Why Today’s Economy Demands a New Mindset

Discover How Interconnectors Illuminate the Way for Other Intelligent Enterprises

by Lauren Bonneau, Senior Editor, SAPinsider

Prior to recent global events, there had been much commentary about the idea that we are heading into an experience economy, including what that might mean and look like for SAP customers on their intelligent enterprise journeys. Many companies had already begun to realize successful transitions by starting to connect their operational data (O-data) with their experience data (X-data). Even though the business landscape has recently changed with COVID-19, connecting X-data with O-data remains just as relevant, as evidenced by The Campbells Soup Company and John Hopkins, for example, which achieved dramatic supply chain and inventory management savings by incorporating experience management (XM) initiatives.

While combining X-data and O-data into one or two functions of the business is a good place to start, integrating X-data and O-data across the entire enterprise — including all departments and all lines of business — takes an organization to the next level in today’s economy. In addition, with remote workforces and frontline employees working under stressful conditions, looking at X-data related to employees is more relevant than ever.

A Fundamental Shift in Mindset

Successfully creating value through improved experiences takes more than simply investing in technology. According to SAP’s David Jonker, Vice President of SAP Insights research center, it requires a fundamental shift in mindset. SAPinsider recently spoke with Jonker, who leads a team of individuals that studies different business and technology issues and trends through surveys along with qualitative and future-oriented research.

During the second half of 2019, this research team published findings illuminating the four common traits exhibited by organizations that have mastered the experience economy. The goal of this study was to determine — through multiple-choice and qualitative questions — if patterns exist around how different departments or lines of businesses across organizations are exploring XM initiatives. The survey used for the study was executed via Qualtrics. It asked questions about straightforward topics — such as the X-data and O-data an organization is capturing, sharing, and integrating across its systems — as well as more subjective questions centered on the respondent’s thoughts about certain issues.

The research team had previously conducted several future-oriented studies looking at the major trends shaping the customer experience. “In those studies, we queried various industry experts specifically chosen for their deep expertise in customer experience to understand the major trends on the horizon and how customers were changing the way they engage with vendors — whether business-to-consumer (B2C) or business-to-business (B2B) organizations,” Jonker says. “What we wanted to do with this study was try to understand what the experience economy looks like internally. We wanted to uncover what organizations are doing — or not doing — as it relates to embracing XM initiatives at the customer- or employee-experience level. Where are they investing? How are they approaching their technology challenges? How are they preparing for XM initiatives? And, at the end of the day, how ready are they for these future customer experiences?”

The blind survey — meaning respondents did not know the sponsor of the research — collected responses from 2,800 business executives worldwide over the course of two months, from August to September 2019. The survey data revealed that a majority of the responding executives are already engaged in XM initiatives — 67% of respondents reported that they are on the path to connecting X-data with O-data to improve business performance. In addition, 52% claimed that they will be using intelligent technologies to automate processes and operations within five years. After thoroughly analyzing the survey results by slicing and re-slicing the data in multiple ways to identify emerging patterns, the research team uncovered an interesting finding.

The research found that 17% of the executives surveyed were “interconnectors,” which means they claimed their business was integrating both X-data and O-data across their entire organization. “When you talk about interconnectors, it’s a spectrum: Some people are highly integrative, others are very siloed, and there is everything in between,” says Jonker. “As we analyzed the individuals who were taking the most integrative approach to thinking about these issues, four patterns clearly emerged within the data.”

Four Traits That Are Critical for Success

Based on the survey data, executives who are figuring out this mindset shift and capitalizing on integration to get ahead in the experience economy — those who are interconnectors — display four traits that are critical for success:

  • Engaging in systems thinking: Interconnectors are taking an integrative approach to collecting and blending O-data and X-data, using intelligent technologies to analyze it, and building a technology foundation capable of integrating disconnected data as a whole.
  • Linking customer and employee experiences with operations through data: In every major area, interconnectors report having efforts under way to combine X-data and O-data to advance business goals, and they are applying this data to improve customer loyalty, increase employee engagement, drive product demand, accelerate data-driven innovation, launch flexible business models, and control spend.
  • Identifying and acting on signals and patterns they detect from intelligent technologies: Interconnectors recognize that automating operations is the most effective way to uncover data insights and operationalize them. They are far ahead of their peers when it comes to machine learning, for example — 58% of interconnectors are using machine learning versus 28% of their peers.
  • Improving information flow and removing silos by modernizing IT systems: Interconnectors are focused on continuous improvement. They will continue to prioritize automating processes and operations with intelligent technologies over the next five years, and they are more likely than their peers to invest in technologies such as artificial intelligence, machine learning, Internet of Things (IoT), big data, and predictive analytics.

The research found that interconnectors saw better financial results — evidenced by higher revenue growth and higher profit margins — than their peers, meaning those identified as interconnectors were more likely to be expanding than other organizations. The survey included a set of questions about the organization’s growth, such as the percentage the business is growing or declining this year and the percentage it is likely to grow or decline over the next two years, according to Jonker. “While the organizations that were most aggressive with their integrative approach saw the best results, there was an interesting anomaly in the data where a small contingent that had a very industrial mindset and continued to operate in silos also saw decent margins,” he says. “Our theory is that if you have your head stuck in the sand and are not investing to adapt to today’s economy, you can actually achieve decent margins for a while. But you will eventually encounter some serious problems, and it will hurt you in the long run.”

Accelerating the Mindset Change

In the days ahead, the experience economy will certainly play a role in the challenges that companies will face in understanding how to operate in the new normal. “Coming out of the multiple studies we have done, we have a theory that COVID-19 will surface a lot of these XM trends and accelerate the mindset change for some folks,” Jonker says. “The convenience of ordering online is only going to grow, especially as technology that delegates simple tasks gets more sophisticated — such as voice assistants that not only order groceries for consumers, for example, but can anticipate the shopping list based on previous orders.”

A brick-and-mortar store used to be a place for procurement. However, post COVID-19, people will have become accustomed to ordering everything online because they could not go to stores to make purchases — and a lot of that behavior will stick, according to Jonker. “In the process, the way that companies engage with their customers will have to change,” he says. “If ordering everything online becomes the de facto for many people due to its ease and convenience, then why go to a store? Now, if businesses want to get people in their stores, they will have to focus on the experience.”

Jonker believes two kinds of organizations will be very successful moving forward: 1) those companies that can figure out how to create very compelling experiences and stay front of mind for their customers because they are giving a lot of thought to their XM initiatives; and 2) the businesses that don’t care about being front and center but rather decide to compete on margin and become what he calls “background brands.” He says, “Organizations that don’t start thinking about how they engage people will run the risk of getting pushed into the background — and that might be OK with them if they want to run a commodity business on margin. But generally, experiences will matter even more.”

The research shows that many organizations have yet to change their mindsets. Of the non-interconnectors, 50% are currently modernizing their IT systems — and, according to Jonker’s theory, if they fail to change to a more integrative approach now, they will miss a huge opportunity to help their entire business.

To learn more about how to be an intelligent enterprise that is ready to make the mindset change and become an interconnector, visit here.