‘Transformation’ is one of those awkward words that often gets carelessly thrown around. Everyone knows what it loosely means, but when it comes to putting it into real-world practice – especially in the worlds of business and industry – the devil truly is in the detail…
This is especially true when it comes to the IoT, the enabling role that it can play in corporate transformation, and the impact that it’s already having on enterprises around the world. Previous iterations and technology cycles have gone a long way to reducing the friction and cost involved in business processes and have already radically changed the ways that we work and live. That said, in many enterprise cases, especially for SMEs, it has largely been a case of ‘business as usual’.
Technology is applied to enhance existing customer relationships, improve product design, manufacture and distribution, and automate previously labour-intensive processes – but doesn’t really change the core of the business model. The scope of the transformation currently being wrought by the IoT is going to be far, far wider
It was with this background in mind that IoT Now’s editor, Alun Lewis, recently sat down with Nayaki Nayyar, GM and global head of IoT and Innovation GTM at SAP, to talk through her – and SAP’s – perspectives on the current sea change underway.
IoT Now: Nayaki, before you joined SAP, you’d spent around fifteen years deeply involved in IT in the petrochemical energy sector with Shell and Valero. More than many, that sector has regularly had to undergo huge and often unexpected change as a result of shifts in many socio-economic, regulatory and political factors. What lessons did you learn there when it came to managing rapid change from the IT perspective?
NN: Looking back, it was really invaluable experience, understanding where the very real and often gritty world of petrochemical engineering met the abstractions of IT system design – and the almost inevitable room for misunderstandings from both sides. Transformation always has a cultural element as well as the changes to the processes and systems involved and, if companies are to make a successful IoT integration journey that reaches from ‘shop floor to top floor’, as SAP defines it, then these cultural factors are implicit to any programme.
Every department within every company has its own views of the world, its own organisational memory and its own semantic shorthand that’s often difficult for outsiders at first to engage with – even if they work for the same company. In the past, these different departments often used to be co-located on the same site and people could interact and share more easily and equitably. Now, thanks to the power of networks, they can be thousands of miles apart, but have to work together even more closely to successfully synchronise often highly distributed activities and resources. One key factor in enabling any transformation involves breaking down traditional silos that segregated people and functions into sharply defined roles. Fortunately, we now have new technology tools that can support these new management processes and structures. The IoT isn’t just about communications infrastructure – it’s about making the transition to a kind of ‘things to outcomes’ way of thinking.
IoT Now: As you highlight, we need new ways of thinking and these often involve new roles, job titles and responsibilities. What’s your take on this aspect of transformation?
NN: There has to be a specific C-level focus on well-defined outcomes, not just the enabling technologies that are going to get you there. That, in some cases, is going to involve creating a new position – such as Chief Digital Officer – as it’s going to require a different skill set and mind set to that usually needed by, say, someone focused on running an IT department.
In my experience, that doesn’t always involve having to recruit from outside for this type of role. There’s very often internal existing talent that’s already familiar enough with the company to guide them through what is inevitably going to be a multi-faceted transformation programme. Whatever the recruitment policy, companies usually need some underlying continuity to reassure employees, partners and customers. Entering the IoT is a long term project and that involves having a long term vison for the next five to ten years and, I’ll emphasise, a vision grounded in commercial and achievable reality.
IoT Now: So how is this going to affect the kinds of skills sets that are needed?
NN: While these emerging job roles will require people able to balance technology and business, new skills and disciplines are also becoming essential. In this context I’d suggest that Data Scientists in particular will be at the top of the hiring tree. With systems that are now capable of sucking in vast amounts of data, not enough attention is being given to the use that can be made of those data pools, lakes, streams and torrents, to use some of the terms that have recently become popular. We’ve not only got to find ways of filtering, storing, classifying and analysing that data, but we also have to find appropriate and mission-focused ways of sharing it with the many different players involved in any product, service or customer and partner relationship. That, in turn, is going to involve applying new visualisation tools to the data to turn it into truly context-sensitive, actionable information that can provide fresh insights to existing problems and identify impending trends before they impact the business model and revenues.
IoT Now: So how can an IoT transformation project actually change the business model?
NN: One great example of this is the current shift by product companies to what are called ‘servitisation’ strategies. Whereas in the past, a company might have had a simple pay/buy relationship with its customers, the IoT now makes it possible to transform that into an ongoing relationship where they pay for what they consume in a dynamic real time way. To a certain extent, this has been done already by the PC printer market, where the cost of initial purchase is low, and the initial cost of the device is recouped over a long period. Advances in sensor technologies in particular, both across manufacturing plant and in the finished product, are helping drive this other key strand of technology-based, but essentially commercial, innovation.
For example, a car manufacturer – or even a maker of industrial tyres – could move to a ‘mileage as a service’ model, tracking how much wear their tyres are going through and charging accordingly. One of our customers, Kaeser Compressors, a major manufacturer of air compressors, has already successfully made this shift. Firstly, they used IoT principles and our software to improve maintenance and productivity in their factories, and they’re now moving to a ‘compressed air as a service’ business model, rather than just selling equipment. As a result, not only have they lowered their maintenance costs, but they’ve also radically transformed the experience of their customers when they interact with Kaeser.
The data that drives these new models – and all the analytic and decision support tools that turn it into actionable information – are also in turn driving cultural and organisational change. The COO no longer has to try and gather information from lots of different sources, all in inevitably different formats, to produce daily or weekly reports in plant performance. Instead, a dynamic and up to date snapshot can be delivered right to his tablet in a board meeting, along with the tools that allow him or her to drill down into the data, spot anomalies and trends, and decrease all the friction and delay usually associated with these processes.
IoT Now: You touched there on manufacturing which I know is one of your key markets. Can you talk us through the other sectors that you’re involved with?
NN: Logistics operations are one major beneficiary of IoT transformations. One big customer of SAP is Hamburg Port Authority, Germany’s largest seaport. Both local port and city traffic can be impacted by up to the 40,000 truck trips that happen daily around the site which has around 900 related businesses in the area. Real-time data accessible through the cloud reveals exactly when containers are ready for shipping and receiving. Train and truck routes for incoming and outgoing goods are optimised and better organised. This maximises mobility to efficiently connect all stakeholders and processes, empowering a ripple effect of benefits for Hamburg and beyond. More generically, the IoT helps vehicle fleet owners get the maximum value from their investments by optimising route deliveries in more dynamic ways.
One sector where IoT-enabled logistics is also having a growing impact is in the pharmaceutical industry. It’s now becoming possible to track medicines from the point of production to the point of sale and even the point of use. Sensors can be included in the packaging to monitor the temperatures that they’ve been exposed to – a critical issue with many medicines such as antibiotics and vaccines. This transparent tracking process also helps block counterfeit medicines from entering the delivery chain, a major problem in many countries.
IoT Now: SAP used the recent MWC event in Barcelona to announce an initiative aimed at the automotive sector where you joined forces with Spanish car manufacturer SEAT and Samsung. Can you tell us something about SAP’s work in this sector?
NN: We showcased two connected car scenarios: Digital Key and Park & Pay. With the digital key concept, drivers are able to lock, unlock, and even operate their cars from their smartphones. The owner can digitally share the key with someone else, such as a family member or repair mechanic, and can revoke the key when the person is done.
With Park & Pay, by using a smartphone app controlled by the car’s head unit, the driver can find and reserve a parking space – and pay for it – in advance without ever having to get out of the car. The SAP Vehicles Network – powered by the SAP HANA Cloud Platform for the IoT – means never having to circle the block again for parking. Payment is made via Samsung Pay, which integrates with MirrorLink technology to display data in the car’s head unit. Drivers can authorise payment with the touch of a finger – on a finger imprint pad conveniently located on the car’s central console. This is a new feature from SEAT and not yet available in the market. Samsung Pay is already available in Korea and the U.S. and on its way to Europe later this year.
This is also an excellent example of how SAP is working with specialist companies in adjoining sectors as one key aspect of transformation is understanding how real value comes from being able to interwork with other systems and suppliers. For example, we’ve recently formed a strategic partnership with Vodafone and this aims to allow enterprises to connect and manage devices using Vodafone’s IoT connectivity platform and to collect and move data from the devices into the SAP HANA platform.
IoT Now: So that’s manufacturing and logistics, What are the other sectors?
NN: The energy and the utility markets are also embracing the IoT, addressing multiple issues in multiple ways. Given the scale that most work on, even the smallest percentage increase in efficiency and asset and resource management can add up to substantial amounts of money. One of our major customers here is Alliander N.V. in the Netherlands. They’re a €1.7 billion company, building and supporting the infrastructures that carry electricity and natural gas to more than 3.5 million customers, making it the largest electricity and gas network company in the Netherlands. With SAP HANA, it ‘s gathering and analysing massive amounts of data to better maintain assets, optimise its grid, and help customers save on energy bills. In application areas like this, machine learning and artificial intelligence have the potential to deliver even more efficiency gains, especially where natural power sources are involved, balancing generation and consumption cycles in more elegant ways.
This is also an area where SAP Edge solutions are particularly appropriate. Devices and sensors can obviously generate vast amounts of data and it’s rarely cost-effective to transport all of this back for central processing. We’re now able to filter and process data closer to the edge of networks, only extracting and transmitting what’s really needed.
IoT Now: Retail and consumer-facing IoT also seems to be getting a lot of attention. What are your thoughts here?
NN: This sector’s started talking about the Connected Store concept. Essentially, this involves bringing together a number of complementary systems, processes and technologies to create a connected store, complete with connected products and connected customers. In the process, you can support ever more real time demand-based supply chains, optimise on-shelf availability, increase the flow of product recommendations both by the store and by users via social networking, and, of course, avoiding frustrating out of stock scenarios. In the pharmaceutical and healthcare markets, for example, customers can now generate and share biometric data gathered through wearables, sleep monitors, and other sensors and apps. It therefore becomes possible to link this with particular product promotionlinked activities, such as making healthy menu suggestions or providing more generic healthy lifestyle advice.
Finally, a healthy lifestyle also depends on the food that we eat – and here SAP and the IoT are playing their part in what’s becoming known as precision farming. We’ve recently introduced a new digital farm app that allows field sensors to transfer data directly to the farmer – with important information on water needs, moisture level, fertiliser supplies and the right time to harvest in real-time. The app is built on SAP’s platform as a service offering HANA cloud platform (HCP) which enables customers and developers to build, extend, and run applications on SAP HANA in the cloud. The ‘things’ here might be green and alive, but that doesn’t mean that they – and the outcomes of more efficient farmers and our satisfied stomachs – can’t benefit as well!