Purpose-Led Organizations: Another Buzzword Or Something More?

Yvonne Fandert

Were jobs in the past meaningless before consultants, researchers, and practitioners identified purpose as a critical differentiator for companies to be successful in the digital age?

Is becoming purpose-driven more hype leading to the expectation of increased profit for those who talk about it? Or is there something more substantial behind this new corporate trend?

And if so, how much of it is really new versus old wine in new bottles? And more importantly, what does it mean for us as HR professionals?

According to a KornFerry study, purpose-driven businesses have 4x the compound annual growth rate (CAGR) of companies in the S&P 500 Consumer Sector. Nearly all employees (90%) in purpose-driven organizations report feeling engaged, compared to 32% of employees in other companies. As SAP colleague Florian Kunzke highlighted in this article, purpose makes people 3x more likely to stay in an organization, leading to 1.4x more employee engagement, and 2x more optimistic employees. It also creates 75% more customer retention.

So there seem to be some convincing – profit and nonprofit related – arguments to inspire organizations to become purpose-led.

What does it mean to be purpose-led?

According to Markus Heinen, chief innovation officer of EY, “Purpose is an aspirational reason for being that is grounded in humanity and inspires action.” In other words, an organization needs to stand for something it believes in, going beyond profit and impacting society. This can, of course, extend beyond pure social projects. If a company can direct its vision, mission, and business model towards something that creates purpose, and can demonstrate how their products create purpose, it is even stronger.

Many great companies show a strong focus on purpose, including:

  • Unilever, one of the top-ranked purposeful brands, states that to succeed requires “the highest standards of corporate behavior towards everyone we work with, the communities we touch, and the environment on which we have an impact.”
  • Patagonia, which produces gear and clothes for alpine and outdoor sports, is determined to reduce waste and impact on the environment. Why? To allow its customers and society to continue to enjoy what they are passionate about: the great outdoors. These goals are reflected in the corporate values as well as many processes such as the famous buy-back initiative of used gear.
  • Zappos and its famous “happiness culture” create not only a distinct corporate culture, but also happy, loyal customers. 

The causality and relevance of purpose

Purpose-led companies usually have strong employee engagement that has increased year over year; they also see an increase in retention. Yet, we could conclude that there is a direct correlation between purposeful activities and the impact just mentioned. But would that be “jumping to conclusions”? My personal view is that purpose certainly helps, but profit is essential as well: not only to fund the social projects, but also to keep your employees happy with a fair and competitive salaries. Purpose and profit should not be seen as contradictions, but complementing factors. As research, such as WillisTowersWatson in 2016, shows, base pay/salary is the second top attraction and retention driver.

Let’s have a deeper look at causality: The impact of the unconsciousness on behavior and decisions is not a new study field. If you research the field of social and market psychology, you will find many studies that show how often we behave irrationally, driven by heuristics and emotional arousal. To put this in context: people behave in a way that makes them feel good; they prefer to be around people they trust; they are more likely to buy products in an environment that makes them feel good. This in turn shows that experience is vital. Therefore, it is vital to focus on consumer experience, treating each other as internal consumers, and putting the consumer into the center of everything.

The human wish to do something meaningful is also not new. It seems to be ingrained in our human nature. Asking “what’s the purpose of (my) life” might be as old as human mankind. At the same time, the answer to it will differ depending on the context, circumstances and the phase/situation of life you are in right now. While, for example, after WWII, people in highly impacted countries focused on starting from scratch to survive hunger and get a job to feed their children. Many are luckily now in a much better position. The unemployment rate is low, and for many people, earning money is not enough anymore, as they take it for granted.

Contributing to a higher purpose has become more relevant. Somehow like the pyramid of needs: moving from core needs towards personal growth and development, until contributing to a higher purpose that goes beyond the individual contribution. In addition, experts confirm that we are in a candidate-driven market, in which candidates hold more power than employers, a trend that seems to be deepening. This means that employees have the power to request a deeper purpose from their employers, a situation that did not exist 50 years ago: “Future generations want the organizations where they are spending their time and energy to match their personal values and purpose in life,” according to Nancy Birkhölzer, CEO ixds. This is also underlined by a recent study done by the MRI Network: 90% of all recruiters are convinced that we are in a candidate-driven market.

experts have described the current labor market as “candidate-driven.” Job seekers hold more power than employers, a trend that seems to be deepening

2017 Recruiter Sentiment Study MRI Network

Source: 2017 Recruiter Sentiment Study, MRI Network.

How to drive purpose in organizations

Now after having explored the various impact, and the increasing relevance that purpose has, let’s have a quick look at some general principles and best practices that helps organizations to improve their purpose:

  • Have an authentic purpose that also fits your business model
  • Communicate it to the employees in a clear way -make them believe in it, and let them experience it
  • Have each team, department, and role design their own purpose which serves an overall purpose and let them act according to it
  • Hold people accountable to the purpose
  • Define metrics and goals based on purpose to assess effectiveness

Conclusion

The relevance of purposefulness has increased over the past years. While knowledge about the human mechanics that are running in the background is not fundamentally new, how it’s being expanded into the business world, including profit organizations, is. This has to do with the increasing importance of employer branding to attract but also retain best talents.

Nevertheless, it is imperative to go beyond pure lip service or marketing brand – just writing down a purpose-driven mission statement is not enough. Purpose-led companies need to be followed by consistent leadership behavior, tangible examples, and continuously evolving and adapting strategy and execution along with the rapidly changing environment.

Profit and purpose do not contradict, but they can complement each other. Successful companies will find a way to keep profit and purpose in a healthy balance.

For more on this topic, see Engage Employee Engagement By Connecting Them To Your Company’s Purpose.

This article originally appeared on LinkedIn Pulse.


Yvonne Fandert

About Yvonne Fandert

Yvonne Fandert is leading the HR Office for the MEE and EMEA region at SAP. She joined SAP in 2006 and held various local and regional HR Business Partner positions, as well as project director positions within HR. She did a Master in Business Administration at the University of Mannheim, Germany, and a Master of Human Resource Management and Coaching at the University of Sydney, Australia. Being a certified coach, Yvonne feels passionate about personal development, and is a firm believer of personal growth via constant learning and self-reflection.

Faye Raincock: Countering Online Abuse

Jane Lu

Faye Raincock, head of communications at global media agency Havas UK, shares compelling research on the harassment of women online. On this SHE Innovates episode, she speaks with Michelle King, a leader in UN women’s gender innovation work, about the perpetrators, impact on victims, and how to support women on social media.

The scale of online harassment

In her research, which took place over six months, Raincock found more than six and a half million tweets involving abuse, or “over 200 abusive tweets to each woman every single day.” These tweets included things such as gender-specific slurs and threats of sexual violence. While Raincock expected to find that most of these were sent by men, her research showed that an equal number were sent by women.

Raincock defines five “power groups” of women who are frequented targeted online: global leaders, politicians, broadcasters, athletes, and entertainers. The most common type of sexual harassment is body objectification. Entertainers are especially prone to this because they usually have high-traffic social media channels. Artists like Taylor Swift are accused of using their body to “ply their trade,” which is perhaps not surprising, but online harassment is regularly directed at figures like Oprah Winfrey and Emma Watson as well. Too often, there’s a sense within society that we can “explain away” sexual harassment.

Part of Raincock’s research focused on how women are represented in media—for example, she cites the magazine cover that featured a picture of Theresa May and the leader of the Scottish party, accompanied by a headline about their legs. Raincock calls on the media to take responsibility for how it represents women: “It’s not just the obvious glaring examples, but a more low-level, pervasive, and repetitive representation of women as objects of desire to be commented on — that makes it OK for society to constantly judge women on the way they look rather than their ability or intellect.”

Raincock notes, “We seem a length removed from these women on social media, but it’s much closer to home than that.” In fact, she adds, “The underlying misogyny and willingness to accept sexism is fundamental to our lives. It comes through in every conversation we have.”

How to support women online

Raincock and her associates looked at how different women dealt with online harassment and determined that there is no single “right” way to combat the problem. But even sending a direct message of support to a person who’s being abused can help. Some abusers are motivated by “social capital” – they tweet to celebrities, hoping that the conversation will gain traction and boost their own account. We need to call this out when we can. Also, before you tweet, stop and think about your message. “It’s not just about women, it’s about how we treat other human beings online,” Raincock points out.

On an industry level, media organizations have a responsibility to help combat sexual harassment by no longer accepting objectification and abuse as permissible. They have a platform to change behavior if they choose to. Technology companies should stop focusing on mitigating damages and start addressing the problems. They have the power to create blocks, filters, and other ways to protect victims of online abuse.

If you are in a position to influence young people, Raincock advises, teach them that kindness isn’t just face-to-face. The younger generations are experiencing the world through a different filter, Raincock says, and she “would like to see all of us talking to young people about how we conduct ourselves in every medium.”

She adds, “Our greatest gift for the next generations is for them to understand kindness can apply off or online.”

Listen to Faye Raincock’s interview on the SHE Innovates podcast.

SHE Innovates is a podcast that shares the stories, challenges, and triumphs of women in innovation, technology, and entrepreneurship. Listen to all our podcasts on PodBean.


Jane Lu

About Jane Lu

Jane is a writer and marketing intern at SAP. She is pursuing a Bachelor of Arts degree majoring in English at the University of Waterloo. While Jane is currently studying in Waterloo, she is originally from Toronto.

How Buenos Aires Deploys The Internet Of Things To Prevent Disaster

Nick Quin

In 2013, a catastrophic flood killed nearly 100 people in Buenos Aires. Citizens spent days wading through waist-high floodwaters. The city spent millions to restore order.

Rebuilding the city’s drainage infrastructure was not an option. An innovative solution was required. Utilizing Industry 4.0 technology, that solution was found: Buenos Aires would become a smart city.

This upgrade has since set a benchmark for innovative disaster management. By understanding it, we can prevent future disaster.

To understand this upgrade to the drainage of Buenos Aires, we must understand what caused the catastrophic 2013 floods. To understand the floods, we must examine the history of Buenos Aires. Buenos Aires was founded by the banks of The Rio de la Plata, in an area which sits above nine other rivers. Because of this extensive river network, over a million residents live in areas which are prone to flooding.

Despite this threat of flooding, Buenos Aires failed to update its aging drainage system. This was a result of the city’s paper-based bureaucracy. This legacy system led to slow maintenance, repeated blockages, and increasing development on floodplains.

Until 2013, citizens simply accepted this flooding as a fact of life. Following the disastrous floods, the city undertook a strategy of innovation. Rodrigo Silvosa, general director of Control Management for the Environment in Buenos Aires, accelerated the city’s partnership with our business. Together, they implemented an innovative solution.To mitigate future flooding, the city installed IoT-enabled sensors in over 30’000 storm drains. These measure the speed, level, and direction of water-flow within the drains. This data is then sent to their technology platform that generates a real-time map of potential blockages.

Prior to this, the city could not prepare maintenance crews in time to prevent catastrophe. Their paper-based system slowed down deployment times, delaying life-saving maintenance. Now, the network of sensors ensure the city only has to practice predictive maintenance at critical moments.

In addition to this, the city’s maintenance crews were once managed across multiple silos. This restricted their ability to assign commands quickly. Now, Buenos Aires can easily track and manage maintenance crews in real-time through their cloud-based system.

It was fortunate that these upgrades were carried out in 2013, as the city recorded some of the heaviest rainfall in its history in 2014. The severe storms of 2014 almost pushed Buenos Aires to the brink. Thankfully, the new system alerted the city to which sewers required attention. By deploying maintenance crews to these sewers through the cloud, the city was able to prevent flooding. These systems have seen the city through severe weather each year since.

If flood-prone cities do not upgrade their infrastructure, The World Bank forecasts that global flood losses will reach $1 trillion per year. As an advocate of smart cities with a desire to work with purpose, I’m proud to see SAP using innovation to change this forecast. By establishing systems like those in Buenos Aires, we can keep our cities safe in our increasingly unpredictable environment.

For more on smart cities, see Focus On Big Data Analysis To Make Public Service Helpful.


Nick Quin

About Nick Quin

Nick Quin is Regional Manager, Southern Region for SAP New Zealand based in Wellington. Nick has been involved in the transformation of organisations across Asia Pacific for over 25 years, with a passion for leading & developing teams, who are committed to deliver the business outcomes sought by our customers.

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.  

 


Dan Wellers

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.