SAP talks about the next big things in automotive, energy utilities, oil and gas - a conversation with Christian Klein

Profile picture for user gonzodaddy By Den Howlett February 24, 2021
Summary:
SAP is well known for its ERP portfolio of solutions but what kinds of projects have been top of mind for its customers over the last year?

Christian Klein
(via the author)

Over the last year, Christian Klein, CEO of SAP has been exceptionally generous with his time, and a call between us yesterday was no exception. On this occasion I wanted to get past the incessant questions around S/4HANA and RISE to learn more about the projects SAP is involved in that don't grab immediate attention but which are having a big impact on the world. An abridged recording of our call is available at the end of this story or directly in Podbean

First among the anecdotes Klein described is the automotive alliance, announced to very little fanfare last December. This arose out of a conversation between BMW's CEO and Klein, just as the pandemic hit and pretty much ground the automotive industry to a halt. BMW recognized that SAP runs the data for large parts of the industry and that extreme supply/demand volatility would likely be a major problem across multiple geographies. Klein said:

He told me you have this business network so why don't you bring all of us together so that we can share this data in real-time and have the traceability with blockchain? And I said, this is actually a fantastic idea. And then we started into the conversation with the other CEOs. It took a bit, because everyone was a little bit scared to what kind of data do we actually need to share in order to make these use cases work? And is that a win win for me? But at the end, everyone signed up, and we are developing this new business network for the automotive industry. And that's only one use case. Now for sustainability. There's also a use case for better quality in the car, which is super important now that the car becomes more and more equipped with software. And so there's super great use cases. That just shows me there are already thoughts around why not do this for utilities or for retail. This is a big, big opportunity.

The idea is that the automotive supply chain moves on from being transactional to one where collaboration provides value throughout the supply chain. But what's this about blockchain? We've heard of many experiments in the past but real-world use scalable cases are hard to find. Klein answered by positioning blockchain technology as a way of shrinking the time to the certainty of parts remediation:

Yes, that's true but in this case the blockchain can provide so much more information so that you can for example improve raw material or spare parts quality very quickly. This track and trace is actually a perfect example where blockchain technology can help. 

But that still leaves open the problem of making this work at the edge, at the point where the small but essential manufacturer is brought into the network. Here Klein talked about the trade-offs needed among suppliers in the network. He said:

In each case we had to understand whether the use case represents a real win-win or an opportunity for me to be disrupted? The various experts got together and figured it out to ensure the right data is shared. 

According to Klein, the alliance expects to see the first use cases being used in the summer with the first results coming out towards the fall. In the meantime, the alliance continues to attract suppliers and other OEMs to be announced shortly. What about economic value? The estimates for one use case alone - inventory in the supply chain - peg the value at around a billion euros. Klein observed: 

We're not talking a few millions here, we are talking a billion. And that's just the start. Here's another example. General Motors wants to improve quality in its procure to pay so we're working on that. With Aeon (energy utilities) we're working on intelligent pricing meaning how high is the flight risk of an end consumer? And what kind of price sensitivity do they need to understand? And we're taking this further to help improve real-time visibility into the cashflow and how that's impacted by the way a customer is billed. These are the kinds of project where what we're doing is well beyond the transactional things SAP is known for. 

Moving on to Klein's sustainability agenda, he shared how the company is working with leaders in oil and gas to not just improve supply chain visibility but also help producers move into the circular economy. 

There's a lot of pressure on these companies to move towards carbon neutrality. The first app comes out this year helping the companies to move more to the circular economy. We are now making the carbon footprint more transparent measuring it. That's just the first step in reducing the carbon footprint.

Coincidentally, on the same day we recorded this conversation, Shell announced a global portfolio of carbon neutral lubricants. In its press release, Shell said:

“Shell has set a target to become a net-zero emissions energy business by 2050, in step with society and our customers,” said Carlos Maurer, Executive Vice President, Global Commercial at Shell. “We know our customers are looking for ways to reduce their net carbon footprint, and as the world’s leading lubricants supplier we have an important role to play. That is why I am pleased to announce the largest carbon neutral programme in the lubricants industry, and one that compensates for the full lifecycle emissions of our products. From today, our consumers, commercial drivers and industrial customers can now enjoy the benefits of improved engine performance and better fuel efficiency in a carbon neutral way.”

My take

Since our first in-person meeting back in 2019 Klein has always talked about topics that are close to his heart with sustainability at the center. This conversation highlighted aspects of how that's working out in the real world and for that, the company should be congratulated. As we were closing out our conversation, Klein rattled off a series of initiatives coming out of the work SAP presented at the World Economic Forum including the ability to provide alerts when suppliers are at risk of breaching child slavery regulations, how it can provide warnings around overfishing and similar but less well-known areas of concern.

As we move forward, it is evident that companies having a shared purpose and values are those that will attract the informed buyer who is motivated by more than the financial outcomes of the business model it operates. Klein wants to be at the center of that movement and community of interest. To him, these topics are 'obvious' if SAP is to deliver on its mission to 'run the world better.'

For that to be apparent we need to hear more of these kinds of stories and, on future occasions, learn directly from the companies who are working on these co-innovation projects.