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5 Tangible Benefits of Digital Transformation

How Digital Technologies Can Increase Insight and Innovation in Your Business

by Matthias Haendly, Vice President of Platform Product Marketing | SAPinsider, Volume 17, Issue 2

April 26, 2016

It seems that at every turn, someone is talking about the “digital transformation.” But the specific definition of the digital transformation is difficult to find. It has taken on the status of a buzzword, and like most buzzwords, it is difficult to cut through the hype and arrive at the business benefits. There are benefits, though, and a number of specific steps you can take to realize the benefits of a digital transformation. Access this article to discover the definition of the digital transformation and to discover five specific ways you can achieve concrete results.

For many business users, “digital transformation” is no more than a buzzword. It is difficult for most professionals to determine where and how they are impacted or what tangible results they can get from digitizing their enterprise. To give the term weight beyond its buzzword status, let’s look at it from the customer’s perspective and examine what embarking on a digital transformation journey means in real business terms.

Demystifying Digital Transformation

Even to the casual observer, the existence of technology trends such as hyperconnectivity, smart devices, and cloud computing is obvious (see the sidebar “What Are the Key Technology Trends Driving Digital Transformation?”). In a connected world, organizations have access to a plethora of data and the abundance of computing power allows them to leverage it across the value chain in the form of rich, contextual information.

What Are the Key Technology Trends Driving Digital Transformation?

Digital transformation is not the only technology buzzword. Below are some other key trends in technology today, as well as how they are affecting businesses worldwide.

Hyperconnectivity: Consumers and machines around the world are now connected, disrupting all the established rules around business channels. Hyperconnectivity drives the movement of goods, services, people, knowledge, and wealth. Today, there are already more than 75 billion connected devices worldwide, a number that’s projected to grow to over 220 billion in the next four years. Organizations can now deliver higher value by engaging with the hyperconnected world to reach new customers, create new products and services, and, ultimately, enter new markets.

Supercomputing: The limits of 20th century computing power are gone. Networking and in-memory computing allow for the creation of infinite new business opportunities. Large-scale in-memory computing collapses transactional and analytical processing into a single platform, dramatically reducing costs and enabling massive business simplification and value creation.

Cloud computing: Technology infrastructure is now rented instead of built, eliminating barriers to entry and enabling technology adoption and innovation to move at lightning speed. Business-to-business (B2B) transactions are moving to new, cloud-based collaboration platforms, where millions of businesses and users are connected in a matter of days. Cloud computing can accelerate time to value, drive higher adoption of new technologies, and connect value chains in real time.

A smarter world: Sensors, robotics, 3D printing, and artificial intelligence are the new normal. The new “outcome-based economy” replaces products and services with innovative outcomes, like what AirBnB and Uber have done for hospitality and transportation customers. Smarter devices and products will completely reshape value chains, industries, and, ultimately, the world.

Cybersecurity: Hackers inside and outside businesses have expansive new capabilities to attack, undermine, and disrupt growing digital businesses. Trust remains the ultimate currency, giving security-focused businesses a significant advantage in brand reputation. With ever-increasing risks of corporate spying and digital theft, cybersecurity will become a major focus as organizations set and execute their digital strategy.

Digital transformation, therefore, is simply the route that companies take toward leveraging this abundance of data and connectivity to change the way they compete and create value. It shifts the focus of value extraction from the hard assets and business processes companies control to information from and about those assets and business processes. This allows companies to improve how they currently operate, create new business models and sources of value, and maintain a competitive advantage. Business leaders who don’t seize this opportunity will see their business models and enterprise value erode — and be left behind the competition.

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A digital transformation involves three key steps (see Figure 1):

  1. Converting data to insight, where you collect and make sense of your data
  2. Infusing insight to action, where you leverage the insight as an action within a business process, be it in your business application or business network
  3. Transforming action to outcome, where you reinvent business processes — or even business models — and create a stronger value proposition

Figure 1 — The three key steps to a digital transformation journey

The concept of digital transformation is already producing tangible, real-world results. Take, for example, sensors on equipment in manufacturing plants. These sensors can provide data that helps predict an equipment failure before it happens, increasing effective maintenance on the shop floor. In the healthcare industry, contextual data enables advances in important areas such as cancer therapy. Innovative healthcare systems can analyze the success of certain treatments or medicines alongside a patient’s genome characteristics, increasing the likelihood of landing on the best treatment for that patient. These use cases just begin to scratch the surface of the potential of digitization.

The 5 Patterns of Digital Transformation

To better understand this potential, industry teams at SAP recently took a systematic look into what digital transformation means for specific industries to see what use cases might arise from digitally transformed processes. In each of the more than 40 use cases that were found, companies with mature digital transformation displayed five essential patterns (see Figure 2):

  1. Deliver insight and foresight by analyzing real-time and historical data and by using predictive models with intuitive visualization to identify business opportunities and risks. This helps to determine the most effective maintenance to prevent equipment breakdown or to choose the cancer treatment with the highest probability of success, for example.
  2. Act in the moment by using real-time insights to enable customers, workers, suppliers, and machines to seize opportunities immediately and take collaborative action at the moment of greatest impact.
  3. Streamline work by increasing automation, usability, collaboration, and real-time processes to improve efficiency. This enables you to market to a “segment of one,” capturing the individuality demanded by customers by improving the economics of your processes.
  4. Network the business by connecting internal business processes, labor, ecosystem partners, and customers to deliver a new level of transparency and create increased value that goes beyond the boundaries of the enterprise. By overcoming these boundaries, you can leverage the power of new networks and rethink the value you deliver.
  5. Deliver innovative outcomes by developing new solutions, processes, services, and business models in an agile way to create greater value for the customer and the supplier, and to form a deeper understanding of what customers really care about. If you’ve spent years selling equipment to customers, you need to learn how uptime of the equipment is ensured and then you can transfer to selling the uptime instead.

The recurrence of these five patterns across the different use cases of digital transformation demonstrates their relevance and comprehensiveness. Understanding and pursuing these business outcomes of digital transformation is the first step to realizing the value of digital technologies and to beginning the digital transformation journey.

Figure 2 — Digital transformation patterns and the steps of the customer journey are both supported by a wide range of SAP solutions

Embracing a Digital Transformation with SAP Solutions

SAP offers a range of solutions that can help you become a digital enterprise to take advantage of the benefits of a digital transformation (see Figure 2). SAP’s digital enterprise platform, including SAP S/4HANA, the SAP HANA platform, and a host of other technologies, together with the enterprise and business network solutions, can provide you with a comprehensive solution set to go through a digital transformation. To harness the insights of unprecedented data volumes, SAP HANA, SAP HANA Vora, and SAP’s analytics portfolio can all help you to derive relevant and actionable insights.

In addition to SAP S/4HANA, SAP Business Suite, and other business network solutions, industry solutions offer opportunities to directly put your insights to action. And, last but not least, SAP HANA Cloud Platform can help you easily extend and innovate your business processes or even your business models to transform your business. With the right tools and a clear understanding of what digital transformation means, you can move beyond the buzzword and toward tangible business results. To learn more about embarking on your digital transformation journey, visit http://discover.sap.com/hana and http://hana.sap.com

All New Content for October on the SAP Customer IT Hub!
Get quick and easy access to the wealth of knowledge, resources, tools, support and services that are available to all SAP customers.

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Matthias Haendly
Matthias Haendly

Vice President of Platform Product Marketing
SAP



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