Why an intelligent ERP is key for successful companies and how this is related to Co-Innovation

Charles Duell said in 1899 – “Everything that can be invented has been invented”. No doubt, all established companies were truly entrepreneurs with tremendous achievements in their respective markets. They have each performed outstanding upon entering the market and they all had great advantages over the competition … for the time being.

Running SaaS ERP is becoming the game changer in the Industry. In the area of business applications, it´s a fatal misunderstanding to see a digital core and cloud delivery models simply as a natural evolution of the known. It goes far beyond and Co-Innovation plays a vital role in it.

For too many companies, digital transformation is an excuse to focus on yesteryears growth rates, at the end loosing against others because they do not challenge themselves early and often enough. The digital economy is about the end-to-end experience. You don´t book an UBER because they run better cars. You book an Uber because you can start your journey wherever you are. It’s easy to use, once you are registered, the same experience everywhere for global travelers. And you know what you get. You can visualize your position against the next free ride, what car, how does the driver look like, no local cash required, invoices via email for your expense report, fair prices as all is tracked via GPS.

This digital store front driven user experience is only the tipping of the iceberg and puts a huge pressure on the real-time processing on the backend. This triggers an average invoice value decrease while the number of invoices is exploding – first of all, no problem for a mature enterprise solution that thinks and acts end-to-end. Though similar impact you will have in your enterprise logistics, the average value and size of lots is going down while the number of lots is going significantly up. The direct consequence of this “UNIT of ONE driven order size” seeps throughout the entire organization. How can I keep my corporate functions working at scale in such an environment?

Now, to manage this real-time end-2-end-experience for your customers, you need to run a digitized, intelligent core

1. An architecture that delivers a scalable foundation to transact at highest possible automation
2. A system of intelligence that supports and steers the business using embedded analytics’, simulation, prediction, and decision support to run LIVE business
3. An end-to-end experience that allows to be faster implemented, consumed, and adapted- with best information at the time decisions are made
4. An open architecture to allow connected-ness and adoption of micro-services

How Machine Learning contributes to the intelligent ERP

One key element for an intelligent ERP is machine learning. So it was no surprise that at this year’s SAPPHIRE NOW this was one hot topic. Hasso Plattner echoed this by saying in his keynote: “We want to be fast in application building and make everything more intelligent.”

But what is Machine Learning all about? Rather than programming software to accomplish a specific task, the machine uses big data and sophisticated algorithms to learn how to perform the task itself. Machine Learning allows applications to “think” and independently make a determination or prediction – going beyond what predictive analytics and big data analytics can do, and often beyond what humans can do.

Not possible in yesterday’s software generations, we were able to co-innovate on invoice matching with customers and deliver scenarios fully deployed, based on machine learning, in the Cloud with the S/4HANA Cloud 1702 release. Not as a conceptional scenario, but as full functional deployed applications (See also here as reference: https://blogs.sap.com/2017/02/14/product-management-update-sap-s4hana-finance-cloud-1702/).

How is this linked to Co-Innovation

There are several reasons why Co-Innovation is a key element in facilitating a customer driven product engineering. In a nutshell: Constantly evolving customer demands rapidly change the marketplace. Studies show that every third company expects a severe or even fundamental change of their business model until 2020. With Co-Innovation the understanding of use cases and potential barriers can be overcome much easier. It helps the product to respond faster to the digitally transformed world. Let us be clear in what Co-Innovation is and how it works.

Co-Innovation is a very well-known concept and often used term, especially because there are benefits for all involved parties like customers, partners and SAP, when engaging in a Co-Innovation approach. As the word Co-Innovation is often used with a different meaning and context, I want to make clear that when we talk about Co-Innovation, we are not reducing it to a single meaning.

Whether you are talking to a partner about a future design concept, call a customer or explain a mock-up to someone and maybe even receive some feedback, all that is Co-Innovation.

it is about creating and validating a funnel of ideas to really set the right scope. With a huge set of ideas in different directions and dimensions we move to the next step in which we collaborate and evaluate these ideas in order to bring them to life.

This happens in a structured process where we sort out where our customers have the most business impact going forward. It is about planning investments and deciding on the right mix of the product.

Within Co-Innovation projects we frequently listen and engage and finally make sure that the proofed business outcome results in a product capability. This of course is always a one-to-many approach and never a one-to-one approach, especially in the cloud as it stands for standardizing processes.

How Co-Innovation engagements work

Every Co-Innovation interaction works differently and is meant to be individually adjusted to the ability of committing time from all involved parties. Overall, it is important to work together with customers and partners continuously along the SAP S/4HANA Cloud product lifecycle. An example could be a close collaborator, who would be involved in a high-touch model, already very early in the development process acting as an industry poster child. An advisor on the other hand could give feedback on different stages throughout the process on a regular basis, proving that priorities are right.

Back to the intelligent enterprise to make it tangible: Right in time before SAPPHIRE NOW we have built a concept demo to show what an intelligent ERP can do for companies. In this use case, which spans an end-to-end case, a company has redesigned its entire business model and operates generators on a subscription basis instead of selling them. Due to an upcoming cold weather front, a failure in a single fuel pump causes issues and they were faced with an increased risk to have many generators in the region running on a limited run rate producing too little energy. This will immediately affect their SLA and NPS. Increasing service levels required to operate in predictive mode: The situation needs to be solved for the customers before a failure actually happens.

We leverage the freshly invented digital assistant, our CoPilot, fed with Asset Intelligence Network and Virtual Reality information to identify the issue, leverage the digital core capabilities to help our customers with an ad hoc reprioritization of product allocation, use SAP CoPilot for further Collaboration and artificial learning, and the new SAP Fiori Overview Pages to trigger a purchase requisition within our Connected Manufacturing scenario.

To learn more about this demo, watch the video below:

A similar concept demo was also built (and presented by Marco Valencia, VP product management) with a McLaren show case  at SAPPHIRE NOW: http://events.sap.com/sapandasug/en/session/32201

Get involved in SAP S/4HANA Cloud Co-Innovation

There are three reasons that illustrate the importance of Co-Innovation, especially during this time of constant change, which brings us directly the first point:

1. The unprecedented pace of change in which we live in. Change has never been as fast it is today and will never be as slow as it is today, if you look into the future
2. The subscription economy allows shorten the distance between engineer and the customer
3. Technology is changing and this is the base for changing the business environment

Are you interest in co-innovating with us or have questions about the topic? Reach out to my team through s4hana-coinnovation@sap.com.

For more information on SAP S/4HANA Cloud, check out the following links:

• S/4HANA cloud release information: http://www.sap.com/s4-cloudrelease
• Product documentation and What’s new in 1705 available here
• Best practices for all the cloud editions here

If you enjoyed this blog, found the information useful or want to read more blogs like this, let us know by hitting the “Like” button and if there are any questions about SAP S/4HANA or Co-Innovation itself, tell us in the comments below.

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