IoT Plus Big Data Analytics Translate into Better Services Management at Auckland Transport

Transcript of a discussion on the impact and experience of using Internet of Things technologies together with big data analysis in a regional public enterprise.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Dana Gardner: Hello, and welcome to the next edition of the HPE Discover business transformation series. I'm Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator for this ongoing discussion on IT innovation and how it’s making an impact on people’s lives.

Gardner

Our next top innovator case study discussion explores the impact and experience of using Internet of Things (IoT) technologies together with big data analysis to better control and manage a burgeoning transportation agency in New Zealand.

To hear more about how fast big data supports rapidly-evolving demand for different types of sensor outputs -- and massive information inputs -- please join me in welcoming our guest, Roger Jones, CTO for Auckland Transport in Auckland, New Zealand. Welcome, Roger.

Roger Jones: Thank you.

Gardner: Tell us about your organization, its scope, its size and what you're doing for the people in Auckland.

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Jones: Auckland Transport was formed five years ago -- we just celebrated our fifth birthday -- from an amalgamation of six regional councils. All the transport functions were merged along with the city functions, to form a super-city concept, of which transport was pulled out and set up as a council-controlled organization.

But it's a semi-government organization as well. So we get funded by the government and the ratepayer and then we get our income as well.

We have multiple stakeholders. We're run by a board, an independent board, as a commercial company.

We look after everything to do with transport in the city: All the roads, everything on the roads, light poles, rubbish bins, the maintenance of the roads and the footpaths and the grass bins, boarding lights, and public transport. We run and operate the ferries, buses and trains, and we also promote and manage cycling across the city, walking activities, commercial vehicle planning, how they operate across the ports and carry their cargoes, and also carpooling schemes.

Gardner: Well, that's a very large, broad set of services and activities. Of course a lot of people in IT are worried about keeping the trains running on time as an analogy, but you're literally doing that.

Real-time systems

Jones: Yeah. We have got a lot of real-time systems, and trains. We've just brought in a whole new electric train fleet. So all of the technology that goes with that has to be worked through. That's the real-time systems on the platforms, right through to how we put Wi-Fi on to those trains and get data off those trains.

Jones

So all of those trains have closed-circuit television (CCTV) cameras on them for safety. It's how you get all that information off and analyze it. There's about a terabyte of data that comes off all of those trains every month. It's a lot of data to go through and work out what you need to keep and what you don’t.

Gardner: Of course, you can't manage and organize things unless you can measure and keep track of them. In addition to that terabyte you talked about from the trains, what's the size of the data -- and not just data as we understand it, unstructured data, but content -- that you're dealing with across all these other activities?

Jones: Our traditional data warehouse is about three terabytes, in round numbers, and on the CCTV we take about eight petabytes of data a week, and that's what we're analyzing. That's from about 1,800 cameras that are out on the streets. They're in a variety of places, mostly on intersections, and they're doing a number of functions.

They're counting vehicles. Under the new role, what we want to do is count pedestrians and cyclists and have the cyclists activate the traffic lights. From a cycle-safety perspective, the new carbon fiber bikes don’t activate the magnetic loops in the roads. That's a bone of contention -- they can’t get the lights to change. We'll change all that using CCTV analytics and promote that.

But we'll also be able to count vehicles that turn right and where they go in the city through number plate recognition. By storing that, when a vehicle comes into the city, we would be able to see if they traveled through the city and their average length of stay.

What we're currently working on is putting in a new parking system, where we'll collect all the data about the occupancy of parking spaces and be able to work out, in real time, the probability of getting a car parked in a certain street, at a certain time. Then, we'll be able to make that available to the customer, and especially the tradesman, who need to be able to park to do their business.

Gardner: Very interesting. We've heard a lot about smart cities and bringing intelligence to bear on some of these problems and issues. It sounds like you're really doing that. In order for you to fulfill that mission, what was lacking in your IT infrastructure? What did you need to change, either in architecture or an ability to scale or adapt to these different types of inputs?

Merged councils

Jones: The key driver was, having merged five councils. We had five different CCTV systems, for instance, watched by people manually. If you think about 1,800 cameras being monitored by maybe three staff at a time, it’s very obvious that they can’t see actually what’s happening in real time, and most of the public safety events were being missed. The cameras were being used for reactive investigation rather than active management of a problem at this point in time.

That drove us into what do we were doing around CCTV, the analytics, and how we automate that and make it easy for operators to be presented with, in real-time, here is the situation you need to manage now, and be able to be proactive, and that was the key driver.

There’s a mix of technologies out there, lots and lots of technologies. One of the considerations was which partner we should go with.

When we looked at that and at all the other scenes that are around the city we asked how we put that all together, process it in real time, and be able to make it available again, both to ourselves, to the police, to the emergency services, and to other third-party application developers who can board their own applications using that data. It’s no value if it’s historic.

Gardner: So, a proverbial Tower of Babel. How did you solve this problem in order to bring those analytics to the people who can then make good use of it and in a time frame where it can be actionable?

Jones: We did a scan, as most IT shops would do, around what could and couldn’t be done. There’s a mix of technologies out there, lots and lots of technologies. One of the considerations was which partner we should go with. Which one was going to give us longevity of product and association, because you could buy a product today, and in the changing world of IT, it’s out of business, being bought out, or it’s changed in three years time. We needed a brand that was going to be in there for the long haul.

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Part of that was the brand, and there are multiple big brands out there. Did they have the breadth of the toolsets that we were looking for, both from a hardware perspective, managing the hardware, and the application perspective? That’s where we selected Hewlett Packard Enterprise (HPE), taking all of those factors into account.

Gardner: Tell us a bit about what you're doing with data. On the front end, you're using a high-speed approach, perhaps in a warehouse, you're using something that will scale and allow for analytics to take place more quickly. Tell us about the tiering and the network and what you've been able to do with that?

Jones: What we've done is taken a tiered approach. For instance, the analytics on the CCTV comes in and gets processed by the HPE IDOL engine. That strips most of it out. We integrate that into an incident management system, which is also running on the IDOL engine.

Then, we take the statistics and the pieces that we want to keep and we're storing that in HPE Vertica. The parking system will go into HPE Vertica because it’s near real-time processing of significant volumes.

The traditional data warehouse, which was a SQL data warehouse, it’s still very valid today, and it will be valid tomorrow. That’s where we're putting in a lot of the corporate information and tying a lot of the statistical information together so that we have all the historic information around real time, which was always in an old data warehouse.

Combining information

We tie that together with our financials. A lot of smaller changing datasets are held in that data warehouse. Then, we combine that information with the stuff in Vertica and the Microsoft Analytics Platform System (APS) appliances to get us an integrated reporting at the front end in real time.

We're making a lot of that information available through an API manager, so that whatever we do internally is just a service that we can pick up and reuse or make available to whoever we want to make it available to. It’s not all public, but some of it is to our partners and our stakeholders. It’s a platform that can manage that.

Gardner: You mentioned that APS appliance, a Microsoft and HPE collaboration. That’s to help you with that real-time streaming, high velocity, high volume data, and then you have your warehouse. Where are these being run? Do you have a private cloud? Do you have managed hosting, public cloud? Where are the workloads actually being supported?

Jones: The key workloads around the CCTV, the IDOL engine, and Vertica are all are running on HPE kit on our premises, but managed by HPE-Critical Watch. That’s an HPE, almost an end-to-end service, but it just happens to be on our facilities. The rest is again on our facilities.

So we have a huge performance increase. That means that by the time the operators come in, they have yesterday’s information and they can make the right business decisions.

The problem in New Zealand is that there aren't many private clouds that can be used by government agencies. We can’t offshore it because of latency issues and the cost of shipping data to and from the cloud from the ISPs, who know how to charge on international bandwidth.

Gardner: Now that you've put your large set of services together, what are some of the paybacks that you've been able to get? How do you get a return on investment (ROI), which must be pretty sizable to get this infrastructure in place? What are you able to bring back to the public service benefits by having this intelligence, by being able to react in real time?

Jones: There are two bits to this. The traditional data warehouse was bottle-necked. If you take, from an internal business perspective, the processing out of our integrated feed system, which was a batch-driven system, the processing window each night is around 4.5 hours. To process the batch file was just over that.

We were actually running into not getting the batch file processed until about 6 a.m. At that time, the service operators, the bus operators, the ferry operators have already started work for the day. So they weren’t getting yesterday’s information in time to analyze what to do today.

Using the Microsoft APS appliance we've cut that down, and that process now takes about two hours, end-to-end. So we have a huge performance increase. That means that by the time the operators come in, they have yesterday’s information and they can make the right business decisions.

Customer experience

On the public front, I'd put it back to the customer experience. If you go into a car park and have an incident with somebody in the car park, your expectation is that somebody would be monitoring that and somebody will come to your help. Under the old system that was not the case. It would be pure coincidence if that happened.

Under the new scenario, from a public perception, that will be alerted, something will happen, and someone will come to you. So the public safety is a huge step increased. That has no financial ROI directly for us. It has across the medical spectrum and the broader community spectrum, but for us as a transport agency, it has no true ROI, except for customer expectations and perceptions.

Gardner: Well, as taxpayers having expectations met, it's probably a very strong attribute for you. When we look at your architecture, it strikes me that this is probably something more people will be looking to do, because of this IoT trend, where more sensors are picking up more data. It’s data that’s coming in, maybe in the form of a video feed across many different domains or modes. It needs to be dealt with rapidly. What do you see from your experience that might benefit others as they consider how to deal with this IoT architectural challenge?

When you start streaming data in real-time at those volumes, it impacts your data networks. Suddenly your data networks become swamped, or potentially swamped, with large volumes of data.

Jones: We had some key learning from this. That’s a very good point. IoT is all about connecting in devices. When we went from the old CCTV systems to a new one, we didn’t actually understand that some of that data was being aggregated and lost forever at the front end, and what was being received at the back end was only a snippet.

When you start streaming data in real-time at those volumes, it impacts your data networks. Suddenly your data networks become swamped, or potentially swamped, with large volumes of data.

That then drove us to thinking about how to put that through a firewall, and the reality is you can’t. The firewalls aren’t built to handle that. We're running F5’s and we looked at that and they would not have run the volume of CCTV through that.

So then you start driving to other things about how you secure your data, how you secure the endpoints, and tools like looking down your networks so that you understand what’s connected or what’s changed at the connection end, what’s changing in the traffic patterns on your network, become essential to an organization like us, because there is no way we can secure all the endpoints.

Now, a set of traffic lights has a full data connection at the end. If someone opens a cabinet and plugs in a PC, how do you know that they have done that, and that’s what we have got to protect against. The only way to do that is to know that something abnormal is there. It’s not the normal traffic coming from that area of the network, and then we're flagging it and blocking it off. That’s where we are hitting because that’s the only way we can see the IoT working from a security perspective.

Gardner: Now Roger, when you put this amount of data to work, when you've solved some of those networking issues and you have this growing database and historical record of what takes place, that can also be very valuable. Do you expect that you'll be analyzing this data over historical time periods, looking for trends and applying that to feedback loops where you can refine and find productivity benefits? How does this grow over time in value for you as a public-service organization?

Integrated system

Jones: The first real payback for us has been the integrated ticketing system. We run a tag on-tag off electronic system. For the first time, we understand where people are traveling to and from, the times of day they're traveling, and to a certain extent, the demographics of those travelers. We know if they're a child, a pensioner, a student, or just a normal adult type user.

For the first time, we're actually understanding, not only just where people get on, but where they get off and the time. We can now start to tailor our messaging, especially for transport. For instance, if we have a special event, a rugby game or a pop concert, which may only be of interest to a certain segment of the population, we know where to put our advertising or our messaging about the transport options for that. We can now tailor that to the stops where people are there at the right time of day.

We could never do that before, but from a planning perspective, we now have a view of who travels across town, who travels in and out of the city, how often, how many times a day.

We could never do that before, but from a planning perspective, we now have a view of who travels across town, who travels in and out of the city, how often, how many times a day. We've never ever had that. The planners have never had that. When we get the parking information coming in about the parking occupancy, that’s a new set of data that we have never had.

This is very much about the planners having reliable information. And if we go through the license plate reading, we'll be able to see where trucks come into the city and where they go through.

One of our big issues at the moment is that we have got a link route that goes into the port for the trucks. It's a motorway. How many of the trucks use that versus how many trucks take the shortcut straight through the middle of the city? We don’t know that, and we can do ad-hoc surveys, but we'll hit that in real time constantly, forever, and the planners can then use that when they are planning the heavy transport options.

Gardner: I’m afraid we will have to leave it there. We have been learning about how big data, modern networks, and a tiered architectural approach has helped a transportation agency in New Zealand improve its public safety, its reaction to traffic and other congestion issues, and also set in place a historic record to help it improve its overall transportation capabilities.

So I'd like to thank our guest, Roger Jones, CTO for Auckland Transport in Auckland, New Zealand. Thank you, Roger.

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Jones: Thanks very much.

Gardner: And thank you, too, to our audience for joining us for this Hewlett Packard Enterprise transformation and innovation interview. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host for this ongoing series of HPE-sponsored discussions. Thanks again for listening, and come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: Hewlett Packard Enterprise.

Transcript of a discussion on the impact and experience of using Internet of Things technologies together with big data analysis in a regional public enterprise. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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Building a Modern Marketing Organization in a Multi-Channel World

Transcript of a discussion on how social media and business networks have taken the lead in shaping perceptions about brands, products, and companies.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Gardner

Our next innovation thought leadership discussion focuses on building a modern marketing organization. Marketing today is a different game. Today’s buyers are more connected and informed than ever, and that’s creating major upheaval in the way companies promote their brands.

Social media and business networks have taken the lead in shaping perceptions about brands, products, and companies -- and savvy businesses are embracing these new channels and technologies both to increase their brand awareness and to drive sales.

We’re here with two experts to talk about these changes and how they are shaping the future of marketing. To learn more, please join me in welcoming Alicia Tillman, Chief Marketing Officer at SAP Ariba. Welcome, Alicia.

Alicia Tillman: Thank you so much, Dana, very happy to be here.

Gardner: We are also here with Pete Krainik, Founder and CEO of The CMO Club. Welcome, Pete.

Pete Krainik: Thanks, Dana and Alicia, good to reconnect again.

Tillman: Yes, of course, you, too.

Gardner: Let’s begin our conversation at a fairly high level. What are the trends, the competitive pressures, and the technology changes that are prompting companies to have to seek new and better ways to market themselves, Alicia?

Tillman: There are two things, Dana. First, when we think about trends or even new ways to market in particular, we're faced with the fact that social media, and networks have taken the lead in shaping perceptions about brands, products, and companies.

Tillman

On one hand, there’s no shortage of information, and that’s a good thing. But on the other hand, it’s really causing companies to get out ahead of that as quickly as possible, because the reality is that today’s buyers aren't struggling to find information. And so many buying decisions are made about companies and products before any interaction with a member of the sales team.

Companies are recognizing that all of the channels in the social media space that companies are going after to find information is key. Making sure that marketers are driving information in a consistent manner across these channels will aid in feeling as though your company’s value proposition and brand are being embraced and accepted in the ways that you want them to.

My second point is in terms of the competitive pressure. All companies are mostly trying to compete on a product, a piece of technology, in a lot of ways, and oftentimes your competitors are saying they already have or are about to innovate on the same thing. So companies need to force themselves to innovate beyond products. There are a lot of opportunities, in particular, thinking about how you differentiate on things such as thought leadership or standing for a particular cause.

How do you take a product and how do you use it to benefit the world in terms of driving higher good in some way? So between social media and networks, embracing those channels and then separately thinking about how you differentiate beyond just the basics of products are certainly the opportunities that companies are faced with today.

Social media

Gardner: Pete, with social media, we're more exposed than ever. People can point at whatever they see about brands or companies. How is this trend shaping the new marketing and competition?

Krainik: I think Alicia is spot-on. I host dinners with chief marketing officers (CMOs), and I'm chatting behind doors on these issues around the new competitive landscape. If you look at the pressures faced by CMOs, you still have the same process or the same thought -- I need to sell more products, I need to differentiate myself, I need to get leads, I need to close, I need to build the brand. Those things and concepts haven’t changed, but you have a whole new wave of extremely agile competitors now, like Uber, like Airbnb.

Krainik

How is the cloud impacting that? You have the new players that you never had to deal with before. You have new media channels, new influencers. In the past, media mostly meant working on press releases. But the whole world has changed. You talked about it, and Alicia again talked about social.

And then, this whole issue of speed of change and how to keep up with it is interesting. How do I, as an organization, keep up with all the changes?

Marketing is completely different than it was five or 10 years ago. There are just too many choices, too much noise, too much outbound. CMOs are getting hundreds of emails a day from someone selling some product and they're not even looking at it. Those kinds of pressures are building, as Alicia said, and taking the competition to the next level. Those things are top of mind right now for CMOs.

Gardner: Alicia, in this environment of disruption, of fast-paced change, of so much noise and information, you recently completed a significant update of the Ariba brand, and you’ve launched a new name and logo. Why did you do that at this time and how did you go about that differently than you would have done 5 or 10 years ago?

Tillman: Ariba was founded some 18 years ago, and at the time, the company had set out on a mission to build a single solution to help companies manage their spend. If we reflect on the past 18 years, you see all the ways in which our business has evolved, in which buyer needs and the economies have evolved, and how our business has worked to evolve and be ahead of that. Today, Ariba is the world’s largest marketplace for all business-to-business (B2B) transactions.

We have two million companies and $1 trillion in commerce that run through the Ariba Network. When we think about some of the significant change that has happened notably in the past four years, number one, we were acquired by SAP. SAP is a global leader in enterprise application software. It has an incredible brand, and is an incredibly sound and operationally and financially stable company known throughout the world. It’s really important to us to take that brand reputation into our identities.

First, we've added the SAP name to our brands, now calling ourselves SAP Ariba. And secondly, the logo, the mark, or the bug as some people like to call it, that fits alongside the company name is equally important. The visual representation of our brand needs to well support the business we're in and the value proposition we offer.

Pete said it really well. When we think about the marketplace that we're in today, there are new competitors, new influencers, and so many choices that we have an obligation as marketers to help buyers clear through the clutter, understand where the differentiation exists within companies, and associate themselves with a company that is most relevant to their needs.

Showcasing customers

So, we evolved our logo and made it into a mark that really showcases our customers, which are both buyers and sellers. Within our logo there's a connection there that’s reflected to support how Ariba brings those two buying populations together.

In addition to that, we've worked to adapt a new tone in our messaging. Messaging got simple and clear to piece point about all the choices that exist. You’ve got to focus on a simple and clear message, and one that is very understood and very relevant for your customers.

Gardner: Pete touched on this issue of so much information available, and research confirms that consumers are looking at multiple channels when they make a purchase. They have much more of an ability to do research and to get social commentary. I myself find, in my own buying, that I'm ready to push the button to buy something, but then I'll glance at the comments or some of the recommendations, and actually back away. So this is really a big deal.

So how do we, as marketers, think about different ways to accommodate these new behaviors by buyers, and how do we then provide information to them as sellers to help them along the way?

Krainik: One thing some of the top CMOs or top brands are doing is moving away from a campaign-focus to 360-degree coverage. I was a CMO before I started The CMO Club, and the profession has moved beyond kind of the "blah, blah, blah" to true focus. There’s the ability to make sure that the content is relevant, that the stories are there, that you’ve identified the advocates, and people underestimate the value of that.

Everybody is driven by mobile now. It's truly a mobile workforce. We're always doing everything on mobile.

You talked a minute ago about how you check on social media or with people you know or respect, and they say, "This product is good, this product isn’t, or I had a great experience here." How do you spend the time making sure you know who those advocates are, who the influencers are, how to engage employees, and really focusing on getting to that. It’s such an important thing that I think people don’t think about as much.

Another piece that there’s not enough focus on: Everybody is driven by mobile now. It's truly a mobile workforce. We're always doing everything on mobile. So making sure when we talk about multichannel and we talk about going where the customers are, we need to be sure it’s in the format they want as well. We want them saying that we have this great website, this great digital space. If you’re not going to mobile, then you’re missing the boat.

Gardner: Alicia, anything to offer on ways marketers need to do things differently to accommodate these new buyer behaviors?

Tillman: I think a lot about the power of consistency and how marketers need to have their finger on the pulse of the channels that their customers are getting information from. Pete’s organization, The CMO Club, hosted a fantastic CMO roundtable a couple of weeks ago where the topic was how to stay ahead of the digital transformation, and how marketers are embracing digital transformation.

One of the questions was how much of our budget is dedicated to a digital platform to support our marketing? Certainly, the percentages were quite high, but we also found that there is still budget being invested in your more traditional channels, including things like print and events. Events in particular, because of the face-to-face communication that occurs and how business is still done over a handshake, and we can’t underestimate that.

Strong balance

Striking a strong balance between your digital marketing channels as well as your traditional marketing channels is key. Keeping the message consistent in how we market between those channels is also quite key, and then understanding the various buyer personas that you speak with. If you’re creating a digital campaign for the CIO audience, the messages are going to be different from how you would market to a chief financial officer (CFO) audience.

As an example, and it’s really important, back to an earlier point I made around relevancy, you’ve got to stay consistent, but you also have to make sure you’re being relevant, and then taking into account a strong balance between the new digital channels that exists, but also not underestimating the power that still remains with some of our more traditional channels.

Krainik: Alicia, I think you're spot-on. I loved the comment about staying true and consistency, and you’ve demonstrated that with what you’ve done. I know you talked about what we actually see in the market. It’s the importance of creating the brand story and being consistent to that story.

It’s more important now than ever, because then you can get your employees, your advocates, and all your stakeholders supporting that brand story, regardless of the channel. Brand consistency is more important now than the actual advertising campaigns. You’ve done a great job and I think you're spot-on with that. It makes the multichannel execution easier, if you’ve got that nailed, as opposed to chasing it campaign to campaign.

Brand consistency is more important now than the actual advertising campaigns.

Tillman: Yeah, absolutely.

Gardner: Well, Alicia, at this point, where we have these challenges, we're also facing some great new tools in the marketplace, ways to get more information, get customization, use big data, and leverage cloud models to extend our reach, but also to gather more information in better ways. Tell me what you think some of the strong tools are, and I am going to imagine that the SAP Hybris marketing suite is among them.

Tillman: I'd start by ensuring that you have a strong marketing automation platform. It's becoming commonplace in most marketing organizations, large or small, for the past five years or so and it’s certainly growing in size in terms of marketing organizations that are raising the technology.

Essentially, this technology allows you to automate the lead generation process to help you manage campaigns in an automated way, help you nurture the leads that are coming through your demand waterfall in an automated way. The leads that you’re handing off to sales are more qualified than they ever had been before.

You have such an extreme ability to nurture these leads using digital campaigns in these automated ways. That’s my first recommendation: you need to pursue marketing automation technology.

The other thing that exists within these technologies is not just an ability to help you manage your campaigns and manage the nurture strategies within them, but it’s also the data that these technologies provide.

As you integrate them with your company's sales customer-relationship-management (CRM) system, it gives you really unprecedented abilities to show where the demand is being created, and how you can most effectively demonstrate the support of marketing to the ultimate growth of the pipeline, and then of course, to the growth of the business.

Focus on measurement

So it is a must-have that you focus on that in particular. That’s the leading place that I would start. Then, there's all of that getting into the analytics. Every marketer should always be focused on measurement. Measurement is the sole thing that has enabled me to grow my team, whether that be headcount or investment.

When you're not sitting across the table from your CEO or my president talking in terms of numbers and data that are showing the true impact as marketing’s existence on the companies thought of mind, you’re essentially not having a conversation, and you will not have an ability to grow your team. So I highly advise that you look at strong marketing automation and data and analytical structure to enable you to help support your programs.

Gardner: What’s super powerful these days about the data is that we're not only gaining a 360-degree view of customers, but we're able to react in near real time, and then target them with precise customization. How are those tools being used, from your vantage point, that sort of feedback loop and an instant ability to know what a customer is doing, learn inference, compare that to other datasets and then offer something back to them, which really should engage them?

Data is what needs to be at the backbone of your operations within the marketing organization, because it really informs everything.

Tillman: Obviously, being part of SAP, I could spend all day talking about the advanced analytical tools that exist, and having the sort of in-memory computing technologies like S/4HANA, which is the backbone of SAP. These tools have the power to look at large datasets quickly. There are many cloud sales applications that work to provide customer information that marketers need in a central location, it’s available at a glance, and it’s delivered in context that’s truly most important for marketers.

There’s so much flexibility in the cloud. Companies can pull together information in real time or live, as we like to say here at SAP, pulling from so many sources. Data is what needs to be at the backbone of your operations within the marketing organization, because it really informs everything from where you can innovate and where campaigns are having the most success, to what that next big thing is going to be to help propel the company forward. And that’s a big part of what’s the core of a marketing organization.

Gardner: Pete, any additional thoughts about what you’re hearing from your CMO audience about use of these data tools?

Krainik: I’ve seen a shift among CMOs in the last year to two years on how they approach data tools. They used to approach it by looking at the tools currently available and choosing one that catches their eye. Now, there are a number of really bright CMOs out there who are actually taking the approach of assuming that they have total visibility, total velocity, and can get total value at their fingertips from a design perspective, whether it’s for demand and lead generation or a campaign. So they start with that assumption, then they design what that ideal tool would be. And then they evaluate the tools’ capabilities and processes.

By the way, what’s equally is important, I found out talking to CMOs is that you can have the great tools, but if you don’t have the right team and expertise to run it, post implementation, it can cause a problem. That’s an interesting approach. If you could have any piece of information what would like to begin with, what would you like to have to know about your customers? It just opens up some interesting ideas to really stretch the envelope versus force fitting, and I am sure, Alicia, you are seeing that too with some of your customers.

Tillman: Absolutely.

Gardner: Alicia, looking to the future, what do you see as some of the greatest challenges that marketers are facing? I'm thinking the perhaps the user experience is going to become more important over time, but how do you see that?

New opportunities

Tillman: There are a couple of things. The war to differentiate and to bring new opportunities, new leads, into the business is always going to be a reality for marketers. They're always going to need to have a very clear brand, a very simple message, and one that’s differentiated and relevant.

So focusing on your brand story and ensuring that that brand story is consistent across all of the buying and marketing channels, and is relevant and is compelling is always going to be a reality for marketers, because your brand drives the growth of your business’s bottom line. It’s what fuels your pipeline; it’s what fuels the sale of your product; it's what enables you to tell your story around differentiation. So, there always needs to be a clear focus there.

The other thing too, and I had mentioned this in one of my opening comments, is around this notion of differentiation and thinking beyond products in ways in which you can differentiate yourself. As an example, I work in a B2B space, but think about some of the best consumer brands in the world, and those that we support in our personal lives.

Often, I like to reflect on the brands that I support in my personal life, and when I think about what the similarities are between those brands and why I am so loyal to them, not only are their products best in class, but they’ve actually put their products to use beyond what the day-to-day objective is.

If you think of a brand like Tom’s or Starbucks, they have filled brand promises around where they source their materials, where they donate portions of their revenue. And when we think about the millennial population as one, but any buyer, there is a much greater desire for them to partner with organizations that stand for something versus ones that don’t. B2B organizations, in particular, have a tremendous opportunity to think beyond the level in which they’re competing with day after day, and think about what is that higher good.

It’s really how we're taking our value proposition and using it to create higher good in the world around things that people care about and really mater at the end of the day. That’s the real opportunity for marketers.

When we talk about visions, vision statements should be operational, and it’s really how we're taking our value proposition and using it to create higher good in the world around things that people care about and really mater at the end of the day. That’s the real opportunity for marketers.

Gardner: Pete, what advice would you offer the CMOs as they think to overcome these challenges in order to reach this vision of a brand-driven and customer-centric world?

Krainik: The two most important things are, first, that I would put my energies around making sure that I have a marketing organization that has the new marketing skills and new technical skills needed for success. Number one, get the best and the brightest.

The other thing, in addition to the differentiation that was discussed, is this whole issue of ecosystem of innovation: creating an ecosystem, understanding how I am going to look to the outside to bring in new ideas, new startup capabilities, new energy. Those are the two essentials for success. If you don’t do those, I think people are going to be in trouble long term.

Gardner: I'm afraid we will have to leave it there. You’ve been listening to a BriefingsDirect podcast discussion focused on how to build a modern marketing organization. We’ve heard how social media and business networks have taken the lead in shaping perceptions about brands, products, and companies. And we have learned how savvy companies are embracing these new channels and technologies to increase their brand awareness and drive sales.

So, please join me now in thanking our guests, Alicia Tillman, Chief Marketing Officer at SAP Ariba, and Pete Krainik, Founder and CEO of The CMO Club.

And a big thank you too to our audience as well for joining this SAP Ariba-sponsored business innovation and thought leadership discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba

Transcript of a discussion on how social media and business networks have taken the lead in shaping perceptions about brands, products, and companies. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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Cloud, Competition and the Rise of Business Networks

Transcript of a discussion on the emergence of business networks and how that requires new models of competition and cooperation.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Dana Gardner: Hi, this is Dana Gardner, Principal Analyst at Interarbor Solutions, and you’re listening to BriefingsDirect.

Gardner

Our next innovation thought leadership discussion focuses on the rise of business networks and how that requires new models of doing business and new ways of relating to customers and partners.

Quite rapidly, we've entered a business world where unprecedented connectedness leads to instant analysis. These insights across entire industries provide powerful new ways for businesses to innovate and to adapt to markets, supply chains, and customer demands.

All things being equal, the companies that best leverage this data-driven innovation and these business network effects will surely win in their markets. We’re here today with two experts to discuss the future of enterprise software and the role that business networks will play in creating new models for sustained success.

To learn more about doing business best in our digital and connected world, please join me in welcoming Alex Atzberger, President of SAP Ariba. Welcome, Alex.

Alex Atzberger: Thank you, Dana. Thank you for having me.

Gardner: And we are also here with Christian Lanng, CEO and Co-Founder of Tradeshift. Welcome, Christian.

Christian Lanng: Welcome, Dana, it’s great to be here, and also with Alex.

Gardner: We've had this ongoing confluence of cloud, mobile, big data and we’re seeing streamlined business processes happen as a result of these -- and it seems to be accelerating and empowering business-network effects. So, my first question to you, Christian, is how is this disrupting businesses and how do they turn that disruption into a benefit and business agility?

Lanng: As you mentioned initially, the confluence of cloud, mobile -- all of these things -- is happening and it’s a massive disruption for the Fortune 500. We’ve never really seen anything on this scale, but I want to point out two key areas. If you go back 10 or 15 years, what you were doing with your supply chain was very batch-driven. It was very large-scale business, and was all about reducing the cost of transactions. We saw the rise of business BPOs where you did a lot of outsourcing of your processes, a lot of outsourcing of transactions.

And it was all about a cost-steady supply chain. If you look at today, the main paradigm has switched completely. What you will see is that it’s all about agility. It’s all about the speed of data. We find that a lot of the solutions we implemented in the '90s and the early 2000s tended to focus on reducing cost, and that very often came with the flip side of increasing the cost of change, because we put everything into very rigid process and very rigid structures.

Full supply chain

One of the things that business networks are transforming right now -- both on Alex’s side of the table and our side of the table -- is that we're now wiring the full supply chain. We're connecting all of the processes and bringing in all of the data in real time. That’s an extremely fundamental switch from a world where everything used to be faxed via paper, up until, actually, quite recently.

It’s a tremendous disruption, probably the biggest we’ve see in business software in the last 30 years, and it’s very exciting to be here, because we're just at the very tip of the iceberg for this whole revolution.

Gardner: Alex, disruption can be a negative, but disruption could also be something that creates opportunity. How are you seeing the current market as an opportunity rather than destruction?

Atzberger: All customers are realizing that digitization, the confluence of the different trends that were spoken about, present absolute opportunities to change the business model of companies. And that if they don’t do it, they will die.

Atzberger

If you look at the Fortune 500, versus what it was 20 years ago, you see such an enormous change. It doesn’t matter which of the industries you're in -- retail, financial services, consumer products. You need to adopt a strategy of thinking about how can you use digital technologies for your benefit, because if you don’t, you will fall behind.

But the other fundamental thing that has changed, and it’s actually an opportunity for companies, is that the user has moved to the center of the conversation. So the aspects of the consumer technology that we are bringing into the business context have fundamentally changed people’s requirements on technology.

But it's also people’s adoption rates of technology. The reason why companies like SAP Ariba or Tradeshift are growing and seeing a lot of demand for our solutions is because we see that companies are embracing the change. They know embracing is the only way forward.

Gardner: And of course, we've seen the disruption on the business-to-consumer (B2C) side of things with eBay years ago, Uber now, and Airbnb changing industries rapidly. How does this affect the business-to-business (B2B) interactions of commerce? Is it the same, or do we just extend what we've seen in B2C, to B2B? Why would B2B commerce be different or more challenging?

Lanng: It’s absolutely impacting. I'll start with a point that Alex made that the consumer, the user, has moved to the center of the conversation. It’s about usability, ease of use. If you take something like Tradeshift, we focused very early on making everything mobile first because we realized that the future of B2B processes were all mobile.

If you take a country like China, there’s 97 percent smartphone penetration and 60 percent PC penetration. If you want to run your supply chain there, you want to be mobile-enabled, you want to be mobile-centric, and you want to create whole new user experiences. The other area where the consumerization of B2B is happening and increasing is what I call apps.

Easy to add apps

In the past, big enterprise systems used the concept of modules. You could load new functionality, but it was very hard to do. It required your IT department. It was very complex and challenging. Today (and Salesforce was really the pioneer), we have platforms like Tradeshift that make it very easy to add a new app to get a new set of functionality going really, really quickly. And it’s easy for the customers to change very quickly and adapt to the business environment.

Lanng

The last area of active consumerization hitting the enterprise is on insights. When I use Twitter or Airbnb, I get real-time feedback. If I send a tweet, I will immediately know the reach, how many users saw the tweet. I can go in and see that limits of the tweet, and I can make a decision, as a consumer, based on that feedback loop.

In the enterprise, in the past, a lot of the business intelligence and analytics we built, were more like centralized reports going to the top and not benefiting the people who were sitting in the front line doing the work of the business.

Where we're going today is rebuilding using network data, using the real-time data, and going to a real-time level with these people. That’s the last huge disruption you'll see in the enterprise: real-time insights, the use of the apps as a driver and a method for delivering new folks. Now, you'll see another whole new paradigm for user experience and user friendliness.

Gardner: And, Alex, for companies that have a hard time adapting rapidly -- that are still using legacy software, that prefer on-premises deployments, that are just now moving past paper-based processes -- how do we encourage them to recognize the change and adapt?

Atzberger: One expression I tend to use with companies is to say that solutions need to be consumer-simple, as well as strong. What I mean by that is that when you're in the B2B space, you need to obviously recognize that the requirements for security, the requirements for integration, the requirements between data and other pieces have a different level of complexity than when you use eBay or Twitter.

The role of technology companies today is to remove friction as much as possible for companies so that they can enjoy the same benefits as a user in the consumer would. At the same time, providers have to obviously ensure that there is a business strength to the solutions that gives companies the comfort to move to a cloud environment.

The role of technology companies today is to remove friction as much as possible for companies so that they can enjoy the same benefits as a user in the consumer would.

So if you're a financial services institution and you've worked on on-premise software all the time, you obviously had full control of making changes to the software. You knew the way it was running, etc. As you're moving this to the cloud, you're gaining the benefits of fast innovation, but you can’t give up on the necessity for security, for instance, and for sound information.

That’s often where we see customers choosing companies like SAP to go with because of the experience we have managing data, ensuring the integrity of the information, and ensuring that security. But a lot of conversations that we have with companies are about how you, on one hand, deliver that wonderful consumer simplicity, but at the same time deliver on the business strength.

This is especially relevant in procurement, because you can make it so easy, through an app, to order products. But if you're in procurement, you don’t want your employees to just buy things randomly -- just because it’s now easy to do it. You want to have the controls and compliance in place to manage your spend, have visibility on the spend, and manage your company.

That’s where the crux of the matter is, and if we solve this, I think customers are ready to move to the cloud.

The right balance

Gardner: Christian, it sounds as if Alex is calling for a balance between the governance and benefits of traditional software and business applications, while also exploiting the newer agility from mobile, from feedback loops, from the consumer-centricity. It’s almost as if we have two companies within one now. How are you seeing that balance and how do you help companies achieve the right balance?

Lanng: It’s quite natural, and Alex and I also can probably recognize that we come from both sides of the equation here. Alex is trying to transform what traditionally has been an on-premise company and going toward the cloud. I come from a cloud-first company, and I'm trying to break into some of these complex use cases. Alex is spot on; security is still a massive issue especially with the data we deal with here.

So, it's about finding that balance. It’s also why we can’t use the consumer apps, since consumer apps need to have security models, and we need to have a lot of things. But this stuff is also getting very robust. You saw some recent breaches last year. There was the Sony story with all of the emails that were leaked. That was an on-premise system that was penetrated. I'm quite sure if that has been a cloud-based provider like Google or Microsoft, that penetration would have never happened.

We have to question ourselves that, in a trade environment like today, can each individual enterprise actually uphold the security that’s required? Are we seeing that cloud companies like mine or Alex’s, in a way, become specialists in securing all domains and securing the data within that domain?

Alex is trying to transform what traditionally has been an on-premise company and going towards the cloud. I come from a cloud-first company and I'm trying to break into some of these complex use cases.

Also, when we talk about this balance, when we talk about compliance for instance, there are two paradigms. You can have control and compliance upfront, but obviously you limit adoption and thereby limit impact on the business-case side.

Another thing, as Alex says, is that we can’t just have people going in and randomly buying everything. Can we guide them better? Can we give them real-time data to show them the consequences of what they could do instead, rather than put up a wall as the first step? That’s where there’s a lot of innovation happening right now, and a lot of thinking.

Gardner: Let’s revisit this notion of business networks. It seems to me also that, as we move toward cloud models, as we look to systems of record as services, the data becomes more transferable, shareable, and manageable, not siloed or isolated.

It seems to me that the more data and access to process information you have, the more of an advantage we have by being able to actually analyze these things in context and in total, rather than isolated as in the past.

So, how do we as suppliers to enterprises help them recognize the benefit of combined network efficiencies -- of looking to a provider to actually help them integrate and understand all of the data that’s at their disposal? Let’s start with Alex. How do we help make business networks palatable to organizations and trust the vendor to do more when it comes to bringing these sources of information together?

Exciting topics

Atzberger: This is an exciting topic, because if you look at it, obviously networks have a network effect. This means that, as more people are connected to a network, the more valuable the network overall becomes to its participants That’s something that we see very much in the Ariba business model.

Today, we have 2 million companies connected to the Ariba Network. When I go into certain markets, and we talk to certain customers about their supplier base, it makes a difference when 50 percent, 70 percent, 80 percent of those suppliers are already connected to the platform.

If you step back and think about point-to-point connections like EDI that existed in the past to create connections between companies, now you suddenly have a network where you have the baseline to add additional services to a network to actually enrich the experience for everyone who actually participates in the network.

At the same time, the data needs to be secure and companies need to feel they actually do business with other trusted entities.

It’s very, very important to understand that from our perspective. When we talk about procurement, I also look at the supplier as a customer. So there’s value on both sides. When we talk, for instance, about mobile apps, the mobile apps don’t just exist on the buyer side; they also exist on the supplier side -- and that’s a very, very important part of this.

As you bring in new services, payments, supply chain information, and forecast information into the network, these are some of the most rapidly adopted solutions that we see, because people already have the network in place and can now do more with it. It’s very similar to social networks that started pretty much with the status update, and today, you can share more and more of your lives and do more and more things on a network. That’s the power of it.

At the same time, the data needs to be secure and companies need to feel they actually do business with other trusted entities. This brings in the whole topic of supplier risk, of having transparency, into who the suppliers actually are that you do business with, but also identifying new sources of supply. That becomes very powerful, and then underneath, everything is the actual data that sits there. Opening up that information in the platform for companies to analyze and benchmark themselves is extremely powerful.

I often talk about the application, the network, and then the data-play as the three dimensions that company should be thinking about as they embrace business networks strategy.

Gardner: A whole greater than the sum of the parts. How do you see organizations take advantage of it?

Multi-Enterprise Grid

Lanng: First off, this is one of the areas where Alex and I wholeheartedly agree. When Gartner came out with the new hot topic for Procure-to-Payment, one area that they pointed out was a whole new category called Multi-Enterprise Grid, and that’s of course, a mouthful to swallow, but what they really said was that the future for enterprise connectivity is something brand new.

It’s not the business networks in the sense that we know them today, it’s not the EDI networks, but it’s something where information can flow in all directions. It’s a full stack of information, not just transactional data, but also, as Alex talked about, real-time insights, analytics data, logistics data, collaboration, and so on.

There were only two providers mentioned in that category, which is rated by Gartner to be one of the most impactful over the next five to 10 years. And the two providers were Tradeshift and SAP Ariba. As a company a third of the age of Ariba, we were proud to be in that category. But I think it shows the focus that both of these companies have in this area.

The long tail of the supply chain will become increasingly important for networks as we move forward.

One thing we did well, and I also think it points to the future of this, is that we started out as a supplier network. Before we built any buyer functionality, we actually designed a completely functional supplier network, and we helped suppliers join for free, get access, and run all of these services. Then, we slowly built out our enterprise portfolio. And that meant that from the beginning, Tradeshift has always been network-first.

Every single feature we built on the enterprise, every single aspect of our platform, we designed with this idea of how we would utilize the network, how we would bring collaboration into it, how our partners and app partners would use these things. To the point of the openness, Tradeshift was born with a completely open set of APIs so that anybody can develop on the platform and put out applications.

The long tail of the supply chain will become increasingly important for networks as we move forward, because as we're moving into much more complex transactions and move into much more complex data, we will need to connect every single supplier. If you take something like risk – as one of the examples that Alex mentioned – you are as exposed to the tiny, tiny supplier as you are to the big North American supplier you’ve been doing business with for 10 years, maybe even more.

If you ask me what the future of networks, I think it will be three things. It will be connect everyone, rather than to connect the top 10 percent. It will be a Multi-Enterprise Grid, which means it’s moving in all directions and data are connected in all directions both from the supplier side and from the buyer side. Finally, it will be open, but to echo Alex, open but secure. People will be able to build and innovate on top of these platforms, but within a secured framework and secured context.

Gardner: Alex, SAP has been around for quite some time, and conventional wisdom nowadays is that if you're a legacy provider you're somehow at a disadvantage in the cloud environment. Yet SAP recently reported very strong growth, and I think this validates a somewhat different approach or a different perception of a legacy vendor. Tell us why you think SAP is growing while other vendors are struggling?

Technology cycles

Atzberger: Dana, if you look at it as a company that has been in business for 42 years, we know one or two things about going through different technology cycles. Each technology cycle requires you to transform your company. What SAP did right in this transformation is that it acquired businesses to move the business forward, and a significant investment in outside R and D basically by bringing in capabilities into SAP.

But then, when the companies got acquired, each company is actually managed as an entrepreneurial entity inside the business. For me, that’s a very important. I belong to a family where my father had his own business. I believe that it’s really important that companies focus on innovation and actually have a capability to have an entrepreneurial mindset, and a commerce mindset inside a business.

I respect companies like Tradeshift and other companies that are emerging very much because of that commerce mindset of those businesses. The power is the scale at which you can impact change at a company like SAP, and that’s where actually so much of the transformational capabilities are coming from.

With 250,000 customers on the SAP side touching 70 percent of the world’s transactions, imagine what type of base this gives to Ariba, which today now facilities $1 trillion worth of commerce, to expand and build on it, and all the technical capabilities that come with it.

As a company that has been in business for 42 years, we know one or two things about going through different technology cycles. Each technology cycle requires you to transform your company.

I always like to say that I want SAP Ariba to be the fastest growing startup inside a large company. And how do we do this? It’s by both focusing on that innovative mindset of a startup company and combining it with all the assets that come from a larger company. That’s a very valuable proposition both for the customer as well as for having passionate employees to actually deliver the best results.

Gardner: Christian, there’s also conventional wisdom that says if you're an agile newcomer that you can run circles around the incumbent companies. How does that work for you, and how do you see that playing out?

Lanng: I want to start by saying that we're the challenger to SAP Ariba in this market. It obviously has its advantages. But I also want to say that Ariba is obviously one of the competitors that we respect the most. Alex has been doing an excellent job also of really integrating a company like Ariba, which is 20 years old.

You have to remember, moving from a whole new stack and a whole new sort of solution also has its advantages. Sure, we're a challenger, but we're not that new anymore. We actually have 500,000 companies on our network. We have total global coverage. We have some of the largest companies in the world also on our customer list, but obviously not as big as SAP.

But it’s true that we can probably move a little faster and innovate a little faster, and maybe also sometimes tease Alex and friends on social media a little faster. But I think we’ve done it with a lot of respect, and I definitely see that’s the place for us as a competitor and challenger in this market. It’s a very healthy competition, because we're both striving to really do better for our customers.

Attracting innovators

One thing as a challenger is that we've also been attracting a lot of innovators within this industry. Other players have focused much more on companies where Ariba was today and not really innovating. I think that’s the wrong way to think about what you want to do.

We always came with being-first principles. We wanted to build something different. We've done that within procurement. We've done that within our risk offering, within our network. It’s very, very different. Also, there is a choice in the market and that’s actually really healthy. We're also tracking customers that like that innovation, and are thinking of new ways for supply chains.

At the end of the day, my biggest integration partner is still SAP. I don’t know if you want to talk about friendly competition here, but it’s certainly a market that has multiple angles.

Atzberger: If I can make one more comment on that, it’s also important to understand that often times for customers, it’s important to see that a trend, a movement gets validated by multiple companies. When the cloud came about some of the innovators, Salesforce for instance, had become absolutely mainstream. All companies have different sorts of cloud offerings, and that's good to hear.

It’s also important to understand that often times for customers, it’s important to see that a trend, a movement gets validated by multiple companies.

That’s actually important because companies know that when they invest in something, it’s actually a concept. That’s why you're talking to two innovators in this space and that gives more companies confidence to invest in something new and to say, "We want to go on this journey. I think this is good that you're taking this topic on this call today, because I do think it’s a massive trend of going forward."

Gardner: I am a big fan of showing and not just telling and doing that through a use-case or a customer example. So, Christian, I wonder if you could relate to us, maybe by name or maybe just by generic description, a customer scenario that demonstrates Tradeshift’s approach and value?

Lanng: I absolutely can, and I'll take a very recent example. We just announced, about a month ago, a big international customer, Zurich Insurance Group. It's a huge global company, very conservative industry. It's been around for 150 years and, of course, has very sensitive customer data. They were having a lot of struggles with this whole process, and they got the people inside the company engaged around actually driving impact and value in these processes.

We showed them at the time our brand new procurement platform called Tradeshift Buy combined with the Tradeshift network. There were three things that stood out for them. The first thing we addressed were rogue buyers; people who are going outside procurement rules, and we said, “Hey, these are actually people who are passionate about their company, who are trying to drive value and even willing to take enough risk that they are not always following the rules. Let’s try to give them some tools so they at least participate, and we can get the spend under control.”

The second thing we did was we showed collaboration aspects with the supply chain and showed how, in real time, you can collaborate with your suppliers around categories and also the procurement department, because in a lot of companies procurement departments get a little alienated; they become the enemy. If I'm trying to do something, they're the bottleneck. One person said, "We are the Department of Cheap."

Strategic part

I don’t think that’s the case. They are actually a strategic part of driving value in your business. So we really try to build a procurement platform where suppliers become equal citizens and became helpers, so that if you are trying to buy something to try to solve the problem, you can engage with them in the solution phase, not just when it’s the last step and you got us in the purchase order (PO).

The last step was the ability to roll out locally for their supply chain. They are a huge global company and needed confidence they could get the onboarding rates. They looked at a lot of solutions and what it comes to down to today is that there is only reach through two network solutions in the world. Those are Ariba and Tradeshift. The rest don't have all of these platform capabilities and this broad scope.

Gardner: Alex, the same question to you. Do you have a use case example, by name or generically, that illustrates the power of the composition of SAP Ariba? 

Atzberger: Absolutely. I'll give you couple of different examples. If you take a company like AIG, the insurance company, I urge you to look at the YouTube video talking about how they saved about $300 million through the Ariba platform. That was driven through -- taking all categories of spend actually on to the Ariba platform including, by the way, legal services, which is something where a lot of companies say, you can’t actually bring this into an e-sourcing environment. So that’s an exciting case.

In the last quarter alone, we enabled another 80,000-plus suppliers on the network. That’s where a lot of the power of the community and the network comes from.

Another one, for instance is, Auchan the French Company that actually went to suppliers and said, if there's no Ariba, there's no business. Basically, you need to be on Ariba in order to do business with them. It's a strong business-driven case of what actually it means if you have a strong procurement department to lead the change and do this not just in France, but across Russia, China, and markets where they operate.

Take companies like BHP Billiton in Australia and Singapore. They drive more than 90 percent of their spend over the SAP Ariba platform and connect their suppliers to it. It's one of the best-in-class examples of a sourcing and procurement organization. Also, they're going into China to identify new sources of supply and that’s something where we're working with them and really extending their reach, which is becoming so important to global sourcing strategies.

Then, I'd point out new customers that we're excited to have as part of the SAP Ariba community, like First Data. First Data has the largest IPO last year in the US. It’s a payment company, but really a technology company as well. If I look at what they want to do with the platform and also what we are doing in partnership with them around B2B payments, it's a very exciting uses case as well.

When you look at the some of the names I just gave you, at the size of those companies and the suppliers, we're talking about tens of thousands of suppliers that those companies have. In the last quarter alone, we enabled another 80,000-plus suppliers on the network. That’s where a lot of the power of the community and the network comes from.

Lanng: I just wanted to add one thing to what Alex said, because I think what he's also showing with his cases is the breadth of industries and global reach of this customer base and who can use networks. We see exactly the same within airlines, such as Air France, and companies in retail, fashion, manufacturing. I don’t think there is a single industry we don’t have on the platform, also new companies like LinkedIn within services and so on.

I just want to echo what Alex said. It's a really broad set of industries and customers who are trying to use live business networks. I don’t think there's anyone who won’t use this or, in the future, won’t have this. It will be a default, as having an ERP system as today.

Data feedback

Gardner: I think we've only begun to explore the depths of the data feedback and analysis capabilities within digital commerce, and within retail, for example, of the user experience and real-time interactions and customization impacts.

So before we close out, let's think about companies that might be resisting this notion of taking advantage of the network, and of starting to do the groundwork in order to be able to realize those feedback loops and analysis benefits.

Starting with you, Christian, what would you say to a company that is still somehow not interested in taking advantage of business networks, and what potentially could they miss out on if they don't start doing the groundwork now in order to be able to be a digital business with deep data-driven analysis capabilities becoming pervasive?

Lanng: We have to go all the way back to the beginning of this discussion, which is what also Alex pointed out, that companies that don’t change and innovate will be gone. We've seen more companies disappear out of the Fortune 500 in the last 20 years than we have in the history of business, and it’s accelerating.

If your supply chain is in such a way that you cannot react to that kind of disruption quickly, and if you can't acquire new suppliers that can help you find all of these threats, you are done.

There are three key things you miss out on if you don’t invest in networks. First is the ability to know and know fast. Today, knowing is way more important than just the cost of things or the cost of transactions. We see huge Fortune 500 companies shocking us with reporting their most basic numbers to their shareholders. You see the shareholders being more and more aggressive on having insights on how these companies are run.

The second thing is agility. Agility is probably the single most important strategic capability in 2016 and onward. And I think if you look at companies we are taking about they have new competitors coming up. You can take a company like P&G who recently got disrupted by the Dollar Shave Club, a company that spent less than a million dollars on marketing to take a shot at $13 billion market.

If your supply chain is in such a way that you cannot react to that kind of disruption quickly, and if you can't acquire new suppliers that can help you find all of these threats, you are done. Lastly is, if you don’t have a connected supply chain, you miss out on the advantage of getting new processes rolled out.

Social networks typically have a status feed. In our case, once you're connected on Tradeshift, once you have a supplier up and running, if you want to roll out any new business process, any kind of new connectivity, it is as easy as pushing a new app. Whereas somebody who doesn't have this technology and is rolling out a new business process, we're talking about a three- to five-year lifespan to get to the old supply chain. So agility, speed, and just not being disrupted are the three key reasons I will point to.

Gardner: Alex, Christian paints the picture of business networks as existential. You really don’t have a choice, but a lot of companies are still struggling with how to go about this. Is there an order to it? How should I begin rationally without getting caught up in complexity and losing control of my company? What advice, Alex, would you give companies on how to start the process of becoming a digital business, and to retain governance, but still get the agility benefits?

Back to basics

Atzberger: If your company is conservative or wondering about how best to take advantage of this, you know, you would have to go back to some of the basics. Of course there has to be a business case. Start with a business case around the benefits and the cost. What does the infrastructure currently cost you, the paper based processes cost you, to do business with your suppliers? What are the benefits that you would have, as Christian pointed out, if you could actually extend more and more capabilities over the network, and that itself is very good.

Then the second piece is to engage some things like Design Thinking, about envisioning what the future could be like. Bring together different people out of your companies cross-functionally to think about how you could envision doing more with the assets you have in actually creating new capabilities.

And that’s where things get really exciting, when you think about maybe we shouldn’t be thinking about the network just as something where we have a buying from, but maybe it is something that we become a supplier into. We have many customers, by the way, who do both, who are both buyers and suppliers on the network, and they are valuing that as well.

Anything that you digitize doesn’t mean that your business becomes somehow less involved, somehow detached from your suppliers. It’s actually the opposite.

Finally, it’s about understanding. Anything that you digitize doesn’t mean that your business becomes somehow less involved, somehow detached from your suppliers. It’s actually the opposite. You become more relevant. You, as a buyer, become a customer of choice to your supplier.

That’s very powerful, because at the end of the day, you can argue that, as a consumer, you start to prefer those companies that have a digital relationship with you. That’s what networks have built and allow you to do -- build a digital relationship between your suppliers and the buyers.

As far as conservative companies, I'm happy to talk to them, Dana. If you have any names, send them my way. We love to engage and we love to have that conversation, but it comes back to the fact that there is a real value in this, and it gives all the things that Christian talks about with the agility and other benefits as well. It both makes sense strategically, as well as from the business case, and if those things come together, companies have a great future.

Gardner: I’m afraid we will have to leave it there. You have been listening to a BriefingsDirect discussion focused on the emergence of business networks and how that now requires new buy and sell models. We have heard how companies that best leverage this data-driven innovation and these business network effects will gain significant advantages in their markets.

And lastly we have learned that the use of business networks creates new models to sustain success. So please join me now in thanking Alex Atzberger, President of SAP Ariba. Thank you, Alex.

Atzberger: Thank you so much, Dana, I enjoyed this thoroughly and thank you, Christian.

Gardner: Yes, and thank you Christian Lanng, CEO and Co-Founder of Tradeshift.

Lanng: Thank you so much, Dana, and thank you, Alex.

Atzberger: Absolutely.

Gardner: And also a big thank you to our audience for joining us for this SAP Ariba-sponsored business innovation thought leadership discussion. I’m Dana Gardner, Principal Analyst at Interarbor Solutions, your host and moderator. Thanks again for listening, and do come back next time.

Listen to the podcast. Find it on iTunes. Get the mobile app. Download the transcript. Sponsor: SAP Ariba.

Transcript of a discussion on the emergence of business networks and how that requires new models of competition and cooperation. Copyright Interarbor Solutions, LLC, 2005-2016. All rights reserved.

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