Digital Enterprise Transformation

A Business-Driven Approach to Leveraging Innovative IT

Axel Uhl, Lars Alexander Gollenia

• Publisher: Routledge
• Year: 2016
• ISBN:
  9781317150848
• Edition: 1
• Topic: Business
• Subtopic: Management
• Index: Business

The integration of technological innovations, such as In-Memory Analytics, Cloud Computing, Mobile Connectivity, and Social Media, with business practice can enable significant competitive advantage. In order to embrace recent challenges and changes in the governance of IT strategies, SAP and its think tank - the Business Transformation Academy (BTA) - have jointly developed the Digital Capability Framework (DCF). Digital Enterprise Transformation: A Business-Driven Approach to Leveraging Innovative IT by Axel Uhl and Lars Alexander Gollenia outlines the DCF which comprises six specific capabilities: Innovation Management, Transformation Management, IT Excellence, Customer Centricity, Effective Knowledge Worker, and Operational Excellence. In cooperation with the University of Applied Sciences and Arts Northwestern Switzerland, University of St. Gallen (Switzerland), Queensland University of Technology (Australia), University of Liechtenstein (Principality of Liechtenstein), and Karlsruhe Institute of Technology (Germany), SAP and the BTA have been validating each capability and the corresponding maturity models based on analyzing several 'lighthouse' case studies comprising: SAMSUNG, IBM, Finanz Informatik, The Walt Disney Company, Google Inc., HILTI AG. Digital Enterprise Transformation presents how these companies take advantage of innovative IT and how they develop their digital capabilities. On top the authors also develop and present a range of novel yet hands-on Digital Use Cases for a number of different industries which have emerged from innovative technological trends such as: Big Data, Cloud Computing, 3D Printing and Internet of Things.

Foreword

AXEL UHL AND LARS GOLLENIA

Everything is changing. Most importantly, the global population has almost doubled since the 1950s and is expected to break the 9 billion barrier in 2040 (United Nations, 2013). At the same time, the extent of extreme poverty has been reduced considerably in recent years: It fell from 43.1 percent in 1990 to less than half that level (20.6 percent) in 2010 (PovcalNet, 2014).

Employment options are a necessity for income and prosperity, but just to maintain the employment rate at a constant level would require the number of jobs worldwide to increase by 600 million within the next 15 years (World Bank, 2013).

Another global trend is the increasing level of urbanization. In 1990, there were just 1.5 billion people in cities (World Bank, 2013a): By 2011, this rose to some 3.6 billion people, which equated to around 50 percent of the world’s population, and according to a study by the United Nations the number will increase to about 6.3 billion in 2050 (United Nations, 2011). Even now, many megacities are already approaching their capacity limits, making it necessary to develop new supply, employment, and mobility concepts.

The increasing globalism of markets is another megatrend that cannot be ignored. Most goods and a growing number of services are ‘made in the world’ and are no longer produced in just one country (OECD, 2013).

The increasingly globally networked world, however, also presents new risks.

Indeed, the five greatest risks faced by mankind are; 1) an increasing inequality of income distribution between the rich North and the poor South, 2) increasing debt levels in countries and communities, 3) the increase in greenhouse gases, 4) a scarcity of drinking water, and 5) rising numbers of elderly people in several important industrial nations.

We will only be able to meet these challenges through advances in technology. After all, technical advances have always ensured the survival of Homo sapiens.

Today, the Internet plays a dominant role: Global Internet traffic has increased more than fourfold in the past five years, and will increase threefold over the next five years (Cisco, 2013). Ninety percent of this data volume is accounted for by videos, which are distributed via Internet portals such as YouTube and Snapchat (Cisco, 2013) so it is hardly surprising that globally stored data might reach 40,000 exabytes respectively 40 trillion gigabytes in 2020 (compared to 130 exabytes in 2005) (IDC iView, 2012).

Mobile communication is also growing rapidly – by the end of 2014, there will be more mobile devices on the planet than there are people (Cisco, 2014). People in the United States spend an average of five hours and 46 minutes each day using their online and mobile devices (eMarketer, 2014).

Social networks also play a major role: Facebook has more than a billion members and other social networks are also expanding tremendously (Meeker and Wu, 2013).

We do not generally tend to embrace change, preferring instead to maintain what we have and how we live but change is an integral part of life – whether we want it or not. Change represents both an opportunity and a risk, and our attitudes to change greatly influence the way in which we deal with changes and how successful they are in improving our lives.

The same applies to companies. They, too, are subjected to changes that require them to adapt accordingly. Not all companies achieve this with the same level of success. For example, more than 40 percent of the Fortune 500 companies in the year 2000 were no longer on the list by 2010 (Solis, 2013).

Supply and demand change in all markets. For example, the number of letters that were sent via the US Postal Service fell from 250 million in 2006 to just 50 million in 2012. The reason for this? E-mails.

Since 2000, the advertising revenue of newspapers in the US has dropped by over $40 billion (Chisholm et al., 2013). This has been caused by an increasing shift in advertising business towards the Internet.

Age and social structures in companies are also set to change. By 2015, generation Y (those born in 1980 or later) will constitute around 75 percent of the world’s labor force and thus have a considerable influence on corporate culture and expectations, and this younger generation frequently has quite different values from their predecessors. For example, only 11 percent of them define one of their goals as being to earn a great deal of money (Solis, 2013).

The new generation of highly qualified workers will come from Asia – Asian students currently account for the largest proportion (53 percent) of youths and young adults studying abroad, most of whom come from China, India, and Korea (OECD, 2013b).

How Can Companies Best prepare Themselves to Ensure That They Remain Competitive in the future?

The customer will, however, remain the focus of attention – and there is still plenty to do here. According to one study, US companies lose some $83 billion in turnover each year due to their poor service and poor customer experience (Genesys, 2009). Only 37 percent of US companies achieved a rating of ‘Excellent’ or ‘Good’ in Forrester’s 2012 Customer Experience Index. If you consider that 12 positive experiences are needed to compensate for one unresolved negative experience, it is easy to imagine just how important customer experience is (Help Scout, 2011). Furthermore, it is six to seven times more expensive to acquire a new customer than it is to retain an existing one (Reichheld, 2003).

But where will companies find their customers? On the Internet, mobile devices, and social networks. Here, too, the Asia Pacific market is the leader (comScore, 2012).

Social networks provide a unique opportunity to acquire new customers and to retain them in the long term. Millenials – people who were born around the turn of the millennium – follow brands on social networks with particular frequency (Solis, 2013). This age group also believes the reported experiences of other consumers on the Internet more than company advertising messages (OECD, 2013a). According to a study conducted by Brian Solis (2013), 70 percent of the consumers surveyed said that their purchase was influenced by the online recommendation of a friend or relative.

Innovative companies have long since taken advantage of such developments. Apple revolutionized the hardware, software, music, and retail markets, and Google did the same with the markets for research, navigation, and travel planning. Amazon is stirring up the markets for books, music, and retail, while at the same time revolutionizing the logistics industry. Skype modified the telecom service range, and Facebook is reforming the banking industry through community banking and community insurance.

High time to prepare for the future! Or do you consider it too difficult to adapt so quickly to the digital age because of your company’s history and associated ‘burden’, such as systems, structures, and employees? And do you feel that the digital world should wait for you? Well, digital companies will probably not treat you so politely and considerately.

Innovation means progress and is a ‘must’ for every company. Not every company, however, can boast a world-class innovator and leader like Apple’s Steve Jobs. Can innovation be created or managed? Numerous articles, books, and magazines give tips on how to make companies more innovative. Apparently, all you have to do is to look at what the Googles and Facebooks of the world would do, but such recipes are usually of little help – what works for company A will not necessarily work for company B.

Innovation is more than just having a good idea or being creative; innovation can sometimes be very simple, and sometimes breathtaking. It can be integrated easily or it can revolutionize a company. It is easier said than done, and it sometimes means overhauling an entire strategy. So how are you supposed to catch this mythical beast that has so many different faces?

A healthy dose of openness, curiosity, and expertise cannot hurt. Learning about the technologies and use cases in various industries is an effective and efficient way to drive business model innovation. Coca-Cola recently announced that it will sell its products in ‘capsules’ in the future, in a similar way to Nespresso. This will change their entire business model. Coca-Cola will save itself the expensive deposit bottles and transport costs and instead sell or rent both the capsules and the drinks vending machines. A similar scenario has developed for the pasta manufacturer Barilla, who wants to allow its customers to print out its pasta themselves using 3D printers.

But our generation has a common problem. In a world of social networks, mobile applications, cloud and big data management, which offer us more opportunities than ever before, we sometimes lack the basic skills to make them happen. We can obtain all the new technologies and ideas to reinvent our businesses, but we have trouble with the basic skills needed to transform the organization behind them.

This book is therefore dedicated to the combination of transformational capabilities and new digital skills to be developed.

The Digital Capability Framework presented here is based on the business transformation management method that has been applied successfully for a number of years.

The Digital Capability Framework is a strategic management tool that is similar to a balanced scorecard, however, the framework goes far beyond that. It enables organizations to obtain clarity about what maturity level an organization has in terms of the six defined Digital Capabilities, what maturity level they wish to attain, and how they intend to achieve this. The digital use cases also help to develop a clear picture of the processes to be optimized and the technologies that should be used. A customized plan to transform the organization into a digital company can be defined as a result.

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Table of contents

• Cover Page
• Half-Title Page
• Title Page
• Copyright Page
• Table of Contents
• List of Figures
• List of Tables
• About the Editors
• Notes on the Contributors
• Foreword by Axel Uhl and Lars Gollenia
• Index