The number $53 trillion—at least when it comes to counting up the annual revenue generated by 11,000 companies—is worthy of gargantuan crunching by digital tools. After all, earning that much money at the rate of $100,000 per second would take, oh, about 17 years, give or take a few lunch breaks to grab a burger and fries.

Speaking of digital tools and tremendous digits, a new white paper by SAP used those base figures to determine just how much a difference effective digital transformation can make as companies pursue financial excellence. The report, “Companies Going Digital Are Running Their Best,” reached some must-see conclusions, such as: Digital transformation can unlock $100 trillion of value for business and society over the next decade. (Think about it: a mere 32 years at $100,000 a second.)

Further, the white paper concludes that SAP customers with high digital maturity outperform peers. The numbers—statistical algorithms and Intelligent Enterprise index scores, for starters—back up that using SAP S/4HANA, SAP Cloud portfolio, and SAP Analytics solutions will get smart businesses where they want to be.

To unpack the findings, ASUG spoke with Tony Martinez, Ph.D., general VP of SAP Industries and Customer Advisory. Here’s what he had to share regarding the strong case for digital transformation supported by top-flight tech.

ASUG: This report represents an ambitious undertaking with many key takeaways. What findings stand out to you as especially surprising?

Tony: When we set out to bring the S&P business data and the SAP adoption data together, we didn’t know for sure whether the results would support our original thesis that a long-term investment in digital business technologies should point to better business performance. So it was a pleasant surprise to see that the thesis was supported in the analysis.

There has been much written about the lack of evidence that investing in IT systems can lead to better business performance (going all the way back to the Solow Paradox, as an example). But our work indicates that enterprises investing in a sustained and integrated business systems strategy over a longer period can achieve peer-leading performance.

[Editor’s note: The Solow Paradox, named for economist Robert Solow, refers to a slowdown in productivity growth despite rapid IT development over the same period. Solow is credited with quipping, “You can see the computer age everywhere but in the productivity statistics.”]

ASUG: “Digital maturity” is a critical lynchpin of this white paper. How should an SAP customer differentiate between low or medium digital maturity, and the high maturity that enhances finance, supply chain, and procurement?

Tony: We defined “digital maturity” on a scale of 0 to 10, with 10 being the highest maturity. We looked at four dimensions when assessing maturity: did the customers have the newest SAP digital products (SAP S/4HANA, for example); what was the percentage of new products versus legacy products; were they moving to the new products; and lastly, were they using the new products?

When thinking about digital maturity, it’s also important to look beyond the product and assess the strategy a customer tries to execute. And that raises many questions. Are they trying to create digitally supported products themselves? Are they trying to innovate their business processes or business model? Do they have digital friendly governance across the enterprise and the people to make that a reality? And so on.

ASUG: In terms of creating meaningful metrics, how did the white paper tackle this?

Tony: We cover these dimensions in our Intelligent Enterprise Assessment, which is available to SAP and non-SAP customers. The IEA covers 10 Intelligent Enterprise dimensions and allows the respondent to assess their digital maturity across 70 next practices. So, digital maturity certainly means using the latest digital products, but also adopting digital thinking across the enterprise.

ASUG: One intriguing finding focuses on the “cash conversion cycle,” which shows SAP customers with high digital maturity experience a 400% improvement over industry peers. That’s a huge benefit from something as simple as getting from inventory to cash flow quicker. How does SAP achieve this?

Tony: In a word, integration. Specifically, the integration of data and processes that allow a company to buy from suppliers, to then manufacture, distribute, sell, and collect the money before paying suppliers: That’s the cash conversion cycle (CCC) in a nutshell. We see an intriguing pattern among the top quartile of enterprises. They invariably have negative CCC; that’s to say that they get their money from customers before having to pay suppliers. We see this among leaders such as Microsoft, Apple, Marathon Oil, Omnicom Group, and many other leading enterprises.

These companies have integrated end-to-end procure-to-pay processes and also integrate to their sales and financial settlement processes. In theory, this can certainly be achieved by integrating multi-vendor systems, but real efficiencies and innovation flexibility can be achieved when data is part of the same integrated application.

ASUG: How does top-flight technology make a difference at a time when supply chains are under tremendous global pressure?

Tony: COVID-19 exposed weaknesses in supply chains, principally in the ability for enterprises to have real-time visibility into the status and location of materials and products; and how to reroute products or materials based on acute changes in demand. Remote working also added to the pressure. We could no longer just rely on people to provide a status or reroute materials or products; it quickly became imperative to know where things were in the supply chain and how to move them quickly.

An integrated digital supply chain strategy helps an enterprise become more resilient. They have better visibility and agility as real-time product data is available and working processes can be quickly modified through flexible business systems.

ASUG: It sounds as though we’re not talking about something extremely complicated so much as the efficiencies gained through adopting SAP’s latest technology. Can you elaborate on this?

Tony: SAP S/4HANA, SAP Cloud portfolio, and SAP Analytics solutions continue to focus on integration of data and processes relevant to a specific industry. We continue to make the applications more flexible and nimble, knowing that change in an enterprise is not only a necessity, but increasingly an advantage. COVID-19 illustrated this well. Having a long-term, integrated digital strategy is proving a critical success factor—and that strategy should consider a broad, integrated enterprise system.

So, while it may not be something extremely complicated, an enterprise needs to consciously consider chipping away at it over time. It’s all about data in the end. Thinking not only about the data needed within the enterprise, but also outside the enterprise, is increasingly essential.

ASUG: Even when the upsides of digital change are obvious, the prospect can prove daunting and intimidating. How can SAP customers begin the process without getting overwhelmed?

Tony: We are learning that companies with long-term performance leadership also have long-term digital transformation strategies that focus on bringing together corporate data and processes. But companies can start in a focused area and work from there. For example, a company may prioritize improving their days inventory outstanding (DIO) performance vis-à-vis their peers. They could next think about the processes and data that could help them achieve that, and they can then implement specific efforts to improve supporting aspects of the business. For example, that could mean having real-time visibility of spare parts, or real-time visibility of stock in hand.

The IEA can help an enterprise identify a digital next practice that may be worth addressing. Also, SAP can provide support via Signavio to identify process improvement, and many of our partners also offer great advice on where improvements could be targeted.

The important thing? Act on some specific improvements that will move the needle on a specific business performance measure, and keep at it with strong governance that answers to senior management. In other words, think holistically.

Best Run Intelligence (BRI) industry peer benchmarking is available complimentary. To learn more, reach out to your SAP contact. To check out the white paper “Companies Going Digital Are Running Their Best,” click here.

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