SAP Leonardo: A Key Step in SAP’s Own Digital Transformation

In order to understand the importance of SAP Leonardo, it vital to realize that it’s a key step in SAP’s own digital transformation.

Digital transformation is leading to rapid changes in every industry — and of course this also applies to the technology business and SAP itself.

New technology opportunities such as IoT, big data, and machine learning are making dramatic changes to the business landscape. Consumers have new requirements and expectations, and there are opportunities to deliver products and services in new ways. SAP Leonardo is an important element of SAP’s strategy to adapt to these changes.

Until now, SAP has typically been mostly associated with “systems of record” — the business applications that provide the essential foundation that keeps organizations running smoothly. But over the last few years, notably with the game-changing SAP HANA technology, SAP has worked very closely with its customers on business transformation, and learned a lot about what it takes to succeed, compared to more traditional IT implementation projects.

Unlike typical ERP upgrades, digital transformation involves creating new business models by bringing together the real and virtual worlds — and this means new ways of selling, new relationships with customers, partners, and suppliers, and new organizational structures.

SAP realized it had an opportunity to do more to support its customers in these efforts, with new ways of packaging its products and services to meet the new needs.

The result is the new SAP Leonardo.

There are already lots of great SAP Leonardo explainer blogsarticles, and interviews out there, but briefly, it’s a “digital innovation system” that was created to help SAP customers innovate at scale to redefine their business. In other words, Leonardo is designed to provide everything SAP customers need to actually succeed with digital transformation, not just technology.

But what’s particularly interesting is that SAP Leonardo was created using many of the same digital-transformation-enabling processes that are included in the system itself:

Design Thinking. Digital transformation requires a lot of technology, and that’s something SAP has a lot of experience in providing. But technology is only one factor in customer success. SAP used Design Thinking to look at the end-to-end digital transformation customer journey, identifying the real problems that were holding back success even when the technology worked perfectly. These turned out to include difficulties in prioritizing transformation projects, effective collaboration between IT and business units, the need for flexible prototyping, ensuring there were clear business cases, avoiding disconnected “islands of innovation”, and many more.

Reimagined products and services. The next step was to figure out how SAP could help customers overcome these non-technology factors. In looking at real-world customer implementations, SAP quickly realized that different business units around the world had pragmatically addressed many of the key barriers to success. But there was a lot of variation as to how and when these methods were being applied. The answer was to include in SAP Leonardo the best practice activities — such as Design Thinking workshops and the BUILD prototyping technology — that had been shown to work in the field and align them into a single coherent set of processes that could be applied consistently.

New business models. Digital transformation isn’t just about innovation, it’s about new ways of innovating. In particular, it requires a lot more experimentation, iteration, and flexibility. In traditional business application implementation, the scope of potential benefits are relatively easy to calculate. But when testing unproven new business models, it’s hard for organizations to commit to large investments until prototypes have been proven to work with trial customers.

This drove changes to traditional SAP pricing and packaging models. SAP Leonardo is priced to be easily “consumable”. For example, there are fixed-cost Industry Accelerators that include both technology and services allow customers to experiment quickly at a reasonable cost. SAP Leonardo projects are designed to enable real innovation in a particular business area in just a few weeks, while also providing the foundation for more comprehensive, company-wide transformation.

New ways of working. Successfully bringing all the elements of SAP Leonardo together from the customer’s point of view required new ways of coordinating SAP’s internal resources. Changes to SAP sales training and incentives were needed because digital transformation projects are often managed very differently from core IT business application initiatives. And to truly help SAP customers innovate at scale, new relationships were needed across the ecosystem of SAP partners, including services providers such as Accenture and Deloitte, and other key digital transformation giants such as Apple, Amazon, Google, and Microsoft.

Iteration over time. Digital transformation is never “completed”, and so SAP Leonardo will also change over time. The system is designed to be flexibly updated based on the pragmatic experiences of what actually works. For example, it’s essential to make sure staff are motivated to help accelerate business model transformation, rather than resist it. And so, for example, it might make sense to extend SAP Leonardo to include elements of SAP’s SuccessFactors collaboration and performance management capabilities. And because companies want to be able to quickly experiment with multiple technologies without being slowed down by complex contract negotiations, customers have asked about more flexible “fixed price menu” options, and risk-based / profit-sharing options for new business approaches. To help guide these changes, SAP has launched the SAP Leonardo International Focus Group community to allow customers to give direct feedback.

From “Run” to “Win”. The bottom line is that today’s enterprise business applications are no longer just important for efficiency and reliability. They are the core foundation and enablers of the business models of the future. It’s not only about running the business better, but also using the technology to transform customer experiences and win new market share within rapidly-restructuring market boundaries.

SAP has long been known as a leader in providing organizations with the systems they need to take to step up their corporate growth. And now, by helping SAP customers dramatically scale up their digital transformation efforts, SAP Leonardo is set to help SAP maintain leadership in the fast-changing technology industry.

To read more about SAP’s strategy, read the Q&A with SAP CEO Bill McDermott.