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Who Is Shaping YOUR Company’s Strategy?

by Chakib Bouhdary | insiderPROFILES

October 1, 2011

Among the ranks of your company’s leadership may well be an executive with the title of Chief Strategy Officer. This new role has seen rampant adoption in the past few years. So, what makes this position so compelling to organizations? See what Chakib Bouhdary has to say about this innovative position and his responsibilities as CSO at SAP.
 

Among the ranks of your company’s leadership may well be an executive with the title of Chief Strategy Officer. This new role has seen rampant adoption in the past few years. What makes this position so compelling to organizations is that it elevates strategy development and oversight to the highest executives. Previous incarnations of this role include Head of Corporate Development and Head of Business Planning. But a growing number of companies no longer want strategy processes cordoned off in dedicated planning units. They want strategy raised to the C-level specter in close proximity to the CEO and where cross-departmental control can be exercised. So enter the new corporate elite: Chief Strategy Officers.

Chief Strategy Officers (CSOs) do what the CEO, CFO, and even COO cannot. They focus solely on strategy. They shape and safeguard it, setting direction for a company’s product portfolio, market strategy, messaging, and acquisitions (see sidebar to the left). It’s a continuous process with inputs first and foremost from the CEO, as well as from business units, industry experts, and most notably, customers.

At SAP, these responsibilities lie with Chakib Bouhdary. insiderPROFILES asked Bouhdary to describe this innovative position and his responsibilities as CSO. His insights offer a unique view of this new corporate role.

Q: What are the big trends that SAP believes will reshape the IT industry?

Typically, in the past, most IT investments were driven by the enterprise world mainly in the areas of business process automation, productivity tools, security, networking, and communication.

The increasing popularity of the Internet and, most recently, mobility has completely shifted innovation back to the consumer. We have seen that smartphones and tablets are dramatically altering the way information is created and consumed, resulting in a new set of business models. This phenomenon is what we call the consumerization of IT.

From an SAP perspective, we believe four trends will fundamentally change where companies will invest in the IT technologies they need to stay ahead of the competition and unleash business value.

1. The first trend is connectivity. This trend goes beyond what we know as mobility today. We are approaching an era where everything will be interconnected — devices, cars, people, and so on. We will connect trillions of objects in the next few years that will change the way business processes such as supply chain procedures are managed real time. Connectivity applies nowadays to just about anything. Your dishwasher and washing machine, for example, can talk to your energy supplier. A pallet of goods can relay its whereabouts. Nearly everything a business process contends with will have an IP address and the process will be able to account for all these touch-points in real time. Companies that adjust to this new connectivity model will drive massive value to their shareholders.

2. Connectivity will create a big data problem. The billions of connected devices and people will give more and more information on their location, status, and behavior than ever before. The availability of massive amounts of data will require businesses to rethink technology architecture and database structures and will result in a new breed of data-driven applications. Companies will move to an “in-memory” world where multiple systems — business process, analytics, and collaborative applications — will run on a single in-memory database at a much lower TCO.

3. The third big trend is the cloud. Enterprise data needs to be available anywhere, anytime, and it needs to be shared with business partners and consumers. This data must be available outside of the firewall. We are at the beginning of an enormous evolution of what we call utility IT — where infrastructure processing capacity will be in the cloud.

4. Finally, we have entered the post-PC smartphone and tablet era. Three to five years in the future, we will look at PCs as the dinosaurs of IT, similar to the way we now look at mainframes. Smartphones and tablets have changed two things about IT: Consumption of technology (touch screen, innovation in usability, and so on) and device smartness (device is aware of the location, context, and content — what experts call the exo-brain, which is an extension of your own knowledge and yourself).

Q: Are these trends futuristic, or are they happening right now?

We are not talking about farfetched ideas. Telecommunications companies can effectively become your bank. For a small transactional fee, you can use your smart phone to pay bills. Retailers are creating new mobile consumer channels. We’re seeing more and more location-based or GPS services. Most of our customers are mobilizing their employees. Let me give you some specific examples of what is happening right now.

• When the earthquake and tsunami hit Japan, you would think that it upended supply chains with key dependencies in the ravaged sections of the country. But this was not necessarily the case. Many SAP customers use an application called Supplier InfoNet, which provides visibility not only into the activities of a company’s direct suppliers, but to the suppliers of their suppliers. When the disaster struck Japan, users of this application could immediately identify which suppliers were exposed and could turn to alternative sources for materials. Speed mattered. The first businesses to do this captured the available capacity from other parts of the world. By the time the laggards figured out the problem, the capacity was already gone or they lost the ability to negotiate and had to pay steep premiums. 

• Avon is an interesting example. Many readers may be familiar with the iconic “Avon Lady,” who for more than a century has been selling make-up door-to-door. How do technological forces change this simple, people-centric sales process? Today, Avon sales representatives who are armed with tablets can take a picture of a client, virtually apply various make-up combinations to the image, and make real-time recommendations based on the client’s reaction and feedback. All the while, the representative can check inventory in real time and commit to product shipment dates. If a particular shade of lipstick isn’t available in time for a bride-to-be’s important day, the sale is not lost. Together, the representative and the client can look at alternative color palettes and combinations.

• Centrica, a UK-based company that supplies gas and electricity, offers an entirely different perspective. This company amasses and analyzes vast amounts of data coming in from smart meters to drive customer energy efficiency programs. Through analytics and industry-specific benchmarking, the business now helps its customers optimize their energy consumption. While the findings vary depending on the industry, Centrica is able to explain to industry titans as well as to small business owners across the UK what the applicable best practices are for energy conservation. That’s very powerful. The company is leveraging enormous amounts of data to become a trusted business advisor. Instead of simply selling energy, the business has transformed into an energy management company that can advise others how to manage their energy better, especially at peak times. This transformation allows the business to make money on this advisory service, reduce the load on its infrastructure, and lower its customers’ costs.

In a bad economy, successful companies invest in innovation. During the recent downturn, SAP has made significant investments in each of the four trends I described. Through our Sybase acquisition, we acquired assets in mobility and connectivity; we are disrupting the in-memory space with our in-memory analytics solution; and we are bringing a fresh new thinking to the cloud.

Q: If SAP is investing in these new areas, what does it mean for the current SAP products and existing customers?

SAP will focus on repurposing the old technologies and solutions with very little disruption to the customer. We don’t believe everyone will adopt these innovations at the same time and speed.

Our mantra is to move companies at their own speed through our innovation roadmap. We don’t have an appetite to change our core ERP and financials functionality. But we do want our customers to leverage our innovations in mobility, analytics, in-memory, and cloud.

     
"We will connect trillions of objects in the next few years that will change the way business processes, such as supply chain procedures, are managed in real time."

The most impressive piece to me is the adoption pattern of these innovations. Typically, innovations start in America, move to Europe, and finally reach Asia and Latin America after a couple of years. Now, the fastest adopters of SAP innovations are in regions like Siberia, China, and Japan. The American and European companies need to keep a watchful eye, as the pressure of adopting innovations will come from competition in new regions.

The speed of adoption for these innovations will be faster than ever. SAP as a global company can support our customers wherever they are.

Q: How have these technology shifts affected the product direction you set for SAP?

Seeing where the world was heading, we invested early to make sure we had the right technology platforms ready. Where we used to be a one-platform company (and that platform was SAP ERP), we are now a five-platform company:

  • SAP Business Suite
  • Business intelligence, which came through the acquisition of Business Objects
  • Mobility, which came through our acquisition of Sybase
  • SAP HANA, which is an in-memory database platform for dealing with big, real-time data (this was the brainchild of SAP founder, Hasso Plattner) 
  • Cloud, which most SAP customers know as SAP Business ByDesign

Our mission is to enable customers to conduct business anywhere via any devices and harness the vast amounts of data for competitive advantage. With these prerequisites in place, you can innovate business processes in very exciting ways. 

These platforms are stepping stones for the next big innovation. These platforms are also the means by which we’re transforming our business. 

Make no mistake about it: SAP is a re-born company. Our new purpose is not just to make businesses run better, but to make people run better. We plan to reach a billion users. It took us a few decades to reach 14 million users. We’re now looking to reach a billion because we believe the future is connecting consumers to companies and connecting things to processes. This is especially poignant at the “moment of truth,” such as dispensing an automated coupon to a customer who is poised in front of a shelf and selecting a product. We are readying some exciting applications in this arena. We can also provide customers with real-time visibility across supply networks. This means SAP customers can start to plan by the hour, not by the day or the month.

Strategy officers grapple with: The future is here. Are we ready? This variegated product portfolio enables SAP companies to answer in the affirmative.

             
           
"We are at the beginning of an enormous evolution of what we call utility IT."
             
Q: If I’m a CIO, all of this sounds very exciting — but what should I do in the near term?

As a CIO, you would need to do the following:

1. Educate yourself on the innovations that can add value to your organization.

2. Pilot one or two initiatives to understand the complexity of implementations and how they could affect your business.

3. Be sure the business is focused on the implementation. Partner with your business stakeholders and implement the innovation that is of highest value to them.

As a CIO, you are also probably very concerned about cost re-structuring. As you take on innovation challenges and initiatives to turn data into a more competitive asset, you are also thinking about how to leverage this opportunity to usher in permanent cost reduction. Permanent cost reduction is the new game because businesses need to provide products and services at a much, much lower cost in this global economy.

Q: How does SAP answer the CIO’s cost reduction question?

There are a number of options. Consolidating applications is one way we work with customers to achieve permanent cost reductions. Virtualization is another. Cloud is another, with so many services now moving to on-demand.  

And then there’s SAP HANA, an in-memory computing solution that has captivated the attention of CIOs. Put all your data into SAP HANA, and you democratize reporting and analytics. Users create their own reports on the fly. IT doesn’t need to pre-configure settings, worry about reporting performance, or act as an intermediary. These requirements go away because SAP HANA can deal, in real time, with enormous amounts of data and any search and analysis criteria you give it. BSF and Lenovo are great examples of SAP customers that both use SAP HANA for profitability analysis. In both cases, huge data volumes are involved. For many companies, SAP HANA is enabling regional-, market-, and SKU-based analysis that was not previously possible because the data volumes were too large.

These options elicited varied reactions from CIOs I’ve met with:

“This will reduce my IT costs by 50%. SAP is completely shrinking my landscape and, at the same time, giving me real-time access to all my data. I don’t need to have one landscape for BI and another for transaction [systems]. This is unbelievable.” 

“This changes how we can engage with consumers.”

“We could actually run our company in real time!”

“We really never had technology that was ready for our top executives. But this is.”

As much as things are changing for CIOs, much remains the same. As guardians of an enterprise’s robustness, their interest in security, compliance, process integrity, and data management is unflappable. And it should be. None of the newer technologies or attempts at business process innovation are worth anything without a robust enterprise. This bodes well for SAP, since SAP is the only vendor that brings all the pieces together.

Q: Have you seen best practices taking hold among SAP customers that have made demonstrable contributions to the business through mobility, connectivity or “big data” initiatives?

I am seeing common best practices take root:

1. They have a clear strategy for mobility. They’ve charted a course for connecting mobile devices that affords them security, user appeal, cost effectiveness, and minimal disruption such that they are creating a great mobile user experience without changing business processes.

2. They have a clear strategy for managing data and enabling the business to make real-time decisions from the top down — and with real data. This wasn’t possible before SAP HANA. It is now.

3. Companies that were forging new consumer channels talked with SAP early on to understand what new technologies and skill sets would be most helpful in a world where the business consumer dictates the pace of IT.

4. These companies didn’t wait until a practice entered the mainstream to seize it. They were the pioneers. We worked with them to pilot new concepts before their competitors did. 

5. They turned existing assets into a growth engine.

 

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