Recently, I was asked if I ever get tired of discussing the term “digitalization.” While there is a simple answer to that question, there are no simple answers to what “digital” means for companies or us as individuals – be it in our private or professional lives.
Digitalization has moved from simply improving existing business models to profoundly disrupting them, resulting in a redefinition of roles and boundaries. We see the lines between industries blurring: car manufacturers integrate solutions traditionally reserved for finance and telecommunications, sports apparel companies move into high-tech digital fitness. The rise of configurable, personalized products and e-commerce means that producers no longer simply produce: manufacturers now also enjoy direct relationships with the end consumers.
As the rules of engagement between buyers, suppliers, and partners change, so do the ways we interact and collaborate – as both individuals and organizations. A strong, open ecosystem is now more important than ever, but equally important are the models of interaction. Increasingly in today’s world, it’s all about partnering to effectively deal with the challenges – and, of course, benefits – of digitalization.
Rethinking Traditional Collaboration Models
The traditional role of software providers – and the clue is in the name – is also affected by this change. Simply developing, selling, and shipping the latest solutions – regardless of how cutting-edge they may be – is not enough anymore. Because despite realizing the importance of digitalization, many organizations still struggle to identify where and how emerging platforms, technologies, and applications could offer value. So it is not the question of why transform that often remains unanswered, but rather the what, thewhen, and the how. Companies want more than just a provider of software as their partner, they want a partner to help them digitalize products, processes, services – or in short, their business.
But digital transformation is obviously not a one-size-fits-all process: every company is different and there is no blueprint to apply that can cover all scenarios. What is possible, however, is to combine forces – the expertise of the provider and the customer – to uncover exciting new opportunities together. This shift sees the software provider move beyond software provision and even co-innovation to a business risk-and-benefit-sharing co-engineering model.
Sharing the Risks and the Benefits
Co-innovation has long played a crucial role in our success at SAP. Working hand-in-hand with our customers through the development process has led to many groundbreaking solutions. But in the co-innovation model, the relationship with the customer only goes so far. Once the product is on the market, the collaboration is scaled back significantly.
In our co-engineering projects, on the other hand, we take our relationship with the customer to the next level. We work together to understand their digital potential and then scale it out, with both parties sharing the risks and benefits – from the initial development through to its market launch and beyond. It’s about a long-term approach that lays the best possible foundation for sustained growth.
One great example of such a project is the “LANDLOG” collaboration with Japanese multinational Komatsu. The company, which specializes in manufacturing, selling construction, mining equipment, and industrial machinery, joined forces with SAP, NTT Docomo, and Optim to create a new cloud-based Internet of Things (IoT) platform. This “smart construction platform” is powered by SAP Leonardo Internet of Things and aims to centrally manage and optimize construction processes, significantly improving resource utilization and safety standards. Here our partnership extends beyond simply delivering the co-innovated product: With a double-digit equity stake in the project, we are both taking on a share of the risks involved in such a venture, but at the same time, we will have a stake in its financial success. It other words, the success of this project is also the success of its stakeholders.
So, to return to the question of whether I am getting bored of discussing digitalization, the answer is obviously a clear “no”: There are still many challenges and opportunities ahead – something that I am regularly reminded of in discussions with our customers and partners. Remaining relevant, innovative, and competitive in rapidly changing markets requires us all to reexamine the ways we work, from what we provide to how we provide it. It’s a very exciting time for all organizations, and I am looking forward to working together with our customers and partners to shape the future.
Bernd Leukert is a member of the Executive Board and head of Products & Innovation at SAP