Transcript
of a BriefingsDirect podcast on how a predictive business strategy enables staying competitive, and not just surviving -- but thriving -- in fast-paced and dynamic markets.
Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Cloud.
Dana Gardner: Hi, this is
Dana Gardner, Principal Analyst at
Interarbor Solutions, and you're listening to
BriefingsDirect.
Today, we present a sponsored podcast discussion examining a momentous
shift in business strategy. Join us as we explore the impact that
big data,
cloud computing, and
mobility are having on how businesses must act and react in their markets.
We'll explore how the agility goal of real-time
responses is no longer good enough. What’s apparent across more business
ecosystems is that
businesses must do even better to become so
data-driven that they extend their knowledge and ability to react well
into the future. In other words, we're now all entering the era of the
predictive business.
To
learn more about how heightened competition amid a data revolution
requires businesses and IT leaders to
adjust their thinking to the next,
and the next, and the next move on their respective chess boards, join
me with our guest for today,
Tim Minahan, the Chief Marketing Officer for
SAP Cloud. Welcome, Tim. [Disclosure: SAP Cloud is a sponsor of
BriefingsDirect podcasts.]
Tim Minahan: Thanks for having me, Dana.
Gardner:
It’s hard to believe that the pace of business agility continues to
accelerate. Tim, what’s driving this time-crunch? What are some of the
changes afoot that require this need for -- and also enabling the
capabilities to deliver on -- this notion of predictive business? We're in
some sort of a rapid cycle of cause and effect, and it’s rather
complicated.
Minahan: This is certainly not your
father’s business environment. Big is no longer a guarantee to success.
If you just look at the past 10 years, 40 percent of the
Fortune 500
was replaced. So the business techniques and principles that worked 10,
5 or even three years ago are no longer relevant. In fact, they maybe a
detriment to your business.
Just ask companies like
Tower Records,
Borders Bookstore,
or any of the dozens more goliaths that were
unable or unwilling to adapt to this new empowered customer or to adapt new business models
that threatened long-held market structures and beliefs.
The
world, as you just said, is changing so unbelievably fast that the only
constant is change. And to survive, businesses must constantly innovate
and adapt. Just think about it. The customer today is now more
connected and more empowered and more demanding.
You have one billion people in
social networks
that are talking about your brand. In fact, I was just reading a recent
study that showed Fortune 100 companies were mentioned on social
channels like
Facebook,
Twitter, and
LinkedIn
a total of 10.5 million times in one month. These comments are really
shaping your brand image. They're influencing your customer’s views and
buying decisions, and really empowering that next competitor.
But the consumer, as you know, is also mobile. There are more than 15 billion
mobile devices, which is scary. There are twice as many
smart phones and
tablets
in use than there are people on the planet. It’s changing how we share
information, how we shop, and the levels of service that customers
expect today.
It’s also created, as you stated, a heck
of a lot of data. More data was created in the last 18 months than had
been created since the dawn of mankind. That’s a frightening fact, and
the amount of data on your company, on your consumer preferences, on
buying trends, and on you will double again in the next 18 months.
Changing consumer
The consumer is also changing. We're seeing an emerging middle class of five billion consumers sprouting up in
emerging markets around the world. Guess what? They're all unwired and connected in a mobile environment.
What's challenging for your business is that you have a whole new class of
millennials
entering the workforce. In fact, by next year, nearly half of the
workforce will have been born after 1980 -- making me feel old. These
workers just grew up with
the web. They are constantly mobile.
These
are workers that shun traditional business structures of
command-and-control. They feel that information should be free. They
want to collaborate with each other, with their peers and partners, and
even competitors. And this is uncomfortable for many businesses.
For
this always on, always changing world, as you said,
real time just isn’t enough anymore. Knowing in real time that your manufacturing plant
went down and you won’t be able to make the holiday shipping season
-- it’s just knowing that far too late. Or knowing that your top customer
just defected to your chief competitor in real time is knowing that far
too late. Even learning that your new
SVP
of sales, who looks so great on paper, is an awful fit with your
corporate culture or your go-to-market strategy is just knowing that far
too late.
But to your point, what disrupts can also be
the
new advantage. So technology, cloud, social, big data, and mobile
are all changing the face of business. The need is
to exploit them and
not to be disrupted by them.
Gardner: What’s
interesting, Tim, is that the tools and best practices that you might
use to better understand your external world, your market, your supply
chain, and your ecosystem of partners is also being applied internally.
Too often, we get enamored with the technology side of the story, but
the biggest change that’s going to occur in business is going to be the
culture change.
These are issues that are
affecting companies to operate better internally, organizationally, managing
their staff, their employees and how they're working differently -- but at
the same time, we had this outward-facing need, too. Another dimension of
complexity here is that you not only have to change the way you're
operating vis-Ã -vis your employees, but your customers, partners, supply
chain, etc. as well. How does the predictive business create a whole greater
than the sum of the parts when we think about this on the total shift internal and external?
Minahan:
Too often, we get enamored with the technology side of the story, but
the biggest change that’s going to occur in business is going to be
the
culture change. There's the need to adapt to this new millennial
workforce and this new empowered customer and the need to reach this new
emerging middle-class around the world.
In today’s
fast-paced business world, companies really need to be able to predict
the future with confidence, assess the right response, and then have the
agility organizationally and systems-wise to quickly adapt their
business processes to capitalize on these market dynamics and stay ahead
of the competition.
They need to be able to harness
the insights of disruptive technologies of our day, technologies like
social, business networks, mobility, and cloud to become this predictive
business.
Not enough
I want to be clear here that the predictive business isn't just about advanced
analytics.
It’s not just about big data. That’s certainly a part of it, but just
knowing something is going to happen, just knowing about a market
opportunity or a pending risk just isn’t enough.
You
have to have that capacity and insight to assess a myriad of scenarios
to detect the right course of action, and then have the agility in your
business processes, your organizational structures, and your systems to
be able to adapt to capitalize on these changes.
Gardner:
Tim, you and I have been
talking for several years now about
the impact of cloud. We were also trying to be predictive ourselves and to
extrapolate and figure out where this is going. I think it turns out
that it’s been
even more impactful than we thought.
How about the notion of having a cloud partner, maybe not only your own cloud, but a
hybrid or
public cloud environment, where the agility comes from working with a new type of delivery mode or even a whole new type of IT model?
Minahan:
We've seen the impact of cloud. You've probably heard a lot about it.
You've been tracking it for years. The original discussion was all about
total cost of ownership (TCO).
It was all about the cost benefits of the cloud. While the cloud
certainly offers a cost advantage, the real benefit the cloud brings to
business is in two flavors --
innovation and agility.
There's now the agility at the business level to configure new
business processes without costly IT or consulting engagements.
You're
seeing rapid innovation cycles, albeit incremental innovation updates,
several times per year that are much more digestible for a company. They
can see something coming, be able to request an innovation update, and
have their technology partner several times a year adapt and deliver new
functionality that’s immediately available to everyone.
Then
there's now the agility at the business level to configure new business
processes without costly IT or consulting engagements. With some of the
more advanced cloud platforms, they can even create their own process
extensions to meet the unique needs of their industry and their
business.
Gardner: It’s also, I think, a little
bit of return to the past, when we think about the culture and the
process. It’s been 20 years plus since people started talking about
reengineering their business processes to accommodate technology. Now
the technology has accelerated to such a degree that we can start really
making progress on productivity and quality vis-Ã -vis these new
approaches.
So without going too far into the past, how
is the notion of
business transformation being delivered now, when we
think about being predictive, using these technology tools, different
delivery models, and even different cultures?
Minahan:
You're already seeing
examples of the predictive business in action
across industries today. Leading companies are turning that combination
of insight, the big data analytics, and these agile computing models and
organizational structures into entirely new business models and
competitive advantage.
Strategic marketing
Let’s just look at some of these examples that are before us. Take
Cisco,
where their strategic marketing organization not only mines historical
data around what prompted people to buy, or what they have bought, and
what were their profiles. They married that with real-time
social media mentions to look for customers, ferret out customers, who reveal a propensity to buy and a high readiness to buy.
They
then arm their sales team, push these signals out to their sales force,
and recommended the right offer that would likely convert that customer
to buy. That had a massive impact. They saw a sales uplift of more than
$4 billion by bringing all of those activities together.
It’s not just in the high-tech sector. I know we talk about that a lot, but we see it in other industries like healthcare.
Mount Sinai Hospital
in New York examined the historical treatment approaches, survival
rates, and the stay duration of the hospitals to determine the right
treatments to optimize care and throughput a patient.
It
constantly runs and adapts simulations to optimize its patients first
8-12 hours in the hospital. With improved utilization based on those
insights and the ability to adapt how they're handling their patients,
the hospital not only improved patient health and survival rates, but
also achieved the financial effect of adding hundreds of new beds
without physically adding one.
In fact, if you look at
it, the
whole medical industry is built on predictive business models
using the symptoms of millions of patients to diagnose new patients and
to
determine the right courses of action.
So all around us, businesses are beginning to adapt and take advantage of these predictive business models.
Closer to home for you Dana, there is also an example of the predictive business, I don’t know if you've read
Nate Silver's phenomenal book, "
The Signal and the Noise,"
but he talks about going beyond
Moneyball, and how the Boston Red Sox
were using predictive systems that really have changed how baseball
drafts rookie players.
The difference between Moneyball and rookies is that rookies don’t have a record in the pros.
There's no basis from which to determine what their on-base percentage
will be or how they will perform. But this predictive model goes beyond
standard statistics here and looks at similar attributes of other
professional players to determine who are the right candidates that they
should be recruiting and projecting what their performance might be
based on a composite of other players that have like-attributes.
Their first example of this on the Red Sox was with
Dustin Pedroia,
who no one wanted to recruit. They said he was too short, too slow, and
not the right candidate to play second base. But using this new model,
the Red Sox modeled him against previous players and found out some of
the best second basemen in the world actually have similar attributes.
So
they wanted to take him early in the draft. The first year, he took the
rookie of the year title in 2007 and helped the Red Sox win the world series
for only the second time, since 1918. He's gone on to win the MVP the
following year, and he’s been a
top all star performer ever since.
So all around us, businesses are beginning to adapt and take advantage of these predictive business models.
Change in thinking
Gardner:
It's curious that when you do take a data-driven approach, you have to
give up some of the older approaches around intuition, gut instinct, or
some of the metrics that used to be important. That really requires you
to change your thinking and, rather than go to the
highest paid person’s opinion when you need to make a decision, it's really now becoming more
of a science.
So what do you get Tim when you do this
correctly? The Red Sox, they got to win a World Series and
they've been able to have a very strong club much more consistently than
in the past. But what do businesses get when they become more
data-driven, when they adjust their culture, take advantage of some of
the new tools, and recognize the shift, the consumer behavior? How
impactful can this be?
Minahan: It can be
tremendously impactful. We truly believe that you get a whole new world
of business. You get a business model and organizational and systems
infrastructure that has the ability to adapt to all the massive
transformation and the rapid changes that we discussed earlier. We
believe the predictive business will transform every function within the
enterprise and across the
value chain.
Just
think of sales and marketing. Sales and marketing professionals, as we
just talked about with Cisco, will now be empowered to engage customers like
never before by tapping into social activity, buying activity on
business networks, and
geo-location
insights to identify prospects and
develop optimal offers and engage
and influence perspective customers right at the point of purchase.
It can be tremendously impactful. We truly believe that you get a whole new world of business.
I
think of pushing offers, coupons, to mobile devices of prospective
buyers based on their social finger print and their actual physical
location or service organizations. We talk about this
Internet of things.
We haven’t even scratched a surface on this, but they can massively
drive customer satisfaction and loyalty to new levels by predicting and
proactively resolving potential product or service disruption even
before they happen.
Think about your device being able
to send a signal and demonstrate a propensity to break down in the
future. It may be possible to send a
firmware update to fix it without your even knowing.
That’s the power that we’ve already seen with this type of thing in the
supply chain.
Procurement,
logistics and supply chain teams are now
being alerted to potential future risks in their sub-tier supply chains and being
guided to alternative suppliers based on optimal resolutions and
community-generated ratings and buying patterns of like buyers on a
business network. We've talked about that in the past.
We
really believe that the future of business is
the predictive business.
The predictive business is not going to be an option going forward. It's
not a luxury. It will be what's required not only to win, but
eventually, to survive. Your customers are demanding it, your employees
are requiring it, and your livelihood is going to depend on it.
The need to adapt
Gardner:
I suppose we're seeing instances where newer companies, upstarts, easily enter
the market. Because they're not encumbered by past practices, using some
of these newer tools can actually make a tremendous amount of headway for them.
Tesla Motors comes to mind as one reflection of that.
Netflix
is another that shows how disruptive the company can be in the short
term. But we're not just talking about green field companies. We're
talking about the need for entrenched global enterprises to be able to
move quickly to change and adapt to some of these opportunities for transformation.
Any
thoughts before we begin to close out, Tim, on how big companies that
have so much complexity, so many moving parts, can start to evolve to be
predictive and to be ready for some serious competition?
Minahan:
Number one is that you can't have the fear of change. You need to set
that aside. At the outset of this discussion, we talked about changes all
around us, whether it's externally, with the new empowered consumer who
is more informed and connected than ever before, or internally with a
new millennial workforce that’s eager to look at new organizational
structures and processes and collaborate more, not just with other
employees but their peers, and even competitors, in new ways.
That's
number one, and probably the hardest thing. On top of that, this isn't
just a single technology role. You need to be able to embrace a lot of
the new technologies out there. When we look at one of the attributes of
an enabling platform for the predictive business, it really comes down
to a few key areas.
You have assess multiple scenarios and determine the best course of action faster than ever before.
You
need the convenience and the agility of the cloud, improved IT
resources and use basically everything as a service -- apps,
infrastructure, and platform. You can dial up the capabilities,
processing power, or the resource that you need, quickly configure and
adapt your business processes at the business level, without massive IT
or consulting engagements. Then, you have to have the agility to use
some of these new-age cloud platforms to create your own and
differentiated business processes and applications.
The
second thing is that it's critically important to gather those new
insights and productivity, not just from social networks but from
business networks, with
new rich data sources, from real time market and
customer sentiments, through social listening and analytics, the
countless bits and histories of transactional and relationship data
available on robust business networks.
Then, you have
to manage all of this. You also need to advance your analytical
capabilities. You need the power and speed of big data,
in-memory analytics platforms, and exploiting new architectures like
Hadoop
and others to enable companies to aggregate, correlate and assess just
countless bits of information that are available today and doubling
every 18 months.
You have assess multiple scenarios and
determine the best course of action faster than ever before. Then,
ultimately, one of the major transformational shifts, which is also a
big opportunity, is that you need to be able to assess and deliver with
ease all of this information to mobile devices.
This is
true whether it's your employees who can engage in a process and get
insights where they are in the field or whether it's your customer you
need to reach, either across the street or halfway around the globe. So
the whole here is greater than the sum of the parts. Big data alone is
not enough. Cloud alone is not enough. You need all of these enabling
technologies working together and leveraging each other. The
next-generation business architecture must marry all of these
capabilities to really drive this predictive business.
Next generation
Gardner: So clearly at
SAP Cloud,
you will be giving us a lot of thought. I think you appreciate the
large dimension of this, but also the daunting complexity that’s faced
in many companies. I hope in our next discussion, Tim, we can talk a
little bit about some of the ideas you have about what the next
generation of business services platform and agility capability that
gets you into that predictive mode would be. Maybe you could just give
us a sense very quickly now about the direction and role that an
organization like SAP Cloud would play?
Minahan:
SAP, as you know, has had a history of helping business continually
innovate and drive this next wave of productivity and unlock new value
and advantage for the business. The company is certainly building to be
this enabling platform and partner for this next wave of business. It's
making the right moves both organically and otherwise to enable the
predictive business.
If you think about the foundation
we just went through and then marry it up against, where SAP is invested
and innovated, it's now the leading cloud provider for businesses. More
business professionals are using cloud solutions from SAP than from any
other vendor.
The company is certainly building to be this enabling platform and partner for this next wave of business.
It's leapt far ahead in the world of analytics and performance with the next generation in-memory platform in
HANA. It's the leader in mobile business solutions and social business collaboration with
Jam,
and as we discussed right here on your show, it now owns the world’s
largest and most global business network with
the acquisition of Ariba.
That’s
more than 1.2 million connected companies transacting over half a
trillion dollars worth of commerce, and a new company joining every two
minutes to engage, connect, and get more informed to better collaborate.
We're very, very excited about the promise of the predictive business
and SAPs ability to deliver and innovate on the platform to enable it.
Gardner:
Well, great. I'm afraid we'll have to leave it there, but I do expect
we’ll be revisiting this topic of the predictive business for quite some
time. You've been listening to a sponsored BriefingsDirect podcast
discussion on this momentous shift in business strategy to the agility
required to become a predictive business.
And we've
heard how the business goal of real-time responses is really no longer
good enough. We can begin now to plot a course to a better
evidence-based insights capability that will allow companies to
proactively shape their business goals and align their resources to gain
huge advantages first and foremost in their industry. So with that,
please join me in thanking our guest, Tim Minahan,
Chief Marketing Officer for SAP Cloud. Thanks so much, Tim.
Minahan: Thanks, Dana, it's been great to be here.
Gardner:
I would like to also thank our audience for joining us. This is Dana
Gardner, Principal Analyst at Interarbor Solutions. Thanks again for
coming, and do come back next time.
Listen to the podcast. Find it on iTunes. Download the transcript. Sponsor: SAP Cloud.
Transcript
of a BriefingsDirect podcast on how a predictive business strategy enables staying competitive, and not just surviving -- but thriving -- in fast-paced and dynamic markets. Copyright Interarbor Solutions, LLC, 2005-2013.
All rights reserved.
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