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Digital is a “Way of Doing Business”

I started my technology career as a SAP junior consultant and got SAP certified in FI-CO in 1997. I use SAPPHIRE Orlando to keep up with what’s new. A lot has changed with SAP since I started using it 20 years ago, but it is true with all types of technology– technology never stands still.

During the SAP Sapphire keynote Tuesday morning in Orlando, the company introduced SAP C/4 Hana and Intelligent Enterprise. Digital is the buzz word around many presentations. Many of the conference attendees, the largest Sapphire attendance ever, are here to catch up with what’s new with digital enabling technologies. Here are my key takeaways from Sapphire 2018 so far. (see SAP published Sapphire presentations)

sap

What is digital?

At one point during the key note, SAP presenters discussing Intelligent Suite showed a roadmap that does not resemble a roadmap to which we are accustomed. Then the SAP presenter said, our partners like Deloitte have started building industry digital business blueprints that can be applicable to different industries. I took it as a validation that digital is not the application systems and not even a platform. Digital is not a “thing”, it is not a role, it is not a program– digital is a way of doing business.

For some businesses, digital allows consumers to have a personalized experience by touching, feeling and understanding products and services. This means understanding customer behaviors and being closely attuned to how customer decision journeys are evolving. Digital transformation is not really about technologies. Existing digital technologies are accessible to all companies. The key is using these technologies to find value at the new frontiers of business. (see what is digital for Adidas) Being digital is not being afraid to use emerging technologies to solve business problems. Being digital requires being innovative and pushing the boundaries even on areas where success is not guaranteed the first time. “Learn fast and then just move on and find a different way to solve the same problem”, says Bharti Airtel’s Global CIO Harmeen Mehta, winner of the 2018 MIT Sloan CIO.

What is Me2B or Me to Business?

We are familiar with the buzz word B2B (business to business) or B2C (business to consumers) but what is Me2B  (Me to business)? Digital is no longer just a way to engage customers and consumers for a personalized experience. The advent of digital manufacturing, machine learning, blockchain, Intelligent supply chain, and artificial intelligence (A.I.) allow consumers to personalize design of the products they want based on current trends. As brands in the future will be mainly shaped by consumers, digital as a new way of doing business puts the customer as the point of focus. “Trust is the ultimate human currency”, says Bill McDermott, CEO of SAP as he unveils C/4 Hana (see demo of SAP C/4 Hana), an integrated platform that will allow business to see a single view of its customer. During his keynote, McDermott described how humans and computers will work hand in hand in A.I. scenarios to link consumers on the move with modern supply chains.

What is Intelligent Enterprise?

To go with SAP co-founder Hasso Plattner’s definition, Intelligent Enterprise is not a marketing buzz, but a logical consequence of what is happening today in technology and modern applications. In the middle of this capability is the SAP Cloud Platform, SAP Leonardo (see SAP Leonardo demo) and SAP Data Management Suite surrounded by its core systems such as S/4 Hana, C/4 Hana, SAP SuccessFactor, SAP Ariba, SAP Fieldglass and SAP Concur. Intelligent Enterprise is not a product, it is an ecosystem or integration of these systems, not limited to SAP products, where collaboration can create intelligent enterprise capabilities. (see Hasso Plattner explain Intelligent Enterprise) Talking about intelligent capability, I also arranged for a personal walk-through of IBM Watson while at SAPPHIRE. It is probably the most widely known and used AI capability out there. “When you are starting to use Watson, it’s like training a baby by feeding her tons of information”, says Shaun Mitra an IBM Watson expert. The only difference, Watson can process it faster, 500 gigabytes of data or equivalent to a million books per second. Watson API is available to developers to create applications leveraging its cognitive capabilities. In the demo, I saw how Watson works with the SAP ecosystem and SAP Leonardo, further empowering intelligent enterprise capabilities.

Intelligent Enterprise is not a marketing buzz, but a logical consequence of what is happening today in technology and modern applications. – Hasso Plattner 

How do you develop a digital business model? “By innovating anywhere, from core to edge”, says Darwin Deano, Deloitte’s SAP CTO. Innovation and transformation are the means to achieve a digital business model using existing and emerging technology platforms. Digital is a shared responsibility between business and IT. There must be convergence of business and IT to drive successful and sustainable digital business transformation.

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Let’s Talk Business Process First! – How to Calibrate Business Relationship Maturity through Business Process Culture

Use of information technology. Is it creating value? Is it improving business processes and capabilities? Or merely creating new wants? Is it important, or only urgent? What is it for? Every Business and IT engagement around business requirements revolves around these questions but managing it isn’t always easy.

First, let’s talk about IT organization’s critical role in the company’s business processes. One of the consequences of Business Process Management is a large majority of these programs are initiated in the IT organization.  There are very good motives for this.  One of the most common: the IT organization is responsible for providing the technology that enables business processes. Take for example, ERP (Enterprise Resource Planning) systems like SAP, Oracle, etc.  This ERP solution is a suite of integrated applications that a company can use for many business processes. Most ERP systems incorporate best practices reflecting the vendor’s interpretation of the most effective way to perform each business process. Systems vary on how conveniently the customer can modify these practices. Talking about best practices, it is advisable not to over-customize because doing so will keep you from taking advantage of the expected improvements and innovations from the purchased ERP package.

How do you characterize the nature of your engagement with your business partners? Is it functional orientated? If it is, there is more tendency for having more solution-based discussion versus process- and value-based. Even worse, it could be possible that your internal customer is engaging you at the tail end of their decision cycle–when they have already determined what they want or need. There is lack of business-IT alignment and strategic partnership.

How do you then improve the level of your business relationship with the business? There are numerous paths towards that elusive business-IT strategic partnership. In this post, I will talk about Business Process Maturity as a path— so I would say – Let’s Talk Process First! This has worked for me in the past. One of the most effective ways to change the orientation and focus of business IT interactions is to start with business process. Calibrate  your organization’s business process maturity and you will take along with it to a great degree IT-business relationship maturity. What you need are experienced business process managers with business relationship management competencies. Below I will walk you through these 3 stages of Business Process and Business Relationship maturity and describe what it means.

Business Process and Business Relationship Maturity

Process Maturity

Level 1: Support

Business Process Maturity = Diverse and Business Relationship Maturity= Adhoc / Order Taker

When your organizational approach to business process is diverse, more often business-IT initiatives are managed with lack of integration. At this stage, most of the organization’s process knowledge is known only to a few individuals. For business process engagement facilitation, there is dependency on external consultancy. There is no standard process management discipline that leads to more functional orientation of IT requirements discussion. Consequently, IT as a provider organization is hardly seen as a strategic partner–at most, a service provider. In terms of business relationship maturity level, most of the time, IT is treated as an order taker. This type of business relationship is characterized by loudest in – first out tendency causing reactive course of actions. My advice is to embark on a business process maturity journey. Establish a discipline of managing business processes as the means for improving business performance outcomes and operational agility.  Leverage use of technology to improve business processes.

Level 2: Improve

Business Process Maturity = Model Integration and IT-Business Relationship Maturity = Service Provider

You want to become an organization that designs processes first and then goes on to implement the technology enablers. Your organization wants to keep pace with technology and maintain a competitive advantage. Companies at this level adapt a consolidated method to design and implement business models using standard processes and tools. Process ownership ultimately improves as management breaks silos and approaches process and technology implementation equally.  The common tendency is for companies to establish process governance and ownership. IT plays a key role in the process evolution of the company and starts to be seen as a service provider and some cases even a strategic partner.

Level 3: Innovate

Business Process Maturity = Process Culture and IT-Business Relationship Maturity = Strategic Partner

The final step to Process Culture Maturity occurs when innovation and change in business practices through process understanding are consistently promoted within the company. As executives passionately embrace process thinking, they are able to promote innovation more confidently when implementing new technologies. In many cases, companies with mature process culture has End-to-End orientation to process management and IT plays a key role as center of process excellence. IT starts to be regarded as trusted and strategic partner. Business–IT relationship is based on cooperation and mutual trust with shared goals to maximize value from business initiatives.

Technology will not automatically implement itself and run your organization’s processes the way you envision. IT has a unique opportunity to spearhead business process improvements in the company. Start by changing the orientation of your business interactions from functional to business process, from solutions to value. Do not shy away from this opportunity. Use business process management to create greater strategic value and by doing so advance business-IT relationship level to new heights.

A Complicated Way to Explain the Importance of a BRM Role in an IT Organization

Don’t tell me I did not warn you. The only thing I can promise is that you’ll learn a thing or two from this one, so please read on.

I came across a predictive validity framework called the “Libby boxes”, popularized by Cornell Accounting Professor Robert Libby. This framework is used to examine the distinction between underlying constructs of strategic objectives and their proxy measures to illustrate causal models related to some objectives in an organization.  Another definition of “strategy” is as a hypothesis about the cause and effect of your objectives. Predictive validity allows you to measure and analyze how well the execution of your objective (cause) predicts your desired performance (effect).

Simple Business-IT Strategy

Now, to illustrate the importance of a Business Relationship Management (BRM) function in an Information Technology (IT) organization, let’s start by picking a Business-IT strategy to dissect. Let’s call it “Strategy A”.

Strategy A: “Create business value through better use of technology.”

Let’s start it simple and take an approach to illustrate cause and effect depict Strategy A using the model. We are going to be taking a very logical approach. The strategy here is— you believe that if you use technology better, you create business value. Let’s assume that technology is comprised of infrastructure and applications that enable the business or enterprise.

Simple Business-IT Strategy

Observe that Strategy A is too simple—or maybe exceedingly simple. Can we really say that if IT provides better technology, we create business value, in the form of profits or savings? Yes, no, maybe. How about this – it is because of better use of technology, we improve business processes of the company and therefore we create business value. In this predictive validity framework, the middle action is called, mediating variable. It stands between two variables and it is an effect of one variable and the cause to another. This brings us to iteration to our business-IT strategy. Let’s refer to this improved business-IT strategy as “Strategy B”.

Strategy B:  “Create value by improving business processes through better use of technology”.

Business-IT Strategy

So how do you interpret this strategy? As an IT organization, your goal is to provide the business with the technology, infrastructure and applications to enable efficient business processes. This will result to business value creation through optimized cost, profitability and strategic advantage. Whew! Follow all that so far?

I think this business-IT strategy works. If you run this, you have a good chance of successful outcomes. But your aim is not to be just good. Your aim is to be great. Your goal is to differentiate your IT department and to support your enterprise to be the best performing company in its industry or to be the best performing company (period!).

The Missing Component to be great

So there is a missing component to your strategy, a moderating component—a component that will have a multiplying effect from certain causes and effects coming out from the collective work that you do. In this predictive validity framework, it is called the moderating variable.  The moderating variable is a variable that determines how big an effect you get from a certain cause.

To illustrate, let’s say you want to improve your performance at playing basketball. By practicing basketball, doing drills and shooting, for sure it will improve your performance. This is a very simple causal model. You practice more and that, in effect, will improve your basketball performance. But think about this, is there a certain amount of practice that will allow you to be like Mike (Michael Jordan)? Most likely, no. Talent and perhaps physical capacities are the moderating variables here.  Sure, practice will improve your performance, but if you have a lot of talent, a little bit of practice goes a long way and will make you much better. If you don’t have that much talent, you’ll have to practice a lot to get just a little better. Talent in this case is a moderating variable.

Basketball Strategy

Now that you understand what a moderating variable is, let’s go back to our Business-IT strategy. Think about an organizational capability equivalent to talent that can potentially transition your IT organization from good to great—it is business relationship management (BRM).

Strategy with BRM

BRM in this case is a moderating variable. The BRM capabilities moderate the effect of improvement of business processes and enablement of new business capabilities on performance, making it bigger (due to converged business-IT strategy) or smaller (in cases where it is lacking). Improved business processes and enablement of new business capabilities doesn’t cause BRM capabilities, it just moderates the effect. How? BRMs (1) facilitate Business-Provider convergence, (2) ensure that use of Technology that drives maximize value and (3) facilitate productive and connections and mobilize business-IT projects and programs.

Value of BRM Role

 

For many years, IT organizations responsible for deploying technology systems to enable business capabilities have had one goal in mind – namely, to assure business-IT alignment. Today, however, as IT capabilities become more and more embedded in business capabilities, and given the pace of technological change and the pervasive nature of IT, alignment is no longer sufficient. The goal today, therefore, is “convergence”. This has given momentum to the growing emergence of the Business Relationship Management (BRM) role, which, according to the Business Relationship Management Institute (BRMI), is about “stimulating, surfacing and shaping business demand for a provider’s products and services, ensuring that the potential business value from those products and services is captured, optimized and communicated.”

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