Looking at business through the digital lens

digital economy

In this two-part article, Stuart Dickinson examines how SAP is meeting customer needs in the emerging digital economy. Part one examines some of the economic factors and IT trends affecting business performance around the globe.

Earlier in the year I attended the SAP Hybris CEC customer and partner event in Munich and more recently SAP’s SAPPHIRE conference in Orlando.

You go to these events looking for answers. Like everyone involved in technology I am constantly studying how the software and solutions we provide can better meet our customers’ needs as they go about business in an increasingly complex world. To do this, it is important to understand the economic environment that is currently affecting business performance around the globe. These can be summarised as follows:

  • Growth is no longer easy: Major global growth drivers have slowed. There are no major economies ‘on the rise’, growth is stagnant worldwide and economic shocks big and small are becoming more prevalent. If you read The Economist for example, it is saying it is a question of ‘when’, not ‘if’, real trouble will hit China thanks to its spiralling debt levels – a problem that is troubling all major economies.
  • Confidence is falling: The 2016 Global CEO Survey by PwC found that only 23{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} of NZ CEOs say the global economy will improve over the coming year – down from 47{db8ca4bbfe57dc8f9b6df9233a3a6c04f4968125edf9bb330d4f787c3a87cd09} in 2015.
  • Business is becoming more complicated: Concern from CEOs around the world over geopolitical threats to business growth, social instability and policy threats. In NZ, CEOs are also focused on micro-business concerns, such as cyber security and the ability to respond in a crisis.

Regardless of the root causes of the challenges brought on by new economic realities, the question all CEOs must grapple with is: Where does growth come from in the future and how equipped am I to reach it? To do that it is important to understand how the market has changed.

What’s changed?

  • The forces of digital transformation: Arm in arm with the demise of global growth, the other macro-economic trend, digital transformation, is radically changing the way companies do business.
  • The speed of digitisation has increased: While digital isn’t new, it is the complex web of interconnected digital layers (think broadband, the cloud and billions of mobile devices) that has enabled an unprecedented explosion in access. This is fuelling rapid market transformation, new networks of stakeholders and new forms of business innovation.
  • Experience economy: What was the Service Economy is rapidly transforming into the Experience Economy. Goods and services are no longer enough, customers want and expect experiences – memorable interactions that engage each individual in an inherently personal way.
  • Data sharing: Big changes are sweeping the world of data. New sources are coming on stream. Open data, social media data from the IoT. No matter how much data one organisation collects, it’s tiny compared to the data that lies beyond its organisational boundaries. Data sharing therefore is increasingly key to added value. As the costs of collecting, storing analysing and distributing data fall, the more valuable data becomes.

What’s driving digital?

The new digital economy is defined by its efficiency in communication. High speed internet is a fundamental force driving digital economy. Consumers are online and connected amongst themselves and to business. That connectivity gives rise to behaviours, ideas and locations being datafied. That data can be communicated, analysed and acted on quicker than ever before. Other drivers include:

  • IoT: Internet connections embedded into inanimate objects provide real time data that can be aggregated and used across a range of sectors.
  • Commoditisation: The cost of product and services and the technology enabling their production is falling. Cloud is a good example of a commoditised technology. An entire operational environment can be hosted for a company whose investment may only consist of a few mobile devices.
  • Convergence: Categories that were once distinct are now converging. Technology pulls different categories and markets towards one another. The smartphone is a gravitational force for everything from communication and media to banking, health and retail.  It is a densely converged consumer channel and puts the global market place in our pocket.
  • Availability: The more people, services and products become connected the more they become available across the barriers of time and space. Exclusive control of resources is in decline as instantly global digital data is being unleashed through open source databases and technology platforms.
  • Networks: In a culture of increased openness, sharing, and collaboration digitised relationships are constantly expanding from every connection point. Buyers and sellers in a particular sector come together online and access each other’s resources, skills, products and services at a greater scale than previously possible.

What does a digital business look like?

As the market changes a number of distinct characteristics emerge. Traditional companies have to adapt and relate to the market in fundamentally new ways.

  • Fast entry, quicker growth: Speed is the defining characteristic of digital market places. Thanks to technology – the time from idea to execution is shrinking. New services often fly under the radar of established players but then quickly reach exponential growth dominating a category (millions of customers but only a handful of staff).
  • Business is complex: Old linear relationships between buyers and sellers are dissolving into complex cross market networks. New market niches are created every day and new collaborations take shape. Business models involve third or fourth parties, along with a globally dispersed based of users.
  • The user is driving: Wherever there is a contact point with users it is their user experience that is critical to success. Users have no patience for something that takes more effort than it offers in value. Smart digital businesses focus on the user experience at the outset.
  • Development never stops: Product development is constantly ongoing. A significant breakthrough in design, functionality or service offering can create a completely new ecosystem of added value products.
  • Innovation first: Innovation must become a mind-set. Rather than asking what the revenue forecast is for a new idea, digital businesses are more likely to try out something new and find a way to monetise it down the track.

In part two, I will examine what this means for business and look at how SAP is delivering to meet customer needs.

Stuart Dickinson is CEO of UXC Oxygen.

Key sources

Mary Meeker’s Internet Trends 2016

The Economist

PWC NZ CEO Survey 2016

Digital Business Transformation – Disruption of Industry Logics – Ericsson

The 2015 Customer Experience Outlook – Joe Pine and James Gilmore

Personal Information Management Services: An analysis of an emerging market

SAP
SAP and ASUG SAPPHIRE
ASUG, DSAG White Paper Digital Transformation SAP

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