DIGITAL TRANSFORMATION: SEVEN QUESTIONS FOR BILL MCDERMOTT

Bill McDermott talks about SAP’s contribution to the digital opportunity, and gives guidance on which strategies companies should pursue.

SAP CEO Bill McDermott talks about the digital transformation. (Photo via SAP)

1. How would you describe the “digital opportunity”?

Bill McDermott: It goes by a lot of different names and descriptions. Some refer to it as “Industry 4.0,” others say it’s the next industrial revolution. When you take out the buzz phrases, the digital economy is ultimately built on five converging technology trends: hyperconnectivity, supercomputing, cloud computing, cyber security, and a world filled with “things” including sensors, artificial intelligence, robots and 3D printers.

When I think about businesses in this era, there’s an unprecedented opportunity to evolve into a “live enterprise.” From customer experiences to workforces and supply chains, a live enterprise predicts the future instead of reporting the past. This means totally agile business processes and the ability to mass customize everything for every single consumer. It means connecting every colleague and asset to a single, intelligent and totally digital core system – one that can anticipate, simulate and innovate new opportunities on the fly.

“When you take out the buzz phrases, the digital economy is ultimately built on five converging technology trends…”

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The most exciting aspect of this is the permission to fundamentally reimagine the way businesses are run. I often tell business leaders that what you focus on expands. When leaders build from their customer’s customer, they are focused on a limitless well spring of opportunity. 

2. What is SAP’s contribution to the digital opportunity?

Bill McDermott: When I think back to 2010, SAP was the No. 1 business applications and analytics company in the world. It was a great model but we knew that the world was changing and that businesses would need SAP to take them into a new era. So we refocused the company on a bold vision to help the world run better and improve people’s lives. We set out on a strategy to be the number one enterprise cloud company – which we are today by measure of users – and to totally change the way businesses manage and use the massive amounts of data that were sitting dormant in 1980s databases. The big idea was SAP HANA, a true in-memory data platform that radically simplified the IT landscape and offered massive speed advantages.

Today we have SAP S/4HANA, which is the most advanced suite of business applications ever created for the digital economy. This is the digital core that gives businesses the insight, speed and security to create new digital business models. I think about SAP S/4HANA as the 21st century system of innovation for a wide range of industries. We also have SAP HANA Cloud Platform, which is giving businesses and developers the chance to build some of the most advanced and integrated business applications ever possible.

Finally, we are the only company in technology that is focused on the idea of business networks – a new gateway to the global consumer that will result in SAP becoming a true “consumer to business” company with a whole new set of ecosystem participants. Just think about how much social networks have changed day to day behavior for individuals. Now take that concept and apply it to the way businesses work together to deliver things like indirect materials or travel related services. Even something like temporary project-based job opportunities are now sourced through SAP’s business networks. Think about this: SAP is already approaching $1 trillion in commerce transacted across the business network and we haven’t even scratched the surface of this total addressable market. I think about the companies like eBay, Uber, Airbnb and countless others – these are the next generation partners that are joining with SAP to accelerate this mega-opportunity.

All of this innovation has to come together in a beautiful user experience, which SAP wasn’t always known for. But today we’re focused on empathy for the users more than ever – which might explain why we continue to win design awards all over the world. It has to be beautiful, easy to use and make people’s work life better.

3. How do you respond to critics who say that the digital opportunity may backfire, since it will be impossible handle the huge volume of data?

Bill McDermott: If Hasso Plattner hadn’t invented SAP HANA, I think people would have a point about the incredible volumes of data. Having said that, Hasso knew this would be the defining challenge of this era which is why he created a platform that was designed to manage transactions and analytics on a single platform. The processing capabilities of SAP HANA are the real game changer that makes things like redefined customer experiences and digitally connected assets a reality. The data was always going to be the most precious resource of this digital economy. In many ways the data itself is the new business model. Think about how much information companies created in the last decade that literally sat dormant in database vaults! Today the winners in business are obsessed with figuring out how to use this information to deliver products and services that consumers have long awaited. So my answer to the critics would be, yes, if you rely on 20th century technology, I can assure you that the digital opportunity won’t materialize. But for those businesses that embrace the future, the possibilities are actually limitless to grow and expand.

4. Which guidance can you give companies that try to understand how their strategies fit into the digital economy and how they can seize the digital opportunity?

Bill McDermott: One of the great innovators in modern business is the founder, chairman and CEO of Under Armour, Kevin Plank. When Kevin talks to his employees at Under Armour he reminds them of one thing: don’t forget to sell shirts and shoes. Kevin realizes that this is how his company rings the cash register and delivers on its original promise to the athletes who rely on his brand. To Kevin, the digital economy isn’t about replacing the original promise, it’s about scaling it and doing new things that make his core business the absolute best in the world. For a sports apparel company, it means knowing exactly where your consumers are, what they’re passionate about and what innovations they’ll need to get even better. Kevin and his team now have the opportunity to extend the core and simultaneously imagine entirely new business models. By running the entire company on the SAP HANA platform, they can see and engage every individual consumer from tweet to receipt – in every channel or community and on any device. As the apparel itself becomes a device that report biorhythms and athletic performance, soon you have a healthcare and technology company with a future 20X the size of the original dream.

So my message to business leaders is actually fairly simple: we have to walk and chew gum at the same time. Leaders can accelerate the core, while also inventing entirely new business models on the fly. This imagination enables us to simulate, predict and invent the future instead of wasting all our precious time reporting what already happened. Be open to new partnerships that can help you offer new products and services – some of them inherently digital. Above all, have a clear vision and a strategy for what you mean to the world and where you are headed. Leaders will be forgiven for a lot of things, but never for a lack of vision and strategy.

5. Which industry will be the next one to be disrupted in the coming years?

Bill McDermott: I think if you look at an industry like healthcare – 10% or more of the world’s GDP – it’s absolutely about to be disrupted in a very significant way. For a long time the most powerless person in the health care system has been the patient. Here the instincts meet the unmet solution in a huge market. Medical research, electronic health records, human genome sequencing and personalized medicine – tying this together on a single, digital, in-memory health platform is a massive undertaking. I view SAP HANA as the foundation for personalized medicine because of its unprecedented capacity to handle all these inputs – whether it’s the genomic, clinical trials or the patient information. There isn’t a short term business case that makes much sense. Having said that, we must do this not only for commercial reasons but more out of personal respect for first responders, nurses, doctors, surgeons and ultimately the patient. The human fabric has held it all together. It’s time they get help from leaders and technology. We can do better. I lived it firsthand, that’s how I know.

6. Which role does leadership play in this disruptive environment?

Bill McDermott: The true measure of a leader is not what we take from this world, it’s what we give. You have stay humble and hungry, drawing on the hunger of the underdog who takes nothing for granted, and the humility of knowing it has and always will be about the people around you. This is how you develop common goals, shared values and a culture built on enduring trust. Above all else your word has to define you. If you make the promise, you keep it. This is what it means to be a leader of consequence, a standard to which we must all constantly challenge ourselves. If ever there was a moment when role model leadership like this mattered, it’s now. People are looking for the permission to be disruptive and to innovate a better way. I’ve often felt one of the most destructive phrases ever used in business is, “this is the way we’ve always done it.” Leaders need to reject this kind of complacency and create an environment where every colleague feels compelled by a greater purpose. At SAP, we chose to focus on helping the world run better and improving people’s lives. If a leader doesn’t wear a bold vision like this on her or his sleeve, the people will never follow.

7. In your book Winners Dream, you describe the prototype of the American dream and the uncertain situations and challenges you overcame. What will carry you into the next chapter of your life?

Bill McDermott: My highest aspiration has been to be a devoted husband, active father, good brother and friend – this remains my passion. Beyond that I live every day blessed by the knowledge that I’m doing exactly what I want to be doing while surrounded by people I deeply believe in. Everything in my life started with a winner’s dream and I can only tell you that the dream is the journey itself as you strive to be true to yourself and create a life of authenticity.

It’s not only about what we did, but even more about what we didn’t do. These are extraordinary times and the size of our ambitions will perfectly correlate to the future companies we leave behind. We need the will to solve some of the world’s largest challenges, as they are also our greatest opportunities. Source: Digital Relevant.