Reshaping Business Models for the Digital Era

Digital technologies are reshaping the world around us, including how companies operate. Mobility, machine learning, Internet of Things (IoT), and other innovations have shifted how companies, customers, partners, and employees interact. These changes are already well under way, and future changes likely will come swiftly, be continuous, and be transformational. In fact, 72% of global CEOs believe the next three years will be more critical for their industry than the last 50 years.

So, what is likely to happen during these next critical years? In the short term, machine learning will allow companies to automate routine tasks, making efficiency less of a differentiator. Organizations will need to embrace new ways of working and harness their business networks; SAP’s investments in Concur, Ariba, and Fieldglass indicate the company’s belief in this. Technology companies and their partners will continue to shift from providing technical solutions to co-innovating new systems of industry.

While these emerging trends present new opportunities, they also raise questions about how these new business models will work and what each organization in each industry will need to succeed in the digital economy. There are no easy answers to these questions. Navigating the digital age requires a modern platform capable of managing the type, volume, and velocity of modern data, while also integrating with existing systems. As companies largely own their data, they need a digital core to help them leverage real-time insight to optimize business processes around their customers, employees, suppliers, and IoT-connected devices, and to achieve a successful digital transformation.

Harnessing Data for a Competitive Edge

Digital transformation starts with data. Big data has been driving change with analytics that provide immediate insights to support fact-based decision-making. In recent years, cloud platforms and the ever-expanding IoT have also dramatically increased the amount and variety of data available — by some estimates, a full 90% of data available today was created in the past 12 months. In the digital economy, a critical differentiator is how a company manages and optimizes all this information, yet only 5% of organizations believe they have mastered digital to a point of differentiation from their competitors.

To achieve this mastery, companies need to develop an understanding of which data is relevant to their business and then look for solutions to help process and analyze the vast amount of information flowing into their systems. SAP S/4HANA provides the digital core needed to connect processes, integrate systems and devices, and provide real-time insight into data — and additional technologies such as artificial intelligence can build on that core, helping companies capture even more value by automating the parsing of this data.

To enable SAP customers to benefit from advantages like automation, including simplifying routine tasks so employees can focus on more complex and higher value work, SAP is working toward enhancing all its applications with machine learning and other forms of artificial intelligence through the SAP Leonardo digital innovation system. In addition, SAP is helping businesses grow by enabling net-new applications with machine learning and by enabling tailored applications through its platform-as-a-service (PaaS) offering, SAP Cloud Platform, as well as its SAP Leonardo partner program.

Partnering for Customer Success

SAP’s partnerships play a central role in bringing transformational technologies to SAP customers. One example is SAP’s partnership with NVIDIA. SAP uses NVIDIA’s computing platform to train the massive data sets and deep learning algorithms that form the basis of SAP’s machine learning applications. Using NVIDIA’s advances in graphics processing unit (GPU) technology, SAP was able to innovate with SAP Brand Impact, a cloud-based application powered by SAP Leonardo Machine Learning capabilities. SAP Brand Impact helps companies evaluate brand recognition and make better decisions on where to spend sponsorship budgets. The solution detects brand assets in moving images and measures their exposure in terms of time, location, size on-screen, and other factors that influence viewer recognition.

This is just one example of new technologies that are helping to power digital transformation. Solutions will continue to proliferate and each breakthrough will require new models, new approaches, and increased “co-opetition,” where competitors become close partners, as the partner ecosystem grows in importance. The more connected companies are to their partners, the better their chances for success — data shows that companies that derive 50% or more of their revenues from digital ecosystems achieve 32% higher revenue growth and 27% higher profit margins. For example, with microservices and open APIs becoming more prominent, companies can generate added value by connecting their systems with partners’ systems to produce a more seamless customer journey.

With this opportunity for added value in mind, SAP partners are increasingly evolving their business models to become outcome-based and more closely aligned with customer success. SAP and its partners have found that the best way to achieve that high level of alignment is in following a model of “customer-driven innovation.” In this model, SAP and its partners work closely with more than 300,000 SAP customers to help them reinvent their businesses with software-based offerings that allow them to tailor their products, services, and delivery to their own customers’ unique needs.

For example, SAP recently teamed up with Swarovski to address a specific need — automating the process of identifying and classifying broken items. Working together, SAP and Swarovski developed a prototype for a machine learning application. The goal is to allow technicians to run an image of a broken product through the machine learning application, which could then automatically categorize the product and provide precise information on what it will take to fix it and how much it will cost. The results have been promising for Swarovski, and they demonstrate the benefits of customer-driven innovation.

Tools to Drive Transformation

By keeping the customer at the center of everything, SAP has seen digital transformation in the enterprise evolve from a product strategy — such as delivering software-as-a-service (SaaS) and on-premise applications — to a design-thinking-led approach to business processes, systems, and customer engagement. SAP understands from experience that this approach works best when all parties embrace a strong partner ecosystem.

SAP’s goal is to offer access to a broad array of solutions and technologies to help businesses use emerging technologies to generate greater value for their customers today and into the future. With the functionality and capabilities available from SAP’s offerings and its expansive partner ecosystem, organizations will have the tools and support they need to succeed.