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IoT 2.0: Rewiring To Create Live, Digital Businesses

Kai Goerlich

When the phrase “Internet of Things” was coined, probably in 1999 by Kevin Ashton of the Auto-ID Center, it was mainly about RFID technology and the early Internet impacting supply chains and logistics. In parallel, Neil Gerstenfeld talked about “When things start to think” while he was at MIT Media Lab. This can be read as an early take on artificial intelligence, or on IoT – or both. Around the year 2000, it somehow felt right to assume that things would follow humans into the Internet and that those things might be smart.

IoT is now 15+ years old and at an inflection point. It is entering a second wave, which goes beyond connected things, and enables companies to become live, digital businesses. From medical devices in a hospital to fan experiences in a football stadium, IoT is enabling a seamless, real-time experience of all interactions that we have in private and professional life. The IoT scenarios on display at CeBIT 2016 provide compelling examples.

IoT is changing the business rules

gears_peopleIn a new IDC study sponsored by SAP, “IoT and Digital Transformation: A Tale of Four Industries,” it is clear that IoT is at the center of the transformation. According to IDC, the IoT-facilitated digitization threatens many current business models. If we take a look at some of the disrupted business models in the ground transportation and hotel industries, as initiated by Uber and Airbnb, we clearly see that IoT enables customers to bypass many of the traditional barriers and get connected to services more directly. Taking out some links in the traditional value chain will create problems for many companies. IDC estimates that around 30% of all industry leaders will be disrupted by digitally enabled competitors by 2018, and 58% of organizations worldwide see the Internet of Things as strategic to their business. Another 24% of organizations see IoT as transformational to their business.

IoT is reshaping the industries

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IoT is poised for rapid growth across a wide variety of industries that are connecting physical assets. According to a story in Digitalist Magazine’s Executive Quarterly, companies are ramping up their IoT investments rapidly, which can be seen in seven major industries with high levels of physical products or assets (you can download the infographic here). IDC forecasts that IoT spending will increase 19% on average through 2018. Some industries, such as discrete manufacturing, have already invested significantly; others, such as healthcare, have spent less to date but are expected to expand quickly. In its whitepaper, IDC examines how quickly four industries – healthcare, retail, consumer products, and discrete manufacturing – are adopting IoT.

Think live to get the most out of IoT

The value of IoT lies in creating a data exchange between parties that have not been connected before. As we are talking about people, machines, and devices acting on different levels of sophistication, data must be combined from various and diverse resources. Truly, new insights will be generated only if IoT is combined with the necessary analytical skills, as IDC points out. What the Internet has been to RFID, in-memory technology will be for IoT. The combination of IoT and real-time analytics will create a world of live business operations with seamless customer and consumer experiences. We are not there yet, but we are already on the way.

Hyperconnectivity is promising a lot, but someone has to be in charge. To explore how the IoT is redefining IT and the role of the CIO, see Who Will Lead Development of the Internet of Things Inside the Organization?

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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. Share your thoughts with Kai on Twitter @KaiGoe.

Predictive Procurement Gets Real

Marcell Vollmer

The physical and digital worlds have officially collided. In the old days, we’d have the morning paper delivered to our doorsteps and read it on the way to work while sipping coffee we made at home. Today, the news stories we care about are automatically delivered to our mobile devices, and we scan them while enjoying the beverage that was ready and waiting for us at the local coffee shop after we ordered it via mobile app. In years past, we attended events after work to expand our professional networks. Now we link to our peers — and their peers — around the world, online in real time.

Connecting the dots

As a society, we are more connected than ever. Thanks to the Internet of Things (IoT), we can see and be seen like never before. We can learn about the future and use this information to shape it to our advantage.

There are plenty of examples of this in the consumer world—for example, refrigerators that predict when you’re about to run out of milk and automatically order and have it delivered before you even notice, and devices that know you’re on your way home and turn on the lights before you get there.

It’s happening in procurement as well, and transforming the function as we know it. Procurement is complex and involves lots of moving parts, from sourcing and manufacturing to transportation and logistics. It’s an intricate web of systems, processes, and relationships that must be coordinated and managed, both internally and externally, to ensure that goods and services get delivered on budget and on time.

Predicting the future

Over the years, procurement has made great strides, leveraging disruptive forces such as business networks and cloud technologies to evolve from a tactical manual process to a strategic digital one. Paper orders and invoices are all but dead. Electronic payments are taking hold. Buyers and sellers are meeting and collaborating online.

Yet the transformation has only begun. Aided by Big Data and the IoT, procurement is becoming smarter and more predictive than ever.

Data is the lifeblood of any organization. From structured information on production, marketing, sales, HR, finance, facilities, and operations to transaction-level data on suppliers, customers, and partners, it tells the story of a business. For years, companies have been mining data simply to figure out what it all means—essentially, to learn from the past and perform better in the present.

Now they are leveraging advances in technology such as in-memory computing, real-time analytics, and the IoT to create assumptions about what will happen in the future and take actions that drive optimal outcomes.

Eliminating risk

Supply chains are more global than ever, and as a result, fraught with more risk. Many companies are turning to the IoT to anticipate and mitigate this risk before it disrupts their business. Consider the mining industry. Trucks are the critical link to transport raw materials to either further process or sell them on the market. If one of these trucks stands still due to maintenance issues, losses to the company could run into the millions, as they only can sell what they get out of a mine and deliver.

With the help of sensors, companies can continually monitor their fleets and receive notifications on upcoming maintenance needs to prevent breakdowns before they occur. Critical components such as engines and braking systems, for example, can be connected by small IoT sensors that monitor their temperature, hydraulic pressure, container angle, position, and vibrations. The sensors transmit all data to a live dashboard, and if a key parameter such as temperature changes, it will trigger an alert for the radiator. This information is then automatically routed to the procurement system, where a replacement order for radiator hose and radiator cleaner is automatically processed in line with the company’s procedures and policies. Related maintenance service is scheduled with a qualified technician who will arrive as soon as the material arrives and perform the work before a fatal defect of the radiator causes the truck to literally stop in its tracks. Risk avoided.

Delivering value

Supply chains are no doubt complex — and the data within them even more so. But data is the new global currency. And the IoT holds the key to unlocking its value. With the IoT, companies can not only spot patterns and trends in their business but anticipate risk and changes and adapt their businesses to gain advantage.

For more on how data analysis is transforming business, see Living The Live Supply Chain: Why You Need Data Scientists.

The article originally appeared in Spend Matters. It is republished by permission.

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Marcell Vollmer

About Marcell Vollmer

Marcell Vollmer is the Chief Digital Officer for SAP Ariba (SAP). He is responsible for helping customers digitalize their supply chain. Prior to this role, Marcell was the Chief Operating Officer for SAP Ariba, enabling the company to setup a startup within the larger SAP business. He was also the Chief Procurement Officer at SAP SE, where he transformed the global procurement organization towards a strategic, end-to-end driven organization, which runs SAP Ariba and SAP Fieldglass solutions, as well as Concur technologies in the cloud. Marcell has more than 20 years of experience in working in international companies, starting with DHL where he delivered multiple supply chain optimization projects.

Ontario’s ‘Smart Cities’ Talk Digital Innovation

John Graham

“The government no longer has a monopoly on information. Our structures of government are outdated.”

Stephen Goldsmith, former deputy mayor of New York and now director of innovation at Harvard Kennedy School of Government, set the scene bluntly as he sat on a panel at SAP’s 2nd Annual Smart Cities Forum on March 7: “Citizens see the services they can get from the likes of Amazon, and want the same from government.”

Densely populated and growing cities around the world know the demands and challenges they face, but they are also waking up to the opportunities today’s technology brings. Fittingly playing host to the event after being named the world’s 8th-most-digitally innovative city in late February, Toronto unleashed its enterprise solutions services director Fazal Husain to the stage to talk about what the city is doing.

He led with the analogy that cities have to learn to walk before they can run in the digital economy. He explained that unlike corporations and other large organizations, which have a more vertical product line, the city has 44 different and varied services.

To tackle that challenge, the city began looking at it from the perspective of business rather than IT. That shifted the focus to the key business processes the entire enterprise builds on: HR, finance, payroll and procurement.

Once that foundation was set, it started to become a digital reinvention of the organization. Had it not been looked at it this way, and instead 15 disparate technologies were used to run the 44 lines of business, change would have incremental and insubstantial and the reinvention wouldn’t have been initiated. This is what Fazal defines as “the art of learning to walk.”

Thanks to all the work done behind the scenes in Toronto, learning to run as a world-class digital entity became a much more distinct possibility. The city is now looking realistically at web-enabled IoT technologies and working more effectively with community partners using its open data sets.

Toronto isn’t the only Ontario city making its name for itself as a smart city. Mississauga, an 800,000-strong city that’s grown rapidly in recent years as part of Toronto’s urban sprawl, was represented by CIO Shawn Slack at Smart Cities Forum. The city has enjoyed its own fair share of international attention and recognition as a burgeoning smart city, and for good reason.

Dealing with the pressures of GTA-wide traffic that could see up to six million people travelling through and around the city every day, Mississauga is well into the implementation of an advanced traffic management system, a network of 750 traffic light sensors linked to a data analysis dashboard.

Then there is the cloud-based, city-wide network of LED streetlights kitted out with radios and sensors that determine when they should be brighter or dimmer and send alerts when they need replacing. If that’s not impressive enough, how about a sensor network in the waterways that detects threats from heavy rainfall or pipe leaks, sending automated alerts to make life a lot easier for emergency services?

Not to be outdone, Joyce Evans, deputy city treasurer and director of revenue for the City of Kitchener, and Alex Ahkoon, manager of ERP business transformation, made the case for Kitchener’s emergence as a smart city.

Privileged to be home to world-class tech leaders and incubators in a region that is often referred to as “Silicon Valley North,” the city is using that to its advantage. Networks of smart LED streetlights, smart utilities services, and free public Wi-Fi are set to become the norm, and city staff members are working with local innovators at the famed Communitech Hub to take things even further.

It’s amazing to see the civic innovation taking shape across southern Ontario. As a resident of Toronto, I can feel that I’m right in among something special, and Smart Cities Forum only made that feeling stronger.

Read about another Canadian smart city initiative: Mississauga: Canada’s Rapidly Growing Smart City.

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John Graham

About John Graham

John Graham is president of SAP Canada. Driving growth across SAP’s industry-leading cloud, mobile, and database solutions, he is helping more than 9,500 Canadian customers in 25 industries become best-run businesses.

How Emotionally Aware Computing Can Bring Happiness to Your Organization

Christopher Koch


Do you feel me?

Just as once-novel voice recognition technology is now a ubiquitous part of human–machine relationships, so too could mood recognition technology (aka “affective computing”) soon pervade digital interactions.

Through the application of machine learning, Big Data inputs, image recognition, sensors, and in some cases robotics, artificially intelligent systems hunt for affective clues: widened eyes, quickened speech, and crossed arms, as well as heart rate or skin changes.




Emotions are big business

The global affective computing market is estimated to grow from just over US$9.3 billion a year in 2015 to more than $42.5 billion by 2020.

Source: “Affective Computing Market 2015 – Technology, Software, Hardware, Vertical, & Regional Forecasts to 2020 for the $42 Billion Industry” (Research and Markets, 2015)

Customer experience is the sweet spot

Forrester found that emotion was the number-one factor in determining customer loyalty in 17 out of the 18 industries it surveyed – far more important than the ease or effectiveness of customers’ interactions with a company.


Source: “You Can’t Afford to Overlook Your Customers’ Emotional Experience” (Forrester, 2015)


Humana gets an emotional clue

Source: “Artificial Intelligence Helps Humana Avoid Call Center Meltdowns” (The Wall Street Journal, October 27, 2016)

Insurer Humana uses artificial intelligence software that can detect conversational cues to guide call-center workers through difficult customer calls. The system recognizes that a steady rise in the pitch of a customer’s voice or instances of agent and customer talking over one another are causes for concern.

The system has led to hard results: Humana says it has seen an 28% improvement in customer satisfaction, a 63% improvement in agent engagement, and a 6% improvement in first-contact resolution.


Spread happiness across the organization

Source: “Happiness and Productivity” (University of Warwick, February 10, 2014)

Employers could monitor employee moods to make organizational adjustments that increase productivity, effectiveness, and satisfaction. Happy employees are around 12% more productive.




Walking on emotional eggshells

Whether customers and employees will be comfortable having their emotions logged and broadcast by companies is an open question. Customers may find some uses of affective computing creepy or, worse, predatory. Be sure to get their permission.


Other limiting factors

The availability of the data required to infer a person’s emotional state is still limited. Further, it can be difficult to capture all the physical cues that may be relevant to an interaction, such as facial expression, tone of voice, or posture.



Get a head start


Discover the data

Companies should determine what inferences about mental states they want the system to make and how accurately those inferences can be made using the inputs available.


Work with IT

Involve IT and engineering groups to figure out the challenges of integrating with existing systems for collecting, assimilating, and analyzing large volumes of emotional data.


Consider the complexity

Some emotions may be more difficult to discern or respond to. Context is also key. An emotionally aware machine would need to respond differently to frustration in a user in an educational setting than to frustration in a user in a vehicle.

 


 

download arrowTo learn more about how affective computing can help your organization, read the feature story Empathy: The Killer App for Artificial Intelligence.


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Christopher Koch

About Christopher Koch

Christopher Koch is the Editorial Director of the SAP Center for Business Insight. He is an experienced publishing professional, researcher, editor, and writer in business, technology, and B2B marketing. Share your thoughts with Chris on Twitter @Ckochster.

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In An Agile Environment, Revenue Models Are Flexible Too

Todd Wasserman

In 2012, Dollar Shave Club burst on the scene with a cheeky viral video that won praise for its creativity and marketing acumen. Less heralded at the time was the startup’s pricing model, which swapped traditional retail for subscriptions.

For as low as $1 a month (for five two-bladed cartridges), consumers got a package in the mail that saved them a trip to the pharmacy or grocery store. Dollar Shave Club received the ultimate vindication for the idea in 2016 when Unilever purchased the company for $1 billion.

As that example shows, new technology creates the possibility for new pricing models that can disrupt existing industries. The same phenomenon has occurred in software, in which the cloud and Web-based interfaces have ushered in Software as a Service (SaaS), which charges users on a monthly basis, like a utility, instead of the typical purchase-and-later-upgrade model.

Pricing, in other words, is a variable that can be used to disrupt industries. Other options include usage-based pricing and freemium.

Products as services, services as products

There are basically two ways that businesses can use pricing to disrupt the status quo: Turn products into services and turn services into products. Dollar Shave Club and SaaS are two examples of turning products into services.

Others include Amazon’s Dash, a bare-bones Internet of Things device that lets consumers reorder items ranging from Campbell’s Soup to Play-Doh. Another example is Rent the Runway, which rents high-end fashion items for a weekend rather than selling the items. Trunk Club offers a twist on this by sending items picked out by a stylist to users every month. Users pay for what they want and send back the rest.

The other option is productizing a service. Restaurant franchising is based on this model. While the restaurant offers food service to consumers, for entrepreneurs the franchise offers guidance and brand equity that can be condensed into a product format. For instance, a global HR firm called Littler has productized its offerings with Littler CaseSmart-Charges, which is designed for in-house attorneys and features software, project management tools, and access to flextime attorneys.

As that example shows, technology offers opportunities to try new revenue models. Another example is APIs, which have become a large source of revenue for companies. The monetization of APIs is often viewed as a side business that encompasses a wholly different pricing model that’s often engineered to create huge user bases with volume discounts.

Not a new idea

Though technology has opened up new vistas for businesses seeking alternate pricing models, Rajkumar Venkatesan, a marketing professor at University of Virginia’s Darden School of Business, points out that this isn’t necessarily a new idea. For instance, King Gillette made his fortune in the early part of the 20th Century by realizing that a cheap shaving device would pave the way for a recurring revenue stream via replacement razor blades.

“The new variation was the Keurig,” said Venkatesan, referring to the coffee machine that relies on replaceable cartridges. “It has started becoming more prevalent in the last 10 years, but the fundamental model has been there.” For businesses, this can be an attractive model not only for the recurring revenue but also for the ability to cross-sell new goods to existing customers, Venkatesan said.

Another benefit to a subscription model is that it can also supply first-party data that companies can use to better understand and market to their customers. Some believe that Dollar Shave Club’s close relationship with its young male user base was one reason for Unilever’s purchase, for instance. In such a cut-throat market, such relationships can fetch a high price.

To learn more about how you can monetize disruption, watch this video overview of the new SAP Hybris Revenue Cloud.

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