[Russell DeLapp]: I think the simplest way to define the Intelligent Enterprise is simply the more that you use the system, the smarter it gets.
[Peter Kowalke]: Hi, this is Peter Kowalke. Today I’m here with… Thanks for joining me, you two.
[Ralph Hess]: Hey, Peter. How are you?
[Russell DeLapp]: My pleasure.
[Peter Kowalke]: Let’s start off with sort of a basic question here. What does it mean to be an intelligent enterprise?
[Russell DeLapp]: What we mean by the intelligent enterprise, and going through that digital transformation, is as your business grows, so does your data. And having a system that understands that data and is able to process that data is gonna be extremely important.
And so not only is it important to understand and process it, but also to act on it. And so when systems like SAP come with AI embedded in it, AI loves data. And so the more that you use a system, the smarter it gets.
And so different things like... processing your AP and that digital transformation instead of getting that paper invoice, writing it off, and going through a manual process, we can have bots monitor your email, extract the data out of a PDF, and upload it into your system.
[Peter Kowalke]: So what I'm hearing is it's largely about using data more intelligently in conjunction with AI and maybe automation?
[Russell DeLapp]: Absolutely. Correct.
[Ralph Hess]: Yeah, Peter, I think there's a critical point that Russell mentioned, which was that digital transformation, right? Oftentimes the terms are used very much interchangeably. But what digital transformation really means is it can really be a range of different points
that people access a digital transformation all the way from a high growth company that's moving on from QuickBooks and spreadsheets and, you know, Johnny's little Access program, all the way up to larger enterprises, which have invested millions of dollars into SAP and enterprise level systems, which they've customized. And in both of those cases, the company is arriving at a decision where we need to really take a step back and look at all of our processes and digitally transform onto a new platform.
So as we take a look at the concept of digital transformation, upon which then the intelligent
enterprise can exist, that's where those two really become linked together.
[Peter Kowalke]: Maybe we should talk about digital transformation in a little bit then? What are some real examples of digital transformation in practice? You kind of outlined it a little
bit, but can you paint us a little bit more of a picture of what that actually means in practice?
[Russell DeLapp]: Yeah, digital transformation is really a journey, right? Every step you take towards digital transformation is gonna make your entities or companies more resilient, more competitive and more predictive. So the more that we can automate through intelligent
enterprise capabilities like machine learning and AI, allows your employees to be more of a value add to your organization.
Being more strategic, looking at KPIs. Every step you take is gonna make you more efficient, and more predictive, really to get the insights that you need to make quick business
decisions in our dynamic economy that we're in these days.
[Peter Kowalke]: Well, you guys work with a lot of businesses that are going through digital
transformation. Can you give me some examples of digital transformation in practice?
[Ralph Hess]: Yeah, I think that probably our best examples come out of our life science
practice, which we do quite a bit of work with some of these companies that have started a journey of science, right? As Russell referred to the journey, really the journey and the maturation of a company is a great example of that. So as you start up businesses, they
start as, you know, really science experiments or just kind of a science exercise, trying to discover the next great cure, the next great therapy, et cetera. And so as they get started, they really piece together those systems.
And remember, systems can be something you do manually in a spreadsheet, keeping track of your financials, right? So as they take a look and make that next step into becoming
what we'll call a real company, really a real enterprise, that's when they need to do a digital transformation, taking digital information out of Excel, digital information out of other sources and putting them into a cohesive system.
Now the data is really only one piece. The other piece is the processes that you put in place to be able to put the controls and predictability, as Russell suggested, into the business itself. So really that digital transformation is taking you from where you were, adopting new
kind of best practices or fit to standard type operations within your business and really implementing the controls and processes that you need to have to allow the business to have a foundation upon which to grow.
[Peter Kowalke]: So what I'm hearing is that the digital transformation is both harnessing
your data and also setting the processes and the systems to effectively use that data.
[Ralph Hess]: That's correct.
[Russell DeLapp]: To add on to that, right, Ralph mentioned digital signatures. And so you can technically sign a document, but the challenges with that, obviously, is that person qualified to sign off that this procedure was done properly. And so when you digitize that
we're able to put in those controls, those certifications to allow that scalability and to have the same compliance that you're going to need for your CFR 21 part 11…um, compliance.
[Ralph Hess]: Let’s use the example of another, let’s say, large consumer products company, of an apparel and footwear company that's a very large customer of ours. And they recently have done a digital transformation moving from the system that took them from, you know, a $10 million company to a $200 million company. And they had excellent systems in place, but to “continue the journey,” as Russell referred to it, to be that half billion, billion Dollar enterprise, they needed to do another digital transformation from where they were, onto another more robust platform that could handle some additional complexity of their business, implement some additional intelligent enterprise methodologies, and really allow
them to continue that journey to their billion Dollar value and volume that they were looking for.
So really, you know, two examples at different ends of the spectrum.
[Russell DeLapp]: And both of them followed the same journey that we talked about before.
Digital transformation and intelligent enterprise, they all kind of come together in three different components that we classify them as, as we are guiding our customers through this process. You have your process transformation, right? Which is pretty obvious. You're going from paper to more of a digital way to do things. You have your business model transformation, because now you have more data that you're controlling and setting up to scale.
But, the most important part is the organizational transformation, that changed management within the organization. From having the historical knowledge of how to do something
and having the leadership to inspire the new wave of innovation and leveraging
these new tools to drive your business. And so really what we see that the end result of all of that is to increase the effectiveness and employee experience interacting with the system and doing their jobs.
Nobody likes to do something that's redundant over and over again that doesn't add value.
So we find that after the change has settled, it's a much better experience for employees. Beyond that, there's also the customer side of things. Knowing somebody that has a system. If you're in life sciences, for example, you're going to want to know that your supplier of your treatment is on an SAP product that has that compliance and control as part of your vendor validation and verification. But also internally as well, once you go through that work
change, now you have a system where you can innovate on, right? You're not worried about breaking the process because everything's paper driven.
So it's a lot easier to see, enhance, and have that center of excellence to constantly be improving your processes with the digital background.
[Peter Kowalke]: You know, we’re talking as if digital transformation is a great thing. And it is. But let's get a little more specific here. What are the advantages of being a digitally transformed business? You know, why do we go through that effort?
[Ralph Hess]: Well, I think primarily what I refer to it as in very non-SAP-anese terms, right, very kind of plain speaking terms, is what you do is you're implementing a system that you can count on.
So another, some people will think, boy, you know, we have to have an army of people supporting the system, right? That was the concept of previously having a large enterprise SAP system. It was an army of consultants to keep it going, right? In today's world, digital
transformation is really minimizing that. It's moving things to the cloud with ready to deploy, ready to run business process. So now you really don't have to worry about supporting the
system. You have a tool that can support you.
Now you can do the innovation that you're looking for. You can pay attention to the business and being strategic about the business, using all the great tools that are available: artificial
intelligence, robotic processing, process automation, those types of things that allow
you to really focus on improving your business, optimizing your business, both for your employees and for your customers, rather than having to worry about, you know, when's that next step upgrade going to happen that I need to reengage a consultant for and how much disruption is going to happen organizationally because of that.
So it's really changing that mindset to having tools in place, a foundation in place, that you can count on that just repeats itself that you can continuously improve rather than the older model of what systems were.
[Peter Kowalke]: So what I'm hearing is: instead of IT being its own thing, IT is just, it's what can it do for you? You're not focused on the IT as much with a digital transformation. You're focused on the results of the IT.
[Ralph Hess]: That's right. Yeah, as my colleague Russell likes to say, what we do is focus on outcomes. Right? When you start to pivot from what do I need to do to get this done, to what's the outcome I'm looking for, and then go backwards from there about what innovation do I need to put in place, and now I have a good foundation upon which to innovate. Now I can start to worry and start to predict what my outcomes are.
[Peter Kowalke]: Are there any other benefits to digital transformation besides getting away from the maintenance and the focus on the IT side of things?
[Russell DeLapp]: I think there's, I would classify it as three main ones, right? You have real-time information and data that increases your insights and allows you to pivot and make quick business decisions. That's number one.
Number two is going to be ultimately, you know, it's going to support your business's growth, right? So it's the only way to really truly be scalable at the rate that the customer, specifically when you're growing very fast over a short period of time, to put that digital transformation in early is the only way that you're gonna achieve that scale in an efficient way.
And finally, it comes down to what I mentioned before. It's extremely important to have a compliant system, whether it's GAAP, that's not gonna limit you in growing into
other countries, or whether it's more in your industry, different compliance or regulatory industries. Whether it's Life Science or Food and Bev or DCAA, all those are important to select the system that's going to support those different industry compliance and regulations beyond just your statutory requirements by your local government.
[Peter Kowalke]: What does it actually look like to digitally transform?
[Russell DeLapp]: Yeah. I mentioned it earlier where we have those three different categories, right? The first one starts with the business process transformation. And so we start off in an implementation by a rapid time-to-value and we'll talk more about our methodology later.
But it really comes down to getting you in the system within 30 days, and showing you an end-to-end best business practice for your industry. So it's not just a general best practice, but it's an industry best practice. And so giving you the opportunity to see what SAP has to offer instead of just blueprinting what you have today and try to rebuild that on the new
system. So that's step one. We show you what's there.
Step two is we begin this mapping process from your current processes and go through change management, how each one of those processes is going to change, how your roles are going to change, and potentially how your organizational structure is going to change.
[Peter Kowalke]: I've heard you talk in the past, Ralph, on the importance of the change management. You know, that really is where a lot of the challenge points are, isn't it?
[Ralph Hess]: It really is, Peter. Change is difficult, right? It's, we don't run away from that as an organization. We never tell you this is gonna be easy and fun because it's not. It can be fun at the end, right? Because you have those outcomes and you achieve what you wanna
achieve with the project. But change is difficult.
People are always, you know, adverse to change. But the way that we go about it is very... workshop-oriented. We like to show the results early so that, you know, we're never ripping
off the bandaid and then let it continue to bleed, right? Where, you know, we're going to do make changes. I think one of the things that needs to be set up front is that it's really a leadership mindset within the company that needs to provide the room for the employees within the organization to make that leap as well. And so they need to be able to understand that leadership is embracing the change.
They're going to give them the room to be able to work through things, go through, make mistakes, have things kind of iterate through the process and be able to adopt what might not be Sally's secret sauce for processing AP, but rather a best business practice that has been proven over 50 years. So again, change is difficult, but again, leadership and giving the team the ability to have the room to make those changes is what's really critical.
[Peter Kowalke]: What are some of the other challenge points with digital transformation?Where have you seen businesses get stuck in the process or have challenges? Change management, of course, is one of them. Are there other areas, though, as well?
[Ralph Hess]: I think that there's times when I've seen implementation projects… Again, Russel runs the implementation side, but my observations are that sometimes people are slow to make decisions, right? Because they haven't been given the room by leadership to make these decisions, to be able to make mistakes, they may overanalyze. They may try to think beyond what really the scope is we're looking to have them accomplish. And so as we look at implementations and really Russell talked about that speed to value, part of this overall digital transformation is not to have it take two or three years, it's to get through it in months, not years, and being able to make sure that decisions are made in such a way that they're high-quality decisions, but that they don't take forever to make and kind of slow down the momentum of the overall project.
[Peter Kowalke]: So let's, we started actually talking about the intelligent enterprise, and then we moved over to digitally transforming to an intelligent enterprise. What does it look like at the end when a business has gone through digital transformation, now they're
an intelligent enterprise? Can you give me some practical examples from clients you worked with on, you know, what that... You know, the end result. What does it look like in practice? An intelligent enterprise.
[Russell DeLapp]: I think the simplest way to define the Intelligent Enterprise is simply the more that you use the system, the smarter it gets. Right? And so, for example, when I'm reconciling my goods receipt with my invoice receipts for any differences, the system learns every time I make a decision, and it assigns a confidence level on it. So the next time I go through there, I'm looking at the confidence level, I'm only looking at exceptions, and that exception list is getting smaller and smaller and smaller.
And so what that does is it, again, it comes, I'm very big on experience. It increases that employee experience. They enjoy using the system more, but it also makes them more efficient and all the things that we mentioned before. It allows them to be more of a value-add to the organization, to review those insights that we looked at before and provide different pieces of information to the business itself, rather than being more transactional,
process-oriented. The second part of that is using different elements of the technology: machine learning, AI, robotic process automation. Like we gave the simplest example is the AP, right?
You have a BOT monitoring your email. It's going to go through and extract a document. And then we can use Intelligent enterprise flow to analyze that if it's a PDF, follow this chain of events. If it's an Excel, follow these chain of events. Then it goes to extracting and mapping the data, for example. When the data is mapped, we'll put conditions and confidence levels on how that mapping is being assigned and provided. And then person is notified. And so
finally, when it comes to leveraging the BTP to fill this out, we can pull in those AI models and learn from those exceptions and how the human address those exceptions.
And then we can do that job for them next time based on the confidence levels. And so again, the more you use the system, the more intelligent it becomes. And ultimately the better the system can support your growth.
[Peter Kowalke]: And by BTP, you mean the business technology platform that SAP has.
[Russell DeLapp]: That’s correct.
[Peter Kowalke]: And that we will be covering in a future video.
[Ralph Hess]: Correct.
[Peter Kowalke]: as part of the program. Are all companies, should all companies be intelligent enterprises? Who, what sort of companies should be looking at becoming an intelligent enterprise?
[Ralph Hess]: Really, as you look at it, every company should strive to be an intelligent enterprise. There isn't any demerit for not being one, but as you take a look at being competitive in having the ability to leverage people's intellect in a higher value way within the organization, you wanna shift them from doing repetitive processes that are redundant,
and again, as Russell referred to it, not adding a ton of value to the business.
Obviously, the transactions need to get transacted, but there's very little money
made on the value of creating a transaction. All the value in a business is in the creation of the value that the human intellect can create. New businesses, new products, new business lines, new routes to market, those are all things that you want to have the freedom to be able to think about and to be able to bring to the business. And I can be thinking about those things if I'm not worried about approving people's expense reports for my field service organization, or having to look and review their payroll and make sure they recorded their
payroll correctly. Right?
So as you start to take those manual, repetitive, redundant processes out… Another one is, let's download data into Excel and let's manually create a bunch of different models in Excel. The system can do that for you. You have predictive analytics that come with the system.
Let the industry expertise that SAP brings to the table, start to guide you through some of those types of processes. Again, leveraging that insight to be able to make better business decisions.
[Peter Kowalke]: So what I'm hearing, really, is it's the routine tasks, a lot of the scut work, let the system handle that. It frees then the employees up at all levels of a company, to really
focus on that next level, on that strategy component, on the how do we make this better instead of those routine things that fill our day and maybe make us feel like we're busy, we're doing something but there's really something better we should ideally be doing.
[Ralph Hess]: That's correct, Peter. So I mean, we're really not just talking about the folks in the front office, right? We can be talking about people on the shop floor. Why is the person on the shop floor having to redundantly enter data and be able to run spreadsheets and
be able to do their scheduling off of that?
They could be thinking about and bringing to the business better ideas of how the shop floor could flow. They may see something in a process, a manufacturing process, a packaging process, that could run better. But if their heads are down doing the transactions, they don't
have, again, the freedom to be able to think about those things.
[Peter Kowalke]: It almost sounds like a version of what everyone says, where we're going with AI, basically. AI will free us up to focus on higher value things. In some regards, that's what I'm hearing with intelligent enterprise. And maybe that's because AI is a component of
that. But what I'm hearing is this is here today, not this where we're gonna be in the future. This is actually something businesses can get to today.
Is this something that small businesses can get to today? What size business should be realistically saying, yeah, let's move towards digital, let's digitally transform and move to being an intelligent enterprise. Is there a, when should they start thinking
about this way? That yeah, we need to do this.
[Ralph Hess]: Well, they should be thinking about It at every stage of their business development. We have customers that are as small as five or $10 million looking at trying
to automate their accounts payable processes as Russell has made the example.
Where you go in and you read the email, a BOT is gonna read your email and then
it's the machine learning's gonna understand more about the data that it's extracting and then processing it through a workflow. Those are available in systems that are very accessible to companies that are anywhere from let's just say, $10 million to a $1 billion. A lot of it comes down to what leadership's philosophy is on technology, and how they want technology to be able to help them on their business journey.
So if it's somebody who sees the cost of a system, a monthly subscription to a system, as that, a cost, then that's a very different mindset than somebody… You know, we're working right now with a prospect that is a land surveying company, right? Very unelegant or inelegant business, right? They go out, you'd be amazed at the technologies with lasers
and stanchions and things that they use today, and drones, etc. Right? So they've
innovated in the field. The owner of that company has the vision that he wants to leverage the technology to enable them to continue their growth. They've reached a certain stage of their business life where they can no longer exist with what they have today.
And they know that they need to digitally transform in order to enable some of those intelligent enterprise methodologies to be employed on their business.
[Russell DeLapp]: Yeah, in other words, it's a tool to do more with less, right, that intelligent enterprise. And so with small companies, often they wear multiple hats. And so really, you need to get to that point, as Ralph mentioned, it depends a lot on the growth strategy
and the year-over-year growth that they plan for, the size of their organizations as small as five, $10 million. But at the same time, the mindset has to be there as well, right? To have that growth strategy in place and leverage the tool as an asset instead of a cost.
[Peter Kowalke]: Well, thank you very much for taking the time to talk with me, Ralph, and Russell. I definitely appreciate it and you've given us something to think about.
[Ralph Hess]: We've enjoyed it. Thanks, Peter.
[Russell DeLapp]: Thank you.