Across nearly all geographies and industries, companies are searching for growth in a low-growth world. Yet economists often divide growth drivers between extensive growth (expanding your workforce, resources, and facilities) and intensive growth (such as new, innovative ways to use existing resources more effectively). While there is certainly capacity to add extensive growth in emerging markets, extensive growth at some stage will lead to diminishing gains and available resources. On the other hand, nearly all markets need to inject intensive growth to break through today’s growth plateau. For many businesses, the answer to this challenge is productivity.
For decades, the relationship between growth and productivity has become evident to economists and business leaders alike. From 1972 to 1995, the annual growth rate of output per hour (which is a measure of labor productivity) averaged around 1.25% in the United States. Then came the explosion of the Internet to mass consumers and breakthrough technologies to businesses such as enterprise resource planning (ERP), surging productivity ahead by 2.25%.
But all of this changed in 2004. Despite the huge breakthroughs since this time (the launch of the iPhone, broad adoption of cloud delivery, etc.), the power of this technology-driven revolution began to wane in the United States. To this day, growth in productivity continues to be the weakest on record since 1950 in most countries associated with the Organisation for Economic Co-operation and Development (OECD).
No matter how you cut it, we are in a state of economic stasis. Many of us are now looking for answers to the same questions that were asked during those prior periods of stagnation. How can western economies in particular grow while population growth stagnates or moves into decline? And at the corporate level, how can a company grow without substantially adding to its workforce or expanding its own facilities?
The in-memory technology breakthrough: Will it overcome this era of economic stasis?
Since the beginning of the 21st century, there’s been a long parade of technology innovations touted as the next big thing. Tech unicorns took over news headlines, and app-enabled startups depicted a picture of ground-breaking digital transformation.
Despite this buzz, a single technology rarely ever moves the needle – rather, it’s a combination of various technologies that unlocks new opportunities. From connecting sensors at the edge of the enterprise to real-time analytics and 3D printing at the customer site, to blockchain, companies are making intensive growth a reality.
Sitting at the center of it all is a tried-and-true technology: the enterprise resource planning (ERP) platform. Once again, ERP is playing a critical role in combining information from every facet of the business and beyond into a central, digital core. However, this is not the ERP system from 40 years ago, it’s a next-generation suite that powers full insight and understanding of the world as your business predicts outcomes and nimbly executes in real-time.
Now, with a combination of new technologies such as in-memory computing platforms and cloud delivery options, companies can establish the next wave of productivity from within.
The dawn of a new revolution in digital transformation begins with ERP
As technology landscapes and business processes converge together, organizations will be better equipped to deliver new advantages and associated productivity gains. But the full potential of that digital transformation is only realized once an ERP platform is built from the ground up with in-memory computing technology and an intuitive user experience.
By removing the obstacles and complexity of legacy database technology, companies not only benefit from dramatic changes to underlying processes, but every line of business can also act and think in real time, running as a live business.
Here are two examples of such a metamorphosis:
1. Supply chain
For decades, lost sales due to stock-outs have plagued the competitive retail market. However, with ERP as the digital core and embedded within transactions, a retailer can receive real-time alerts based on current stock requirements – offering intelligent and consistent decision-making support. At the same time, on-time delivery of new products is streamlined by integrating pick, pack, and ship processes.
For one major grocer, this approach is proving to be so effective that it on the path to reducing revenue loss due to stock-outs by 20%, equating to €30 million in saving in its first year of operations and covering the cost of its ERP project costs several times over.
For other ways that supply-chain processes are transforming in the world of in-memory, check out this clever cartoon from a colleague of mine.
For finance professionals everywhere, the prospect of eliminating the reconciliation process is promising. With this approach, a single transaction table for general ledger, controlling, asset accounting, and inventory accounting and provide real-time access to open items in accounts receivable and accounts payable.
Take Vectus, for example. This leader in water storage and piping systems for the agricultural industry shrunk its four-month financial close process to real time and reduced its overall operational costs by 15%. More staggering, unlike traditional ERP initiatives, the company implemented its next-generation ERP investment in only four months.
User experience is even more vital – especially with the insights available to an ERP running in-memory
No matter how advanced, technology provides little benefit if it’s difficult to use. This is especially critical to productivity as users increasingly demand the ease of consumer-grade technology.
By providing a single, role-specific entry point through a role-based and personalized interface, users of all levels can access the entire functionality of the ERP platform. Navigation, search, and notification capabilities create a coherent experience across the system. And with access to relevant information at a glance and valuable insights from dashboards, users can make decisions and take immediate action.
Gone are the days when you invest in technology that guarantees advantages for small pockets of your value chain. From finance and human resources to supply chain, manufacturing, marketing, sales, and service – every line of business can run live with incredible insight and power to move in the moment to deliver greater value to your customers. That’s the power of next-generation ERP. And that’s what it will take to help businesses worldwide finally find growth in a low-growth world.
Discover the productivity potential of a next-generation ERP platform. Over the next six weeks, we’ll share additional insights from a study of businesses using SAP S/4HANA. Be sure to check every Tuesday for the new installment to our blog series “In-memory ERP: Breaking the Growth Plateau.”