Hans Thalbauer, SAP, Senior Vice President, IoT and Digital Supply Chain Solutions, joins SAPinsider's Ken Murphy to discuss SAP Leonardo at the SAPinsider SCM-IoT-PLM-Manufacturing 2017 event. Ken Murphy, SAPinsider: Hi, this is Ken Murphy with SAPinsider, and I am at the SAPinsider SCM-PLM-Manufacturing-IoT event 2017 in Orlando. This morning, I am pleased to be joined by Hans Thalbauer, who is the Senior Vice President for IoT and Digital Supply Chain Solutions for SAP. Hans has just recently delivered the keynote address here. Hans, thank you for being with us today. Hans Thalbauer, SAP: Thank you. Ken: One of the things we heard a lot about in the keynote was about how companies are moving from producing things to now producing outcomes, and how that is the hallmark of a live business. I was hoping you can address the importance of getting to that state today. Hans: Yes, manufacturing is fascinating if you think about all the changes going on all at the same time. Some companies are really introducing complete new business models, which is really what you’re asking about. So instead of selling the product which I’m producing, I’m selling the output of the product. It’s a very different way of thinking, it’s a very different approach how you need to structure your entire business model for this specific business unit or for the entire company. Actually companies are introducing that for specific business units at the moment; they’re not giving up completely the let’s say more traditional way of selling the product or the machine itself. It’s mainly actually done with companies and industries where it’s machine producers. You think about an example like Kaeser Compressor, a Germany based company producing compressors for compressed air, and instead of selling the compressor they introduced a model of selling the compressed air. And with that you introduce a really new way of thinking because now I need to make sure the machine is always up and running. Only then do I generate revenue. How can I do that? I can only do that if I understand what is going on with the machine. I can understand the vibration from the machine, and from there I get the signals which enable me to predict maintenance and with that I can ensure that the machine is up-and-running and I ensure that I generate revenue. These types of models you see more and more, in different industries but primarily in the industrial machinery and components industry. Ken: So it’s about capturing a lot of sensor data and making changes accordingly to your business processes, but I’m guessing it’s not just about capturing that data but making insights about what it’s telling you. Hans: That’s absolutely true, so it’s not only capturing the data and then you have a data lake. Well, that’s good. The next thing would be now you put some analytics around it and you can monitor, also good. But what if you add machine learning capabilities where based on the patterns which you see how the data is evolving you predict an outcome and you predict maintenance. So it’s not only capturing the data, it’s not only an analytical environment where you monitor. But now you actually take this information and you start to predict – then you can really change the way you think about maintenance processes. Instead of scheduled maintenance which typically is the situation where every month or quarter I maintain the machine. So now I can predict and with that I’m very precise and I can reduce the cost of this whole set-up dramatically. At the same time, it enables me to introduce a new business model as we discussed. Ken: So it’s absolutely imperative to leverage Internet of Things, or IoT technologies into your live supply chain. Hans: It would be wrong if you wouldn’t. We have the possibility, the technology is there, we have more and more products that are smart, intelligent, and we need to connect them and bring this information and prepare this information in a way that we can generate the best possible outcome. And from our perspective and our view is that we can do that in connecting the information with the business processes. Then we achieve the best outcome, the highest value for the companies. Ken: And so you mentioned obviously SAP Leonardo in the keynote, and that’s the key then to reach the state of connecting your processes with your people, your assets? Hans: Very true, and we’re very proud of SAP Leonardo, and we introduce this new brand to represent the entire Internet of Things portfolio. And we have structured this portfolio in six categories. The first three are really focusing on the Industrial Internet of Things, Industry 4.0 scenarios, which is really about connected products, connected assets, and the connected fleet. So everything that is moving. But then we go beyond. We also want to capture the topics around infrastructure, so the pipelines and the energy networks. We want to capture the topics around the categories around markets, rural areas, urban areas, smart cities. But then also and finally the connected people, so it’s about the work environment, it’s about home, it’s about the health of people. So really having an Internet of Everything portfolio, and we introduced that with SAP Leonardo. Like I said we’re very proud about that, and we do that by connecting the things with the business processes with the people. Ken: To circle back to the example you gave about manufacturing and IoT, and so it’s allowing you to change actual designs? Hans: The fascinating examples are where companies start with a specific process, and at the beginning they’re really focusing for example on predictive maintenance, using the vibration analysis from the machines in order to predict maintenance, and we talked about this. Now the next thing for these companies who have done this already, is that they can use this information not only for the predictive maintenance process, but they can influence the design of the product. Because if they learn that if they design the product a little bit differently, maybe it would find a more stable environment which would reduce maintenance again. And so you have the reverse process where the machine, the product, is telling you “Please design me differently.” And I find that fascinating. Ken: So we’re really now at the cutting edge of a lot of untapped potential and opportunity here. Hans: Absolutely, and these types of processes are not only true between assets and design process, but you can also actually by capturing metering data now think about how can I use this information not only for the asset purposes, but maybe for the marketing purposes. I have the information, now I can be more precise, I can offer something very differently. This is what we’ve seen here at the keynote from Volker Hildebrand where he talked about the customer experience. These connections, IoT is not only staying in the supply chain and the manufacturing world, it’s really relevant for the entire enterprise. Ken: Hans, thank you for joining us today. Hans: Thank you. [embed]https://sapinsideronline.wistia.com/medias/isqsg14t3s[/embed]