However, CTO Bernd Leukert quickly switched to IoT. Since then, he has continuously been enhancing his IT tool box for digital transformation: SAP Leonardo.
With SAP Leonardo, Leukert has allowed Bill McDermott to burden him with a Herculean task. To develop and enhance the IT tool box for digital transformation is no easy feat. And it is certainly not made easier by the fact that SAP is a novice in almost all areas of digitalization – including blockchain, IoT, AI, DevOps and multi-cloud.
However, due to CFO Luka Mucic’s good work, Leukert has a financial safety net to fall back on. He is therefore investing a lot of money in employees who can close the gaps in SAP’s knowledge, and is also buying small companies with highly specialized know-how.
This reorganization regarding digitalization in the SAP community already started at the beginning of last year: SAP expanded the responsibilities of its executive board. “To support leaders and careers has always been our mission”, said Bill McDermott, CEO of SAP. “SAP stands for innovation and growth. I’m proud of my colleagues who will make our company even more successful.”
The responsibilities of Bernd Leukert also grew more numerous then. First, he was only responsible for products and innovation. Now, he also has to ensure that the SAP platform and the company’s transformation strategies will become ever more dynamic. Furthermore, he has to manage business growth and make sure that development and sales work closely together. This begins with the design thinking process and ends with project initiatives directly at the customer.
The new business models
“Digitalization first and foremost means the development of new business models. Companies should not try to do this half-heartedly, but provide the necessary resources and funds”, explained Bitkom president Achim Berg. “As the conception of a digital strategy should be a matter for the boss, the realization of it cannot rest with individual departments. It has to be supported by a digitalization team.”
Companies who want to accelerate digital transformation often have to realize that digital business is not as easy as purchasing new technologies. That’s because it requires decisive changes in a company’s structure as well as culture.
A survey by Gartner shows that up until now, only a small percentage of companies was able to take their digital initiatives beyond the experimental phase. “To be put into practice, the digital business requires new skills, systems, organization models as well as a cultural change”, explains Marcus Blosch, Research Vice President at Gartner. “To go from a structured, orderly and process-oriented company to one with diverse ecosystems, continuous adaptation and learning and experimenting is hard. Some companies will succeed. Others will become increasingly antiquated and will soon be replaced.”
Leonardo da Vinci
Leonardo da Vinci thought in images and wrote thousands of pages of notes. He observed fish to gain knowledge about the flight of birds, and studied Michelangelo’s work in order to learn something new. He was also a passionate networker and vegetarian. All of this shows how versatile and innovative Leonardo da Vinci already was 500 years ago.
In the SAP realm, Bernd Leukert will try to replicate Leonardo da Vinci’s way of thinking: The framework for SAP growth is Leonardo. In 2016, Leonardo was still a collective term for all things Industry 4.0 and IoT. Some time has passed, and Leonardo now also entails digital transformation.
Therefore, Bernd Leukert had a difficult time getting Leonardo started. The IoT portfolio combines big data applications and connectivity to a package spanning across departments and presenting application scenarios for connected products, systems and infrastructure as well as fleets, markets and people.
Who knows SAP Leonardo?
According to the investment report 2018 published by the German SAP user group DSAG, 40 percent of respondents (DSAG members) did not know or did not understand the Leonardo portfolio at the beginning of 2018.
However, almost half of all respondents stated that they were interested in it and wanted more information about it. SAP has already reacted to these demands and has been organizing regular information days and webinars together with DSAG.
Otto Schell, chairman IoT/Business Transformation of DSAG, explained, “From DSAG’s point of view, Leonardo means that SAP combines tools, methods and services to create innovative solutions easily integrated into existing SAP products and applications. This is great – in theory.”
Schell adds, “If companies see potential to implement Industry 4.0 and IoT applications and to redesign corporate structures and networks, they definitely should allow them in their cooperative processing landscapes. This means that companies should define end-to-end processes together to utilize the machine learning and artificial intelligence capabilities. Leonardo can make intelligent ERP for differentiating processes possible and support users in digitizing business processes relatively easily.”
IoT and Indirect Access
The original concept was that SAP Leonardo should consolidate digitalization from SAP core solutions and automation to intelligence and systems creating IoT data. With the SAP Cloud Platform, Leonardo is intended to provide intelligent IoT applications, business services for high speed data and edge computing.
For digital transformation, these IoT services seem to be working fine, but they are still not comprehensive enough. Furthermore, there is still the unanswered question of Indirect Access looming in the background. Neither customers nor partners know when Indirect Access will suddenly be applied to them.
Not long ago, SAP partner Itelligence presented an IoT/RFID solution without knowing if this can be charged under Indirect Access. The financial risk of implementing this solution is unpredictable. And nobody wants to risk anything right now. Consequently, a lot of SAP solutions are never going to be put into practice.
Process chains and IT
Besides Indirect Access, there are a lot of other challenges to tackle. DSAG-chairman Otto Schell explains, “Leonardo also means numerous challenges for companies when implementing these new technologies. The topics, such as blockchain, machine learning and artificial intelligence, may be logical, but they are not easy to integrate into existing processes and IT landscapes. Furthermore, most companies have neither the business nor the IT architecture to support the implementation of these technologies into process chains and hybrid landscapes or to use networks as a platform for data exchange. Migrating to S/4 Hana can be a first step towards consolidation.”
Schell adds, “Companies are increasingly building up bimodal organizations, meaning organizations operating at two different speeds. This makes it possible to prepare for digital transformation or to deploy new business processes through acquiring a start-up, for example, while still operating normally. However, bimodal concepts also come with new challenges regarding competencies, budget or necessary organizational changes which will be crucial for digital business models.”
The IT tool box
One thing is for sure: Digital transformation needs an IT tool box.
“In the era of Industry 4.0, manufacturers need intelligent, connected solutions which make predictive methods possible”, emphasizes SAP CTO Bernd Leukert tirelessly. “Our cloud solutions for manufacturing support customers in profiting from the Industrial Internet of Things by connecting machines, people and processes in the digital supply chain. Furthermore, they ensure that production and business processes are closely connected with each other.”
However, the challenges of digitalization can not be tackled by algorithms alone. Companies do not just need computer scientists, but also economists and lawyers. Digital transformation is a business, organizational, technical and legal challenge.
IoT and more
There was a lot of confusion around Bernd Leukert’s work, because IoT has been the main focus point of discussions and presentations of Leonardo for a long time. Since the beginning of 2018, it has been becoming ever more clear that Leonardo could and wants to be so much more.
Modern technologies like speech-based artificial intelligence, blockchain and analytics open up completely new opportunities. SAP seems to be convinced that since its introduction, the technological possibilities of Leonardo have already supported numerous customers in their innovation processes.
The challenge for Bernd Leukert is the rather broad market offer. Every technology in his tool box is offered by other providers as well. In the case of machine learning, the offers from Google, Amazon and Microsoft are dominating the market and are more affordable than SAP’s.
Moreover, many other providers have long years of experience with the technologies in the Leonardo portfolio. Meanwhile, SAP is still a novice regarding artificial intelligence and blockchain, and even Industry 4.0 cannot be its unique selling point, as Siemens, Bosch and General Electric are doing it better.
One solution is the quick acquisition of specialists, but before they can be of any help they have to be integrated into the Leonardo portfolio. However, if SAP wants to keep up with the rapid developments, there is no alternative for this cumbersome solution at the moment.
When is Leonardo most valuable to customers? Precisely when it’s about integrated solutions in an ERP system. When the value is generated not by the technology alone, but by a combination of IoT, blockchain, supply chain and ERP.
If customers want to utilize modern technologies with their existing solutions, SAP offers innovation packages based on Leonardo for industries like retail, life sciences, manufacturing and automotive.
SAP Cloud Platform serves as the backbone of the integration, since the beginning of 2018 also with a multi-cloud offer. Consequently, SAP customers can now use Google Cloud Platform and Microsoft Azure for their innovations.
Even with the knowledge of comprehensive IT solutions, SAP will not be able to get started with Leonardo on its own. Without the partner community, the digital evolution will not proceed.
Accenture was the first partner to be qualified for SAP Model Company. The consultancy will help with developing Leonardo and introducing it to the market.
“Groundbreaking new technologies change the way we do business. Conditions for success nowadays are rapid innovation, continuous collaboration and flexible supply”, explained Christophe Mouille, global head of the SAP Business Group of Accenture.
Up until now, Bernd Leukert has very successfully been running with the hare and hunting with the hounds. This year, SAP also introduced Hana Cloud for intelligent product design, a new solution for joint research and development.
Digital twins of plants are combined with manufacturing solutions of SAP, cloud networks as well as Leonardo functionalities for machine learning, blockchain and the Internet of Things. “The solution makes an overview of the information of digital twins possible”, explained Bernd Leukert at a German event.
Bernd Leukert is doing a lot to convince his customers of the Leonardo way. The direction is right! All technologies of the IT tool box have been carefully and wisely chosen, but for every Leonardo component exist numerous alternatives which are either a little bit better or a little bit cheaper.
That’s why SAP has not just been relying on technology. It also tried to convince customers with educational work. The SAP Center for Digital Leadership has already supported more than 200 executives in accelerating the digital transformation of their company. SAP also provides tools and services for the advancement of agile innovation.
What else can Bernd Leukert do?
DSAG, the German SAP user group, has an answer. Chairman Otto Schell said, “From DSAG’s point of view, it is clear that SAP has to come back to its unique selling point – the integration. SAP must prove to its customers that it is faster, better and cheaper to implement innovative solutions with established SAP products instead of the alternatives that were available before Leonardo. At the same time, SAP has to create a transparent licensing model for the tools and has to clarify once and for all what Leonardo actually is.”
Schell added, “SAP entered the market relatively late, therefore it has to coexist with competitors like Google, Microsoft and numerous highly specialized companies. However, we as DSAG believe that SAP can establish itself with Leonardo if it orients itself towards open standards.”
Digital transformation remains a great challenge, because money alone is not enough. Companies need a completely new culture to make it successful.
Struggling with digital transformation
Only a minority of companies globally thinks they have the necessary digital technologies to master digital transformation (39 percent), according to a new survey of the Digital Transformation Institute of Capgemini.
The survey titled “Understanding Digital Mastery Today: Why companies are struggling with their digital transformations” also found that two out of three companies are failing to develop a strong digital culture and involve their employees in the process of digital transformation.
“With artificial intelligence, machine learning, automation and IoT, technologies nowadays open up completely new possibilities for companies”, explains Claudia Crummenerl, Head of Executive Leadership and Change at Capgemini. “However, to be able to profit from these possibilities, it is not enough to only invest in new technologies. Companies also have to realize the importance of change management.”
Curated by Peter Färbinger. With texts from SAP, Itelligence, Gartner, Capgemini, Bitkom, Redline and DSAG.