Given the short product life cycles, competitive pressures, and changing customer needs, innovation is vital for companies in the software industry. We asked SAP Australia Managing Director Tim Ebbeck to describe how he promotes innovation within SAP’s Australian operation.
ceoforum.com.au: In broad terms, how does SAP approach the issue of innovation?
Tim Ebbeck: One challenge for us is that 50% of our revenues come from products that are less than five years old, or, put another way, 50% of our revenues in five years time will come from products that don’t currently exist. This makes innovation an absolute imperative for our survival as a company. While innovation has always been important to us, we have recently moved to make it a core value of the company.
Our approach to innovation tends to be highly collaborative. We know we are not the fount of all wisdom on innovations, so we work closely with our customers in particular to make sure we continue to deliver value. These industry value networks, which look at the specific challenges particular industries face, are central to delivering innovation.
As I often remind our staff, no CEO wakes up in the morning wanting to spend money on software! Delivering and demonstrating value is fundamental for our approach to innovation.
ceoforum.com.au: Customers are one source of innovative ideas. Do you work closely with other partners, such as upstream technology providers?
TE: Our situation is a little different from some of our major competitors. Oracle, for instance, has acquired Sun, so they have become more vertically integrated as a company.
In our case, we believe our relative independence from other technology partners, and our ability to move between them if needed, gives us greater strategic flexibility. We can choose who we work with, and change our partnering arrangements as customer needs evolve.
We do work closely with other stakeholders, such as government and the wider research communities. We have a genuine research facility within Australia, for instance, where we have 50 people who are focused on looking at what business will look like in 10 years time. This has led us to explore things like the Smart Services Cooperative Research Centre (CRC), where we work with other researchers to see how emerging technologies could be applied to the needs of particular industries like emergency services.
ceoforum.com.au: Working together with government and other public sector organizations like universities to develop things like CRCs can pose challenges for many organizations. What did you find to be the most effective way to do that?
TE: The mindset is very different, so both sides probably need to invest the time initially in understanding each other’s objectives. I know it is a management cliché, but it is essential for both players to have some ‘skin in the game’, otherwise proposals often go nowhere. It’s also a way of quickly assessing the real level of interest: there are a lot of people, for instance, who will discuss ideas with you over coffee, but considerably less who will support those ideas with a resource commitment!
ceoforum.com.au: What are some of the ways you promote innovation within the local organization?
TE: Within Australia, 95% of our business by revenue comes from field sales, so our main focus here is by trying to identify which sectors of our business are most likely to grow the most in the short- to medium-term. We then try to allocate at least some of our best people’s time to those sectors, recognizing that, by doing this, their numbers may suffer a bit in the short-term
For example, we believe that the Telco sector will grow very quickly in the next few years, due to technological developments like the rollout of the NBN (National Broadband Network) and the emergence of cloud computing. We have some of our best business development people working on that sector, making sure we are positioned to take advantage of the growth that does occur.
With our research facility, they have a much longer term focus, so they tend to take a portfolio approach to managing their different projects. The number of patents they make is a key measure, whereas the measures for successful innovation in the field are more general business measures of market penetration and revenue growth.
ceoforum.com.au: How do the different areas within the company e.g. research and field support, interact to achieve innovation?
TE: All the three major divisions within SAP globally – field sales/support, product development, and research – are represented within the SAP Australia operation. Normally, these divisions are managed quite separately, but, because we are a smaller operation, staff from the three divisions are often co-located locally. This has led really helped our innovation: I am surprised how often the cross-fertilization of ideas e.g. ideas from research staff that are picked up by the field staff, can result in short-term commercial gain.
As a result, Australia has become a bit of a hot spot for innovation within the global company, and the principle of co-location is being looked at carefully for other operations around the globe. I think the physical office environment has played a part in boosting this creativity – if you look at our Brisbane office, for instance, it was very much designed to be an environment conducive to creativity: it’s very green, there’s lots of breakout space, and all those things you would expect to see in a R&D office environment. All the non-research staff there, however, have also benefited from that, but you wouldn’t have had that environment in the first place if the research function had not been present in the office.
ceoforum.com.au: Do you think it is possible to screen for innovation when you recruit people into the company?
TE: That is difficult – people may be able to ‘talk the talk’ in an interview, for instance, yet fail to deliver innovation on the job. One area, however, where I feel the IT industry has let ourselves down, however, is in the diversity of its employee demographic. IT has quite a narrow demographic, and we have a responsibility to broaden that demographic over the coming years. If we can do that effectively, I believe that will contribute to higher levels of innovation within the company.
ceoforum.com.au: What is your own role in promoting innovation in the company?
TE: I’ve been in the CEO role just on two years now, and I have learned a lot about innovation in that time. In particular, I have found that it is very easy for your agenda to become dominated by day-to-day events, and you really have to make time and space for promoting, fostering and celebrating innovation.
I have a major role in our recognition and reward schemes for innovation, where staff can nominate peers on a monthly, quarterly and yearly basis. As well as this, I like to celebrate any innovation that comes to my attention by recognizing and rewarding the staff involved. These can be relatively small things – a particularly ‘clever’ deal, where we collaborated well across departments and/or with customers, a new way of meeting customer needs, and so on – but I think it is important to send the message that innovation is being both noticed and rewarded.
I also like to challenge my own direct reports to come up with innovation, as I see it as a core responsibility of leadership. With one direct report, for instance, who is managing a support function, I have challenged him/her to come up with three initiatives in service delivery this year that are picked up by the global company.
All of us have a responsibility to innovate, and it has to be part of our performance management systems. There is no point telling people how important it is to innovate if you do not reward them for doing so.
