Transcript Blog: SAP and Oxford Economics: Building Interconnected Companies in the High Tech Industry
A report done by SAP and Oxford economics attempts to find out if an interconnected business exhibits more resiliency than other businesses. To put this report in the context of the high tech industry, Josephine Monberg interviews Patrick Maroney, High Tech Executive Industry Advisor at SAP in this episode of Industry Insights by SAP.
Hello everyone. And welcome to this episode of our podcast. So SAP did a report with Oxford economics and what they did is that they surveyed about 3000 senior business leaders to find out how, and if they have been able to implement holistic management style into their everyday business operations. So essentially what they wanted to find out is if an interconnected business exhibits more resiliency and leadership than other businesses. And so that’s actually what I want to talk about today, but I don’t just want to talk about the report isolated. I want to put it in context with a specific industry and the industry is the high tech industry. So what my guest and I are going to do is to look at some of the findings from the report and then see if that holds true for the high tech industry. And so to do this, I have obviously brought an expert in, and that guest is Patrick Maroney and he is an industry executive advisor for the high tech industry at SAP. So Patrick, thank you for being on the show, first of all. And then secondly, can you just introduce yourself to all of our listeners?
Absolutely. I mean, you just mentioned my title and maybe I’ll explain what that means. Right? So I get to work closely with executive teams from our customers. I basically help them to develop the appropriate time phase strategies and roadmaps, and that is based on their business goals, on the outcomes and the business outcomes you’re trying to drive. We look at the things that are inhibiting them from achieving those objectives. And then you know, what’s preventing them from getting there. And then we look at whether it’s business processes or technologies pine phase roadmap for overcoming those obstacles.
Hmm. So now let’s turn over to look at some of the findings in the report. And one of the findings was that executives across a variety of different industries, right? Cause they looked at a lot of different industries are actually pretty confident in functional and process integration, actually nearly four out of five, say that they have integrated operations. They also set that interactions with IT is seen as critical to success. So now let’s turn over to the high tech industry. Is that something that you’re seeing in the high tech industry too, Patrick?
You know, I think that’s a really interesting Survey result. And I would say on two different levels on the first level, you know, I would say that it does not align with what we’re seeing. So for example, let’s suppose that you were driving on a road and behind you, the road was perfectly straight, but in ahead of you, the roads really curvy. And let’s also say that all you could do was to judge where you were going by looking in your rear, right? Because the road behind you is straight, you would assume, assume the road ahead of you is straight. And when you hit those curves in the road, you would likely drive off the road. If all you could look through his rear view mirror. And so the road ahead for high tech and many other industries is really curvy. I we’re pacing, supply shocks, demand, shocks resource shocks. And so it’s really about how quickly and how better you can predict what the road ahead is going to look like. And the better and faster you can do that the, you can adjust to those changes. So I find it strange that all of those executives would really comment to that extent because you know, the focus is really on, on these changes. We often don’t know what we don’t know. And its obvious as that might sound, you know, if we just solely based on this rear view mirror approach, then we’re going to drive off the road. Let me give you an example. We were working with a large high-tech OEM recently and, you know, they’ve invested a lot of time and substantial funds in business process. Re-Engineering across the board, across all their processes. But if we think about it from what they’ve did in procurement, just to procurement, as an example, we asked them, how many variations do you expect in your standard procurement process?
And they said, after all this re-engineering, we would expect more than six variations to our standard procurement process. And we said, well, let us analyze that. And we used a set of big data tools to look at all of the log files across all of their systems. So you think about in the old days, you would bring in consulting teams that had spent six months building value streams and all this. We used technology-based tools to look at log files, to analyze their processes. And you know what we found in Western three weeks of an hour, we found that they had over 220 variations of their procurement process. And that’s just looking in procurement there’s money to all those variations. That’s people buying off contract or Maverick spend, right? That’s people not adhering to all the business process re-engineering that you’d invested in. So you need tools like this to not only look at your processes and analyze these processes, but also on an ongoing basis.
Yeah. Make sure that you’re adhering to the superior that you put in place right now. I’d also say that the survey, another interesting result from the Oxford surveys was along the lines of the fact that they, they, they found 14% of the executives. They surveyed also said that they haven’t fully broken down all the organizational silos that exist, which means there’s a lot more work to do to gain visibility across your organizations and companies today, they need actionable data and they need this data without latency, without having to do all these different data hops. And storage’s, you need to see what it is now, that’s going on in your company. And with that, if you can get actual insight today, then you can drive a much more intelligent business. You can be much more agile to all these shocks that we just talked about that are going to occur. And therefore you can be a lot more competitive. I apologize if that was a long-winded answer, but I, I hope that that’s useful to you and your audience.
That was, that was a really interesting and insightful answer and to hit on what you just said, right? So essentially it’s really important in today’s world that businesses know where the road is headed or at least that they have some kind of insight into and predict where they want to go and where they should be going, using data to achieve this. And I think especially in today’s world in 2020, this is even more critical, right. Because COVID is impacting everybody and that creates so much uncertainty and unpredictability. So can you comment a little bit more on what’s going on with COVID and how has COVID impacted the high tech industry?
Yeah, and as I just mentioned, right, the supply demand resource shocks are definitely driving the need for increased agility. And high-tech has always been a space that, that, that lived fast and furious, right? It might take nine months to engineer a new printer in three months for that printer to be obsoleted. And if you’re the leading printer manufacturer in the company, it’s probably, you they’re obsoleting your own products. COVID has taken that to a whole new level with being having to be responsive and agile to the, the variations and changes and shocks that are hitting the system. Now, this is also a huge human component to this as well. Think, think about just, just looking at SAP, right? When, when when COVID really hit in the world in a big way, when everybody realized what this meant in, in, in really March SAP, we moved 90,000 employees to, from traveling and working in offices, to working from home essentially overnight.
And, and every company faces these challenges. And, and there’s a certain amount of that that you need to be on top of how are we measuring our, our employees, wellness, our employees experiences, how are we ensuring that we’re retaining the top talent that we need to retain in our company and keeping them getting them the needs that they have in this new normal, right. If we were used to doing 90% of our sales direct, face-to-face in a B2B model now 99% of your sales are indirect in e-commerce. So there’s a lot of changes that are taking place and happening. And as, as much as the business processes that have to change along with them occur, it’s technology that enables you to adapt and flex and and ensure the wellbeing of your employees and the wellbeing of your processes in, in this day and time.
So many sectors have been impacted quite negatively by, by, by COVID. I mean, look at hospitality and airlines, hotels, all of that. In many cases, the technology that enables us to work from home is powered by high tech. So there’s a bit of a buffer, so to speak and some of the demand shocks and in parts of it that are B to B, to C you know, Apple’s storefronts, they all closed, but a company like Apple, they don’t just furlough all their employees. They retrain them and they, they use a downturn in a cycle to prepare for the next upturn. In 2008, when Lehman brothers happened, it was then that Apple used that timeframe to to launch the iPad. The iPhone came out in 2008 and they were developing the iPad at that point in time, which was launched in the marketplace in 2010. So when the going gets tough, tough companies get going, they use LOLs and shocks and changes to fine tune themselves to emerge more competitive, or even use the conditions to showcase their abilities, to be more competitive. And, and, you know, it affects different industries in different ways. I think high tech has always been a very resilient sector and and I think COVID allows them to leverage their ability to be resilient as a competitive strength and challenge.
So Patrick, going back to the Oxford economic study, so the survey found that nearly half of the respondents say that technology investments contribute to improve both customer and employee experiences and increases employee productivity. And what they also said is that IOT AI and predictive analytics, our top investment priorities, is that the case for the high-tech sector too?
Absolutely. Right. So, you know, the impact of losing a customer is massive, right? I think they say that for every dollar you spend to get a customer, you spend at least nine X to get them back if you lose them. So in a, such a competitive environment as the high-tech industry is and how fast it moves, right. I just gave an example a second ago about life cycles and, and and, and, and product turnover. It’s really all about time, the volume in the high-tech sector. So you can’t afford those blips and customers. It’s in narrative to understand and constantly take a pulse on what your competitors are doing. And, and in the technology space where people are investing, there is more and more, they’re trying to get real time sensing of what the customer experience is. And how do I bring that back to take action on it immediately?
Right. I feel like we’re talking about the same theme here. If you looked at the gas gauge in your car and it gave you last week’s gas level, what good would that be? It’s accurate, but it’s not current, right? You would have to drive your car very differently than you drive your car today. When you look at your gas gauge, you expect that data to be real time, businesses need to be able to combine customer experience with what’s going on in their business real time. So the data and the analysis they’re looking at is real time information, and they can take real-time action, right? And that’s absolutely imperative with short product life cycles. And in this time to volume marketplace, now, we also talked about the effects of COVID and how important it is for us to really take a pulse, not just on our customers, but on what our employees are doing.
And so that’s absolutely critical, you know, technology customers often you know, high tech companies, technology companies, often adopt change and, and technology to enable that change. They often adopt it faster. And the reason for that is to drive competitive differentiation for all the reasons we’ve talked about, right? Because it’s so important to hold on to our customers. And, and, and when we look at these other technologies, you mentioned as we look at IOT, predictive analytics artificial intelligence, right? This is all about connecting the processes that we use to run our companies together end to end, right? If you’re using IOT, you could use IOT to maybe sense vibrations in a manufacturing line to predict that the manufacturing line is going to go down ahead of time. If you were also taking pulse data against customers, you could start to tie the dots between customer bad experience and maybe on a product experience back right back to that product, coming from a specific line that was experiencing the success of violate vibrations.
And now you’ve connected the dots between a product quality problem and a manufacturing machine tool, asset problem, right? The companies that can do that better and faster than other companies have, in fact, a competitive advantage, they can derive insights as it relates to their business faster. That’s, what’s behind industry four dot, Oh, and at SAP we’re calling it industry for now, right? And it’s why companies that even during a downturn are investing in these kinds of technologies to give themselves a competitive advantage to enable employees that maybe have to work remotely better access to data and information to make decisions. And so companies that can accomplish this with technology have an advantage against companies that just throw bodies at the problem, right. If I can replace inventory with data, what kind of a competitive advantage is that it’s massive. It’s huge. And it’s, it’s where the industry’s going. And I, I say industry, I don’t just mean high-tech. I think, you know, high-tech might lead the charge. But all industries are moving in that same direction, right. In my humble,
In my humble opinion, I hope other industries are listening in as well. So, I mean, it’s really about creating a business that is interconnected, right? Where all processes work together and you leverage the technologies that we have at hand in today’s world to give executives or anybody in a business, better insight into what’s going on to be able to act in real time and just create a business that’s more resilient and more agile, which is so critical again in today’s world. So you’ve touched on so many different, I think, best practices in the, in the high tech industry, talk a little bit more of some best practices. And then also what best run businesses are doing in today’s world to address today’s top 10
You know, I love that question and we could, we could probably spend an hour talking about it, which I don’t think you are going to give me. And your is probably don’t. Don’t want to hear me blabber for an hour anyway. But I think resilience is the word of 2020, and probably will continue to be so into 2021 resilience. Right? If you, if you think about what resilience is, right, the ability to adapt to change, right? Charles Darwin once said that it’s not the strongest species that survive. It’s the ones that can adapt the best and the fastest to change. And those businesses, which have interconnected processes that can easily collaborate both within the silos of their own business, as well as with external partners, they have an advantage. And what’s interesting is as you look at these studies from Oxford economics, these are all central themes that they have in each of their surveys in each of their studies, resilience, the interconnected businesses, the ability to collaborate, right?
It’s a really, it’s about integrating social information with achieving your strategic goals. We talk about the, the question that we just went through a second ago about being more closer to both your employees and your customers. How can I take all of the data out there in the social environment and how can I use that information to better serve my patients, customers, to better serve my employees. And there’s a risk in doing that too, because all the regulations that come along with say GDPR and all the other data, privacy concerns, it’s absolutely imperative that we use the data for good, but we don’t use the data in ways that violate privacy rules. So the management of this data and the intelligence derived from it and how we use it and where it’s stored and maintained is absolutely critical. If it’s done properly, we have a business that’s way more agile, but now moves from gut-based decision making to data-driven decision-making.
And we can start to focus, focus on the experiences that our customers have that our employees are having, that are proud engineers having. And if we product the engineering of our product, correct in the marketplace, what experiences does that create? The, the longer, the latency of realizing this experience information with the trends, actionable data that run our business, the bigger, the data gaps in driving insights from this information, the less competitive we are, especially in an investment where our competitors have the ability to derive those insights quickly. So the the imperative to be more agile to, to adapt to these shrinking product life cycles, or shocks of global pandemics, absolutely critical. And it’s absolutely critical that we can use this data in a way that that adheres to everything I’ve talked about. And that gives us competitive advantage. So you talked about best practices, right?
During Sapphire recently you know, I had the absolute honor of hosting a panel with leaders from India, so, and Verizon, and yeah, they talked a lot about, you know, Intel gave a great example of the reduction in latency and taking a process that have been taking them two weeks in a heterogeneous environment to drive it’s information that they can now do with zero latency using compute solutions and technology solutions obviously offered by SAP, but that, that lay across a heterogeneous environments that have looping it all out, how do they close that 20% gap of what they couldn’t do? And now it allows them to simulate. They can actually see the effects of certain campaigns and things that happen on, on the East coast, as the sun comes up and apply them to how they store and manage and promote that same movement of inventory.
And, on the backend, on the West coast, and that’s a semiconductor company think about applying that in a B to C environment, right? What, that could do Verizon talks about technology to be able to close the books virtually anytime they want and how they can use that as a competitive differentiator. And albedo even potentially a competitive weapon as the markets change, knowing window, how to announce good news or bad news, and using that in such a way that allows you to do it at your leisure and flexibility that can give you an advantage over, over people in your marketplace. And that applies not just to these big companies that I’m talking about. Imagine being a high growth, high tech unicorn, you might be $80 million in revenue today with aspirations of being a billion dollars in revenue in the next three years, which means you have to have processes and tools that really big companies have.
You know, the cloud affords us to, to adopt technologies and solutions very, very quickly. And companies shouldn’t just look at SAP as a company for very big companies, you should say, wow, SAP has been providing solutions in the marketplace for over 40 years. And even if I’m a small company, I can benefit from all the lessons learned and all the best practices that have been developed and built directly in SAP software to drive resilience, to drive interconnectivity across disconnected silos, to allow you to collaborate with external partners, to integrate social data, to enable my business goals, to make sure that my business is flexible and agile, and that as the marketplace just changes that I can adjust and change really, really quickly and, and remain agile in this world of increasing agility requirements.
But it’s safe to conclude that an interconnected business does exhibit more resiliency and leadership. And as we both talked about, especially in today’s world, this is absolutely critical for, I’d say survival, that different processes in a business of course are integrated, but that we also get this data both within the company, but also from the outside, so that we’re able to see our business from an outside perspective and run more efficiently. So, Patrick, thank you so much for coming on the podcast. You made me so much smarter about the high tech industry about what’s going on and, and to everybody who listened to this episode, if you are curious about the report and you want to learn more about what 3000 business leaders said about driving, running an interconnected business, and we’re going to link to it, but Patrick, thank you so much for coming on the show.