Co-innovation as a service: A reflection on SAP Co-innovation Lab

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SAP and the SAP Co-innovation lab

SAP is the world’s largest enterprise software provider with 320000+ customers in 190 countries and an annual revenue of 22 billion Euro in 2016.  80% of SAP’s 320000+ customers are small and medium enterprises; in the meantime, it has 98% of the 100 most valued brands as its customers. Collectively SAP customers produce 78% of the world’s food, 82% of the world’s medical devices, and 76 % of the world’s transaction revenue touches an SAP system.

To serve its customers effectively, SAP relies on around 80000 employees working in 130+ countries with help from 2100 partner companies globally.  This is a very powerful and large ecosystem, still growing with more partners exploring to work with SAP.

One of the challenges the ecosystem faces is to figure out how to work together to effectively and collaboratively serve the joint customers.  When a prospect partner starts to explore opportunities with SAP, it often feels like stepped into a jungle without a compass - they can get lost very easily. To address these challenges, the SAP Co-Innovation Lab (COIL) was created in 2007 with a mission to help its ecosystem effectively work together to serve joint customers.

 

Core Innovation vs. Co-innovation

Innovation takes many different formats. Let’s call innovation driven by groups within a company as core-innovation and innovation evolving multiple companies as co-innovation.

Core-innovation focuses on the evolution and/or revolution of core business of a company. The company owns the intellectual properties of core innovation and is fully responsible for the design, development, and sales of the end products.  It’s the innovation around the bread and butter of a company.

Co-Innovation Addresses Whitespace with Ecosystem

While core-innovation is critical for driving organic growth of a business, no company can provide everything its customers need. Co-innovation comes into picture when a company works with its ecosystem to provide joint solutions for customers.  Every company has so called “whitespaces” where it sees clear customer demands but decides not to offer a solution itself.  While staying focused on what it does best with core-innovation, a company may open up the whitespace and invite its partners with complimentary solutions to serve the customer.

Co-innovation usually aims to produce a successful joint solution; it requires close collaboration among the participants to make sure the customer needs are sufficiently addressed.  In many cases, Co-innovation focuses on integration of solutions from different parties and proof of concept of new applications built on top of existing solutions, etc.

The results of co-innovation may differ a lot. Most time the participating parties stay independent while playing a different role in joint go-to-market for serving joint customers. We have seen cases where co-innovation ends up with a new joint venture – an independent business entity funded and owned by participating companies but with full autonomy to run the new business.  A more successful co-innovation may end up with merger & acquisition. A player in a con-innovation engagement may decide to merge with or acquire another to expand its core business.

Core Innovation Drives Organic Growth

As a company, SAP is well recognized as a lead for evolving with business and technology trends and for turning creative ideas into innovations within the company walls. For many years, the company was a true believer of organic growth driven by core innovation within the company. It only started major acquisitions in the last decade to accelerate the pace of innovation.

SAP focuses on a common job to be done for its customers – every company wants to run a live business so decisions can be made with real time data about the status of its business. To help its customer get their job done, the company went through many iterations of strategy evolutions and rounds of rounds of core innovations.  When it started in the early 1970’s, it was a new entrant to a brand new market for enterprise resource planning.  It was a new market at that time, and SAP grasped the opportunity to offer solutions for material management, production planning, human resources management, accounting etc.  Overtime, it improves its products and expand its solution portfolio via sustaining innovations while the ERP market flourished in 1990s. By early 2000, it’s already the number 1 enterprise solution provider with solutions best designed for large enterprises. In the process, the risk arose that its solution got too complicated and overserved smaller customers. To manage low-end disruptions from smaller competitors, SAP offered its own solutions tailored for SMEs.

As of end of 2016, SAP offers a set of end-to-end solutions focusing on help customers run live business, with the following main components:

• A suite of Enterprise Resource Planning software that help automate and optimize all business-critical processes


• Packaged solutions for 25 industries and 12 line of business (customer relationship management, supply chain management, advanced planning, etc.)


• Real time business analysis solutions: Business intelligence, Predictive Analytics etc.


• Its latest and greatest application is called S/4HANA which is built as its digital core that drives digital transformation for reimagined business models, processes in the age of Internet of Things and Big Data.


• A set of simplified solutions tailored for SMEs, such as SAP Business One for small companies and SAP All-in-One for medium-sized companies.


• A real time computing platform – SAP HANA


• A Business Network on the cloud that provide the leading solutions in the areas of


• Goods and services: Ariba has a trade volume of US$ 82 billion, connecting 2.2 million businesses


• Travel and expense: Concur is being used by 42 million travelers


• External workforce and service procurement: Fieldglass manages 2.6 million temporary workers

Co-innovation as a Service

With such a comprehensive set of solutions which is ever evolving to serve new customer needs, SAP is well positioned in helping its customers getting their job done; however, no matter how large its portfolio becomes, there are always whitespaces that it can’t cover and needs to work with its ecosystem via co-innovation to offer joint solutions for customer needs.

Co-innovation address whitespaces. In real world, it’s typically managed as individual co-innovation projects. A co-innovation project tracks the end to end process from ideation to productization, and go to market.

Unique Challenges for Co-innovation Projects

To facilitate and manage co-innovation projects, we first need to have a clear understanding of the unique challenges any co-innovation project must address.  Unlike a typically core innovation project where a company has full control and full ownership of everything involved, a co-innovation team faces more tricky situations and challenges, just to name a few:

1. Scoping: Define what to do and who to work with – pin point the customer needs that require solutions from the involving parties. The initiation typically starts with customer meeting by one party. This party may determine what other parties may have the complimentary solution, and proposals are made to other parties to join the effort. All parties need to have necessary legal framework in place to ensure necessary confidentiality when ideas are exchanged. Non-disclosure Agreement (NDA) or confidentiality agreement are typical legal tools used in this phase.

2. Resourcing: Determine what it takes to get it done and who will do what at what time. The team needs to figure out what’s the appropriate joint architecture, what solutions should be used from each party, where to get access to such solutions, where to get the right domain expert and get their commitment to work together, etc. Since no single party has whole ownership and there are no HR reporting lines among the members of the project team, it’s critical that there are measurements in place to ensure each signed up party will deliver what’s committed. Statement of Work (SOW) is typically used to guide the planning and execution of a project.

3. Intellectual Properties: Determine who owns what’s produced from the project and what will be share and how if project produces meaningful results. IP terms should be negotiated before and during the project execution phase.

The above is just a small sample of the challenges a co-innovation team faces, there are many other aspects depending on the nature of the project. The Co-innovation Lab is SAP’s answer to these challenges for our ecosystem to co-innovate with SAP. Through the last decade, the lab has evolved and established its role as the go-to-place for the co-innovation within the SAP ecosystem via a set of well-proven core services.

Target Customers of SAP Co-innovation Lab

This ecosystem, including external partners and internal SAP groups, are the target customers served by the SAP Co-Innovation lab.  Their job to be done in our context is to fill in the SAP solution whitespace with a win-win solution to serve joint customers.

In the beginning, given the proximity to Silicon Valley, most of the partners we worked with were high tech companies, especially infrastructure/hardware vendors. For these companies, there are little direct competition with SAP, and collaboration is straightforward with complimentary offerings from each party. For the vendors, having their product validated in our lab to produce evidence that their hardware supports running SAP applications make it much easier for them sell to SAP customer base. For SAP, with a tested hardware vendor as partner, we can make recommendation to our customer knowing which one has the best performance and sometimes optimized for running our applications. It’s a win-win strategy. In fact, our partners like the value proposition so much that the entire data center in Palo Alto is sponsored by our partners, such as Intel, Cisco, VMware, Fujitsu, and NetApp.

As we solidified the model for working with technology partners, we expand our coverage to other application vendors. In the context of the SAP ecosystem, the job to be done for application vendors is similar with technology vendors, but the operation is more complicated, and in many cases it’s more like a “collapetition”- competition and collaboration at the same time.  It’s trickier to identify whitespaces, determine who are the right partners to work with, and define what role each party plays. As an enablement service provider, we understand that such decisions must come from other SAP groups who are in charge of the specific business.  We made it mandatory that every project must have an executive sponsor from a SAP group to endorse the business alignment with the partners involved, so we delegate the business validation to the domain experts who own the specific domains.

In 2009, we started an exciting journey of expanding to all emerging markets, and established offices in all the BRICK countries. The lab network has grown into 15 locations globally by the end of 2016. For the emerging markets, we see more demand to work with SAP field teams and partners to support customers directly.  They need quick access to a readily available SAP landscape without too much legal and logistic complication. Unlike in Silicon Valley where we often have project specific hardware from vendors to support a particular project, for the emerging market locations, a core infrastructure with standard data center services and SAP landscape provisioning services are sufficient for those teams. Focus is more on showcasing the collaboration, knowledge transfers via workshops and co-innovation days, and customer workshops addressing specific customer requirements.

 



 

Outside-in Gateway for Partners

For many of SAP partners, especially those who are new to SAP world, SAP on one hand represents a huge opportunity for them to expand their business into the large SAP customer base to offer solutions that are complimentary to what SAP offers. On the other hand, it’s also a huge challenge to figure out what’s the right thing to do and who to work with within SAP given the large portfolio of solutions offered by SAP.

For those partners, Co-innovation Lab serves as their gateway and often time navigation guide to the “SAP jungle”.  The lab helps them define joint customers and pinpoint customer challenges that can be addressed by joint solutions, work with them to identify and reach out to the right SAP group that owns a particular business domain that may benefit from the partner solutions, gives them access to the relevant SAP solutions, and provide them IT infrastructure to set up their own solutions so integration or extension to SAP solutions can be exploited to build proof points to GTM support.

Inside-out Gateway for SAP Groups

Many co-innovation initiatives are started by SAP internal groups who see a need for selecting a partner solution to enhance or extend what SAP offers. These initiatives are sometimes driven by top executives and often end up with acquisitions; for these cases, COIL may play a critical role in helping technical due diligence to build proof of concepts with the acquisition targets and validate their compatibility with SAP solutions.

More often internal co-innovation initiatives are driven by grass root development or field groups. Those colleagues are domain experts for what they do and understand the best about what they need from our ecosystem, but the last thing they want to worry about is, for example, talking to legal department about what to do. COIL helps these colleagues find the right partners to work with, get legal coverage about intellectual properties, define statement of work to ensure resource allocation from all parties, find the right IT infrastructure to build a project landscape that allow a partner to install their solution inside SAP without violating any laws and corporate rules.  In short, COIL help our developers and sale colleagues focus on what they do best, and take care of all the other aspects of working with our ecosystem.

The core set of co-innovation enablement services

After years of exploring emergent strategies addressing different partners and locations, a deliberate strategy emerged by itself for COIL – while staying to be agile and flexible in supporting local emergent needs, the lab offers a core set of co-innovation enablement services across all locations to help SAP ecosystem to work with SAP with win-win solutions to serve joint customers.

The core set of services is the corner stone of COIL’s success in the last 10 years.



 

Co-innovation Legal Framework

COIL offers membership to its ecosystem. Partners and customers may become a COIL member. With a small fee, the paid membership entitles a partner to work at the labs on various co-innovation projects for a year. The legal framework is consisted of the following key elements:

• The Master Membership Agreement covers general confidentiality, NDA, and terms defining how to manage intellectual properties. These terms apply to most common co-innovation cases. For unique requirements, COIL works with SAP legal department to negotiate with partner until reach mutual agreements.


• Lab House Rules defines policies and guideline for use of lab facilities, including showroom and data centers


• Statement of Work Templates address different legal challenges for various kind of co-innovation projects, in addition to ready to use content for scoping, use case definition, architecture design, resource allocation, and executing planning.

Co-Innovation Methodology, Solution Architecture Advice & Knowledge Brokering

COIL provide subject domain expertise for IT infrastructure, SAP Basis, SAP architecture, and many more. Given the wide spectrum of SAP solution, no single group will be able to provide SME on all solutions; the knowledge brokering capability of COIL is an important asset for co-innovation enablement - When we don’t have the subject matter expert in house, we know where and who for us to reach out the other SAP groups to get help.

Co-Innovation Project Management Framework

COIL specializes on providing partners and SAP teams a structured and guided global approach to produce innovative solutions with shorter time to market and reduced risk.

Based on 10 years of collective experiences from all COIL locations, we offer a framework for managing co-innovation end to end.

Best practices and execution guidelines are made available to lead project team from ideation and business development, to requirement collection, project definition and scoping, to solution design, timeline planning and resource allocation, team initiation and knowledge brokering, to application/demo development, deliverable publication, and go to market enablement.

IT Infrastructure

COIL IT infrastructure is built with equipment via generous sponsorship from Cisco, Fujitsu, Intel, NetApp, and Vmware.   With 4 production-like data centers around the global, COIL offers a cloud-based infrastructure platform that enables us to provide project participants with IT resources to fully provision all SAP software landscapes and key partner components.



Each project has its own dedicated vLAN, and the project team has full control about what’s to be provisioned within the landscape and who has access to what.

Full access to all SAP solutions

The lab provides licenses for its members for all SAP solutions while they are working at the lab. These may encompass analytics, in-memory computing, cloud, security, and enterprise mobility and span multiple industries such as manufacturing, healthcare, retail, banking, mining, and oil and gas, etc.

Facility for GTM support

COIL provides a wide spectrum of templates for documenting project deliverables, including solution brief, white paper, live and/or recorded demo, website featured stories, press releases, vedio interviews, podcasts, etc.

Wherever feasible, the lab offers showrooms for exhibiting project outcomes and hosting GTM events

These set of core services proven to be the key ingredients fueled the growth of the lab from one location to the other. The core services set also help COIL expand our core competency to support ever evolving industry trends. The co-innovation hot topics evolves from year to year, no matter where the wind blows, COIL always stays in the frontier of the evolution. Since inception, our lab network has helped the adoption inside and outside SAP of the key innovations for SOA,  grid/cloud computing, mobility, in memory computing, big data, and more and more. The current focuses are on Internet of Things, industry 4.0, and Artificial Intelligence.

By managing co-innovation with our ecosystem to provide joint solutions for specific customer needs which SAP can’t address alone, the Co-innovation lab network helps the company sell more product and/or services otherwise impossible.

How to Engage With COIL

The following diagram provides an overview about how to engage with COIL.  No matter what you have in mind, we will work with you side by side to document your requirements, design a solution, put together a team, produce the desired results, and publish the deliverables.



 

COIL’s mission is to grow the market pie and foster/enable new revenue for our ecosystem. COIL is not a profit center; we only charge a minimal fee for the COIL membership to make sure all engaging parties are serious about bringing an idea into fruition. The fee may vary based on the COIL location and the work we plan to do together, but is almost certainly lower than what you have to pay to a commercial vendor for similar infrastructure and services.

Partners

If you already have an established partnership with SAP, it will be super simple to engage with COIL. You may want to expand into new domains of collaboration, (re)validate your solution, or infrastructural support for premium qualification testing of your solution to get it into SAP pricelist or get certified with SAP, we are here to help.  If you already have a partner manager or other SAP contact working with you, bring them with you to our conversation. we will ensure your COIL engagement will solidify and enhance what you already have in place with SAP.

If you are completely new to SAP, the first thing we will do with you is to understand what you do and what opportunity you want to explore with SAP, we will help you identify the right SAP group(s) to build a business case and define the first project we will work together. The COIL membership will help you get your foot inside the door of SAP, and start an exciting journey of co-innovating with SAP.

SAP Internal Teams

When you need to work with a partner or customer for a co-innovation opportunity, COIL may help you focus on what you do best and take all the other burden off your shoulder.

You may need to work with an infrastructure vendor to get specific hardware and/or intensive computing power to build and/or test an application; you may want to validate how a partner solution can complement what your team offer; you may be asked by a customer to help address a pain point that SAP doesn’t have a solution available yet and you know some partner can help; …, no matter what lead your eyes to a partner or a prospect partner of SAP, bring them to COIL.

With COIL, you just do coding if you are a developer, you just do solution design if you are an architect, you focus on You don’t need to negotiate with a corporate lawyer to get an NDA in place before you can even exchange any idea with a partner, you don’t need to sign a contract, write a statement of work before you can start coding with a partner, you don’t need to run around trying to find the right hardware and ask favor from a SAP Basis colleague to help you build a landscape, these will all be taken care by COIL.

Customers

You are SAP customer. Most likely you buy from many other vendors as well.  If you want to do a PoC to make sure a vendor solution will work greatly (at least won’t interfere) with your mission critical SAP deployment, send them to COIL. With COIL, you can get a proof of concept done very cost effectively, and lessons learned in the lab may provide you best practices so you may avoid mistakes in your production environment that may cost you millions of dollars.

In Silicon Valley, we are only an email away from you. Reach out to us if something innovative is burning inside you, we will help you get it out gracefullyJ.

Here is our emails to start our conversation Kevin.Liu@sap.com and/or David.Cruickshank@sap.com

 

References:

1. SAP Corporate Fact Sheet http://go.sap.com/documents/2016/07/0a4e1b8c-7e7c-0010-82c7-eda71af511fa.html


2. SAP Co-innovation Lab Brochure


3. Harvard Business School HBX class “Disruptive Strategy with Clayton Christensen”