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The right approach to S/4HANA – Blog Post #5: The “Intelligent Enterprise”​ is the cure, but what is the disease?

 

 

Today we are going down to the essence of our innovation strategy. The foundation of everything SAP does is to enable our customers to become an “intelligent enterprise”, which means a considerable new setup: For decades we delivered applications and solutions. Software that got things done easier, faster and more precise with each release. Customers were able to bring their existing business to a new level of excellence.

But today that claim has shifted.

It’s not about bringing processes to a new level anymore, it is about enabling processes that have never been possible before.

That requires us to change our point of view, away from isolated applications to business strategy, we have to speak about that condition we define as “intelligent enterprise”, but not about the intelligent enterprise alone but on the factor that made the intelligent enterprise not an simply desirable state, but a necessary state to excel in the digital economy of the 21st century.

It’s not about bringing processes to a new level anymore, it is about enabling processes that have never been possible before.

In other words: It is not enough to explain the intelligent enterprise as a medicine, but we also must talk about the disease for which this next level is the cure.

It is easy to insert “Intelligent Enterprise” into a signature, but that does not make you miraculously an expert in explaining and enabling it. We all have to embrace the context the “Intelligent Enterprise” was born in, and to do this in this blog, we will examine the “cure” and the “disease” thoroughly.

So let’s start with the easier task (because it is widely available), the definition of an intelligent enterprise:

The Intelligent Enterprise leverages emerging technologies such as AI/ML, IoT, and Analytics to enable the workforce to focus on higher value outcomes. SAP will deliver the Intelligent Enterprise through a framework consisting of three key components:

1.Intelligent Suite – to enable our customers to automate their day-to-day business processes and better interact with their customers, suppliers, employees, etc., through applications that have intelligence embedded in them

2.Digital Platform – to facilitate the collection, connection, and orchestration of data as well as the integration and extension of processes in our Integrated Applications

3.Intelligent Technologies – to enable our customers to leverage their data to detect patterns, predict outcomes, and suggest actions

So far so good. But a problem arises now when you have an interested but skeptical customer in front of you, who surely will ask you this question now: “Nice vision, but what are we then now? Dumb?” And if your own intellectual effort (Next to inserting “Intelligent Enterprise” into your signature, title or linkedin profile) was limited to memorize above definition you are in serious trouble now if you have not departed from your features and functions mindset and cannot explain what disease the “Intelligent Enterprise” is all about and phenomenal to cure.

Let’s go now to the part that has seldom been answered: What is the disease? WHY should an enterprise aspire to become “intelligent”? And are non-intelligent enterprises dumb? Of course, it is known that new emerging technologies and higher data volume are overcharging classic ECC systems. No arguing, that having an ERP that has a base architecture from the early 90s is like a hand-axe in the digital age, not able to cope with the challenges. But we don’t want to be satisfied with those justifications because they are neither coherent nor conclusive in their effect.

It’s because enterprises don’t have a choice if they want to survive.

Instead, lets talk about the true reason why enterprises should definitely aspire to become an intelligent enterprise: Its not about being 10% better in this process and 12% better in that process (one reason while benchmarking is not a big help here). Classic ROI and value calculations are not making sense in finding a reasonable motivation for taking the step to become a intelligent enterprise, because the real cause is much simpler:

It’s because enterprises don’t have a choice if they want to survive.

Strong words? Sure. But let me tell you why these strong words are absolutely justified. And please keep on following me because we have to back up a little bit to provide you a satisfying explanation. You can find it for yourself if you for example have heard Omar Abbosh, Chief Innovation Officer of Accenture, talking about using technology as an enabler for growth, S/4HANA SVP Sven Denecken or other inspiring Thought Leaders. And your task is to connect the dots, so let’s discuss “the disease”:

When I was writing my “Abitur thesis” about Business Process Engineering in the mid-90s, KODAK was an often published example for excellence, a sound company at its prime, a rock that’s able to withstand economic storms. A few years later only, this rock had been crumbled under disruption of its industry via digital photography because its most of its business model had tanked.
But why this outcome? It is not that KODAK did not see the advent of this new technology, KODAK even developed this new technology in the beginning themselves! But why got KODAK disrupted by its own new brain child? Because KODAK was not able to shift its business model to take advantage of this new technology, in other words: The tanker was not able to do the turn.

And Kodak is not a singular example, Blockbuster had its last breath when Netflix made DVD/Blueray-renting pointless, seemingly invincible Nokia took a heavy landing when Apple made a mobile phone with a touchscreen on it … the examples of this kind of “Big Bang” disruptions are spectacular.
Logarithmic cost reduction in all fields of innovation drivers like Cloud Storage Costs, Vehicle Battery Packs, 3D Printing machines, Photovoltaic Cells etc. have given the “nuclear option of disrupting whole industries” in the hands of innovative people. Fresh money is available, so the established players can be caught in a defensive position by an innovative start up at any time.

Interestingly, these spectacular cases are even surpassed by a far more dangerous, creeping and sneaking kind of disruption: “Gradual disruption”. In this case an established industry and its players is not whiped out with a bang like in above example and the advent of a new technology does not mean the immediately grounding of established products and services, but it takes their growth rate away and by this, companies that fail to make the shift into these new levels of business dry out: The missing growth rates takes away their liquidity and ability to invest in innovation, so they take a slow but sure death of starvation.
And you can find many examples of companies and industries in such a transformation: Siemens and General Electric are selling big parts of its total assets to finance their digital morphing; the automotive industry can not rely on combustion engines as moneymakers for all eternity since electricity and alternative fuels are changing mobility forever and to give you one final example … SAP. SAP itself is directly in a dramatic transformation, since the on-premise sales numbers have remained settled on a zero growth for the first time since 1972 while the cloud subscriptions are soaring to new heights each quarter. So that’s why we at SAP have the ambition to always be the best cloud company on this planet …. you get my point.

Because of above mentioned “innovation costs nothing” – premise, industries will not be disrupted once but probably every three to four years, with the effect its players have to follow a two-tier strategy: On the one hand they have to “Grow the Core Business” on a highly automated AI/ML – fueled platform by building more competitive cost structures to improve flexibility, increase profits and drive up investment capacity. On the other hand “Scaling the New” highly flexible innovation infrastructure by identifying new areas that are relevant in their industries (maybe the “next big thing”) and scaling them, and finally to keep a “Wise Pivot” by keeping an eye on pace and balance, because the core and new business usually need to coexist for a substantial period of time, and by this raising their business constantly to a new level of enterprise value.

This is what the “Intelligent Enterprise” is all about.

Enterprises have to redefine themselves constantly and if you are a tanker that is not able to take tight turns, react to disruptive attacks and fight back with own “gamechangers” you will probably have a hard time in this century.

And this is where SAP’S products come in, because on the “Core” side you will find our digital core, your next generation ERP Suite consisting of S/4HANA and its additional engines and on the side of “the New” our innovation suite consisting of SAP Leonardo where you can realize your innovation. Fast and easily.

Enterprises have to redefine themselves constantly and if you are a tanker that is not able to take tight turns, react to disruptive attacks and fight back with own “gamechangers” you will probably have a hard time in this century.

In the end, becoming an “Intelligent Enterprise” is not a question of becoming x % better in some processes, it is about digital transformation to be able to “stay in the game” and not to be disrupted out of it.

To become an “Intelligent Enterprise”, please talk to us at SAP and our partners like Accenture.
And continue to read this blog series.
Thank you.

 

 

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