COVER STORY • Digital Society — Issues & Challenges • 10

Interview with Slava Orekhov, Senior Vice President of Industries and Digital Leadership,
Asia Pacific Japan (APJ), SAP Asia Pte Ltd.

H

ow We Can Benefit From
New Technology?

By Japan SPOTLIGHT
SAP SE, based in Germany, is the largest software company based in Europe and the fourth-largest in theworld, after Microsoft, Oracle and IBM, in terms of sales. In particular, it has the largest market share inenterprise software for large companies. As of July 2018, it had 404,000 companies as customers in 180
countries and its global sales reached around $30 billion.
Its local subsidiary in Japan, SAP Japan Co., Ltd. was founded in 1992. Slava Orekhov, a 35-year-old
Russian, is the senior vice president of industries and digital leadership at SAP Asia Pte Ltd., and a
representative young leader of the digital economy in our age.
(Interviewed on Aug. 1, 2018)

Digital Economy in Asia
JS: SAP is a very well-known

company and our readers
would like to know who you
are and what exactly you aredoing.

also need to transform themselves tobe competitive and relevant on theworld stage.
JS: To be frank with you I am

not an expert on technology.
I’m curious about the growthpotential of IT business in
Asia. Unfortunately, Japan isconsidered a little behind thetrend of information
technology.

Orekhov: First of all, thanks for theopportunity. I myself am a young
professional working 11 years for SAP
in different industries and also in
different countries. Now I am part of
the regional executive team based out
Orekhov: The speed of growth isof Singapore in charge of industries
actually unlimited in any region of the
Slava Orekhov
across the Asia-Pacific and Japan.
world including Asia. I’m sure you have
Basically, my team and I support our customers and advise them ona smartphone right? And you are a Facebook user or you chat withhow to achieve their transformational goals using technology.
others on the phone. We all are essentially a part of this digital world.
Everything we do involves IT from traveling on a train to driving a car
JS: How do you see business in the Asia-Pacificor shopping in a store. All the operations are controlled or influenced
by software and technology that companies like SAP provide.
region?
The next big thing is machine learning and artificial intelligence (AI),which basically means that machines will eventually replace a lot of
Orekhov: Asia has more than half of the world’s population and somepeople and the work that they do. An example is translation. Now weof the fastest-growing economies. And at the same time, the speed ofoften need translations or we need to learn the language. Very soon
development of Asian countries over the last 50 years is often seen as
this will be part of your smartphone where you can easily
a phenomenon of the modern economy. So when I wanted to basicallycommunicate with anyone else regardless of language.
make the next step in my personal development, after serving two
There are hundreds of other things, which are affecting the way weyears as managing director of SAP CIS, I really wanted to come to Asia
live. New companies like Netflix, Airbnb, Uber, Amazon — they’reto be part of this exciting journey.
based on the technology transforming our lives. Actually you may not
The level of innovation and competition is creating a very goodbe familiar with the technology but you’re living in this digital world.
boiling environment. Everyone in every country wants to transform.
And Asia is not an exception to the rest of the world. We work with a
Some are building everything from scratch like some of the Southeast
company in India that aims to provide all citizens with access to the
Asian organizations, or small and middle-sized companies in India.
Internet allowing many villages to connect to the rest of the world.
Some have a lot of legacy like the older big Japanese companies who
https://www.jef.or.jp/journal/

Japan SPOTLIGHT • November / December 201841

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Companies like Rakuten in Japan are basically disrupting retailindustries to some extent. Softbank is establishing an investment arm
to consolidate some of the newer technology and make sure that it ispart of its growth.
My last comment on this topic addresses the risk of Japan. It did
extremely well in the second and third industrial revolutions. It still has
an advantage because many countries still believe that Japan is at thefront of the trends. However, most of the Japanese companies, ourcustomers, have a sense of urgency when it comes to transformation
and applying all this modern digital technology and connectivity. They
would love to learn from Silicon Valley how they too could innovate at
the same level. The key is that Japan needs to be more open. You
cannot live or win in isolation. Through openness and cooperation newthings will develop.

What is VUCA World?
JS: You said that today the Internet and information

technology connect everybody, and that is creating
VUCA: volatility, uncertainty, complexity andambiguity. Could you please describe this?

controlled this way, then potentially you can reduce the consumptionof electricity by up to 20%.

Digital World & Regulations
JS: Enhanced connectivity among different sectors

and individuals is a post-Industrial Revolution
phenomenon. This could be good but it could cause
uncertainty and other VUCA issues as well. These
technologies must be considered a sort of public
good but they are not regulated.

Orekhov: The main task for the government and regulators is to makesure that there is a fair environment; no monopolization to stifle
competition. If there is one common infrastructure layer, then it’seither controlled by governments or by a set of participants. As withphones, you have competition for different operators and you canswitch. IT is more dangerous. Facebook is almost a monopoly in theWest. When it comes to enterprises, they can manage themselves andgovernments don’t need to interfere. When it comes to citizens,governments need to take care of them.

Orekhov: Every generation over the last couple of hundred years has
experienced some transformation. When cars were invented, people
were really scared of them and planned to stick with horses. The same
was true when computers came along. People are afraid of change andthey often see the newer technology as a risk.
The discussion about autonomous cars, for example, is about
displacing drivers, an industry comprising millions of people globally.
What if translators are replaced by technology? And this applies tomany other professions — where do they go?
About 200 years ago, 95% of Japanese were involved in agricultural
trades. Now in developed countries like Japan, less than 5% of thepeople are involved in agriculture. Imagine 200 years ago, someone
steps up on the stage and announces that we will soon lose 90% of
our jobs. Panic would ensue. That transformation created a lot of newjobs in factories making tractors, and for mechanics and engineers.
We need to understand there is a lot of uncertainty connected with anytransformation and new technologies.
My bottom line is that there are a lot of uncertain elements thatcome with every transformation. And this transformation driven bysoftware and IT is probably the biggest one that humans have everexperienced.

JS: When it comes to individuals, how should we

JS: Another distinction between the post-Industrial

Orekhov: Working for a European company, it is very tricky to answer
this question. First, I think that the intention is absolutely right. We
need to make sure that we give the right tools to people. I think it is agood thing for society in general that the EU has already started
implementing the law. Because, if later we decide to adjust the policies,
you need a starting point. One can argue whether it is good or bad, but
I think only time will tell.

Revolution and other innovations in the past is the
speed of progress of the digital/IT economy. Will thissubstantially increase volatility and uncertainty,
complexity and ambiguity?

Orekhov: Of course, to some extent. But it also gives a lot ofopportunities. Let me give you one example. Imagine you have a big
factory. By connecting all the machines so they can communicate witheach other you can micro manage them. If we know that a machine
will not be needed for the next three minutes, software takes it off grid.
No person is actually thinking about this. If all the machines can be
42 Japan SPOTLIGHT • November / December 2018

protect our privacy?

Orekhov: This is actually a very big debate right now. Basicallyeveryone is tracked every second and your pictures are everywhere
because you walk down the street and hundreds of people are taking
pictures of the street too. And tomorrow your face appears on someblog and you never know this is happening. The amount of informationthat is now collected and it is possible to analyze about individuals isscary.
And I think ultimately all information will become open. The younger
generation doesn’t mind actually. They like to be visible; they like tocheck with friends and family and where they might be so they canmeet. They see this as an opportunity and not a trap. It will naturally
happen and there will be more and more openness of data. On theother side of the equation, we need some laws protecting personal
information, like erasing or blocking for various reasons.
JS: How do you feel about the European Union’s new

privacy protection law in the digital society called
General Data Protection Regulation (GDRP)?

The Key to Surviving a VUCA World
JS: What kind of companies will survive this world

described as VUCA and what companies cannot?

COVER STORY 10

You mentioned that open companies would survive
better than closed ones. Could you elaborate?
Orekhov: There are three key things which we believe will help thecompanies to survive during this transformation. The first is to analyze
their processes. This technology is completely different and so too theopportunities for us to manage things differently. If an organization isconstantly looking to improve its processes and is open to change,
then it will survive from the process perspective.
The second big thing is the business model. New technologies are
giving them opportunities for new models, examples being Uber andAirbnb. Basically, Airbnb is the biggest hotel operator that has nobuildings or owns any rooms. This is a new business model. Komatsu
is trying to push the service and not the product. Essentially you canrent out a truck instead of buying it.
The third important aspect is the workforce. Companies need tochange the way they work in order to survive because the workforce ofthe future will be different from the current one. The younger
generation has grown up with these technologies. When they come towork they expect the same level of easiness and interaction forwhatever they do.
Essentially, companies don’t have an option. You cannot fight it. If
the entire generation is coming with different expectations, then you
change or you die. SAP helps a lot of our customers preparing for thisnewer generation of workforce.
Japan, in particular, has another challenge, which is not that
common in many parts of the world: diversity and gender equality. You
still have potentially 30% of your workforce not working amid ashrinking and aging population. The way to survive is either to replace
it with robots and AI or engage more of society, especially women who
don’t have access to do the same work as men.
Rakuten introduced a diversity policy and its growth was boosted
immediately. Gender equality is just one thing but it is really important.
We just discussed it with 50 customers on July 31 and this was amajor point for everyone.
But another thing is diversity, in general meaning foreigners. Japanis such a great place to live. But no one knows this because you have
127 million people living here and only 1 million foreigners. Singapore
is an example of one of the most innovative and rapidly growing
countries because of this technology. They have two and a half million
people yet 51% or 52% are not Singaporean.
The next big fight between countries is for people’s brains, global
talent and not material resources like in the past. I know that Japan istaking steps, like visas for skilled work and the startup hub in Fukuoka,
where you can get a visa as an entrepreneur. But I think that Japanneeds to do much more because that is the limiting factor to future
growth and development.
JS: Regarding startups and entrepreneurship, thisrevolution has made it easy for people to start
because of dramatically lower fixed costs. In light of
this, I think that leadership in the future may become
somewhat different from leadership in the past.

Orekhov: Absolutely. And this openness is a necessary part of diversity
and understanding. The concept of diversity brings different

perspectives, thinking outside the box that is necessary for success.
Japan is doing well investing on average $2.4 billion per year into thebuilding of this startup community. But still, if you take a look at thecurrent statistics, not more than 16% of younger Japanese are open to
the idea of being an entrepreneur, which is much lower than most of
the countries in Europe and even in China. And I’m not saying that it’sbetter to be part of the company. I am a member of a big company but
we also constantly work with startups. We have a lot of platforms tocooperate with startups and to nurture them and we acquire some ofthem.
We also bring in innovation from the outside. SAP has an internal
entrepreneurship program to support them. Essentially we treat someof the internal innovations as startups and we help and invest in them.
Some even spin off and others become part of the future success for
SAP. The point is to be more open and flexible. All the Japanesecustomers I personally have been talking to over the last two and ahalf years see the need. They all are willing to learn; it is just how fastthey can go. Also, what is the government doing to support them? Is it
making it easier to bring in people from outside?
Singapore is building a lot of the infrastructure to support all thisinnovation and they want to become an innovation hub. In fact, they
are already an innovation hub; they just want to stay ahead. Why not
Japan? It’s an amazing place but it’s not known.
JS: What about the education system? In order toraise entrepreneurs the education system needs tobe changed.

Orekhov: Absolutely. My personal feeling is that the education we havenow, in most countries, resides in the Middle Ages. In other words,
not much has changed unfortunately. So we see a lot of newcompanies trying to disrupt the educational market; they are giving
access to knowledge to all people in the world. The current educational
system is not doing this. Through the Internet one can interact withthe best students all over the world in real time, and have access to thebest professors. One does not have to leave home. I think that higher
education is in real danger. It is not really transforming itself andgovernments need to push the demand.
JS: The education system is important not only interms of entrepreneurship but also in terms ofadjusting our lives to AI, which can replace simple
labor. I think we should enhance the added value ofhuman activities.

Orekhov: I think this will happen naturally when the newer generation
comes to power. This is one of the main barriers for the companies inJapan especially and why they are not really moving faster intransformation. Their senior leaders are not technology savvy. So they
don’t understand the technology, they don’t live with the technology,
and that’s why they don’t drive the transformation from thetechnology. Once the younger generation enters it will happen naturally
in all organizations including the education system.
JS: So you think in a VUCA-dominated world young

leaders will definitely be necessary?

Japan SPOTLIGHT • November / December 201843

COVER STORY 10

Orekhov: Absolutely. And again Japan is a very good example,
because of the cultural aspects they usually have at the CEO and board
levels, people with a lot of experience. Grey hair is well respected here.
There is nothing wrong with that. But let’s come back to my previous
point about diversity. The key is to keep the balance because
sometimes we just need to infuse a little bit more of the courage fromthe younger people to transform.

Impact of the Digital Economy
on Public Policy Issues
JS: Some economists see the need to change theregulatory system in accordance with the progress ofthe post-Industrial Revolution and this might change
the nature of capitalism. What do you think?

Orekhov: There are two aspects. One is whether the regulation
systems need to be changed, and I honestly don’t know. But
I definitely believe that they need to be reviewed. And this is what we
usually do when a company or organization understands that theyneed to transform. We strive to improve everything that can be
improved and constantly review these things together with thecustomers to bring in some new models, new business processes,
next generation best practices. Then we provide the technology that
supports that change.
Governments usually don’t think this way. They have remained inplace because there are too many other things to do. This kind ofreview and assessment — what we call “process consulting” — isbetter for the future. And I am not sure your government is thinking
this way.
The other aspect is the entire change of society. This is what will
happen eventually. In the past sustainability was a big topic amongst
our Japanese clients. Now they think not only about shareholders,customers and employees but also about the planet, the world and thefuture of our generation. I would say these issues have a very limited
connection to traditional capitalism and presage a major change insociety in the future.
JS: In my mind there is an argument that competition

rules should be reinforced. We are living in a sort ofplatform economy and each platform could serve asa monopoly, a dominant power.

Orekhov: It’s not always easy to predict what could become amonopoly. When it comes to some natural things like utilities, someinfrastructure, one can organize and restructure. When it comes to thenew platforms like search platforms, Google is dominant in most of
the markets in the world, but there are still exceptions. China andRussia, which are very different, have their own search engines andplatforms and this is not because of anti-monopoly regulations, but
because of normal competition. Personally, I believe we need to giveopportunities for people and companies, so they create a new good. Of
course if we cannot avoid it, then we need to implement controls.
JS: One more question is related to equality andinequality. I think the current world is efficiency- and44 Japan SPOTLIGHT • November / December 2018

growth-friendly. The question is whether this VUCA
world is really an equality-friendly one. Some would
say it is equal because everybody has an opportunity
to start a business.
Orekhov: I think eventually equality will improve. I mentioned theexample of education. We now have these massive open online
courses (MOOCs) where everyone can participate. Someone withlimitations, or living in remote locations, can now be part of this worldin the same way as everyone else.
Another example is health care, which is undergoing hugetransformations. One can have remote consultations with a doctor any
time. He looks at your data and analysis and you interact with him
through video connection. Close to 1 billion people don’t have basic
Internet connectivity. There is a great inequality now, but eventuallytechnology will bridge this gap. Equality when it comes to opportunity
and access will happen.

The Future Outlook
JS: How do you see the future of this VUCA-world andin the light of this assessment what is your businessstrategy?

Orekhov: I see it as bright and smart, absolutely no doubt about that.
We are now building these tools to basically equip humanity, and at theend of the day to make the world run better. This is our mission
strategy. SAP helps companies to transform and many companies
want to learn from us, not only for the technology but also through ourown history. We transformed ourselves four times over the last 45
years in order to stay alive. We’re bringing intelligence to all thesystems we are building. Intelligent enterprise, where things will bedone by computer and not by man.
JS: Your strategy is basically to push your business inaccordance with the trends?

Orekhov: Actually, it is a bit more sophisticated. We see several trends
that we’re working on. One is trying to integrate all parts of thebusiness to be one common thing. Secondly, we believe in the futureof AI and machine learning, so we want to infuse all these technologies
in all products that we create. And thirdly, we believe that we need tohave a common “data platform” because data layer is critical foreveryone else. You’re building the data layer, which is basicallyconsolidating all the systems that we can build, but which also has theability to connect to the rest of the world and ultimately this supports
the openness we have been talking about. So these are the criticalelements of our strategy and this is how we see our products going to
the market.

Written with the cooperation of Dan Considine who teaches at Seikei
University and is president of NeTip Inc.