One of my high points on day one of SAPPHIRENow 2017 was a quick video shoot with Holger Mueller, principal analyst at Constellation. See the end of this story for the video.
Mueller is a firm believer in the primacy of technology and much prefers to hear vendors showing their wares. In the context of Leonardo, he coined the expression ‘Leonardo 2‘ to describe what SAP showcased in its opening keynote.
Mueller is concerned – and with some justification – that SAP runs the risk of confusing the marketplace with something that extends far beyond Leonardo’s original remit of concentrating on the detail behind IoT topics. In that context, SAP has talked about ‘intelligent asset management’ as an umbrella terms for things like predictive, preventative plant maintenance, where a combination of captured machine sensor data, analytics and pattern recognition from machine learning techniques can be applied to industry.
IoT as a discrete topic may well be where manufacturers want to start their 21st century change journey, but that is only a start. As I have said before, SAP is at its best when it is solving Big Hairy Problems and the current iteration of Leonardo is SAP’s best effort at bringing that together from the tools and tech perspective.
Back in the day, SAP came to market with R/3 as a radical change in the way back office processes could be automated. It was a genuine departure from what went before, promising integration among processes as the backbone for what, in the 1990’s, was wrapped up in the catch all ‘business process re-engineering.’ It was as much of a change then as the much touted ‘digital transformation’ is today. When viewed in that way, what SAP is offering makes perfect sense.
Mueller agrees for example that the only way to move forward with this as a generic topic is for SAP to quickly move from theory to practice across vertical markets. That is already happening. However, Mueller sees a problem in the sense that you can’t build what you don’t know. Unlike the R/3 story where there was a horizontal set of problems waiting to be solved, Mueller believes that companies need to go through a series of steps to discover what might be best practices for a given issue. They can achieve that starting point through design thinking workshops.
That set of steps puts SAP in the position of consultant as well as software engineering delivery shop. Mueller questions whether this is something that SAP can do in such a way that it will come up with repeatable (i.e. commoditizable) software solutions it then places into the market. I get that argument if, for no other reason than consulting activities have a different cost and margin profile to that of software sales. There would be an impact on SAP’s reported results that cannot be balanced by higher margins on the technology it delivers.
Best practices or fail fast?
While I see Mueller’s position, I think he has this partially wrong because he assesses the problem through the wrong lens. I should caveat by saying that I am prepared to be persuaded but…
Any talk of ‘best practices’ as it relates to the 21st century model of business makes no sense. Best practices define what you can achieve with a fair degree of certainty based upon the past. This is about the future. We already know that the current mantra is one best characterized by the notion of ‘failing fast.’
We are also very much at the beginning in understanding what those future models look like. In some cases, the model will require wholesale transformation – think ‘Everything as a Service’ a la John Deere. In other cases, it will mean collaboration among competitors for the purpose of creating entirely new markets – and no, I’m not going to give examples just yet. For still others, it will mean radical automation and workforce reduction/reorganization as a step towards end to end supply chain efficiency. For this, pick your favorite in retail.
In each case, there can be quick wins but the journey will be a decade or more in the overall execution.
Regardless and as some of the speakers on the digital business panel described, organizations will need to be open minded about how they go about taking these baby steps. They will need SAP (and others) to help them understand the problems they need to solve, the order in which those problems are solved and then the technologies that get applied. These are subsets of C-level driven strategic initiatives to which SAP ought to be well suited, provided it can find enough people who are business minded and not just the technology wonks. SAP also needs to be at the center of discussions among business people, not just the C-Suite at one end and IT at another.
What does Hasso think?
To that end, I put this question to Hasso Plattner, co-founder SAP in a private meeting held late on the first day of SAPPHIRENow.
Qu: HANA is done, S/4 is pretty much done, what is the next Big Hairy Problem that you’d like to see SAP solve?
At first, Plattner didn’t provide a direct answer other than to refer to work needing to be done on Fiori. That’s an incremental innovation problem. When pressed in the context of external solution delivery, he said this:
We have to change, we have no choice. I hear that we need to make things run on MongoDB for instance. We will do those things. We have to be open and inclusive. We don’t really know some of the problems so we have to discover what can be done.
That was quite a statement and conforms in some senses to what Mueller anticipates. It also reflects what Bill McDermott said earlier in the day in that solving tomorrow’s problems is not so much a matter of technology per se but about business change in the context of unpicking strategies to find the highest value. In addition, it reflects the kind of environment that Vijay Vijayasanakar described in a recent tirade at the moribund nature of current services firms:
Advisors and buyers’ agents will need a lot more depth than the high level digital transformation power points, and rate card benchmarks to earn their keep . The level of knowledge needed to implement actual robotics in a company is not the same as “here are the 7 steps” on a power point chart you can impress a senior exec with today.
As I have said before – we need more polymaths.
This is the pinch point Mueller and Vijay understand and to which I believe both McDermott and Plattner are alluding. The traditional route for SAP has been to rely upon partners as discoverers of problem to which SAP applied a ready made solution. This is very different. Yes, partners like Accenture, Deloitte and IBM can help but they already have a broad range of solutions from which they can pick.
SAP for its part now has to demonstrate that it can get out in front of the Microsofts, IBMs, GEs and Salesforces of the world and that means learning industry needs in new ways and then owning the technology stack that goes with it.
In that sense, Leonardo need not confuse but only provided SAP leads with the conversations required to elicit an understanding of what the customer needs. The burning question in my mind rests on whether SAP is prepared to take the very difficult step of sacrificing short term margin for long term gain.
To be continued…
Image credit - via SAP and Constellation Research
Disclosure - SAP is a premier partner at time of writing and covered most of the author's T&E for event attendance