A Strategy for Innovation

Q: In a period defined by rapid change, how are companies redefining their business goals and what does this mean for IT?

Flannagan: When I talk to senior execs, I hear four things pretty frequently. One is they need to increase top-line growth — grow revenue faster. The second is about improving the bottom line — being more efficient and more productive so they can deliver better profitability. Third is engaging with customers better, and fourth is what they need to do with their risk profile, whether in system downtime or noncompliance.

To accomplish these goals, leaders know that IT cannot simply keep the lights on, or find inefficiencies that they can improve upon. IT needs to not only do these things, but also innovate for the future.

Q: With so many buzzwords in IT these days, where do customers begin when it comes to mapping out a technology strategy for the future?

Flannagan: Customers don’t always show up at our doorstep and use buzzwords like transformation or digitization. But all of our customers have forces that are happening in their markets with their customers, and they’re all dealing with pressure and transformation that is happening in their industry that require them to respond to the market in different ways. And that’s where we find a shared journey with the customer. It’s not so much around the technology buzzwords, but around what they’re trying to do with their business.

I’ve never met a CEO who woke up on a Tuesday and said, “I can’t wait to go buy some machine learning today.” That’s not what CEOs think about — they are thinking about how to stave off their competition, grow market share, or improve the bottom line. Those kinds of conversations are not about systems of intelligence — they’re about running the business, and that’s the appropriate dialogue for a CEO. Underneath that, there are things that need to be done and some of those involve systems of intelligence like Internet of Things (IoT) and machine learning.

Q: How do companies maintain a balance between implementing these new, innovative technologies and running their existing systems — what is often referred to as “bimodal IT”?

Flannagan: Most customers don’t talk to me about bimodal IT, but they understand the need to run their core business efficiently while responding to the market evolution around them. They can’t stop doing one to start doing the other — they can’t trade innovation to get scale, or squeeze out productivity in the core business but not invest in innovation. They have to figure out some way to do both. And the reality is that most core business systems can deliver a lot of scale, but they weren’t built to enable a lot of innovation, and sandbox environments that are meant to deliver the ability to play around, try new things, and fail fast, don’t do a very good job of scaling.

We introduced SAP Leonardo as a system of intelligence to bridge that divide. A system is a complex set of things that all work together in concert, and that’s what SAP Leonardo is. It’s not one thing, it’s multiple things — analytics, IoT, machine learning, artificial intelligence — and the key to being able to implement innovative things in your environment is that it has to solve a business problem and it can’t work in a vacuum. Everything has to work together properly.

And while SAP Leonardo comprises technologies attached to certain technologies today, if you flash forward 15 years to the future it may be a whole different set of technologies. SAP Leonardo is not just about a set of technologies, it’s about a methodology for innovation and being able to integrate new, innovative things into your core business in a scalable, seamless way. 

Q: How do companies apply the new technologies in SAP Leonardo to their current businesses in a practical way?

Flannagan: Consider an IoT use case for a large retailer with many refrigeration and freezer systems and a variety of products to keep cool. Some are cans of soda, where if the refrigerator isn’t working, it’s not really a big deal — when the refrigerator starts working again, the cans will cool and be sellable. But let’s say another refrigerator is stocked with filet mignon. If the refrigerator stops working, the meat will spoil and go to waste. The value of IoT sensors in those two scenarios is different — for the filet, it’s crucial, for the soda, it’s a nice-to-have.

There’s also the consideration of big data. A retailer like this would have thousands of stores and warehouses that would be generating incredible amounts of data from having sensors on every machine they have. If all that data is generated and stored somewhere but not integrated into anything else, it’s not as valuable, and that’s without considering the work on the part of the IT staff to integrate it across disparate systems.

So simply adopting countless technologies and applying them in all different contexts isn’t the answer. You need to be thoughtful in the adoption and deployment of technology and make sure that it addresses real business problems. This is why design thinking is so important to SAP and SAP Leonardo — thinking about the customer problem first and designing solutions around it.

Q: Design thinking has been transformational for SAP in terms of its business approach — is there a way for SAP customers to explore a similar transformation without disruption?

Flannagan: This was a motivator for us to make SAP Leonardo Centers, which give people an opportunity to get outside of their day-to-day and think a little bit differently. They’re meant to be environments that foster creative thoughts, where you can play with technology and see robots running around.

So the answer is yes — the transformative effect that design thinking had on SAP can do the same for customers. Coming into an SAP Leonardo Center is an opportunity for them to interact with SAP in a way that frees them from that day-to-day “how it works in my company” mentality and gives us the opportunity to help them think about how it could work if they put their users or customers at the center of everything they do.

Q: Where do partners fit in? What is their role as SAP customers navigate the path ahead?

Flannagan: The future is going to be more about going to market together as an ecosystem. The probability of any one company being able to build and deliver everything that’s required for an end-to-end solution with that many different complex technologies involved is pretty low. Partnerships are ways that companies can combine their areas of expertise to go to market with a product that will give the customer exactly what they are looking for. And that’s one of the strengths of SAP: We have a fantastic partner ecosystem and can tap into that and expand what those partners are doing with us.