How Klöckner’s Finance Team Is Redefining The Steel Industry

Michael Diehl

I had an opportunity to meet with Dr. Oliver Falk, CFO of Klöckner Metals Europe, to learn how Klöckner’s finance team is redefining the steel industry.

The steel market has experienced its share of challenges over the last decade. Back in 2008, it suffered a crippling crisis of falling prices and shrinking creditor confidence. And for steel companies, thriving in this climate required unprecedented ingenuity and reinvention. To safeguard themselves from such turmoil, companies such as Klöckner & Co. have maintained this mindset as they take on digital transformation.

Operating across 200 locations in 14 countries and serving more than 140,000 customers, Klöckner is one of the largest producer-independent distributors of steel and metal products and one of the leading steel service center companies worldwide. Its 9,200 employees generate more than €6 billion in annual sales. To maintain its industry leadership, the distributor quickly realized that it needed to ride the wave of digital transformation that is happening in the market and beyond to not get “Uber-ized” with a new market entrant running a next-generation business model.

“We have to redefine our business model. And one of the primary targets is to set up an open digital industry platform,” said Oliver Falk, CFO of Klöckner Metals Europe (which represents a significant share of Klöckner’s revenues).

Klöckner’s sales and operations teams were especially interested in this effort because it meant an opportunity to receive data and insights faster and more often. And of course, not only did they want numbers, but they also wanted to know the story behind them.

For its finance area, this demand spotlighted a need for new requirements, especially for controlling. Although the role of the CFO has always been important for Klöckner, “it might become more important. That’s because the knowledge of data and the ability to analyze that information to gain proper business insights makes the CFO even more requested than before,” Falk stated.

Looking for more consistent data based on a single source of truth, and the possibility to analyze data every second, Klöckner found a perfect match with SAP.

Thanks to its implementation of the SAP HANA platform, the response time for major transactions is now five times faster than before. The number of clicks and time needed to conduct postings are significantly reduced, resulting in a much easier and more efficient way of working. In fact, incoming payments and invoices are processed automatically. More important, costs related to accounting activities continue to shrink as Klöckner becomes more efficient.

“Live data gives us the opportunity to take a critical look at the business at any time. We do not need to wait until the month’s end and monthly closing. We can analyze data on request every time. And since the data does not need to be reconciled between different modules as it is residing in the single unified ledger, the quality of the data is significantly improved,” said Falk. “Implementing SAP HANA-based financial management was a big step to becoming a live business.”

To learn more from Oliver Falk and Klöckner, check out this video.

For more insights from other organizations on the benefits of the latest technologies, download the infographic and read the report, “Making the Business Case: Real CFOs Discuss the Benefits of SAP S/4HANA Finance.

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


Michael Diehl

About Michael Diehl

Michael Diehl is the director of Global Finance Audience Marketing at SAP. His specialties include go-to-market strategy, thought leadership, demand generation, digital marketing, messaging, and positioning.

How Newton Can Help Manage And Change Strategy In FP&A

Brian Kalish

Part 16 in the Dynamic Planning Series

I think it has to do with being formally trained as an engineer (or maybe I’m just a geek), but when I see the words “manage” or “change,” I immediately jump back in time to my undergrad physics classes and ponder Newton’s first and third laws of motion.

Newton’s first law of motion (also known as the law of inertia) states, “an object at rest stays at rest, and an object in motion stays in motion with the same speed and in the same direction unless acted upon by an unbalanced force.” Newton’s third law is, “for every action, there is an equal and opposite reaction.”

It is important to keep Newton in mind when you have to manage or change strategy in FP&A, because there will be some force that causes a change to be required, and there will be reactions to the change you implement.

Planning for change

One of best tools one can use to maximize the likelihood of implementing change to a strategy successfully is to plan, plan, and plan some more. Developing a change management strategy for FP&A provides purpose and direction.

Every FP&A change-management strategy must include an understanding of the unique characteristics of the change, a supporting structure to implement the strategy, and analysis of the risks and potential resistance to the change.

When implementing a change to FP&A strategy, it is important to keep in mind “ADKAR” (awareness, desire, knowledge, ability, and reinforcement). Can the organization answer the following questions in the affirmative:

  • Is there the Awareness of the need for change?
  • Is there the Desire to participate in and support the change?
  • Is there the Knowledge about how to change?
  • Is there the Ability to implement the required skills and behaviors?
  • Is there Reinforcement to sustain the change?

The process of change can be broken down into three parts:

  • Preparing for change
  • Managing the change
  • Reinforcing the change

Preparing for change incorporates defining the FP&A change-management strategy, preparing the change management team, and developing the sponsorship model. Managing the change involves developing the plans and taking action to implement them. Reinforcing the change means collecting and analyzing feedback, diagnosing the gaps and managing any resistance, and implementing corrective actions and celebrating success.

Start at the top

In my experience, there are a number of actions an organization should take to maximize the likelihood of success when there is a need to change FP&A strategy and then manage that change.

An organization needs to lead with its culture. The organization needs to address and overcome any cultural resistance and leverage cultural support for change. As Lou Gerstner, former CEO of IBM famously stated, “culture is everything.” To be successful, the organization needs to start at the top, where almost all successful change originates. The advance work must be done to ensure that everyone agrees about the case for the FP&A change and the particulars for implementing it.

Every layer of the organization needs to be involved in the change and take ownership. Often, it is the midlevel and front-line people who can make or break the effort.

Engage employees

The organization needs to make the rational and emotional need for change at the same time. To truly engage employees, in addition to presenting the business rationale, management needs to connect with staff in a way that generates genuine commitment to the change.

The organization should leverage both formal and informal solutions. Formal solutions include structure and compensation, while an informal solution is more reflected in the culture of the organization.

Organizations must also focus on assessing and adapting to what is and isn’t working throughout the entire change process, just like the argument we have made about adopting dynamic rather than static planning. The world is moving too fast, and the velocity and magnitude of change are too great not to be constantly monitoring the situation and making adjustments in real time.

To learn more about how dynamic planning lets you update your financial forecast to react to events, click the button in the banner on the top right to download the research paper from Aberdeen Group.

We will be addressing these issues and more at the many FP&A roundtables and conferences we will be hosting in 2018. We hope to see you at the SAP-Centric Financials conference in Plano, Texas (Dallas area) March 19-21, and at SAPPHIRE NOW in Orlando June 5–7.

2018 will be a busy year with FP&A Roundtables in Chicago, Boston, San Diego, Atlanta, San Francisco, Dallas/Fort Worth, Las Vegas, Jeddah, Hong Kong, London, Denver, Charlotte, Raleigh, New York City, Singapore, Bahrain, Kuwait, Frankfurt, Dubai, Kuala Lumpur, Prague, and many other locations around the world to support the global FP&A community.

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


Brian Kalish

About Brian Kalish

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

Disclosure Effectiveness Weakened By Complicated Ownership

Olivia Berkman

Financial disclosures should be tailored to the business and written clearly and concisely for the investor. They shouldn’t be verbose, overly complex reports that don’t meet the investors’ needs and are the product of legal and compliance departments.

“Risk factors have taken on the dynamic of sitting in the corner of the legal department, and the corner of the financial reporting, and have become more of [a] protective type of communication rather than [a] communicative document,” said Sam Eldessouky, senior vice president and corporate controller, Valeant Pharmaceuticals, at a recent Pacesetters in Financial Reporting presentation in New York City.

Indeed, as a result of differing objectives of the legal department and financial reporting, disclosures can fail to be the effective tools for investors they should be. To combat this, disclosures should be continuously updated, based on factors unique to the business, concise, and written in plain English.

According to a recent study by the Investor Responsibility Research Center Institute (IRRCi) and EY, “There is an opportunity for companies to streamline language around common risk factors and to offer more insightful, company-specific information. For risks that are particularly important, a company could enhance its disclosures by providing more descriptions of its risk mitigation efforts.”

Tailored to the company

Risk factors should be very company-specific and not boilerplate. In practice, however, many are generic, unclear, overly voluminous, and not particularly helpful in understanding the true risks of the company.

Unfortunately, many companies view disclosure preparation as a check-the-box type of exercise, instead of detailing the unique risk factors that are relevant and representative of their business.

Panelist Jonathan Nus, executive director, EY, shared that, although comparability exists within an industry, in looking at disclosures of the top 10 companies within an industry, risk factors are overly consistent and comparable because they copy each other.

“I think where it falls apart a lot of times is that risk factors are treated more like a photograph rather than a movie. The disconnect is really between risk factors and a risk profile of a company. Once upon a time, it was very easy to compartmentalize companies within a sector.”

Companies can also fall into the habit of simply carrying forward disclosures from year to year without reassessing their continued relevance. “To the extent that the business profile and the risk profile of a company is changing, the risk factors just aren’t keeping up,” said Nus. “I think what’s happening is that there are some companies that are taking the lead in terms of connecting the dots, and making sure that the KPIs are aligned, the business model is aligned, their key metrics are aligned, but I think a lot of times it’s still treated in silo. I think that’s a major challenge.”

Clearly and concisely for the investor

Zeroing in on the risk factors that are unique to the business is an effective way that companies are reducing the number of risk factors. By identifying risks specific only to them, or combining some closely related risks, readers can better focus on and process the information that matters most to them and help streamline financial reports.

Valeant’s Eldessouky said companies should be thinking about the 10Q as not just a compliance document, but as a communicative document. The focus should be: What kinds of information around risk and risk management are investors looking for?

Moderator Keith F. Higgins, chair, Securities & Governance Practice, Ropes & Gray, and former director, SEC Division of Corporation Finance, explained, “If I were an investor, I’d want to know: How is the company going to be run in the longer term so that my investment will continue to grow and the company I’ve invested in will be able to respond effectively to things that it can’t always anticipate?”

On the lengths of disclosures, Eldessouky shared, “It is growing: 22 risk factors on average, and the average section in the filing is eight pages long. Another study found that the length of risk factor disclosure increased 85% relative to the rest of the 10K. It’s an area where there’s certainly a lot being disclosed. I still think they are somewhat overwhelming.”

Who owns the disclosure?

A reason that the length and complexity of disclosures has increased is that the preparers may have different objectives. On the legal side, disclosed risk factors can serve as mitigating factors if a lawsuit is brought against the company (e.g., if the securities don’t perform as well as expected, the investor was warned of such an outcome). On the financial reporting side, risk factors are intended to describe possible circumstances that could make investing in the company risky or speculative.

“When it comes to risk, there’s not one measure,” said Eldessouky. Members of the financial reporting team, the legal team, and operations may have different points of view on what is risky, and how risky it is. “Trying to balance the different views, what the risk is and putting it into risk factors, I think that’s where the disconnect starts happening in terms of where we are today in terms of how companies outline risk factors.”

Lori Zyskowski, partner, Gibson and Dunn, admitted that risk-factor disclosure is largely driven by the fear of securities litigation. Risk factors are used by companies to protect themselves from being sued for making statements about the future, such as forward-looking statements.

“There’s boilerplate forward-looking statement language in everybody’s 10K that looks at all of the factors and makes sure that the risk factors are also covered,” said Zyskowski. “The problem with that is it enhances the desire to make the risk-factor disclosure longer, and to make it as all-encompassing as possible. The issue is: It’s not as effective if it’s not tied to the company’s actual risks, and if it’s boilerplate and not specific. Quite frankly, the requirements under the rules are to make it specific to the company and not boilerplate. What companies can do is really think about whether or not the risks that they’re listing and describing are truly risks of the company, or whether they’re remote risks.”

Learn how to simplify GRC with automated functions that integrate with your existing processes.

This article originally appeared in FEI Daily and is republished by permission.


Olivia Berkman

About Olivia Berkman

Olivia Berkman is the managing editor of FEI Daily, Financial Executives International’s daily newsletter delivering financial, business, and management news, trends, and strategies.

More Than Noise: Digital Trends That Are Bigger Than You Think

By Maurizio Cattaneo, David Delaney, Volker Hildebrand, and Neal Ungerleider

In the tech world in 2017, several trends emerged as signals amid the noise, signifying much larger changes to come.

As we noted in last year’s More Than Noise list, things are changing—and the changes are occurring in ways that don’t necessarily fit into the prevailing narrative.

While many of 2017’s signals have a dark tint to them, perhaps reflecting the times we live in, we have sought out some rays of light to illuminate the way forward. The following signals differ considerably, but understanding them can help guide businesses in the right direction for 2018 and beyond.

When a team of psychologists, linguists, and software engineers created Woebot, an AI chatbot that helps people learn cognitive behavioral therapy techniques for managing mental health issues like anxiety and depression, they did something unusual, at least when it comes to chatbots: they submitted it for peer review.

Stanford University researchers recruited a sample group of 70 college-age participants on social media to take part in a randomized control study of Woebot. The researchers found that their creation was useful for improving anxiety and depression symptoms. A study of the user interaction with the bot was submitted for peer review and published in the Journal of Medical Internet Research Mental Health in June 2017.

While Woebot may not revolutionize the field of psychology, it could change the way we view AI development. Well-known figures such as Elon Musk and Bill Gates have expressed concerns that artificial intelligence is essentially ungovernable. Peer review, such as with the Stanford study, is one way to approach this challenge and figure out how to properly evaluate and find a place for these software programs.

The healthcare community could be onto something. We’ve already seen instances where AI chatbots have spun out of control, such as when internet trolls trained Microsoft’s Tay to become a hate-spewing misanthrope. Bots are only as good as their design; making sure they stay on message and don’t act in unexpected ways is crucial.

This is especially true in healthcare. When chatbots are offering therapeutic services, they must be properly designed, vetted, and tested to maintain patient safety.

It may be prudent to apply the same level of caution to a business setting. By treating chatbots as if they’re akin to medicine or drugs, we have a model for thorough vetting that, while not perfect, is generally effective and time tested.

It may seem like overkill to think of chatbots that manage pizza orders or help resolve parking tickets as potential health threats. But it’s already clear that AI can have unintended side effects that could extend far beyond Tay’s loathsome behavior.

For example, in July, Facebook shut down an experiment where it challenged two AIs to negotiate with each other over a trade. When the experiment began, the two chatbots quickly went rogue, developing linguistic shortcuts to reduce negotiating time and leaving their creators unable to understand what they were saying.

Do we want AIs interacting in a secret language because designers didn’t fully understand what they were designing?

The implications are chilling. Do we want AIs interacting in a secret language because designers didn’t fully understand what they were designing?

In this context, the healthcare community’s conservative approach doesn’t seem so farfetched. Woebot could ultimately become an example of the kind of oversight that’s needed for all AIs.

Meanwhile, it’s clear that chatbots have great potential in healthcare—not just for treating mental health issues but for helping patients understand symptoms, build treatment regimens, and more. They could also help unclog barriers to healthcare, which is plagued worldwide by high prices, long wait times, and other challenges. While they are not a substitute for actual humans, chatbots can be used by anyone with a computer or smartphone, 24 hours a day, seven days a week, regardless of financial status.

Finding the right governance for AI development won’t happen overnight. But peer review, extensive internal quality analysis, and other processes will go a long way to ensuring bots function as expected. Otherwise, companies and their customers could pay a big price.

Elon Musk is an expert at dominating the news cycle with his sci-fi premonitions about space travel and high-speed hyperloops. However, he captured media attention in Australia in April 2017 for something much more down to earth: how to deal with blackouts and power outages.

In 2016, a massive blackout hit the state of South Australia following a storm. Although power was restored quickly in Adelaide, the capital, people in the wide stretches of arid desert that surround it spent days waiting for the power to return. That hit South Australia’s wine and livestock industries especially hard.

South Australia’s electrical grid currently gets more than half of its energy from wind and solar, with coal and gas plants acting as backups for when the sun hides or the wind doesn’t blow, according to ABC News Australia. But this network is vulnerable to sudden loss of generation—which is exactly what happened in the storm that caused the 2016 blackout, when tornadoes ripped through some key transmission lines. Getting the system back on stable footing has been an issue ever since.

Displaying his usual talent for showmanship, Musk stepped in and promised to build the world’s largest battery to store backup energy for the network—and he pledged to complete it within 100 days of signing the contract or the battery would be free. Pen met paper with South Australia and French utility Neoen in September. As of press time in November, construction was underway.

For South Australia, the Tesla deal offers an easy and secure way to store renewable energy. Tesla’s 129 MWh battery will be the most powerful battery system in the world by 60% once completed, according to Gizmodo. The battery, which is stationed at a wind farm, will cover temporary drops in wind power and kick in to help conventional gas and coal plants balance generation with demand across the network. South Australian citizens and politicians largely support the project, which Tesla claims will be able to power 30,000 homes.

Until Musk made his bold promise, batteries did not figure much in renewable energy networks, mostly because they just aren’t that good. They have limited charges, are difficult to build, and are difficult to manage. Utilities also worry about relying on the same lithium-ion battery technology as cellphone makers like Samsung, whose Galaxy Note 7 had to be recalled in 2016 after some defective batteries burst into flames, according to CNET.

However, when made right, the batteries are safe. It’s just that they’ve traditionally been too expensive for large-scale uses such as renewable power storage. But battery innovations such as Tesla’s could radically change how we power the economy. According to a study that appeared this year in Nature, the continued drop in the cost of battery storage has made renewable energy price-competitive with traditional fossil fuels.

This is a massive shift. Or, as David Roberts of news site Vox puts it, “Batteries are soon going to disrupt power markets at all scales.” Furthermore, if the cost of batteries continues to drop, supply chains could experience radical energy cost savings. This could disrupt energy utilities, manufacturing, transportation, and construction, to name just a few, and create many opportunities while changing established business models. (For more on how renewable energy will affect business, read the feature “Tick Tock” in this issue.)

Battery research and development has become big business. Thanks to electric cars and powerful smartphones, there has been incredible pressure to make more powerful batteries that last longer between charges.

The proof of this is in the R&D funding pudding. A Brookings Institution report notes that both the Chinese and U.S. governments offer generous subsidies for lithium-ion battery advancement. Automakers such as Daimler and BMW have established divisions marketing residential and commercial energy storage products. Boeing, Airbus, Rolls-Royce, and General Electric are all experimenting with various electric propulsion systems for aircraft—which means that hybrid airplanes are also a possibility.

Meanwhile, governments around the world are accelerating battery research investment by banning internal combustion vehicles. Britain, France, India, and Norway are seeking to go all electric as early as 2025 and by 2040 at the latest.

In the meantime, expect huge investment and new battery innovation from interested parties across industries that all share a stake in the outcome. This past September, for example, Volkswagen announced a €50 billion research investment in batteries to help bring 300 electric vehicle models to market by 2030.

At first, it sounds like a narrative device from a science fiction novel or a particularly bad urban legend.

Powerful cameras in several Chinese cities capture photographs of jaywalkers as they cross the street and, several minutes later, display their photograph, name, and home address on a large screen posted at the intersection. Several days later, a summons appears in the offender’s mailbox demanding payment of a fine or fulfillment of community service.

As Orwellian as it seems, this technology is very real for residents of Jinan and several other Chinese cities. According to a Xinhua interview with Li Yong of the Jinan traffic police, “Since the new technology has been adopted, the cases of jaywalking have been reduced from 200 to 20 each day at the major intersection of Jingshi and Shungeng roads.”

The sophisticated cameras and facial recognition systems already used in China—and their near–real-time public shaming—are an example of how machine learning, mobile phone surveillance, and internet activity tracking are being used to censor and control populations. Most worryingly, the prospect of real-time surveillance makes running surveillance states such as the former East Germany and current North Korea much more financially efficient.

According to a 2015 discussion paper by the Institute for the Study of Labor, a German research center, by the 1980s almost 0.5% of the East German population was directly employed by the Stasi, the country’s state security service and secret police—1 for every 166 citizens. An additional 1.1% of the population (1 for every 66 citizens) were working as unofficial informers, which represented a massive economic drain. Automated, real-time, algorithm-driven monitoring could potentially drive the cost of controlling the population down substantially in police states—and elsewhere.

We could see a radical new era of censorship that is much more manipulative than anything that has come before. Previously, dissidents were identified when investigators manually combed through photos, read writings, or listened in on phone calls. Real-time algorithmic monitoring means that acts of perceived defiance can be identified and deleted in the moment and their perpetrators marked for swift judgment before they can make an impression on others.

Businesses need to be aware of the wider trend toward real-time, automated censorship and how it might be used in both commercial and governmental settings. These tools can easily be used in countries with unstable political dynamics and could become a real concern for businesses that operate across borders. Businesses must learn to educate and protect employees when technology can censor and punish in real time.

Indeed, the technologies used for this kind of repression could be easily adapted from those that have already been developed for businesses. For instance, both Facebook and Google use near–real-time facial identification algorithms that automatically identify people in images uploaded by users—which helps the companies build out their social graphs and target users with profitable advertisements. Automated algorithms also flag Facebook posts that potentially violate the company’s terms of service.

China is already using these technologies to control its own people in ways that are largely hidden to outsiders.

According to a report by the University of Toronto’s Citizen Lab, the popular Chinese social network WeChat operates under a policy its authors call “One App, Two Systems.” Users with Chinese phone numbers are subjected to dynamic keyword censorship that changes depending on current events and whether a user is in a private chat or in a group. Depending on the political winds, users are blocked from accessing a range of websites that report critically on China through WeChat’s internal browser. Non-Chinese users, however, are not subject to any of these restrictions.

The censorship is also designed to be invisible. Messages are blocked without any user notification, and China has intermittently blocked WhatsApp and other foreign social networks. As a result, Chinese users are steered toward national social networks, which are more compliant with government pressure.

China’s policies play into a larger global trend: the nationalization of the internet. China, Russia, the European Union, and the United States have all adopted different approaches to censorship, user privacy, and surveillance. Although there are social networks such as WeChat or Russia’s VKontakte that are popular in primarily one country, nationalizing the internet challenges users of multinational services such as Facebook and YouTube. These different approaches, which impact everything from data safe harbor laws to legal consequences for posting inflammatory material, have implications for businesses working in multiple countries, as well.

For instance, Twitter is legally obligated to hide Nazi and neo-fascist imagery and some tweets in Germany and France—but not elsewhere. YouTube was officially banned in Turkey for two years because of videos a Turkish court deemed “insulting to the memory of Mustafa Kemal Atatürk,” father of modern Turkey. In Russia, Google must keep Russian users’ personal data on servers located inside Russia to comply with government policy.

While China is a pioneer in the field of instant censorship, tech companies in the United States are matching China’s progress, which could potentially have a chilling effect on democracy. In 2016, Apple applied for a patent on technology that censors audio streams in real time—automating the previously manual process of censoring curse words in streaming audio.

In March, after U.S. President Donald Trump told Fox News, “I think maybe I wouldn’t be [president] if it wasn’t for Twitter,” Twitter founder Evan “Ev” Williams did something highly unusual for the creator of a massive social network.

He apologized.

Speaking with David Streitfeld of The New York Times, Williams said, “It’s a very bad thing, Twitter’s role in that. If it’s true that he wouldn’t be president if it weren’t for Twitter, then yeah, I’m sorry.”

Entrepreneurs tend to be very proud of their innovations. Williams, however, offers a far more ambivalent response to his creation’s success. Much of the 2016 presidential election’s rancor was fueled by Twitter, and the instant gratification of Twitter attracts trolls, bullies, and bigots just as easily as it attracts politicians, celebrities, comedians, and sports fans.

Services such as Twitter, Facebook, YouTube, and Instagram are designed through a mix of look and feel, algorithmic wizardry, and psychological techniques to hang on to users for as long as possible—which helps the services sell more advertisements and make more money. Toxic political discourse and online harassment are unintended side effects of the economic-driven urge to keep users engaged no matter what.

Keeping users’ eyeballs on their screens requires endless hours of multivariate testing, user research, and algorithm refinement. For instance, Casey Newton of tech publication The Verge notes that Google Brain, Google’s AI division, plays a key part in generating YouTube’s video recommendations.

According to Jim McFadden, the technical lead for YouTube recommendations, “Before, if I watch this video from a comedian, our recommendations were pretty good at saying, here’s another one just like it,” he told Newton. “But the Google Brain model figures out other comedians who are similar but not exactly the same—even more adjacent relationships. It’s able to see patterns that are less obvious.”

A never-ending flow of content that is interesting without being repetitive is harder to resist. With users glued to online services, addiction and other behavioral problems occur to an unhealthy degree. According to a 2016 poll by nonprofit research company Common Sense Media, 50% of American teenagers believe they are addicted to their smartphones.

This pattern is extending into the workplace. Seventy-five percent of companies told research company Harris Poll in 2016 that two or more hours a day are lost in productivity because employees are distracted. The number one reason? Cellphones and texting, according to 55% of those companies surveyed. Another 41% pointed to the internet.

Tristan Harris, a former design ethicist at Google, argues that many product designers for online services try to exploit psychological vulnerabilities in a bid to keep users engaged for longer periods. Harris refers to an iPhone as “a slot machine in my pocket” and argues that user interface (UI) and user experience (UX) designers need to adopt something akin to a Hippocratic Oath to stop exploiting users’ psychological vulnerabilities.

In fact, there is an entire school of study devoted to “dark UX”—small design tweaks to increase profits. These can be as innocuous as a “Buy Now” button in a visually pleasing color or as controversial as when Facebook tweaked its algorithm in 2012 to show a randomly selected group of almost 700,000 users (who had not given their permission) newsfeeds that skewed more positive to some users and more negative to others to gauge the impact on their respective emotional states, according to an article in Wired.

As computers, smartphones, and televisions come ever closer to convergence, these issues matter increasingly to businesses. Some of the universal side effects of addiction are lost productivity at work and poor health. Businesses should offer training and help for employees who can’t stop checking their smartphones.

Mindfulness-centered mobile apps such as Headspace, Calm, and Forest offer one way to break the habit. Users can also choose to break internet addiction by going for a walk, turning their computers off, or using tools like StayFocusd or Freedom to block addictive websites or apps.

Most importantly, companies in the business of creating tech products need to design software and hardware that discourages addictive behavior. This means avoiding bad designs that emphasize engagement metrics over human health. A world of advertising preroll showing up on smart refrigerator touchscreens at 2 a.m. benefits no one.

According to a 2014 study in Cyberpsychology, Behavior and Social Networking, approximately 6% of the world’s population suffers from internet addiction to one degree or another. As more users in emerging economies gain access to cheap data, smartphones, and laptops, that percentage will only increase. For businesses, getting a head start on stopping internet addiction will make employees happier and more productive. D!

About the Authors

Maurizio Cattaneo is Director, Delivery Execution, Energy, and Natural Resources, at SAP.

David Delaney is Global Vice President and Chief Medical Officer, SAP Health.

Volker Hildebrand is Global Vice President for SAP Hybris solutions.

Neal Ungerleider is a Los Angeles-based technology journalist and consultant.

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



The “Purpose” Of Data

Timo Elliott

I’ve always been passionate about the ability of data and analytics to transform the world.

It has always seemed to me to be the closest thing we have to modern-day magic, with its ability to conjure up benefits from thin air. Over the last quarter century, I’ve had the honor of working with thousands of “wizards” in organizations around the world, turning information into value in every aspect of our daily lives.

The projects have been as simple as Disney using real-time analytics to move staff from one store to another to keep lines to a minimum: shorter lines led to bigger profits (you’re more likely to buy that Winnie-the-Pooh bear if there’s only one person ahead of you), but also higher customer satisfaction and happier children.

Or they’ve been as complex as the Port of Hamburg: constrained by its urban location, it couldn’t expand to meet the growing volume of traffic. But better use of information meant it was able to dramatically increase throughput – while improving the life of city residents with reduced pollution (less truck idling) and fewer traffic jams (smart lighting that automatically adapts to bridge closures).

I’ve seen analytics used to figure out why cheese was curdling in Wisconsin; count the number of bubbles in Champagne; keep track of excessive fouls in Swiss soccer, track bear sightings in Canada; avoid flooding in Argentina; detect chewing-gum-blocked metro machines in Brussels; uncover networks of tax fraud in Australia; stop trains from being stranded in the middle of the Tuscan countryside; find air travelers exposed to radioactive substances; help abused pets find new homes; find the best people to respond to hurricanes and other disasters; and much, much more.

The reality is that there’s a lot of inefficiency in the world. Most of the time it’s invisible, or we take it for granted. But analytics can help us shine a light on what’s going on, expose the problems, and show us what we can do better – in almost every area of human endeavor.

Data is a powerful weapon. Analytics isn’t just an opportunity to reduce costs and increase profits – it’s an opportunity to make the world a better place.

So to paraphrase a famous world leader, next time you embark on a new project:

“Ask not what you can do with your data, ask what your data can do for the world.”

What are your favorite “magical” examples, where analytics helped create win/win/win situations?

Download our free eBook for more insight on How the Port of Hamburg Doubled Capacity with Digitization.

This article originally appeared on Digital Business & Business Analytics.


Timo Elliott

About Timo Elliott

Timo Elliott is an Innovation Evangelist for SAP and a passionate advocate of innovation, digital business, analytics, and artificial intelligence. He was the eighth employee of BusinessObjects and for the last 25 years he has worked closely with SAP customers around the world on new technology directions and their impact on real-world organizations. His articles have appeared in publications such as Harvard Business Review, Forbes, ZDNet, The Guardian, and Digitalist Magazine. He has worked in the UK, Hong Kong, New Zealand, and Silicon Valley, and currently lives in Paris, France. He has a degree in Econometrics and a patent in mobile analytics.