Dan Miklovic and I had the opportunity to attend SAP Leonardo Live last week in Chicago. Entering the week, we both agreed that would could count it a successful two days if we could answer the question, “What is SAP Leonardo?”
The branding and product set at SAP have been quickly evolving over the past several years— check out this previous post if you want a quick tutorial.
SAP first announced Leonardo in 2016 and the company has been quickly refining the scope, positioning, and value statement. It seems like it’s closing in on a definition and answer to the question that may stay relatively stable over at least the coming few years.
When we pose the question to SAP spokespeople, their answer is threefold. First, they describe it as a digital innovation platform. Second, they describe it in terms of what problems it can solve. One customer example from the event was, “Can we predict in real time where a Dutch footballer will aim a penalty shot?” Finally, they describe it in terms of the “innovative technologies” delivered as services on top of the SAP Cloud platform like machine learning (ML), blockchain, Big Data, Internet of Things (IoT), analytics, and more.
System of Record Versus System of Intelligence
LNS particularly likes the idea that SAP S/4HANA is a system of record and SAP Leonardo is a system of intelligence. LNS sees Leonardo not as a collection of web services and APIs but rather as a framework and set of digital enablers for Industrial Transformation. SAP should be applauded for elevating Leonardo to a business and innovation discussion, completely removing product or functional requirements from the dialogue. This is the direction that many IT and operations technology (OT) vendors are trying to head, and almost all of them struggle. Of course, the approach creates a different problem — like answering the question, “What is SAP Leonardo?”
How should industrial customers think about and potentially engage with SAP Leonardo? Here’s a summary of what SAP recommends:
- SAP Design Thinking workshops focus on solving specific business problems in a short timeframe — weeks or several months.
- Leonardo accelerators to speed interoperability between existing SAP technologies, making it easier to buy through consolidating what used to be multiple products and license agreements into a single subscription. On stage, SAP gave the example of one accelerator that went from seven products, five license agreements with a list price of $450K to a single license agreement at $300K.
- Rapidly scale new digital solutions across value chain processes. Examples in the showcase included new user interfaces and use cases that incorporate artificial intelligence (AI) and chat bots across procurement, retail, manufacturing, warehousing, service, and more.
LNS Research recommends industrial companies consider the following:
- Digital Transformation is more about transformation than digital. Most companies now realize digital is not a goal or destination — in other words the objective is not to become a digital company. The right perspective is that digital is an enabler to transformation and ultimately becoming a better, more successful company.
Workshops are an incredibly powerful tool to jumpstart transformation, but they need to be aligned with an executive-sponsored initiative and they must be cross-functional. As such, these workshops should include people from not just IT but also OT and Operational Excellence. It’s often beneficial to have an external third party as a trusted advisor in the workshops. This is clearly the role that SAP and its partner ecosystem wants to play with Design Thinking workshops. In some cases this can work while in others it can create bias towards SAP solutions and further increase the OT-IT divide.
- Accelerators can help companies move away from a big bang approach to technology adoption and instill a process of innovation that drives transformation. Accelerators also presuppose an existing strong commitment to SAP products — they will work well for companies that have committed to SAP across the system of record. If your organization has multiple ERP products, or has chosen best of breed solutions across product lifecycle management (PLM), manufacturing execution system (MES), supply chain management (SCM), and more, accelerators might not be for you.
It’s also important to note that SAP is clearly increasing its focus on asset-intensive industries and digital use cases, which LNS sees as a powerful starting point for many companies. Finally, as SAP further develops Leonardo and Leonardo accelerators, the company will have to be careful to ensure these don’t become mutually exclusive — sending customers down a path they will later regret, and essentially locking them out of some needed functionality.
- Rapid scaling is the benefit of choosing a solution provider with a robust Industrial Internet of Things (IIoT) platform. Pilot projects and workshops should focus on both short-term business value and long-term transformational value. In this regard, LNS fully supports the concept that digital solutions should span then entire industrial value chain.