Notes from an Engaging Keynote Experience

Recap of SAP's Dr. Volker G. Hildebrand and Hans Thalbauer's Keynote

by Gary Byrne

May 26, 2017

While riding on the Orlando airport subway on my way home from spending a few days at the Customer Engagement & Commerce 2017, SCM 2017, and HR 2017 conferences, I heard a tape of Orlando mayor Buddy Dyer thanking people for visiting Orlando and hoping they enjoyed “the Orlando experience.”

Dyer’s words were a motif used during the keynote address at Customer Engagement & Commerce 2017 by Dr. Volker G. Hildebrand, Global Vice President Customer Engagement and Commerce at SAP Hybris. Hildebrand started his discussion by saying that with regard to digital transformation, you have to “think beyond CRM. You have to digitize everything from customer engagement in the front office all the way to the supply chain and the back office.

Wouldn’t it be great if you could do the same and maybe dial it up a notch for your business?”

He then walked attendees through the last 100-plus years of history – from the industrial economy in 1900 when Henry Ford introduced the assembly line for manufacturing for the Model T. (You can have it any color as long as it is black.) Assembly line manufacturing lowered the price of automobiles to make it affordable to the masses.

In the 1950s, the perfection of assembly line manufacturing driven by Word War II enabled the mass production of household goods cheaply, and the industrial economy reached its apogee. Corporate leaders focused on sales and marketing. The mass media and adverting agencies worldwide entered the golden age of making people desire consumer goods.

In the 2000s, millennials tuned out TV and refused to click banner ads. (Later in his presentation, Dr. Hildebrand underscored his point that customers are harder to engage by displaying a graphic that indicated that 99.76 of online ads are ignored.) They refused to be passive consumers. The consumer economy began to break down and was replaced by the digital economy.

So how do you dial up things a notch to remain competitive in a digital economy in which according to Hildebrand, “technology is changing the game while at the same time customers are changing the rules of engagement”? One point Dr. Hildebrand made was that customers expect a lot more “not only from digital businesses but also from every business.” Their expectations are shaped by experiences with Uber, Amazon, and others.

He added that in today’s digital economy it’s no longer about building and selling products, but it’s also about creating a better customer experience than your competitors. Customer experience has become a competitive differentiator.

He spoke about these examples:

  • GE Medical: Sometimes simple things that don’t require much technology can provide a good customer experience. GE Medical’s computed tomography (CT) scanners were designed to be friendly and less scary to children who had to go through a CT scanner tunnel (read the full story of this design here). GE Medical took a customer-first approach and turned the overall experience of the scan to customize to the needs of children and make it a fun adventure instead of a scary experience.
  • Uber: Consider the ease with which you can arrange for a cab ride with Uber. You can see a car on a map on your mobile phone, read driver’s ratings, view what you’ll pay for your transportation, and easily provide feedback.

Digital Technology Is Going Mainstream

Hildebrand underscored this point by citing a study by the Global Center for Digital Transformation, an IMD and Cisco initiative, that revealed that seventy-four percent of executives believe digital transformation is about improving value for customers.

If your business is too slow to respond to the changes in the digital economy, it puts itself at risk of becoming irrelevant. Hildebrand listed three examples:

  • There are more than a billion smart phone users today, but only 17 percent are ready to support a mobile-first customer-engagement strategy.
  • There are more than 400 million LinkedIn members, but seventy-five percent of businesses’ CRM systems still have no way to track social media interactions.
  • There are more than a billion Facebook users, but more than half (56.6 percent) of businesses’ CRM systems still can’t be contacted by social media.

Technological Innovations

Hildebrand cited three examples of technological innovations that are changing CRM as we know it:

  • Smart-connected devices
  • Machine learning (artificial intelligence)
  • Ubiquitous mobility

He spoke about use of drones (remember the drone display at the Super Bowl), artificial intelligence (machine learning), and how a company could use drone technology and algorithms to inspect power lines in locations that are hard to reach.

He then spoke about Google developing a computer that played Go and won (not every game out of five games, but it won a game). It wasn’t programmed to play Go; it learned how to play Go.

His example of a company that used all of these innovative technologies is Disney, which provides visitors to Disney World with a magic band and the magic-plus platform that enables visitors to make restaurant reservations and food selections and configure it to make payments. Thousands of sensors interact with the band to guide visitors to their favorite rides and characters.

He followed this example with a study’s finding that revealed that 61 percent of companies believe their CRM systems do not support their future needs for customer engagement.

He stated that the CRM market is expected to become the largest business application market this year, surpassing the ERP market and he urged attendees to make CRM spending at the top of their companies’ budgets.

Time to Move Beyond CRM

Companies need to move beyond traditional CRM and engage customers in the moment when it matters. What does AI mean for business? He stated that SAP Hybris has been using AI capabilities for a few years and recommended using SAP Hybris and SAP CLEA (SAP’s machine learning platform) to achieve AI-customer-driven engagement. An example demo of a company using machine learning for customer satisfaction was TUI, a European travel company.

 Reimagine Sales

As Dr. Hildebrand started to talk about reimaging sales, services, and marketing, he cited a finding by Gartner that indicated that by 2020 nearly a third (30%) of all companies will employ AI to augment at least one of their business processes.

Smart engagements anytime, anywhere can be possible.

Reimagine Customer Service

As Dr. Hildebrand spoke about reimagining customer service he displayed a finding from an Accenture study that revealed that businesses lose an estimated total of more than $1 trillion in sales owing to poor customer service.

He called up a colleague to demonstrate how a small device (a sensor tag) using AI and IoT sensors can be used to display data on an IoT dashboard revealing the location, temperature, light, and orientation of the sensor tag on a product such as a wine bottle.

Dr. Hildebrand then displayed the following statistic from an Accenture study:

In five years, most customers will purchase goods or services through a digital middle man (e.g., messaging platforms, connected devices, or a smart assistant).

As an example of how a company can use SAP Hybris to create a profile while browsing for products, Hildebrand showed a demo of a woman using SAP Hybris to create an anonymous, but personalized profile of bathroom accessories that she likes.

Reimagine Marketing

To underscore how marketing is also changing, Dr. Hildebrand stated that marketing is now about personal, contextual engagement. He cited a Forrester study that indicated that 62 percent of customers are more willing to pay for, recommend, or choose brands of products from companies that provide a personalized experience. He also mentioned how Porsche increased sales by 100 percent with SAP Hybris Marketing’s predictive analytics.

Talking About a Revolution

Hans Thalbauer, Head of Digital Supply Chain and IoT, at SAP, then took the stage to discuss how customer engagement can be applied to extended supply chain operations.

Thalbauer stated that major transitions are going on in what is truly a revolution in supply chain manufacturing. Some points he made were about:

  • Modern manufacturing — Assembly processes are being replaced with “intelligent manufacturing islands.” Machines can communicate with each other and support individualization of products.
  • Outsourcing — Evolution to localization of manufacturing
  • Mass production — Evolution to a lot size of one.

With regard to the customer experience, Thalbauer said “supply chain and manufacturing need to understand the customer experience.”

He stated that the networked aspect of business and how society is changing are also important points for companies to consider.

Customer experience from a supply chain perspective is about the customer life cycle. New business models don’t sell machines; they sell output. For example, a German company that sells compressed air, not the compressors.

Some other industry changes and trends Thalbauer made included:

  • Demand management — Know your customer’s environment (Be ready to deliver within an hour; statistical forecasting is not enough.)
  • Demand sensing — Combine machine learning with a demand management approach (For more information on demand sensing, read my blog with Sujit Singh, chief operating officer of Arkieva.)
  • Omnichannel delivery — Omnichannel logistics processes support the customer experience
  • Local manufacturing — Local replaces outsourcing; manufacturing is consumer driven and personalized, individualization (e.g., Nike using a 3D printer to make customized shoes)
  • Plants are being optimized, people are not working on machines; machines are working together as “intelligent islands”
  • 3D printing for producing products (e.g., HP using a 3D printer to create 3D printer components)
  • Digitizing inventory
  • Leveraging signals — “Things-enabled” design, engineering, and manufacturing

Networked Economy

Be able to collaborate and exchange information easily. Thalbauer listed three aspects of a networked economy:

  • Connected enterprise — Cross-department business networks, logistics collaboration
  • Cross-industry business networks — Product business models are changing; farmers, wholesalers and other businesses need to work together
  • Sustainability and socially responsible networks — Compliance is still very important

He also stated that understanding how societies are changing (urbanization) is important. For example, he mentioned plans to introduce drones in the city of Dubai for passenger transportation.

Thalbauer also discussed how Japan’s aging population and low immigration have created a paucity of young workers (for example, truck drivers and service workers). Japan’s remedy for this problem was to automate more business processes.

He then reiterated these four points:

  • Customer experience is driving everything
  • Manufacturing will be completely different
  • Networks need to be flexible
  • Environmental and social changes need to be understood

How does a business tie all these aspects together? SAP’s answer is the Digital Supply Chain powered by the SAP Leonardo portfolio. The portfolio focuses on these main categories:

  • The industrial Internet of Things (Industry 4.0) — connected products, connected assets, connected fleet
  • Connected infrastructure — connected markets
  • Connected people

According to Thalbauer, SAP’s strategy is to “connect things with business processes and people.”

Thalbauer tied his points together by describing a scenario in which a manager named Marco is working in a new environment in which he is looking at asset management for a natural gas company in Italy. Marco looks at KPIs that initially look good, but he then he sees an alert that there is a problem with a valve in a compressor station in Cassino.

Marco used predictive analytics to understand options to fix the problem in the Cassino station. His options included inspect and repair, inspect and replace, or shift to another available compressor. The data provided by predictive analytics indicated that repair was the best option. Marco could also use a Maintenance Cockpit in SAP Leonardo to determine if compressors at other locations needed repairs and which ones were in need of immediate repair.

Another example Thalbauer used was Hamburg Port Authority’s use of sensor-based data and analytics to increase its capacity by 30 percent without extending the facility.

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