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Interview with Stefan Hoechbauer, Regional President, SAP, Middle East and Europe

PragueConnect.cz in cooperation with Czech & Slovak Leaders Magazine

 
Digital Transformation and Its Impact on Businesses and Society

Having the opportunity to interview Mr. Stefan Hoechbauer gave me not only a positive insight into the situation on digital transformation in the Czech Republic and its neighboring markets in Austria and Germany, but also an impulse to look at the technology from another perspective. More than ever, new technologies are becoming drivers of the business model change. The revolutionary examples of Airbnb and Uber show us how small players can grow into global ones and on the other hand, how the global ones might become smaller ones or disappear completely. In order to succeed, the IT needs to become integral part of the business to profit from the successful and long-term sustainable development.  

Mr. Hoechbauer, what are the main business model changes and disruption trends that SAP helps its customers to address?

The topic of digital transformation or business transformation as discussed nowadays is driven by three factors. The first one is represented by surprising competitors that have emerged and now are challenging many established players in traditional industries. Several years ago, it would seem odd to consider that BMW or VW would face competition from Google and its
autonomous driving, as Google now has all the data relevant and needed.  Similar disruptions are happening elsewhere: one of the biggest taxi providers Uber does not own cars, likewise Airbnb achieved its success without owning one single hotel bed. More and more, the traditional companies in traditional industries need to start thinking about new ways how to engage with customers. 

The second factor is linked to the Internet of Things – taking into consideration all devices that are connected to the internet and that will be connected to the internet. According to studies, by 2020 there will be about 50 billion devices connected to the internet. We tend to think mainly about mobile phones, but there are many other devices and sensors connected, and generating enormous overall volume of data. Just imagine immense opportunity for businesses arising from combining data from devices together with corporate data, which create the backbone of the enterprise, and then enriched with the data from the social media.  Now the next step comes and that is what to do with the data and how to combine them with analytics. We present to our customers the example of Digital Boardroom as the place where all information about different parts of the enterprise is available and so it enables not only access to data in real time but also decision making according to complex evaluation of the current status of an organisation as well as enhancing communication across various departments. Besides effective decision making, this approach also enables many new opportunities how to interact with customers. 

The third dimension of disruption trends comes with next generation, the so-called millennials or also internet generation. They have totally different ideas about how to consume goods and services. I always present the example of my 14 year old son. He likes cars, but he has already made up his mind that he does not want to own a car in the future.  He wants to have a flexibility and use it according to his needs, so he thinks about sharing cars with friends and changing models as he likes. And now this new approach to consumption is starting to be reflected in the whole automotive industry. 

Having heard all this, now I understand that your statement: “In order to win in the new economy, you must digitize or become irrelevant”, should not be considered an overstatement.   

To illustrate all of the changes mentioned above on one specific example, I can give you an insight from my recent discussion with a car rental company, an industry that few would consider particularly innovative. Generally, we would think the business is about maximum possible utilisation of the cars, being at the right place at the right time. However, facing the challenges, there is a need to come up with new types of shared and mobile services for their customers. Potentially, SAP as a corporate customer, will not have one company car per employee but rather service level providing a car at disposal according to needs. So from owning or renting a car, we are turning to consuming either miles or hours or any other flexible arrangement. Individual SAP employee might thus profit from various cars for different occasions. Smaller car easy to park when driving in a city, a family car when going to the seaside for summer vacations or an off-road when going for a skiing weekend. Or perhaps would he or she like to try a convertible throughout summer? Expanding on this mobile cart, let me describe  a few services that could be interesting from the user’s point of view. Just by entering the car and connecting to the GPS, there would be a welcome and the navigation system would be automatically selecting the optimal journey to the next meeting. If I go to the petrol station and I refuel, the bill would be automatically added to the right expense company account. No more difficult and manual handling of receipts and bills into a system. By the way, this is already possible thanks to SAP technology called Concur.

So this was one example that for changing business models you need flexible and reliable, rock solid IT infrastructure with data, applications and solutions and building on these, you come up with new services and ways to engage with your customer to serve their needs better.                      

Digitalization is truly affecting each and every industry and each and every geography. The adoption might be different if you compare America and Western Europe to Russia and CIS but it is omnipresent. Sometimes, it comes under headline of business transformation but the ultimate aim as to how best adapt for future market is always the same. 

For a long time, SAP has been associated primarily with large corporations. In reality, 80% of your customers are SMEs. In Germany, the SMEs have been traditionally considered backbone of economy, but in the Czech Republic, SMEs have been in an inferior position with regards to access to funding and innovation, when compared to multinationals.  Has the situation changed?

I cannot comment on the situation of Czech SMEs, but in SAP, we have the same customer base in each country where we operate. What might differ, is the definition of the SME as such, with regards to the revenue or number of employees. But the principle how we engage with SMEs, what products and solutions we offer and how we engage with them, stays the same. As you pointed out, SMEs are also a backbone of business for us. Look at our product and portfolio and you find a range scaling from small to large enterprises. In some areas the offer is the same, in some areas there are special products developed in cooperation with our partners, based on our technology and ready to solve specific solutions in particular segments.

Three particular segments – finance, media and production - have been discussed at SAP

Forum held in Prague in June. Finance and production are often discussed, but what was the reason to include media?

As I mentioned, digital and business transformation is relevant for each and every industry.  Some of the industries might be more adaptive than others. With media and in particular social media, the question of making use of data available becomes imminent which brings us back to the solutions we offer. This was confirmed in the keynote speech of Mr. Petr Dvořák, CEO of Czech Television, discussing new trends in TV time consumption and the effect on the transforming world of media as such.   

SAP is active in both, public sector and private sector. How is the public sector, comparing to the private one, interested in digital transformation? Are there any differences, can you give an example?

It is interesting to note that with regards to the digital transformation, the often mentioned public-private sector divide is not relevant. There might be some slight concerns with regards to cloud solutions, but overall, the solutions and the responses are the same. Let us take the example of growing pressure from citizens with regards to the need of more transparency and budget spending or the pressure to be more flexible in handling administrative agenda - filing on the documents and paperwork. The topic of efficient data use and data sharing can be extended to health care where I see a great advantage and potential. The potential of connectivity was demonstrated in one study done by the Heidelberg University Hospital which carried out digitizing cervical cancer screening in Kenya, in a process that helped to prevent data loss and duplication. And one last positive remark regarding adoption and readiness, I am pleased to see that the level of discussion is almost comparable between Germany, Austria and the Czech Republic.  

So far, we have talked about transforming businesses and technologies.  Now, let us talk about people. What is your view and approach to leadership at SAP in times of transformation?

In SAP, we walk the talk on disruption and so we introduced the methodology called design thinking which is a smart way of brainstorming and engaging with our customers.  But we also use it internally. We talk about potential disruptive ideas, topics, trends and influences and how to link them to the opportunities our technology enables. Therefore, the employees need to be open to learning and to adapt fast. We also experienced our transformation from turning from an enterprise resource planning system company into a cloud company based on rock solid technology Hannah. This way, we are able to address much bigger market potential, in terms of different industries, lines of business, different buying centers etc. Our experts are trained to be always the most relevant source for their customers as potential consultants on future disruptive trends in a particular industry or business. We invest in training, education, coaching and we are aware that this is an on-going and never ending process. 

Inspiration from SAP - Design Thinking

A Design Methodology

Basically, Design Thinking is a design methodology, which differs from traditional design approaches in specific ways. For example, it is characterised as more creative and user-centered than many traditional design approaches.

A Problem-Solving Approach or Process

Design Thinking can be regarded as a problem-solving method or a process for the resolution of problems.

As a solution-based approach to solving problems, Design Thinking is particularly useful for addressing the so-called “wicked” problems. Wicked means that they are ill-defined or tricky. For ill-defined problems, both the problem and the solution are unknown at the outset of the problem-solving process. Even when the general direction of the problem may be clear, considerable time and effort is spent on clarifying the requirements. Thus, in Design Thinking, a large part of the problem-solving activity is comprised of defining and shaping the problem.

Much like any other problem solving process, Design Thinking consists of a number of stages or phases, which differ slightly between various Design Thinking proponents.

An Approach to Encourage Creativity

Unlike analytical thinking, which is associated with the “breaking down” of ideas, Design Thinking is a creative process based on the “building up” of ideas. While analytical approaches focus on narrowing the design choices, Design Thinking focuses on going broad, at least during the early stages of the process.

In Design Thinking, designers do not make any early judgments about the quality of ideas. As a result, this minimises the fear of failure and maximises input and participation in the ideation (brainstorming) and prototype phases. “Outside the box thinking”, also called “wild ideas”, is encouraged in the earlier process stages, since this style of thinking is believed to lead to creative solutions that would not have emerged otherwise.

A User-Centered Approach That Brings Design into the Business World

Design Thinking is seen as a way to apply design methodologies to any of life situations. It is often used to explore and define business problems and to define products and services. In other words, Design Thinking brings the design approach into the business world. As a style of thinking, it combines empathy for the context of a problem, creativity in the generation of insights and solutions, and rationality and feedback to analyze and fit solutions to the context – All this helps derive a solution that meets user needs and at the same time generates revenue, that is, drives business success.


PragueConnect.cz in cooperation with Czech & Slovak Leaders Magazine - Prague, 04.10.2016