Digital Transformation from Customer Viewpoints
“What is the starting point of your digital transformation?”
I was able to find the answer to this question by reviewing the experience and insight of the executives from the six companies that lead the Korean economy—Samsung, Hyundai, SK, Lotte, Kolon, Daewoong Pharmaceutical, and Delivery Hero (Yogiyo) who recently concluded its largest $4 billion merger.
“Digital Process Innovation” was the common theme across these six companies, leading their industries, including electronics, automotive, semiconductors, chemicals, pharmaceuticals, and online delivery.
Throughout the 1990s and the 2000s, management innovation projects, which ushered in the adoption of advanced business practices and increased competitive advantage, resulted in the implementation of Enterprise Resource Planning (ERP) system.
The introduction of ERP, which brought about process optimization (management innovation) across all aspects of business, such as purchasing, production, assets, quality, sales, accounting, finance, human resources, etc., has now spread to small and medium-sized enterprises.
And since the 2010s, Digital Transformation has become a new catchphrase.
Companies have grown rapidly, thanks to Process Innovation with core backbone system (ERP), along with extended systems, like customer relationship management, supply chain management, manufacturing execution system, product lifecycle management, warehouse management systems, online purchasing, and so on. These systems have been producing a huge amount of data, leading to accumulation of similar data, in many cases. This complexity has caused inaccuracy in decisions, and slow response to market demands. A new break-through was called for.
By digitizing all resources, processes, and services, companies should proactively connect them to cope with market demands and optimize current or new business models, while analyzing the outcomes at the speed of ‘in-memory’ for best possible decisions. They needed ‘Digital transformation’ to make this possible.
“So, from where do you start your digital transformation?”
I found the answer through the experience and insight of the executives representing different industries in Korea. Each company has a its own background in getting into digital transformation, but the common task of building a digital core, which digitizes all aspects of enterprise resources (ERP), was at the heart of it.
The following six digital transformation stories illustrate the impact of digitization of enterprise resources, although they all have different backgrounds about why they need innovation in the first place.
(Each story refers to the articles in ‘Pleasant Technology Story – TechSuda’ )
Robust Digital Core – Lotte Chemical
Lotte Chemical achieved the no.1 position in the domestic chemical industry with 190 times growth compared to 1980 and operating profit of $2.5 billion (revenue of $16.4bn) in 2017, and now its new goal is to be Global Top 10 and 10% net profit by 2030.
Lotte Chemical has been diversifying its fuel around the world to minimize the risk of oil price fluctuations, and at the same time acquired Samsung Fine Chemicals and SDI Chemicals, laying the foundation for its growth as one of the top 10 global companies in the world.
In order to establish a global competitive system, it needed to build a new information infrastructure to integrate mergers and acquisitions, and we are working on a global single instance for for ERP systems to support all activities taking place in a diversified global base.
At the heart of the digital core for next-generation growth was in-memory-based SAP S/4 HANA. Ten core tasks such as purchasing, production, equipment, quality, sales, accounting, finance, human resources, GRC, and chemical materials management are powered by the new digital core, which takes seven months from April 2017 to November 2017.
The implementation of a next-gen ERP system unites exporting countries from Korea to 110 countries around the world.
As a result, key business performance has improved by 90.5%, and successful system upgrades have been completed with a significant reduction in 114-hour downtime to 52 hours.
“Lotte Chemical has responded proactively to changes in the management environment. We have diversified our raw materials all over the world to ensure continued growth without being swayed by oil prices. We will make every efforts to bring Digital Transformation aiming to be an intelligent enterprise, where Digital Core works as a core engine”
Jaesung Park, CIO / Lotte Chemical (Click here for more details)
Secret Recipe for Triple-digit Growth – Delivery Hero (Yogiyo)
What is the secret behind the three-digit growth of Yogiyo, which recently acquired the “Nation of Delivery” by investing 4 Billion$ and became the largest player in the domestic delivery app market.
Statistics show that one-fifth of our people solve their meals with delivery, and the delivery app’s annual payment swells to more than $6 billion. If 10 million users order three meals a day, orders will be rushed at golden time.
Yogiyo has seen a surge in usage of delivery apps since 2013, and has embarked on an evaluation of Core system that receive, process, and settle orders as revenue grows. Considering the huge volume of orders from tens of millions of users are placing at a peak time, Real-time processing of large amounts of data was critical with ensuring all the processes are seamless to the end.
After six months of preliminary review, Yogiyo evaluated cloud auto scale-out systems that can be easily scaled up by fast volume order processing and order explosion, and then decide on a new digital core, SAP S/4HANA.
“We don’t know when and how your business model will change. However we need a system that can fits in to enable us to always deliver amazing experience to our customers.
Scott Choi, CFO / Delivery Hero Korea (Click here for more details)
Cloud Is A Tool for Happiness – SK Hynix
What is the company’s solution that brings the happiness of its members first and foremost as its management philosophy?
By 2022, generation X will become executives, and by 2027, YouTube generation will start joining. In 2037, people who get used to watching than reading a book will be members, but what infrastructure can they all have to work happily?
SK Hynix noted that both customers and employees using traditional corporate systems are unhappy and found that the main reason is to manage and provide too much and too old information from diverse sources.
Understanding that employees are running and keeping the company alive, we’ve been thinking about how to build a system for them to be happy in order to maintain a long-lasting and good company. As each member handles advanced machine learning and learns deep learning and assists them to do it themselves, the entire organization will be able to climb past the tipping point that is rapidly changing at some point.
“This is a game where the first person wins unconditionally. Cloud is a happiness tool for future members, customers, and potential members, as well as current employees. I think that the last thing our generation needs to prepare for is to consider adopting a happiness tool for people in the future.” –
Changrock Song, CIO / SK Hynix (Click here for more details)
Key Partner for Smart Mobility – Hyundai Kia Motors
(One Team for Transformation)
Hyundai Kia, a global TOP 5 car maker for electric vehicles, autonomous driving and PAV, aims to become a future smart mobility company that encompasses eco-friendly car manufacturing and services using electricity and hydrogen by 2025.
As existing vehicle manufacturers focus on high-quality mass production centered on internal combustion engines, they have, of course, maintained an independent operating system between corporations, allowing for supplier-centric standardization and regional specific design.
However, the current and future market are increasing the demand for personalization based on small quantity batch production, and the demand for eco-friendly cars has become a new opportunity in the markets. Sharing services for houses, hotels and taxis now affect auto makers, and if they don’t make money from mobility, they’ll lose the market.
To be able to respond quickly and flexibly, robust information infrastructure and data-driven decision-making are key to allowing more than 50 entities to move like one body.
To this end, Hyundai Kia’s decision is Cloud ERP based on a global single instance (GSI). For fast and accurate decision-making required an in-memory-based GSI environment as well as cloud computing for rapid deployment and data aggregation.
The result is a successful reduction in costs of 26 Million $ per year and a reduction in consolidated accounting settlements from 7 days to 3 days. It has acquired an engine called Digital Core, and has succeeded in digital transformation with two wheels: digitization of R&D and smart factory.
“ERP is the core system for preparing, connecting, analyzing, and utilizing the most important data. In that sense, the next-generation ERP (Digital Core) is clearly the most important means of Digital Transformation, even if it is not all of it.”
Dongbok Kwon, Hyundai Kia Motors, (click here for more details)
An Essential Step to A Billion Dollar Club” – Daewoong Pharmaceutical
It is the innovation story of DaeWoong Pharmaceutical, which expanded its business area with biotechnology and cosmetics based on generic medicines and achieved $1 billion in sales.
To continue this growth, it needed an operating model where members worked autonomously with clear goals and were transparent about the results they had created, and that they were rewarded with certainty.
It also reviewed the responsible management support infrastructure to support business innovation and employee growth through open collaboration, accelerating customer value and global innovation in drug development.
After a thorough evalutation review, DaeWoong Pharmaceutical launched the ‘S4 Project’ in October 2018, with the goal of securing four ‘S’ centered Core system representing S/4HANA-based, Speed, Standard and Smart management.
As a result, the next generation of digital cores was implemented, and all employees were able to see the company’s performance and current issues at a glance, and focus on building an intelligent work environment where employees can do their best for performance-driven tasks.
“This upgrade to Digital Core has brought digital transformation to the way we work fundamentally, and increased work efficiency. Daewoong Pharmaceutical sought to secure the foundation for becoming a global healthcare group with intelligence enterprise environmet.”
Sengho Jeon, President / Daewoong Pharmaceutical (click here for more details)
Reborn for Innovation and Growth – Kolon
Kolon was not easy to respond to rapidly changing external environment due to each silo work environment divided into chemical, fashion, construction and distribution, environment and energy, automotive parts and IT, bio and healthcare businesses.
First, Kolon put together IT environment from major chemical companies, and combined the construction companies and IT-dedicated companies together later.
In less than two years, however, large amounts of data were generated and accumulated, resulting in a slowdown in the system. A general bottleneck of the IT systems also occurred! Once again the system needed to be overhauled.
In such a situation, Kolon has decided to introduce a new cloud-based Digital Core system for 19 companies including nine major affiliates, five in China, and some in the United States.
Based on this innovative experience, Kolon could gain a new competitiveness in winning orders from external IT upgrade projects, and it has boldly proceeded with next generation IT deployment projects.
As a result, sales order-based production increased from 49% to 77%, Information inquiry and analysis response decreased by 8 to 47 times in financial accounting.
Finally it help Kolon comply to a new labor regulation of the government called working environment for 40 hours a week (up to 52 hours a week).
“Proactive response creates new opportunities, as other companies are now embracing these changes., there is a solid and flexible information infrastructure (S/4HANA) for the transformation of the reborn Kolon.”
Chun, SunKyu, Director / Kolon Benit (Click here for more information)