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SAP has long ago realized that to survive in the competitive and ever-changing landscape of enterprise software the company would have to re-invent itself over and over again. The concept of Software Business Model Cycles illustrates the scope and the speed of the industry-wide change well. To begin with, the decade of 1975 to 1985 witnessed the “Mainframe” era: there was very little – if any – interconnectivity between the machines, and software focused on large devices that could perform the required tasks strictly “in the house”. Around 1985, however, things started slowly moving towards client/server architecture and the first signs of interconnectivity and resulting progressively increasing complexity of the networks started emerging. By 1995 “the Internet” was not only a buzzword heard around highly technically oriented personnel anymore: it had become a cultural phenomenon, and it brought sweeping changes in how business used their software.

Now, however, we are witnessing yet another wave of change: a move towards something that can be named “Enterprise 2.0”.  Businesses already posses the data on their operations, customers, financials, and alike. They also have applications that can use and operate based on that data.  However, the challenge is how to make that data relevant? This is where SAP comes in, and I believe that a systematic and pragmatic approach towards innovation allows it to provide best of the class software solutions relevant in this new environment – just like it has been doing it for the last 30 yeas.

SAP focuses on a very specific kind of innovation: “Innovation without disruption”. To fully understand why SAP has chosen this approach, one must grasp how much of an impact SAP solutions have on the businesses.  In most cases, SAP software is crucial to the companies’ daily operations, as well to their long term, strategic planning, so there is often very little room for experimentation and potential mistakes at SAP solutions. “Disruption” is not a good thing, particularly considering that even small errors could cost a client company millions of dollars. Thus, the incremental innovation, involving SAP’s customers throughout the whole innovation lifecycle, ensures that the risks are minimized.

SAP’s well communicated strategic direction of “On Premise, On Demand, On Device” with overlaying layer of “Orchestration” allows it to discriminate between the tools, initiatives, and internal structures that encourage innovation best tailored to the strategy. Examples of such initiatives that are in many ways unique to SAP are Co-Innovation Labs, Imagineering, the Incubator, Business Networks and Value Prototyping.

Co-Innovation concept and its’ implementation at SAP is a particularly interesting example of a successful innovation initiative at SAP.  The company uses a holistic approach to think about co-innovation with the companies – that could often be both customers and competitors at the same time. SAP’s Co-Innovation is used to explore new business models, new applications, new audiences and new value services. The feature that is most unique to SAP is the early involvement of the customers in the co-innovation pipeline. Only the original idea, the “SAP Vision” is developed exclusively in-house. The very next step – vision design workshops – involves partners, and ensures that they can both impact the concept of an innovative idea at the very early stages, and commit to the project at a point where the initial investment by SAP is not very high. Cooperation, trust and communication are key factors needed to make the co-innovation work, and SAP is working hard to implement right procedures to facilitate the process.

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