How Digital Transformation Is Rewriting Business Models
Everybody knows someone who has a stack of 3½-inch floppies in a desk drawer “just in case we may need them someday.” While that might be amusing, the truth is that relatively few people are confident that they’re making satisfactory progress on their digital journey. The boundaries between the digital and physical worlds continue to blur – with profound implications for the way we do business. Virtually every industry and every enterprise feels the effects of this ongoing digital transformation, whether from its own initiative or due to pressure from competitors.
What is digital transformation? It’s the wholesale reimagining and reinvention of how businesses operate, enabled by today’s advanced technology. Businesses have always changed with the times, but the confluence of technologies such as mobile, cloud, social, and Big Data analytics has accelerated the pace at which today’s businesses are evolving – and the degree to which they transform the way they innovate, operate, and serve customers.
The process of digital transformation began decades ago. Think back to how word processing fundamentally changed the way we write, or how email transformed the way we communicate. However, the scale of transformation currently underway is drastically more significant, with dramatically higher stakes. For some businesses, digital transformation is a disruptive force that leaves them playing catch-up. For others, it opens to door to unparalleled opportunities.
Upending traditional business models
To understand how the businesses that embrace digital transformation can ultimately benefit, it helps to look at the changes in business models currently in process.
Some of the more prominent examples include:
- A focus on outcome-based models – Open the door to business value to customers as determined by the outcome or impact on the customer’s business.
- Expansion into new industries and markets – Extend the business’ reach virtually anywhere – beyond strictly defined customer demographics, physical locations, and traditional market segments.
- Pervasive digitization of products and services – Accelerate the way products and services are conceived, designed, and delivered with no barriers between customers and the businesses that serve them.
- Ecosystem competition – Create a more compelling value proposition in new markets through connections with other companies to enhance the value available to the customer.
- Access a shared economy – Realize more value from underutilized sources by extending access to other business entities and customers – with the ability to access the resources of others.
- Realize value from digital platforms – Monetize the inherent, previously untapped value of customer relationships to improve customer experiences, collaborate more effectively with partners, and drive ongoing innovation in products and services,
In other words, the time-tested assumptions about how to identify customers, develop and market products and services, and manage organizations may no longer apply. Every aspect of business operations – from forecasting demand to sourcing materials to recruiting and training staff to balancing the books – is subject to this wave of reinvention.
The question is not if, but when
These new models aren’t predictions of what could happen. They’re already realities for innovative, fast-moving companies across the globe. In this environment, playing the role of late adopter can put a business at a serious disadvantage. Ready or not, digital transformation is coming – and it’s coming fast.
Is your company ready for this sea of change in business models? At SAP, we’ve helped thousands of organizations embrace digital transformation – and turn the threat of disruption into new opportunities for innovation and growth. We’d relish the opportunity to do the same for you. Our Digital Readiness Assessment can help you see where you are in the journey and map out the next steps you’ll need to take.
Up next I’ll discuss the impact of digital transformation on processes and work. Until then, you can read more on how digital transformation is impacting your industry.
Transform Or Die: What Will You Do In The Digital Economy?
By now, most executives are keenly aware that the digital economy can be either an opportunity or a threat. The question is not whether they should engage their business in it. Rather, it’s how to unleash the power of digital technology while maintaining a healthy business, leveraging existing IT investments, and innovating without disrupting themselves.
Yet most of those executives are shying away from such a challenge. According to a recent study by MIT Sloan and Capgemini, only 15% of CEOs are executing a digital strategy, even though 90% agree that the digital economy will impact their industry. As these businesses ignore this reality, early adopters of digital transformation are achieving 9% higher revenue creation, 26% greater impact on profitability, and 12% more market valuation.
Why aren’t more leaders willing to transform their business and seize the opportunity of our hyperconnected world? The answer is as simple as human nature. Innately, humans are uncomfortable with the notion of change. We even find comfort in stability and predictability. Unfortunately, the digital economy is none of these – it’s fast and always evolving.
Digital transformation is no longer an option – it’s the imperative
At this moment, we are witnessing an explosion of connections, data, and innovations. And even though this hyperconnectivity has changed the game, customers are radically changing the rules – demanding simple, seamless, and personalized experiences at every touch point.
Billions of people are using social and digital communities to provide services, share insights, and engage in commerce. All the while, new channels for engaging with customers are created, and new ways for making better use of resources are emerging. It is these communities that allow companies to not only give customers what they want, but also align efforts across the business network to maximize value potential.
To seize the opportunities ahead, businesses must go beyond sensors, Big Data, analytics, and social media. More important, they need to reinvent themselves in a manner that is compatible with an increasingly digital world and its inhabitants (a.k.a. your consumers).
Here are a few companies that understand the importance of digital transformation – and are reaping the rewards:
- Under Armour: No longer is this widely popular athletic brand just selling shoes and apparel. They are connecting 38 million people on a digital platform. By focusing on this services side of the business, Under Armour is poised to become a lifestyle advisor and health consultant, using his product side as the enabler.
- Port of Hamburg: Europe’s second-largest port is keeping carrier trucks and ships productive around the clock. By fusing facility, weather, and traffic conditions with vehicle availability and shipment schedules, the Port increased container handling capacity by 178% without expanding its physical space.
- Haier Asia: This top-ranking multinational consumer electronics and home appliances company decided to disrupt itself before someone else did. The company used a two-prong approach to digital transformation to create a service-based model to seize the potential of changing consumer behaviors and accelerate product development.
- Uber: This startup darling is more than just a taxi service. It is transforming how urban logistics operates through a technology trifecta: Big Data, cloud, and mobile.
- American Society of Clinical Oncologists (ASCO): Even nonprofits can benefit from digital transformation. ASCO is transforming care for cancer patients worldwide by consolidating patient information with its CancerLinQ. By unlocking knowledge and value from the 97% of cancer patients who are not involved in clinical trials, healthcare providers can drive better, more data-driven decision making and outcomes.
It’s time to take action
During the SAP Executive Technology Summit at SAP TechEd on October 19-20, an elite group of CIOs, CTOs, and corporate executives will gather to discuss the challenges of digital transformation and how they can solve them. With the freedom of open, candid, and interactive discussions led by SAP Board Members and senior technology leadership, delegates will exchange ideas on how to get on the right path while leveraging their existing technology infrastructure.
Stay tuned for exclusive insights from this invitation-only event in our next blog!
Scott Feldman is Global Head of the SAP HANA Customer Community at SAP. Connect with him on Twitter @sfeldman0.
Puneet Suppal drives Solution Strategy and Adoption (Customer Innovation & IoT) at SAP Labs. Connect with him on Twitter @puneetsuppal .
What Is Digital Transformation?
Achieving quantum leaps through disruption and using data in new contexts, in ways designed for more than just Generation Y – indeed, the digital transformation affects us all. It’s time for a detailed look at its key aspects.
Data finding its way into new settings
Archiving all of a company’s internal information until the end of time is generally a good idea, as it gives the boss the security that nothing will be lost. Meanwhile, enabling him or her to create bar graphs and pie charts based on sales trends – preferably in real time, of course – is even better.
But the best scenario of all is when the boss can incorporate data from external sources. All of a sudden, information on factors as seemingly mundane as the weather start helping to improve interpretations of fluctuations in sales and to make precise modifications to the company’s offerings. When the gusts of autumn begin to blow, for example, energy providers scale back solar production and crank up their windmills. Here, external data provides a foundation for processes and decisions that were previously unattainable.
Quantum leaps possible through disruption
While these advancements involve changes in existing workflows, there are also much more radical approaches that eschew conventional structures entirely.
“The aggressive use of data is transforming business models, facilitating new products and services, creating new processes, generating greater utility, and ushering in a new culture of management,” states Professor Walter Brenner of the University of St. Gallen in Switzerland, regarding the effects of digitalization.
Harnessing these benefits requires the application of innovative information and communication technology, especially the kind termed “disruptive.” A complete departure from existing structures may not necessarily be the actual goal, but it can occur as a consequence of this process.
Having had to contend with “only” one new technology at a time in the past, be it PCs, SAP software, SQL databases, or the Internet itself, companies are now facing an array of concurrent topics, such as the Internet of Things, social media, third-generation e-business, and tablets and smartphones. Professor Brenner thus believes that every good – and perhaps disruptive – idea can result in a “quantum leap in terms of data.”
Products and services shaped by customers
It has already been nearly seven years since the release of an app that enables customers to order and pay for taxis. Initially introduced in Berlin, Germany, mytaxi makes it possible to avoid waiting on hold for the next phone representative and pay by credit card while giving drivers greater independence from taxi dispatch centers. In addition, analyses of user data can lead to the creation of new services, such as for people who consistently order taxis at around the same time of day.
“Successful models focus on providing utility to the customer,” Professor Brenner explains. “In the beginning, at least, everything else is secondary.”
In this regard, the private taxi agency Uber is a fair bit more radical. It bypasses the entire taxi industry and hires private individuals interested in making themselves and their vehicles available for rides on the Uber platform. Similarly, Airbnb runs a platform travelers can use to book private accommodations instead of hotel rooms.
Long-established companies are also undergoing profound changes. The German publishing house Axel Springer SE, for instance, has acquired a number of startups, launched an online dating platform, and released an app with which users can collect points at retail. Chairman and CEO Matthias Döpfner also has an interest in getting the company’s newspapers and other periodicals back into the black based on payment models, of course, but these endeavors are somewhat at odds with the traditional notion of publishing houses being involved solely in publishing.
The impact of digitalization transcends Generation Y
Digitalization is effecting changes in nearly every industry. Retailers will likely have no choice but to integrate their sales channels into an omnichannel approach. Seeking to make their data services as attractive as possible, BMW, Mercedes, and Audi have joined forces to purchase the digital map service HERE. Mechanical engineering companies are outfitting their equipment with sensors to reduce downtime and achieve further product improvements.
“The specific potential and risks at hand determine how and by what means each individual company approaches the subject of digitalization,” Professor Brenner reveals. The resulting services will ultimately benefit every customer – not just those belonging to Generation Y, who present a certain basic affinity for digital methods.
“Think of cars that notify the service center when their brakes or drive belts need to be replaced, offer parking assistance, or even handle parking for you,” Brenner offers. “This can be a big help to elderly people in particular.”
Chief digital officers: team members, not miracle workers
Making the transition to the digital future is something that involves not only a CEO or a head of marketing or IT, but the entire company. Though these individuals do play an important role as proponents of digital models, it also takes more than just a chief digital officer alone.
For Professor Brenner, appointing a single person to the board of a DAX company to oversee digitalization is basically absurd. “Unless you’re talking about Da Vinci or Leibnitz born again, nobody could handle such a task,” he states.
In Brenner’s view, this is a topic for each and every department, and responsibilities should be assigned much like on a soccer field: “You’ve got a coach and the players – and the fans, as well, who are more or less what it’s all about.”
Here, the CIO neither competes with the CDO nor assumes an elevated position in the process of digital transformation. Implementing new databases like SAP HANA or Hadoop, leveraging sensor data in both technical and commercially viable ways, these are the tasks CIOs will face going forward.
“There are some fantastic jobs out there,” Brenner affirms.
Want more insight on managing digital transformation? See Three Keys To Winning In A World Of Disruption. Image via Shutterstock
Article published by Andreas Schmitz. It originally appeared on SAP News Center and has been republished with permission.
Diving Deep Into Digital Experiences
Google Cardboard VR goggles cost US$8
By 2019, immersive solutions
will be adopted in 20% of enterprise businesses
By 2025, the market for immersive hardware and software technology could be $182 billion
In 2017, Lowe’s launched
Holoroom How To VR DIY clinics
From Dipping a Toe to Fully Immersed
The first wave of virtual reality (VR) and augmented reality (AR) is here,
using smartphones, glasses, and goggles to place us in the middle of 360-degree digital environments or overlay digital artifacts on the physical world. Prototypes, pilot projects, and first movers have already emerged:
A Vast Sea of Possibilities
- Guiding warehouse pickers, cargo loaders, and truck drivers with AR
- Overlaying constantly updated blueprints, measurements, and other construction data on building sites in real time with AR
- Building 3D machine prototypes in VR for virtual testing and maintenance planning
- Exhibiting new appliances and fixtures in a VR mockup of the customer’s home
- Teaching medicine with AR tools that overlay diagnostics and instructions on patients’ bodies
Immersive technologies leapt forward in spring 2017 with the introduction of three new products:
The Truly Digital Workplace
- Nvidia’s Project Holodeck, which generates shared photorealistic VR environments
- A cloud-based platform for industrial AR from Lenovo New Vision AR and Wikitude
- A workspace and headset from Meta that lets users use their hands to interact with AR artifacts
New immersive experiences won’t simply be new tools for existing tasks. They promise to create entirely new ways of working.
VR avatars that look and sound like their owners will soon be able to meet in realistic virtual meeting spaces without requiring users to leave their desks or even their homes. With enough computing power and a smart-enough AI, we could soon let VR avatars act as our proxies while we’re doing other things-and (theoretically) do it well enough that no one can tell the difference.
What Is Immersion?
We’ll need a way to signal when an avatar is being human driven in real time, when it’s on autopilot, and when it’s owned by a bot.
A completely immersive experience that’s indistinguishable from real life is impossible given the current constraints on power, throughput, and battery life.
To make current digital experiences more convincing, we’ll need interactive sensors in objects and materials, more powerful infrastructure to create realistic images, and smarter interfaces to interpret and interact with data.
When everything around us is intelligent and interactive, every environment could have an AR overlay or VR presence, with use cases ranging from gaming to firefighting.
Download the executive brief Diving Deep Into Digital Experiences.
We could see a backlash touting the superiority of the unmediated physical world-but multisensory immersive experiences that we can navigate in 360-degree space will change what we consider “real.”
Read the full article Swimming in the Immersive Digital Experience.
About Kai Goerlich
Kai Goerlich is the Chief Futurist at SAP Innovation Center network His specialties include Competitive Intelligence, Market Intelligence, Corporate Foresight, Trends, Futuring and ideation. Share your thoughts with Kai on Twitter @KaiGoe.heif Futu
How Blockchain Can Restore Trust In The Wine Industry
Blockchain is one of those things that everyone talks about but no one (myself included) really understands-like bitcoin or the stock market. I do understand, however, that blockchain is all about trust, and that’s the reason it’s going to revolutionize every industry. It’s also the reason it can revolutionize wine markets.
Fine wine has traditionally been bought and sold based on large measures of trust. A seller offers a bottle for sale, most likely something rare, old, or from an iconic maker; provides a reasonably good story of origin (or provenance) to establish that the wine is authentic and has been stored correctly; and buyers line up to shell out thousands, if not tens of thousands, of dollars.
That has changed in the last decade.
In 2008, Benjamin Wallace’s true crime hit The Billionaire’s Vinegar (soon to be a movie starring Matthew McConaughey) brought to light the story of a German music manager and wine collector who allegedly duped other wealthy collectors into buying counterfeit wine (i.e., wine that has been adulterated in some way, often passed off under a more expensive brand), including several bottles he claimed belonged to Thomas Jefferson.
Wallace’s book became a New York Times bestseller and planted a significant seed of doubt in the minds of collectors everywhere.
Half a decade later, the wine world was again shaken when wine-collector-turned-wine-forger Rudy Kurniawan was sentenced to ten years in prison for defrauding high-end collectors to the tune of at least $20 million. (For the whole story, check out Peter Hellman’s new book In Vino Duplicitas.) In the wake of the “Rudy affair,” auction houses began to withdraw lots of wine of suspicious provenance. Lawsuits followed, and one prominent collector-billionaire Bill Koch, who fell victim to both Rudy and the alleged forger of Wallace’s book, Hardy Rodenstock -even began a crusade against fake wine, hiring a team of experts and spending more than $20 million of his own money to ferret out counterfeiters.
Trust in fine wine markets has never been lower, but blockchain has brought hope.
Meet Everledger, a London-based blockchain technology firm and the first company to secure a wine’s provenance via blockchain. After making its mark fighting counterfeiting in the diamond industry, Everledger made the jump to wine, and has partnered with renowned wine fraud specialist Maureen Downey (who played an important role in the Rudy Kurniawan investigation) to create the Chai Wine Vault.
Using Maureen’s Chai Method, which identifies more than 90 data points on a bottle, along with high-resolution photographs and ownership and storage records, Everledger creates a permanent, digital representation of a bottle on the blockchain. This permanent record acts as a verification point as the bottle changes hands. The blockchain is updated along the way so anyone who buys or sells the bottle can rely on trustworthy provenance.
This level of supply chain security is increasingly vital to every industry. “If you can track and trace diamonds, you can track and trace anything,” says Joe Fox, SAP Ariba’s Senior VP of Business Development and Strategy.
“One of the things blockchain does is facilitate greater visibility and trust. In embedding it across our applications and network, we can enable supply chains that are smarter, faster and more transparent from sourcing all the way through settlement.”
Wine counterfeiting isn’t new-Pliny the Elder lamented the practice in first century Rome-but it’s certainly reaching new heights. Experts, Downey included, have suggested that as much as 20 percent of wine sold globally is fraudulent. An estimated 10,000 “Rudy bottles” are still in circulation, and just last week, police seized 6,000 bottles of counterfeit wine in China.
For wine markets everywhere, blockchain is a timely innovation that underscores the value of trust in any transaction.
For more on blockchain’s potential to impact business processes, see Improve User Experience With Internet Of Things, Blockchain, And Platforms.
Article published by Eric Annino. It originally appeared on SAP and has been republished with permission.
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