the future of the digital economy and sap's role

The Future of the Digital Economy and SAP’s Role Sven Denecken, GVP Co-Innovation and Strategy, SAP S/4HANA October 2015

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The Market Perspective

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Macro perspective, the modern drivers of change

*Concept Source: Unboundary, Inc.

© 2015 SAP SE or an SAP affiliate company. All rights reserved. 3

Hyperconnectivity across people, business, and devices give rise to a new digital economy powered by real-time data


75 billion connected devices in the Internet of Things

Over 2.55 billion social media users by 2020

U.S.$65 trillion in global trade through connected businesses

Source: SAP Corporate Fact Sheet 1/2015 Source: www.emarketer.com Source: Business Insider


As five billion people reach middle class, new challenges arise in customer expectations, workforce, and resource management

Dramatically Changing Workforce

82% customers stop doing business with a company due to a poor experience

$5.6T savings through connected vehicles

67% increase in crop yields 22% increase in supply

chain efficiency

Rising Customer Expectations

71% of business leaders believe that customer experience is the next battleground

High employee engagement: 3x higher operating margin

72% of Millennials feel their current organization is not

making full use of their skills

Pressure on Resources

Water 1.5x by 2030 Energy 1.5x by 2020

Food 1.5x by 2030 Metals 2x by 2030

Sources: Impact Report, Harris Interactive. Colin Shaw and John Ivens, 2010; Deloitte Millennial Study, 2015; Shell, 2014; WRI, 2014; SAP SE, 2014. Towers Watson, 2012

Major tech trends drastically change "art of the possible"

Augmented reality

Immersive visualiza<on, e.g. showroom experience, maintenance/ assembly instruc<ons

Internet of things/device interaction

Intelligently connect smart objects to link material and informa<on flows

Advanced robotics

Autonomous, coopera<ng industrial robots with numerous integrated sensors

3D printing

Manufacture tailored products in smaller lots, more distributed/closer to point of sale/use

Big Data/Predictive analysis

Develop deep insights into supply chains & beJer forecast, e.g., demand and capacity

Autonomous transportation

Intelligent, autonomous systems, e.g., self-‐driving vehicles/trucks, unmanned areal vehicles (UAVs)

Shift to the cloud

Highly scalable soPware-‐as-‐a-‐service apps with remote storage and processing power

Ubiquitous connectivity

"Always-‐on" access to content and communica<on capabili<es

Social, local, mobile

On-‐going engagement with customers and communi<es in a relevant and geo-‐contextual way


10.2% or U.S.$237 billion of profits are lost by the top 200 global companies due to hidden costs of complexity


Business Network

Say it’s decision making

75% 73%

60% Believe it’s technology Layers of legacy and interfaces make it difficult to keep pace with change

Say it’s business processes Business processes built for the Internet age, not the real-time digital era, where insights

are connected to action

Difficult to collect the right data, see from top level to

transactions, socialize decisions, and connect

decisions to actions

Source: The Simplicity Index 2011, 2015 Wharton-SAP Run Simple Survey.

The Digital Core

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Internet of Things Unit of One

Technology induced change

Digi<ze The Core

Service promise Ability to deliver End to end experience

The end to end digi0zed enterprise is a mandatory consequence

[#/€]

<me Digital Economy

Number of items/lots

value/size of items/lots

Unit of One

Digital store as typical fast market entry

Digital Customer Experience Segment of ONE

New customer expectations

Auto-replenishment/ Subscription

Personalized Coupons

Plan Your Trip to the Store

Personalized Communication

Easy Ordering from app

Curated Experience

In-Store Navigation

The digital economy is a reality

*MIT Digital Change Survey, 2013

Of business leaders said that achieving digital transforma<on will become cri<cal to their organiza<ons within the next two years.*

78%

Of employees in companies where CEOs have shared their vision for digital transforma<on feel that it is the right thing for the organiza<on.*

93% All lines of business running in real <me on a digital business plaZorm

The digital value chain

Suppliers People

Resources

Omnicommerce

Deliver excep<onal experiences to your customers across every channel of interac<on

To enable the workforce of the future – employees and con<ngent labor

Enable fric<onless commerce by managing suppliers beJer

Manage materials, assets, money, and other resources beJer

Customers Busine

ss network

Social Internet

of Things

Other unstructured/

structured data

The digital value chain


The business models of the future

Customer centric

Operationally excellent

Globally networked

Rapidly innovating

Agile •  Fast adapta<on of business

strategies •  Fast innova<on •  Highly skilled, empowered

people in cross func<onal, cross organiza<onal teams

•  Driven by strong vision and leadership

"Plug and play" networks •  Global reach •  Scalable capacity •  "Pay as you go" •  Secure •  Actively managing risk

Segment of One – at scale •  Personalized, intelligent

products and services

•  Rich, real <me customer interac<on

•  Based on 360° customer view

Next genera0on processes •  Highly automated

e.g. "touchless order" •  Embedded, "real <me"

decision support •  Highly adaptive

Empowered consumer / customer

Science and technology progress

Globalization Competitive and regulatory pressures

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•  Definition of strategic digital objectives •  Agile approach to strategy

Digital strategy •  Think and act like a VC •  Still: leverage existing asset base •  ...

Digital disrup0on

Five main approaches towards digital transformation Prioritized approache(s) are specific for each company

Create value from data •  Business model based on data •  Digitally enhanced products •  Product-‐related services based on sensor

data •  ...

Digi0ze core business •  Faster, simpler and further

automated processes •  Seamless integration across all value

chain processes •  Digital R&D, production, administration •  ...

Enhance digital capabili0es •  Analy<cs capabili<es •  Agile working mode •  Agile plaZorms, con<nuous delivery •  PlaZorm TCO

Improve customer experience •  Relentless customer centric focus •  Connected touch points in customer

journey •  Sales channels / CRM •  Mobile customer engagement

Digital transformation

Build digital ecosystem •  Posi<oning in relevant ecosystem •  Consume digital services •  Partner for common offerings •  ...


Plenty of digitization opportunities in core processes Even though ERP processes seem to be unchanged at the top level

Automa<on of process steps

Management by Excep<on

Insight to Ac<on Process Integra<on Segment

of One

Loca<on-‐ and context aware processes

Self service processes, any<me & anywhere

Omni-‐Channel customer engagement

Simplified User Experience

New Devices

QR Codes, RFID, Sensors

New Technologies

New Data

New Services

Localiza<on services

New Tracking

Green manufacturing, CO2 tracking, GRC standards

Employee Empowerment, de-‐

layering

Procure to Pay Plan to Product Order to Cash Request to

Service

Finance Human Resources

Process digitization opportunities

Process digitization drivers © 2015 SAP SE or an SAP affiliate company. All rights reserved. 13

Marketing in real time to the Segment of ONE based on individual customer activities on all channels Individualized advertise-ments, discounts, product configurations, product recommendations, etc.

Mass customiza0on supported by real time

•  fulfillment monitoring •  processing of customer

change requests •  responses to unplanned

downtimes •  responses to changed parts

availability •  etc.

Digitzation of core processes is critical to scale up Example: Digital commerce – fulfillment example

Digital store is a typical MVP for fast market entry

Digitized core is needed for consistent customer experience

Digital store front Batch fulfillment

Digital shopper experience •  Mobile commerce •  In store navigation •  Easy ordering •  Peronalized coupons •  Curated expereince

Limited number of variants Weekly or daily planning, fulfillment and delivery tact Low flexibility for order changes and responses to unplanned down time, supply problems, etc.

Lot size one

✓ Auto-replenishment/ Subscription




Easy Ordering from app Curated

Experience

In-Store Navigation

Auto-replenishment/ Subscription




Easy Ordering from app Curated

Experience

In-Store Navigation

Digital store front

Minimum Viable Product End to end digitized


SAP S/4HANA – The Digital Core

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Understanding the new value levers The digi<zed core enables transforma<on

Digital economy

Mobile

Big Data

Internet of things

Cloud

Subscrip0on

Digi0zed core

Segment of one

Unit of one Personalized experience

Connected manufacturing

Business model transi0on

Lot size one Contextual marke0ng

Digital transforma<on

SAP S/4HANA Value Toolkit: digitize beyond the core, embrace the digital economy

Internet of Things

Business networks

Social networks

Devices

Big Data

People

Process Enriched Scalability I Real <me I Predic<on I Simula<on

Live Data Granular I Responsive I Accurate

User Empowered Instant insight I Contextual informa<on I Personalized experience

Segment of 1

Lot size of 1

No latency

Tradi<onal core value play

SAP S/4HANA value play

At scale

Leading-‐edge processes I Integrated system

Digital transforma<on of business models

Digital Core Digital Economy Digital Transforma0on


Connect to the world’s largest business and social networks and lead business innova<on with IoT

•  Instant connec<vity to supplier, customer and partner networks

•  360 view of customers with access to all interac<ons •  Real-‐<me connec<ons to sensors embedded into

products and assets

SAP S/4HANA's offers breakthrough capabilities for digital transformation

Re-imagined business processes Advanced business analysis

Connections to IoT and Business Networks Immediate business insight

Use embedded analysis, predic<on and simula<on to an<cipate future business outcomes

•  Contextualized analy<cs at the point of decision making

•  Easy to use, yet sophis<cated built in predica<ve func<ons

•  What If analysis tools to make more informed decisions

Get live and personalized business insight to make any decision from anywhere on your device of choice

•  Single source of truth across the en<re enterprise data

•  User experience tailored to individual business roles •  Interoperability across different devices and OSs

Run digi<zed business processes across your enterprise with a modern core designed for the digital economy

•  Faster, simpler and more automated business processes

•  Seamless process integra<on across the en<re value chain

•  Big Data, Cloud and Mobile enabled business process


Exemplar Value Case: Digital transformation in Finance and Logistics

Manufacturing “In Sync” manufacturing

�  Ensure physical reality in production and representation in IT system are always in sync

�  Drive more frequent Inventory updates in real time

Business outcome:

�  Reduce costs with always correct inventory information, less exception handling

�  Improve product quality with early detection of master data errors

Key innovations:

Finance Soft Close

�  Improve management and control of operations anytime within period �  Allow immediate financial and business decisions (such as transaction-

based revenue recognition, calculation of overheads)

Business outcome:

�  Revenue and margin increase through real-time profitability analysis

�  Real-time revenue recognition for goods and services

Key innovations:

Process Enriched Scalability I Real time I Prediction I

Simulation

Live Data Granular I Responsive I

accurate

User Empowered Instant insight I Contextual information I

Personalized experience

Digital Core

�  Universal journal �  Intra-period reconciliation �  Real-time inventory management �  Inventory information at granular level


Connected equipment.

Big Data.

Industry 4.0

Internet of Things.

Connected design: Providing: Complete lifecycle visibility for improved design. Business outcome: Lower cost and higher quality.

Serving the segment of one: Providing: BeJer synchroniza<on of processes. Business outcome: Higher revenue through faster <me to market.

Connected manufacturing: Providing: Real <me informa<on with the Internet of Things . Business outcome: Increased cost efficiency & asset u<liza<on. The Digital core

The manufacturing Digital transformation

Omni-‐Channel commerce.

Internet of Things.

Big Data.

Insight-‐driven wholesale distribu0on.

Omni-‐Channel service: Providing: Mul< channel customer interac<on. Business outcome: Increased revenue and customer loyalty.

Profitability op0miza0on: Providing: Customer Life<me value based targe<ng. Business outcome: Increased margin per customer segment.

Connected vending machine sales: Providing: Meet customer demand, any<me, anywhere. Business outcome: Increased customer loyalty.

The Wholesale Digital transformation The Digital economy in Wholesale:

The Digital economy in Manufacturing:

+ real <me, in memory plaZorm + role base & mobile UX + flexible, lowest data granularity + predic<ve and analy<cal driven + digital readiness + guided configura<on

Exemplar Value Case: Digital transformation in Manufacturing and Wholesale

How to Start

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The Digital Transformation lever is huge

Mobile

Cloud

Big Data

IoT

Business Networks

Internal IT as service broker

Hybrid as the new norm

End2End process chain

How to leverage for my business

New enterprise architecture

Mobilize services, BYOD

Collabora<on Web 2.0

New value chains

New communica<on mechanisms

Data-‐driven development

Real-‐<me analy<c

Data as new economic resource

Machine2Machine communica<ons

Classic industry vs. digital business

IT security, tracking

User experience

Simplify data model

Flex the core


Right ambition level depends on both industry and company specific drivers

Opportunis*c adop*on of digital

technologies Transforma*on of core business model

Systema*c leverage of digital for performance improvement

Leverage digital to develop new compe**ve advantage

Industry specific drivers: •  Development of new business models •  Reduc<on of entry barriers •  Share of industry revenue pool generated by digital •  Relevance of customer behavior

Company specific drivers: •  Digital as add-‐on or fundamental transforma<on •  Poten<al to leverage digital to mobilize and innovate

company

Source: BCG experience

What is the right aspiration for your company in Digital?


SAP helps simplifies your technology architecture, business processes, and decision making


Applications Business Network

SAP HANA Platform

In-memory computing. Analytics. Services.

Every line of business and every industry

SAP S/4HANA Customer engagement and commerce

Human capital management Procurement

Inter-enterprise commerce and spend

Suppliers Workforce

Travel and entertainment

With SAP, CEO’s can reimagine new business models to take advantage of the opportunities in the Digital Economy


Zero latency supply chains

Applications Business Network

Sales, Service, Marketing

Human Resources

Finance

Supply Chain

SAP HANA Platform Capitalize on the power of real-time data to deliver

innovation to business without disruption

Anticipate customer needs

Inspired and engaged employees

Instant cash flow visibility

Frictionless commerce

Deliver across channels

Fluid and scalable workforce

Predictable and optimized expense

Your journey to master simplicity and capture the Digital Economy starts today – at the pace you choose


Design Thinking Co-Innovation

Choose business processes

Choose decision scenarios

Choose technology platform Architectural plan Technical readiness assessment

Data discovery workshop Business strategy Data mapping

Industry value engineering Business scenario recommendation

Run Simple. Thank you. @SDenecken

INTERNAL

Run simple with the next-‐genera<on business suite

@ [email protected]

@SDenecken

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Sven Denecken, GVP Co-Innovation and Strategy S/4HANA SAP SE