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The path to digital transformation

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Kathy Gibson reports from CeBit in Hannover – Technology is set to fundamentally shape the future of every business. But every business wants to know how to do this in a scalable and profitable way.
Bernd Leukert, board member of SAP stresses that digital transformation is not just hype, but is happening all around us.
“It is clear the digital transformation is top of the agenda for most companies – and it will soon be at the centre of many companies’ strategies.
“And 60% of companies believe they will double their revenue by becoming a software-centric organisation.
“The companies that can make this transition successfully are the rising stars of the future.”
The journey is not an easy one, though ,as it is a re-invention of entire businesses and business models, Leukert says.
“And there is not a single recipe, there is no one size fits all. Every individual, department and process in the business will be affected.”
According to SAP’s Digital Transformation framework – which can start anywhere within the organisation – algorithms and data are going to be key going forward.
“You have to ask if you want to become a software company or if you want to build alliances with other companies,” Leukert says.
He believes that older organisations will enter a bimodal state, where the first phase focuses on the core business; the second phase is about fast development without disrupting the existing business.
He says digital transformation involves five building blocks, or questions to ask:
* How do I find customers in the new digital world
* Differentiation is always the winning strategy – so how do I differentiate going forward
* The whole economy will transition into an outcome based economy which will fundamentally change your operation, means of production and engagement
* How can I optimise my existing business and work with the new business going forward?
* How can I manage a highly scalable business going forward? How can I transition a great idea into a scalable and profitable business?
“At the centre of everything you do is your customer’s customer, who wants to be dealt with in a multi-channel, individualised way,” Leukert says.
“But customer relationship management (CRM) was traditionally business to consumer (B2C) or business to business (B2B) – but both of these are always from the point of view of the business.
“In a digital society the consumer drives the business, so CRM is outdated and needs to become customer interaction and commerce. Companies need to build intense and deep relationships with customers. This means a fundamental understanding of everything they do.”
Although the new world of CRM starts with sales, it should continue with marketing and service, ensuring the all the customer’s needs are met.
Once companies have changed the way they interact with customers they have to deliver on the differentiation they have promised, with each product individualised for specific customers.
“This means one size doesn’t fit all,” Leukert says. “You need to deploy individual software components that let you differentiate. You need a second-mode platform that is able to integrate digital applications with the existing business; and you need to focus on the new business model.”
This requires an agile and flexible business approach, he adds. “It’s not just a digital and technological platform, but it needs to serve the needs of the business model. It needs to be scalable and support realtime business.”
Being outcomes-oriented means organisations have to drive technology out of the IT operation into the rest of the world. “The Internet of Things (IoT) is a combination of different capabilities, and this requires a single platform to drive that connectivity,” says Leukert.
Recent research shows that 76% of manufacturing companies will add smart devices in the next couple of years; and close to 70% expect significant investments into IoT products.
“This is what is driving the discussion with all of our customers these days,” Leukert adds.
He cites the case study of Italian Railways, which worked with SAP to equip all of its trains with sensors. These send information through to the central system, allowing to organisation to do predictive maintenance so that the trains are more efficient.
“On top of improving the experience for passengers, the project will save Italian Railways 8% to 10% of their annual maintenance cost – a significant amount,” Leukert says.
The second mode of IT requires a digital core in ordee to engage with the customer and execute on analysis. “This is the central nervous system of your company, and it needs to have maximum flexibility,” Leukert says. “If it isn’t flexible, or able to adapt to new capabilities, you won’t have the speed and ability to react to customer needs. The digital core needs to have simplicity in the data model, speed and the capability to respond.”
Possibly the most important step in digital transformation, he says, is that it has touch everyone in the organisation, from the shop floor to the boardroom. “Realtime analytics has to be combined with planning and assimilation in order to be effective,” Leukert adds.