Business in the Networked Economy

Michael Golz, CIO, SAP North America
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Michael Golz, CIO, SAP North America

The way we interact both in our personal and business lives is changing rapidly. We’ve reached a point of hyper connectivity where we are always connected and always on. The rise of the cloud and the Internet of Things (IoT) has helped facilitate this shift. In business, we are witnessing the maturation of a globalized networked economy. For CIO’s, our role is once again changing. We are being asked to think beyond the four walls of our enterprises and we’re now interacting through business networks. Because of this connectedness, we are helping our enterprises become more collaborative, intelligent, responsive and efficient than ever before.

What’s more impressive is that this new connectedness has yet to peak. The number of connection points between people, applications and devices is set to reach more than 70 billion by 2020. The IoT is having an incredible impact on all aspects of life and it has led to a major shift towards the Networked Economy. We will see dramatic increases in productivity and economic value. It will transform the way we live and work, how business runs, and how society functions–and it will do this in a time frame that is radically shorter than any other major economic transition in history.

In the networked economy data is king–and the ability to derive meaning from that data will rule. There are three characteristics of a networked economy. In the networked economy everything is digitized and tracked –from our wearable devices to sensors in everyday products, everything is connected–from our cars to our homes to inventory in warehouses and everything is ready to be shared, our content and data are all part of a global network to the extent we decide to share it. There are 1.3 billion of us connected through social networks today and there will be an estimated 2.5 billion by 2017. In business, more businesses are connected through integrated supply chains and business networks than ever before. And the emergence of the Internet of Things and the explosion of sensor data mean, more data being fed into these networks.

How will Businesses Operate in the Networked Economy?

Social networks, such as Facebook and Twitter, or online merchants like eBay Amazon and Alibaba have made it easy for us to shop, share and consume information in previously unknown ways. When shopping on Amazon, we connect both with Amazon’s own network and also outside to external merchants who are connected to Amazon’s network – Amazon facilitates this, we don’t worry about connecting to individual merchants, banks or credit card companies. It’s all done within the network.

Business networks do for business what these personal networks do for our personal lives. They provide an equally simple and scalable way for companies to discover, connect and collaborate with their trading partners in order to gather resources they need to operate. Like Amazon’s marketplace, companies can shop for goods and services, place and manage orders and pay for them electronically. They can view and manage cost across all major categories and engage customers across multiple channels – all through a single, connected platform. Truly networked businesses will operate in three keys ways:

Firstly, they will have the ability to amaze customers with highly personalized experiences. With ubiquitous mobile sensors and advanced real-time analytics, the idea of customer-centricity will advance leaps and bounds. Concepts such as the idea of connected retail, can not only tailor products at the point of transaction, but also seamlessly connect to supply chains while providing real time market intelligence to automatically adjust product allocations, pricing, and plans.

Secondly, in a business climate which is still rebounding from years of recession, businesses will be able to optimize resources in order to maximize outcomes. A great example is the Port of Hamburg in Germany, where in order to increase container volume from 9 million to 25 million over the next 10 years they are working to connect every truck, container, crane and ship via sensors to a sophisticated scheduling application. The entire logistic chain is constantly updated and is optimized. This ability to anticipate, predict and prevent as more assets become equipped with sensors is a key benefit of the IoT and business networks.

Thirdly, they’ll unleash the power of people. Giving back time to employees through automation is not enough. To truly unleash the human potential for innovation, businesses must provide the right platform that enables people to collaborate better. As more companies rely on contingent workforces, networked businesses will use best-in-class solutions in order to streamline the process of procuring and managing flexible labor. They will also be masters of managing how money is spent across their networked businesses, from travel to expenses and invoices, all in an effort to increase productivity.

Embracing the Networked Economy

According to a McKinsey study, businesses fully leveraging business networks can lead to greater market share and higher margins. This is because networked organizations have more fluid information flows, removing barriers to change. They can deploy talent more flexibly, and drive decision-making throughout the enterprise. The key lesson for businesses is: the more you embrace networks, the more you confront change and risk; the more you avoid networks, the faster you fall behind. Businesses should look to activate, optimize and transform.

  • Activate connections (connect your people, business partners, and asset resources)
  • Optimize resources (infrastructure, work­force, services and tie everything back to core processes and workflows that run your business)
  • Transform their business (by taking ad­vantage of the network effect to reinvent and automate processes in real time, simplify infra­structure and unleash human potential)

The networked economy offers a faster, more cost-efficient and innovative model for do­ing business beyond the four walls of the enter­prise. This is the power of the business network, companies can shop amongst a massive global network in order to reduce costs, become more efficient and create econom­ic opportunities we have yet to imagine. CIO’s have a unique position to identify opportunities in the networked economy, prepare the company for networked busi­ness and connect to the right platforms. As the business models change, so does the CIO’s priorities and contributions.

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