The View from China: Digital Transformation Is Not A Choice

2018 SAP Automotive Summit in Yantai, China

A few weeks ago, I had the pleasure of speaking at the SAP Auto Summit in Yantai, China. There were over 150 people representing China’s best and most promising companies in the automotive ecosystem. The energy of Chinese automakers has always impressed me. This time, I was particularly struck by how eager both established auto players and new startups were in leveraging state-of-the-art SAP solutions to gain a competitive advantage. For them, digital transformation is not a choice — it is the only way to survive.

I began my talk by underlining SAP’s commitment to the automotive sector. We are in over 100+ countries with 7,000+ automotive customers; reflecting two decades of developing automotive specific capabilities in our software suite.

We’re going further. With the vision of transforming every customer into a truly Intelligent Enterprise, SAP is committed to helping automakers around the world to survive the next chain of disruption. This is a future of touchless systems, automated processes, and other similar technologies. These will augment human capabilities to focus on value-added work and manage exceptions. This innovation will be fueled by data, from having the right kind of intelligence to execution.

Most importantly, the intelligent enterprise is already here. Dr. Julian Popp of automotive consulting firm, MHP, presented about how Algorithmic Production optimizes model mix planning and reduces bottlenecks, as well as how SAP Machine Learning applies smart algorithms to optimize the manufacturing process at a leading German car manufacturer. Not to be outdone, Daimler is working with us on a Global Supply Chain initiative relying on SAP’s S/4HANA technology, starting in China.

Perhaps, nowhere else in the world are automakers so committed to the CASE (Connected, Autonomous, Shared, Electric) megatrends reimagining the automotive industry — than in China. Take the case of Chongqing-based Sokon Industry Group. Yusheng Liu, head of digital manufacturing at Sokon’s Jinkang New Energy Automobile subsidiary, laid out an ambitious global agenda to make his company a premier, luxury electric vehicle brand. Liu also explained the logic behind American acquisitions such as SF Motors as part of an integrated approach to manufacturing and selling intelligent electric cars. The best techniques and technologies — whether they originate in China or elsewhere in world — would be shared and implemented across the company.

Jusheng Liu of Sokon Automotive

I am very happy that SAP is working closely with Liu and his team to achieve their goals. Jinkang is a highly sophisticated user of solutions like SAP S/4HANA. They are planning to implement S/4HANA in the United States in October. I can’t wait to see what we can achieve together!

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The event concluded with an excellent panel that brought together automotive CIOs from both startups and large companies such as BAIC and UAES (a joint venture of Bosch and SAIC).

The role of IT is rapidly changing, according to these executives. While IT was a supporting department in the past, it will be the center of business transformation. The department will support a range of new business models from new mobility initiatives to smart traffic and smart cities. IT professionals will play a key role in creating collaboration between departments, not only within a company, but externally contributing to increasingly connected ecosystems. These new value chains will cross borders, industries and firms; enriched by robust architectures and solutions.

These CIOs echoed something that we’ve heard time and time again in China: less than 10% of the new energy OEMs will survive. This means that out of the more than 50 that are currently active, only a handful will survive. Digital transformation to stay ahead of the competition will separate the winners from the losers.

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Want to hear more about automotive and mobility trends? See me and other industry leaders at the New Mobility World Forum, Monday September 24, 2018 during the IAA show in Hannover, Germany.

What do you believe is the most disruptive technology affecting China? Let me know by commenting below, or tweeting me @UliMuench!