How Companies Overcome The Three Key Challenges And The Power Of XO

Sven Denecken

With the accelerated pace of market and consumer behavior change, companies are exposed. This is especially apparent through the explosion of alternative product offerings for today’s consumers, the changing consumer behavior fueled by social networks, and the resulting erosion of brand loyalty.

The new normal for business is persistent and increased customer value focus; up or out. We all need to continuously improve products and services, cater to new business models – all the time – and aspire for differentiation through flawless execution.

We need to constantly convert customers into brand advocates (like in Kotler’s Marketing 4.0); ultimately, to win, engage, and retain buyers, we need to stand out from our competition. Companies today need to become sticky by making every touchpoint valuable and memorable – the true power of XO. But more on that later.

Those of us meeting at SAPPHIRE NOW in Orlando will have many discussions on customer experience and how to enable businesses to get more intelligent. In this blog, I’ll share the challenges and first lessons learned through my many, many, many valuable interactions in co-innovation with clients and partners.

Today’s challenges for becoming or staying a best-run business

Your challenge is to transform your company into a well-oiled, agile execution machine, where each action and resource is optimized towards customer value delivery and strategy. Every member of the team needs to be interconnected and engaged in purposeful activity; know their customers and their preferences, their history of interactions, and expectations; be able to evaluate the optimal path of action in all planned and unplanned circumstances; and provide direct or indirect value at every point of action.

So far, so good?

Well… this means that company processes are not only optimized for standardization and efficiency – which essentially means perfecting operations for repeatability of “normal business“ – but can simultaneously deal with rapidly changing markets, demands, business models, customer preferences, and out-of-bounds events.

We need to introduce mass-customization and agility for the new expectation of customer-centricity (aka experience). Likewise, we must ensure we are leveraging machine learning (ML) and other AI technologies to eliminate manual efforts – and allowing robotic process automation (RPA) and innovations to drive the processes.

Finally, “each left hand must know what each right hand does,” even when the pace accelerates or unplanned situations occur. This is a challenge in hardwired organizations because competition arises in segments where agility is key. Interconnected organizations need to determine how to best leverage data, technology, and capabilities to achieve the right outcome for the clients they serve.

How to address these challenges?

Let’s remember that we’re not new to this way of thinking. We can build on our rich experience in helping our customers manage their enterprises in an experience-data-driven and collaborative manner. Signal-to-action has always been a driving force, but the amount and variability of signals have changed dramatically.

So, what have we learned, changed, and adapted to meet the new challenges? Where are we helping our clients do the same?

To address these challenges for modern businesses, we must introduce several innovations and adjustments. Let’s focus on three:

1. Relieve users from any task that can be automated, and focus on value-adding decisions and increasing the ease of value.

  • As the “system of record” for most businesses in the world, ERP already contains the data foundation of digitalization. We can leverage machine learning to identify patterns in historical data that can then be applied to new data, predicting outcomes without human intervention.
  • RPA allows users to easily automate basic tasks across multiple applications, just as human workers in a team would. This further reduces the burden of repetitive, manual tasks on employees and enables business users to automate even more complex tasks, integrating and orchestrating data from heterogeneous systems.
  • With intelligent situation handling, end users are directed to business situations requiring their attention, provided with rich context via the same user interface, and presented with alternative options to support fast and informed decision-making. Furthermore, tracking the users’ handling of situations results in data useful for analytical insights and incremental improvements, and sets an excellent foundation for machine learning and rule-based automation, thereby moving towards autonomous execution with little or no human intervention over time
  • Conversational user interfaces using natural language interfaces and digital assistants allow users to query a system using natural language for a hands-free experience. Combined with machine learning algorithms, the system will be able to cover more complex interactions. For example, procurement can use the system to evaluate purchasing practices to spot similar purchases and suggest the creation of new catalog items, while drastically reducing manual processing efforts and related errors.

2. At a business level, evolve ERP to real-time steering across the value chain.

  • Beyond improving the individual end-user experience through technical means, we need to ask: What are today’s information needs to run a digital business for individual roles and across teams and value streams?
  • Evolve traditional ERP functionality towards more deeply integrated and agile scenarios, e.g., moving beyond the classic focus on supply/demand matching and profitability towards:
    • Ongoing business optimization via simulation of scenarios and embedded valuation
    • Focus on customer experience along the entire value chain
    • Exploiting strategic opportunities through organizational agility
  • Expose this richer and more task-focused information at each point of action via embedded intelligence. We can do this by leveraging embedded analytics and simulation capabilities to deliver optimal decision support for roles across their activities, and by using enhanced functionality to remove existing process gaps and renovate processes, mainly through automation.
  • Foster collaborative execution across the enterprise with real-time steering. Whereas in traditional ERP, businesses are managed in cycles of forecasting, executing, and reporting, with relatively slow response to changed circumstances. The speed dynamics and competitive pressures on today’s enterprises require that companies manage the business as a highly interactive, collaborative, and fully informed team across all business areas.

We can already see results by truly measuring what our customers want and what they achieve. Following are some of the things we’ve learned from our co-innovation engagements with SAP partners.

We all need to change from traditional business models to digitized, modern business models. Some of the changes we’re observing include: from mass-market products into personalized, “smart” products and services; from traditional retailer or reseller models into direct consumer connections; from point-to-point into multiple enterprise orchestration; from reactive processes and systems into thinking processes and systems; from agility to resiliency; and, of course, from needs to experiences.

We can measure this, and many customers have achieved impressive results, which will be demonstrated by our customers and partners speaking at SAPPHIRE NOW in Orlando.

The last point, about the change from needs to experiences, brings us to:

3. The power of XO

The experience economy has changed the way businesses compete. Today, organizations must continuously listen to the beliefs, emotions, and intentions of customers, employees, suppliers, partners, and all other stakeholders – at every touchpoint. This type of data is called experience data, or X-data.

Businesses must be able to interpret and analyze large amounts of X-data and understand its relationship to the operational data of the business, or O-data. To achieve breakthrough results, businesses need to move beyond systems of record to new systems of interaction specifically designed to intelligently use both X- and O-data to manage and improve the four core experiences of business: customer, employee, product, and brand.

Experience management is the combination of X (Qualtrics) and O (SAP) data to provide insights into what happened (O) and why (X) and drive actions that have impact on customers and the bottom line. You can learn more about this, as well, in Orlando at CX LIVE.

O-data comes from enterprise applications like sales, finance, supply chain, and HR systems. It tells you inventory turnover, cart abandonment, days sales outstanding, employee attrition – all really important stuff. O-data is critical to managing the business. Thus we need to adapt constantly, as points 1 and 2 above explained.

X-data, on the other hand, is fundamentally different than O-data. X-data is the human-factor data: the beliefs, emotions, and intentions that tell you why things are happening and what to do about it. X-data comes from things like customer feedback, Net Promoter Scores, product reviews, brand sentiment, and employee engagement.

Start maximizing your customer experience insights

The bar has been raised for measuring the customer experience. Take our survey to discover how organizations are combining insights from customers, employees, and operations to improve the customer experience – and business performance. As a thank you for participating, you will receive a report that analyzes the survey findings.

Take our survey!

In case you cannot join SAPPHIRE NOW in person – join online.

Follow us via @SAP and #S4HANA, or myself via @SDenecken

This article originally appeared in SAP Community.


Sven Denecken

About Sven Denecken

Sven Denecken is Senior Vice President, Product Management and Co-Innovation of SAP S/4HANA, at SAP. His experience working with customers and partners for decades and networking with the SAP field organization and industry analysts allows him to bring client issues and challenges directly into the solution development process, ensuring that next-generation software solutions address customer requirements to focus on business outcome and help customers gain competitive advantage. Connect with Sven on Twitter @SDenecken or e-mail at sven.denecken@sap.com.