ways of working and learning. In a smart factory, where human beings, machines, and resources work together in a network, there will be a significant need for qualification: existing employees need to be enabled to study further. Also, the younger generation is educated well academically and professionally, but insufficient for digital requirements.
At the same time, a smart factory creates additional positions, for example when we talk about the development of systems or services that are linked to products. The flexible processes also have to be managed. All this creates an extremely interconnected and diverse working environment that offers each and every employee all kinds of different tasks. In the future, it will not only be about qualification, but about the ability to be agile.
With our new digital learning offering as part of the SuccessFactors suite, we enable companies to accelerate learning, improve quality of content, and allow faster penetration of changes.
How will the Internet of Things revolutionise business?
The number of internet users worldwide has grown enormously over the last 15 years and is now estimated to be close to three billion. Even more striking is the vast array of intelligent devices that are now connecting to the vast information network around them.
Estimates vary, but many analysts speculate that the number of connected devices could be more than 50 billion by 2020 – extending the reach of software-enabled insight by an order of magnitude. Along with the growth in connected devices comes a wide array of opportunity.
Insight can be offered to businesses and consumers wherever products exist. Devices can analyse their own contextual information and advise customers about optimal ways they can be put to use. We have long envisioned these types of intelligent devices – now they are a reality thanks to recent gains in the realms of connectivity, sensor technology, and real-time data processing for a wide array of products. Today, it is all about selling outcomes rather than products. This requires the tight integration of customer, processes and products.
Adding intelligence to an ever-expanding network of connected devices will create tangible value for enterprises around the globe. No matter how many devices will be connected by 2020, the implication is the same: the way everyone does business will change. The Internet of Things will allow companies to connect their core business systems to devices at the edge of the network, transform business processes to gain operational efficiencies, and reimagine their business models from the ground up. As an example, we are enabling companies to introduce business models like pay-per-use across all their partners.
What ambitions does SAP have for the future?
Our strategy is simple: we want to become the cloud company powered by SAP HANA. ‘Run Simple’ is our organisational principle in driving and executing on our strategy. Because ‘run’ is what we do. We run more than 296,000 of the most relevant organisations in the world.
Our innovative solutions are a strategic enabler in today’s global economy. We are uniquely positioned to support customers to solve the complex challenges they are facing today. With SAP HANA, we are simplifying IT landscapes, technology, and business models. We further simplify how customers consume our solutions by bringing them onto our cloud. Our customers are at the heart of everything we do.
Our software is interlocked with their companies – we run their businesses. That’s why it is a given that we will stay close to our customers and continuously adapt to changing market demands both in our industry and our customers’ markets. We are both a driver and an enabler of the digital transformation.
Part of the series: Our Digital Planet: Data-Driven Business Frameworks Are the Future. In a Hyperconnected World, the Collaborator Is King.
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