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A Fun Read for IT Operations, Governance, Risk, And Audit Professionals

Norman Marks

My very good friend, Gene Kim, together with Kim Behr and George Spafford, have published a fun read: “The Phoenix Project: A Novel About IT, DevOps, and Helping Your Business Win

I strongly recommend signing up for their whitepapers and can tell you that I enjoyed reading the book – so go ahead and spring for it!  Amazon has a great price if you don’t want to buy it from the site above.

Why do I like it?

  • It’s a fun read, as I said before. The drama is in vivid color and credible
  • As you read it, you can learn how the theory of constraints, as famously brought to us in The Goal: A Process of Ongoing Improvement, can be applied within an IT function
  • It illustrates that most problems within organizations (and many are described in The Phoenix Project) have a root cause – people

It would be interesting to have a discussion on the IT General Control issues that can be found. I will start the list:

  • A failure to ensure that all changes to applications and other infrastructure are approved by all affected areas and IT management
  • A failure to adequately test all changes
  • An inability to coordinate related changes
  • Ineffective management of IT resources, including the prioritization of work
  • A culture of heroes (especially one hero, who is relied upon for pretty much everything)
  • A failure of responsible leadership
  • The CISO did not perform a risk assessment, and was irresponsible in directing his and other staff to bypass controls
  • Inadequate resources
  • A lack of trust among the IT leadership members

I welcome your comments on the book and its messages.

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About Norman Marks

Norman Marks previously held the role of Vice President, Evangelist for Better Run Business, at SAP, responsible for optimizing business processes for internal audit, risk management, governance, and compliance.

Why 3D Printed Food Just Transformed Your Supply Chain

Hans Thalbauer

Numerous sectors are experimenting with 3D printing, which has the potential to disrupt many markets. One that’s already making progress is the food industry.

The U.S. Army hopes to use 3D printers to customize food for each soldier. NASA is exploring 3D printing of food in space. The technology could eventually even end hunger around the world.

What does that have to do with your supply chain? Quite a bit — because 3D printing does more than just revolutionize the production process. It also requires a complete realignment of the supply chain.

And the way 3D printing transforms the supply chain holds lessons for how organizations must reinvent themselves in the new era of the extended supply chain.

Supply chain spaghetti junction

The extended supply chain replaces the old linear chain with not just a network, but a network of networks. The need for this network of networks is being driven by four key factors: individualized products, the sharing economy, resource scarcity, and customer-centricity.

To understand these forces, imagine you operate a large restaurant chain, and you’re struggling to differentiate yourself against tough competition. You’ve decided you can stand out by delivering customized entrees. In fact, you’re going to leverage 3D printing to offer personalized pasta.

With 3D printing technology, you can make one-off pasta dishes on the fly. You can give customers a choice of ingredients (gluten-free!), flavors (salted caramel!), and shapes (Leaning Towers of Pisa!). You can offer the personalized pasta in your restaurants, in supermarkets, and on your ecommerce website.

You may think this initiative simply requires you to transform production. But that’s just the beginning. You also need to re-architect research and development, demand signals, asset management, logistics, partner management, and more.

First, you need to develop the matrix of ingredients, flavors, and shapes you’ll offer. As part of that effort, you’ll have to consider health and safety regulations.

Then, you need to shift some of your manufacturing directly into your kitchens. That will also affect packaging requirements. Logistics will change as well, because instead of full truckloads, you’ll be delivering more frequently, with more variety, and in smaller quantities.

Next, you need to perfect demand signals to anticipate which pasta variations in which quantities will come through which channels. You need to manage supply signals source more kinds of raw materials in closer to real time.

Last, the source of your signals will change. Some will continue to come from point of sale. But others, such as supplies replenishment and asset maintenance, can come direct from your 3D printers.

Four key ingredients of the extended supply chain

As with our pasta scenario, the drivers of the extended supply chain require transformation across business models and business processes. First, growing demand for individualized products calls for the same shifts in R&D, asset management, logistics, and more that 3D printed pasta requires.

Second, as with the personalized entrees, the sharing economy integrates a network of partners, from suppliers to equipment makers to outsourced manufacturing, all electronically and transparently interconnected, in real time and all the time.

Third, resource scarcity involves pressures not just on raw materials but also on full-time and contingent labor, with the necessary skills and flexibility to support new business models and processes.

And finally, for personalized pasta sellers and for your own business, it all comes down to customer-centricity. To compete in today’s business environment and to meet current and future customer expectations, all your operations must increasingly revolve around rapidly comprehending and responding to customer demand.

Want to learn more? Check out my recent video on digitalizing the extended supply chain.

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Hans Thalbauer

About Hans Thalbauer

Hans Thalbauer is the Senior Vice President, Extended Supply Chain, at SAP. He is responsible for the strategic direction and the Go-To-Market of solutions for Supply Chain, Logistics, Engineering/R&D, Manufacturing, Asset Management and Sustainability at SAP.

How to Design a Flexible, Connected Workspace 

John Hack, Sam Yen, and Elana Varon

SAP_Digital_Workplace_BRIEF_image2400x1600_2The process of designing a new product starts with a question: what problem is the product supposed to solve? To get the right answer, designers prototype more than one solution and refine their ideas based on feedback.

Similarly, the spaces where people work and the tools they use are shaped by the tasks they have to accomplish to execute the business strategy. But when the business strategy and employees’ jobs change, the traditional workspace, with fixed walls and furniture, isn’t so easy to adapt. Companies today, under pressure to innovate quickly and create digital business models, need to develop a more flexible work environment, one in which office employees have the ability to choose how they work.

SAP_Digital_Emotion_BRIEF_image175pxWithin an office building, flexibility may constitute a variety of public and private spaces, geared for collaboration or concentration, explains Amanda Schneider, a consultant and workplace trends blogger. Or, she adds, companies may opt for customizable spaces, with moveable furniture, walls, and lighting that can be adjusted to suit the person using an unassigned desk for the day.

Flexibility may also encompass the amount of physical space the company maintains. Business leaders want to be able to set up operations quickly in new markets or in places where they can attract top talent, without investing heavily in real estate, says Sande Golgart, senior vice president of corporate accounts with Regus.

Thinking about the workspace like a designer elevates decisions about the office environment to a strategic level, Golgart says. “Real estate is beginning to be an integral part of the strategy, whether that strategy is for collaborating and innovating, driving efficiencies, attracting talent, maintaining higher levels of productivity, or just giving people more amenities to create a better, cohesive workplace,” he says. “You will see companies start to distance themselves from their competition because they figured out the role that real estate needs to play within the business strategy.”

The SAP Center for Business Insight program supports the discovery and development of  new research-­based thinking to address the challenges of business and technology executives.

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Sam Yen

About Sam Yen

Sam Yen is the Chief Design Officer for SAP and the Managing Director of SAP Labs Silicon Valley. He is focused on driving a renewed commitment to design and user experience at SAP. Under his leadership, SAP further strengthens its mission of listening to customers´ needs leading to tangible results, including SAP Fiori, SAP Screen Personas and SAP´s UX design services.

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IoT In Discrete Manufacturers: Create A Live Business Operation Around Connected Products

Kai Goerlich

While discrete manufacturing is used in a diverse range of industries, including automotive, aerospace, defense, construction, industrial machinery, and high tech, all of them face common and tough challenges such as higher resource volatility, more competition, increasing customer expectations, and shorter innovation cycles.

According to a study by a Roland Berger (see chart), product complexity has increased dramatically in the past 15 years. Manufacturers have to cope with two overlapping trends: the variety of products is constantly increasing and has more than doubled in the past 15 years, and, in parallel, product lifecycles have gotten about 25% shorter. These factors are putting an increasing pressure on margins, on supply and procurement systems, and on overall business models. According to Roland Berger, managing this complexity could reduce costs by roughly 3% – and certainly digitization can help improve this margin.

rolandberger

The threats and potentials of digitization

Adapting to the age of hyperconnectivity is a matter of life and death for the majority of companies, according to a study by the Economist Intelligence Unit. More than half of enterprises feel very strong competitive pressure from digital offerings by their traditional competition, established companies using digital to enter their market, and digital startups. Certainly, the competition is not waiting, and neither will today’s well-informed digital customers, who want more choice, better customization, and more information around the buying process. While digitization might add another disruptive dimension to an already rising complexity, discrete manufacturers are seeking the benefits of digitization. They are already proactively exploring the use of the IoT to better connect their supply chains, assets, and products, according to an IDC white paper, The Internet of Things and Digital Transformation: A Tale of Four Industries, sponsored by SAP.

SAP_IoT_discretemanu_2016

Most manufacturers start with less complex projects, such as enhanced visibility or tracking, and progress to more sophisticated processes that require automated or predictive workflows, according to IDC. The findings of the study suggest that companies should start their IoT projects with the overarching goal of a live business operation already in mind. By combining three IoT use cases for manufacturing, i.e. connecting products, creating a connected shop floor with customization, and extending digital business models (see chart), companies will create a competitive business operation that fully exploits the digital opportunities.

Connecting products to improve innovation

Using IoT for innovation is a highly underestimated potential of digitization. A significant percentage of new products fail, and the associated R&D and marketing costs are lost. Customers already expect their products to come with a certain degree of interactivity and this demand will certainly grow in the future. According some estimates on the adoption of connected technology by consumers, the ratio of connected and interactive products will rise to approximately 20% on average by 2020, according to Forbes. This is a conservative estimate, and in some segments the ratio might increase much faster.

By digitizing current products and launching fully digitized ones, manufacturers can significantly reduce the risk of new product failures, as IoT-based products will enable them to monitor the actual use and performance of their products, get live feedback from their customers, and adopt future product innovation. IDC expects that by 2017, 60% of global manufacturers will use IoT to sense data from connected products and analyze that data to optimize the product portfolios, performance, and manufacturing processes. Similarly, the integration of IT assets and information with operational technology in the plant and the supply chain is also on the roadmap, if not already started.

Connecting the shop floor

Digitization offers the possibility to oversee every step in the manufacturing process, from customer demand, through production, and across the complete supply chain. The IDC study identified two IoT use cases – strategic asset management and customer experience – that seem to be very attractive for discrete manufacturing.

1. Strategic asset management

Manufacturers should start to digitize all of their assets in the production process and use IoT-based preventive and predictive maintenance scenarios in the plant and supply chain to reduce downtime and improve utilization. Using the information generated from digitization and IoT, businesses can evaluate use patterns and maintenance routines of their inventory and assets and optimize operations. Fixed assets can account for as much as one-third of all operating costs, so under today’s cost pressures a digital asset management surely matters. To fully use the potential of IoT and the real-time information gathered from assets, devices, and machines, companies need to ramp up their analytical and decision-making capabilities. Anecdotally, companies report that IoT use cases (such as remote maintenance) changed the way they thought about data and got them thinking significantly differently about information and insights.

2. Customization for customer experience

Demand for more choice, flexibility, and customized products is growing fast and estimated to be 15% of all products by 2020, according to MIT Smart Customization Group. Depending on size, material, and complexity, that percentage might be significantly higher. However complex the challenge for manufacturers might be, connected production in real-time is the basis, and it needs the right data from production capabilities, supply, equipment, and workforce, combined with all customer preferences. Getting the customer into the customization and production process is increasingly important for an improved customer experience, so IoT should be used to connect the products and, with it, the customer. This will not only give companies valuable data about user preferences and ideas for product innovation and improvements, but it will allow them to plan the customization of products much more efficiently.

Digitally enhanced business models

Digitization is by now a synonym for disruption. According to a study by the Economist Intelligence Unit, 60% of companies think that digitization is the biggest risk they face. More than half of companies feel competitive pressure from digital offerings by their traditional competition and digital startups. As IDC found, discrete manufacturers are already actively exploring the IoT opportunities, so the change is already underway.

As we pointed out previously, the customer experience of choosing and buying a product is increasingly important, but it does not stop there. IoT-connected products will get the customer into an ongoing interaction with the product vendor and/or retailer, enhancing the buying and use experience. Moreover, companies can use this connection to expand their business models. In its study, IDC mentions a wider range of ideas that manufacturers already explore, such as remote maintenance, refill and replenishment, contracting, product performance, training, and location-based services. While they may not be applicable for all companies, they show the wide range of possibilities and opportunities. Digitization may be a threat for some traditional business models and companies, but it offers huge potentials for those who focus on the customer experience.

Creating a live business operation

The huge potential that IoT offers is less the physical connection of things, machines, and devices, and more the opportunity to create a live business operation based on an advanced data strategy and analytics. While all aspects of IoT have large innovation opportunities on their own, the combination of connected products, customization, and digitally expanded business models promises the biggest benefits for discrete manufacturers. Thus any IoT strategy – wherever it starts – should be created with a larger digitization goal in mind.

Conclusion

  • Connecting products and strategic asset management has big potentials for discrete industries.
  • The combination of connected products, customization, and digitally expanded business models promises the biggest benefits.
  • Companies should create a live business operation with advanced data and analytical skills to use the full potential of IoT.

For more details and information, please read IDC’s IoT whitepaper IoT and Digital Transformation: A Tale of Four Industries and look for future IoT papers that delve deeper into the IDC study’s findings.

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Kai Goerlich

About Kai Goerlich

Kai Goerlich is the Idea Director of Thought Leadership at SAP. His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation.

What Going Digital Really Means For Your Supply Chain

Amr El Meleegy

Like the air we breathe, the term “digital” permeates every facet of our lives, so much that it’s become a fact of life that we take for granted. We use digital technology to communicate information, learn new skills, sell goods, shop, and much more. While most find this new way of life revolutionary, others might argue that there is nothing really new about digital. Why? Because they have been doing digital forever.

For decades, supply chains have incorporated digital technologies like programmable logic controllers, radio-frequency ID, EDI, and electronic documents into their processes and operations. If that’s digital transformation, supply chain operators have long-boarded that train before anyone else thought of coming along for the ride. Over the last 25 years, these technologies have optimized and streamlined the function dramatically – evolving rapidly to accelerate processes, squeeze costs, and offer better quality.

So why are we still talking about digitally transforming the supply chain? During the SAP Radio episode Digital Transformation Across the Extended Supply Chain, from the Coffee Break with Game-Changers Future, Rick Imber, national vice president for the Extended Supply Chain Center of Excellence at SAP, stated “The key is going digital with your business processes and eliminate all those manual steps so you can give the customer what they want. That’s what supply chain digital transformation is all about – the customer.”

Redefining the supply chain one digital innovation at a time

When executives say that their supply chain is going through a digital transformation, they are not referring to the traditional model of supply, demand, and fulfillment. They really mean the extended supply chain – a close integration with other lines of business units that impact and are influenced by the supply chain such as product development, manufacturing, sales, and operations to name a few. Most important, that entire network needs to revolve around delivering the best-possible customer experience.

According to Michael Yagdar, principal and America’s SAP leader at Ernst and Young, the demand for instant service in near perfect quality is bringing additional pressure to the supply chain. “Every single day, companies provide excellent service or ultimate flexibility to the customer. But the implications for the business are significant. Just look at how the supply chain needs to evolve to meet that demand. Customer intimacy is now the source of differentiation,” he stated during the panel discussion with Imber.

Take smart vending machines, for example. With this new beverage delivery system, consumers can personalize their drink, choosing different flavors and ingredients by simply pressing a few buttons on a single machine. While this may sound like a great differentiator, this is only half of the story. By linking the kiosk to a supplier network, enterprises can provide insights to their suppliers into what consumers prefer and how much they pour at a single visit. Not only will suppliers understand which products are selling and need to be replenished, but they can also pinpoint an opportunity to offer a new flavor on store shelves.

Another great digital technology that is evolving the supply chain is 3D printing. For Barilla, this technology is revolutionizing its pasta production and realigning its entire supply chain. The brand can now offer more than just five varieties of pasta to restaurants, retailers, and wholesalers, giving them a choice of ingredients (vegan!), flavors (Mediterranean tomato!), and shapes (soccer balls to celebrate my favorite team’s win!). By putting a 3D printer in its customers’ facilities, Barilla’s supply chain must anticipate and fulfill every possible configuration. The whole notion of demand anticipation and fulfillment and replenishment is completely flipped. Instead, the supply chain needs to think about arriving at the customer site to service this piece of equipment.

Powering the supply chain of the future

In such a dynamic environment, supply chains – as well as the rest of the business – need a new digital core that can provide full, immediate access to accurate, real-time information about their customers, supplier network, and competitors. Having the right information can make a difference when producing and distributing custom products with shorter lead times and smaller runs to meet customer demand while keeping costs under control, minimizing inventory buffers, and driving productivity to peak levels.

With a new digital core any change in supply and demand can be quickly detected and resolved throughout the supply chain. A large order needs to be suddenly shipped overnight? No problem. The digital core can identify any production gaps efficiently, send an alert about the demand-and-supply imbalance, and provide various options to fix it. Now, the supply-chain process happens in real time with increased visibility and decision support

No matter how efficient your processes, the supply chain is only as good as the supplier network. By integrating the digital core into your suppliers’ network, companies can help ensure that they are using the right and best suppliers.

The supply chain of the future: networked, connected, with a brand-new operational model that keep customers coming back for more.

To get a personalized digital core business scenario recommendations report visit https://www.s4hana.com.

For an in-depth look at the digital supply chain and other influences affecting business in the digital age, download the SAP eBook, The Digital Economy: Reinventing the Business World.

Discover the multiple factors driving digital transformation in the SAP eBook, Digital Disruption: How Digital Technology is Transforming Our World.

This article originally appeared in SAP Business Trends. It was modified for Digitalist Magazine.

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Amr El Meleegy

About Amr El Meleegy

Amr El Meleegy is a senior director of Product Marketing at SAP. He is currently responsible for our next-generation suite of business applications, SAP S/4HANA.