Digital Transformation of Swiss Enterprises

Digital Transformation of Swiss Enterprises SAP CCoE Forum 2015 3. February 2015, SAP Regensdorf Prof. Dr. Axel Uhl SAP BTS Business Transformation Academy (CH)

Business Transformation Academy Who we are

Business Transformation Academy Who we are Mission Statement The Academy creates and offers unique knowledge and expertise on: INNOVATION drivers and future trends and TRANSFORMATION strategies, best-practices and methodologies Research ation Community Training & Advisory Case Studies 360 Journal Conferences Innovation & Articles Books New media Transformation Services Training development Strategic Advisory 3

Business Transformation Academy Journey Building a global network of regional BTA hubs More than 200 contributors from over 20 countries and 10 different industries BTA Europe Hub North America Hub Turkey Hub APJ (Singapore) Latin America Hub ANZ (Australia) Current contributors BTA planned roll-outs 4

BTA What we do ation 360 - the Business Transformation Journal Worldwide acknowledged Journal dedicated to the topic of Business Transformation and Innovation Target Audience Business practitioners: CxO managers, transformation managers, program leads, practice oriented academic community Already 12 issues published www.360-bt.com Handbook of BTM 2 (2012) Business Transformation Essentials (2013) Digital Enterprise Transformation (2014) 5

Innovation and Switzerland

About Switzerland Global Recognition for Innovativeness & Competitiveness 1 st by Quantity of scientific research institutions 1 st by Company spending on R&D 1 st by Patent applications quantity / mln pop 1 st by capacity for innovation In top 3 by the number of Nobel prize winners per capita Switzerland has the highest potential for future successful development 6 th by availability of latest technologies 6 th by firm-level technology adoption Source: Global Competitiveness Report 2014-2015. Pillars Innovation and Technological readiness Nobelprize.org / The Official Web Site of the Nobel Prize 7

Synergy between Competition & Innovation Switzerland consistently ranked no. 1 per global Indicators Top 10 Countries Global Innovation Index 1 Switzerland United Kingdom Sweden Finland Netherlands USA Singapore Denmark Luxemburg Hong Kong (China) Top 10 Countries Global Competitiveness Index 1 Switzerland Singapore USA Finland Germany Japan Hong Kong (China) Netherlands United Kingdom Sweden Source: The Global Innovation Index 2014. Cornell University, INSEAD, and the World Intellectual Property Organization (WIPO). Global Competitiveness Report 2014-2015 8

We have a great past and tradition, but now it is all about the future Source: Hochschulen und Forschung in der Schweiz (2013) Staatssekretariat für Bildung, Forschung und Innovation. 9

Competition is not an issue, it gives motivation to innovate most innovative countries are those that lack natural resources Key success factors for innovation* 1. Knowledge 2. Competition 3. EU workforce Swiss franc has a constantly strong position when compared to other leading currencies** Key obstacles 1. Regulations 2. Financial resources 3. Domestic workforce 2005 2015 CHF/EUR exchange rate dynamics * Source: Experts survey Economiesuisse (2012). Schlüsselfaktoren und Haupthindernisse für Innovation: Unternehmen. Rahmenbedingungen, ** European Central Bank statistics https://www.ecb.europa.eu/stats/exchange/eurofxref/html/eurofxref-graph-chf.en.html 10

For the world economy innovation today means TECHNOLOGY

Internet technologies Internet economy as a percentage of GDP is growing In 2009 In 2016 [E] United Kingdom South Korea Japan United States India Germany France Canada China Italy Brazil Russia 0,8 1,5 1,7 4,6 4 3,8 3,2 3,2 4 3,1 3,4 2,7 3,6 2,6 3,5 2,4 2,8 5,4 5,4 5,6 5,6 6,9 8 12,4 Source: BCG (2012) The Internet Economy in the G-20; McKinsey (2011) Internet matters 12

Mobile technologies Contribution of mobile technology to GDP is growing (in US$ Bn) 2,367 3.6% 2,634 4.0% 2,882 4.2% 3,113 4.4% 3,328 4.6% 3,560 4.8% 3,803 4.9% 4,055 5.1% 2013 2014 2015 2016 2017 2018 2019 2020 Source: GSMA Intelligence; Annual reports; Factiva; BCG Analysis 13

Green technologies Information Technology can contribute to saving energy (in GtCO 2 e) Abatements 2002 2020 40.0 ICT 0.5-7.8 5 times ICT s direct footprint 51.9 ICT 1.4 If climate change is not controlled, global GDP will lose at least 5% per annum. And how can your company contribute to avoid this? Emission ICT footprint Selected ICT-enabled abatements Source: The Climate Group (2008) Smart 2020 14

Key technology trends offering new possibilities for business development

The 4 th industrial revolution is here. Today. And this new wave of technological development is driven by cyber-physical systems 4th wave Innovation and value creation 1st wave Water and steam power 2nd wave Electrical power Chemicals, Internal combustion engine 3rd wave Electronics and IT Petro-chemicals, Aviation, Space, Digital Networks, Biotechnology, Software & IT Cyber-physical systems Along with: Sustainability, green IT, Industry 4.0, Internet of Things, 3D printing, cognitive computing, augmented/ virtual reality, connectivity, sensors, robotics Iron, Textiles, Commerce, Railroad, Steel, Cotton End of the 18 th century Beginning of the 20 th century Early 70s (20 th century) Today Copyright Business Transformation Academy 16

S M A R T Sustainability Mobility Analytics Robotics Things 17

The SMART technological basis for Digital Innovation Sustainability Mobility Analytics Robotics Internet of Things Ecological Awareness Connected Community Big Data Smart Robots and Machines Whole New Level of Connectivity Being conscious about the environment and surroundings is a key differentiating factor among competing businesses Blurring geo-spatial boundaries not just between people and places, but also products and processes As the amount of data doubles every 1.2 years*, understanding the present and extrapolation into the future at speed. Big Data as a raw material of the 21st century. Everywhere: in production, logistics. Close collaboration between remote employee and a robot through human-machine interfaces based on sensors Digital and real world merging. Machines, work pieces, systems and human beings are strongly interconnected * Source: AT Kearney Study Big Data and the Creative Destruction of Today s Business Models, 2013, p.2 18

Technology introduces multiple changes as well as gives opportunities

Each of the digital giants has already stepped into one or more of new industries revolutionize Mobile Software Music Retail revolutionize Information procurement Navigation Travel planning transform invent Cloud Business Book market Music distribution redefining Logistics revolutionize Telecommunications change Social Business communication+communication Change world of Community banking Payment + methods challenging Media industry challenging Media industry challenging Taxi sector 20

Key trends and case studies Merging 1:1 Digitization Supply Power the Digital and Physical worlds individualization across the entire value chain chain becomes intelligent and borderless shift from producer to a fully-knowledgeable customer

Berliner Philharmoniker aims at advancing the Digital Concert Hall to transform classical music industry and reach 100 million visitors worldwide 22

Nike plus transforming their business model to a digital one sensors and mobile apps enhance customer experience and connect customers with their friends 23

AXA drive recorder serves as an airplane black box recording driving parameters in real-time to improve customer behavior and reduce risks and costs 24

Huggies introduces an organic and printable clip-on humidity sensor Sending parents a tweet when a diaper needs to be changed 25

Flexibility and 1:1 customization New level of production combining customer centricity & operational excellence Mass production 1970 Mass customization 1980 Personalized Products Product volume Industrial production 1913 Craft production 1880 Product Variety 27

Nike builds up completely customized shoes and other clothing with clients designing products for their personal needs and preferences 28

FC Bayern München benefiting from 1 bln social media contacts per month Personalized offers through Big Data, Social Media and CRM integration Social media presence (eff. 08.2014): Facebook likes: 19.6 mio Youtube: Twitter: Instagram: Google+: 206k subscribers, 34.7 mio views 1.42 Mio followers 957k followers 1.8 mio followers, 174.5 mio views 29

Marenco SwissHelicopter Made in Switzerland E2E visualization throughout entire (digital) enterprise 31

Spare parts production practices changes completely with 3D models and printing Such on demand production decreases shipment/logistics and machine maintenance costs 33

At Smart factories connectivity enables intelligent maintenance introducing new possibilities to machine-software-work piece communication (e.g. Villeroy & Boch) 34

Fidor bank leverages disruptive technologies to boost customer satisfaction providing easy access to special features like Social Lending, Social Trading, Crowdfunding and more Availability 24*7 Community advising Open platform for products Peer-to-peer / C2B lending Crowdfinancing available 36

The world changes profoundly and it s up to the companies to benefit the opportunities for their business models

Business model vs. Process/product innovation Business model innovators outperform traditional innovators TSR premium over industry peers, median performance (%) Process and product innovators 6.8 1.7 8.5 Business model innovators Product customization offered as a service Offering additional value to the customer and increasing the coverage of customer segments Transition from product to performance 3-year period TSR premium is defined as the percentage by which innovators average total shareholder return (TSR) exceed that of their industry peers. Sources: BusinessWeek/BCG Innovation Survey, 2008; BCG ValueScience analysis. 38

Innovation capability determines profitability Business model innovation helps to be at the high end of the value chain High end Value Chain ~ 40 % profit Low end Manufacturing of mobile devices ~ 2 % profit Copyright Business Transformation Academy 39

Swiss companies can leverage multiple opportunities and modernize there business models before it s too late High performing research and education system High degree of IT competence Short distances and close collaboration between suppliers and customers Qualified and highly motivated employees Innovation ecosystem, encouraging research and development activities as well as introducing new business models Market leadership in engineering and machinery Innovation potential for embedded systems and automation 40

What can happen if the company does not embrace the changes & benefit existing trends?

On different stages of business transformation Flexibility tends to decrease with increasing pressure Negative impacts not yet visible Sustained success Blockade of necessary transformation efforts Lack of awareness and knowledge Loss of customers Lack of stakeholder commitment Unclear operating results Lack of strategy Capital consumption, negative cash flow Lack of business success Lack of liquidity high Pro-active management Flexibility to react (time and options) Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 low 42

Transformation readiness and barriers negatively impact the companies ability to generate room for maneuver to realize transformation options Market barriers increasingly limit the options for transformation: for market entry for market exit: Processes have a great impact: Business processes today are often static or fragmented. Heterogeneous character of application landscape hard to manage in a system Employee and management barriers increasingly limit the ability to transform: Resistance to change often caused by a lack of information Management resistance Stage 0 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Flexibility to react (time and options) 43

Time to act!

Thank you Axel Uhl Head Business Transformation Academy E: a.uhl@sap.com M: +41 79 828 03 31

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