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The two dimensions of digital transformation and the factors driving it in 2018

SAP Press

PRESS RELEASE: The two dimensions of digital transformation and the factors driving it in 2018

by Simon Carpenter, Chief Technical Advisor at SAP Africa
JOHANNESBURG, South Africa – 25th January 2018, –/African Press Association (APA) / – Digital transformation will touch every business in every sector that wishes to remain competitive.

The adoption of exponential technologies such as artificial intelligence, IoT, and blockchain will force executives to rethink and reimagine their business models. Without a powerful digital platform that enables companies to innovate at speed and scale and provides accurate insights in real time, business leaders will struggle to keep pace with the rate of change in 2018.

According to the IDC 2018 Digital Transformation Predictions report, digital transformation spending will increase by 42% between 2017 and 2019 to reach $1.7-trillion globally.

AI, which in 2017 already attracted investment of $12-billion in 2017, will likely be firmly in the spotlight as big data, machine learning and predictive analytics drive improvements in the agricultural, manufacturing, healthcare, retail and financial services sectors.

Blockchain will move out of the test phase into full-scale implementations in government and private sector initiatives regarding transactions, payments, and identity management.

Companies that are quick to move in linking these exponential technologies to a powerful digital core that enables lines of business to optimise and innovate will find great opportunity in their digital transformation initiatives.

The motivations for undergoing digital transformation vary, but there are two major factors pulling organisations this brave new world, namely:

Customer Expectations
On one hand, it’s the heightened expectations of the Uber-using, Facebook-connected, Amazon-enabled consumer, shopper and “prosumer” and the Millennial or Gen Z employee demanding compelling, exciting experiences with instantaneous gratification. It is this factor that is driving the primacy of Customer Experience (CX) as a white-hot topic in most organisations. It is this aspect that makes Design a crucial competence.

Exponential Organisations
On the other hand, there is a new breed of Exponential Organisation that synthesises technical capabilities into new business models that can be launched and scaled with very little overhead (because they can leverage cloud platforms) and that come after existing value propositions or established industry structure in ways that incumbents can’t anticipate or don’t expect.

And of course, these two factors are mutually reinforcing; every time a savvy new start-up offers customers a great experience or something novel that then becomes part of their expectations.
From an “inside-out” perspective Digital Transformation also has two dimensions – particularly for incumbent organisations:

Optimise the Existing
You must keep doing what you’ve always done to create value – even if it may not survive for ever – because right now it’s your cash cow, it provides the return on capital invested and it is meeting some, albeit changing, customer expectations. And, frankly, there are many business processes and constructs that are not going to disappear; procurement, inventory management, the Balance Sheet and P&L, the need to govern and manage risk.

So, in these areas (what Gartner refers to as “Mode1”) your digital transformation efforts should be about Optimisation; focused on reducing costs and latency, accelerating processes, managing risks, driving efficiencies at scale by standardising and harmonising systems in the cloud, offering better user experiences and so forth.

Innovate the New
You must also turn your attention to accelerating innovation because this drives your ability to grow and remain relevant. In this space (which Gartner calls Mode 2) the emphasis on Innovation through rapid cycles of experimentation enabled by empathy and design capabilities and leveraging new technology capabilities like IoT, Blockchain and AI. This is about delivering new Customer Experiences, new Business Models and new sources of revenue.

It’s very, very important to understand that these are not separate, silo’d worlds. Today’s Mode 2 is tomorrow’s Mode 1. Tomorrow’s awesome new Mode 2 Customer Experience will still need to integrate into today’s Mode 1 inventory system to effect delivery. Tomorrow’s sensor-equipped drill (Mode 2 IoT) will still need to integrate into today’s Mode 1 Asset Management system to execute the maintenance order and spare parts inventory.

This realisation leads to the need for an Enterprise Platform.

Innovation requires Platform Thinking
Respected analysts, Gartner, stress the need for organisations to adopt a platform architecture when they think about how to use technologies to drive Digital Transformation.

This is so that data and objects, artefacts and processes are shared across the Mode 1 and Mode 2 worlds and so that successful Mode 2 experiments can be immediately operationalised, integrated into the business and scaled in the Mode 1 environment.

This leads us directly into SAP’s strategy. We want to enable our customers to elegantly and efficiently handle both mode’s requirements by providing the Platform. When SAP talks about the Intelligent Enterprise we envisage an organisation where Mode 1 and Mode 2 capabilities are blended on an Enterprise Platform to provides capabilities for real-time situational awareness, agility, hyper-efficient, highly automated processes and compelling User and Customer experiences.

The innovation pieces of that platform are what we call the SAP Leonardo Digital Innovation System.

With 13% of CIOs in Africa already moving beyond delivery into scaling on their digital initiatives – and a further 45% currently designing or delivering their digital initiatives – the SAP Leonardo Digital Innovation System will play a powerful role in enabling exponential innovation in 2018 and into the future.

Distributed by African Press Association (APA) on behalf of SAP.

About SAP
As market leader in enterprise application software, SAP (NYSE: SAP) helps companies of all sizes and industries run better. From back office to boardroom, warehouse to storefront, desktop to mobile device – SAP empowers people and organizations to work together more efficiently and use business insight more effectively to stay ahead of the competition. SAP applications and services enable more than 345,000 business and public sector customers to operate profitably, adapt continuously, and grow sustainably. For more information, visit www.sap.com.

For customers interested in learning more about SAP products:
South Africa: +27 11 235 6000
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For more information, press only:
Ansophie Strydom, SAP Africa, +27 (11) 235 6000, a.strydom@sap.com
Adam Hunter, SAP Africa, +27 (711) 787 035, adam.hunter@sap.co.za