As a new product for clients, GreenMonk are now offering moderated screencast videos – the inaugural one is with SAP’s VP of Sustainability Solutions, Jeremiah Stone. In this screencast Jeremiah and I discuss Operational Risk Management, what that has to do with sustainability, how SAP are moving from systems of record to systems of engagement, and seven minutes into the video, Jeremiah gets out his iPhone and iPad and gives a really cool demo of how their software can be used in the field.
Here’s the transcription of the screencast:
Tom Raftery: Hi everyone, welcome to GreenMonk TV. We are doing a moderated screen cast with Jeremiah Stone from SAP.
Jeremiah is VP, Sustainability Solutions. So today we are going to talking about operational risk management. Jeremiah could you first of all give me a quick intro on why you think operational risk management has anything to do with sustainability?
Jeremiah Stone: Hi Tom good morning. Thank you for having me on GreenMonk. I am a big follower and I like what you guys do. So it’s really a lot of fun for me to come on with you.
When SAP has worked with our customers, and we have a customer base in manufacturing of close to 30,000 customers, the common thing that comes back to us is that companies are engaged and interested in running more sustainably and that means using less energy, it means producing less emissions. It means recruiting people for the long term and making sure that they can adapt to changing labor conditions and changing demographics.
But there are sorta some prerequisites before people or companies can be successful with that and one of those is to cut operational losses and also to be able to adapt and change within their operations because often these factories, these plants, these operations are sort of steady state designed entities where they are very static and they are not really amenable to change.
Tom Raftery: What kind of operational losses you are referring to Jeremiah?
Jeremiah Stone: Well Tom it’s easy to think about the types of catastrophic accidents that happen throughout the world I think the Gulf oil spill is something that people think off, Bhopal thirty plus years on is still high in people’s minds. So those sorts of process safety incidents, we regrettably had a fire here in the California Bay Area not two weeks ago up at the Richmond Refinery.
These things happens, sort of, every day and what we are seeing is that as manufacturing operations and manufacturing I think of oil and gas, I think of utilities, I think of mining, but even transportation logistics air planes that sort of thing. We’ve built these systems that are very complex and sophisticated but they are not very change friendly.
So, to change them, they need to change, they need a radical change for sustainability purposes they need to have systems in place whereby you can change and continuously improve the static designed system whether it’s an energy refinery or a transportation network without having accidents, without hurting people, without creating environmental spills, et cetera. And we find that our customers are fundamentally lacking that ability.
Tom Raftery: Okay, tell me something so about or — tell me about this operational risk management solution that SAP have.
Jeremiah Stone: Okay, well maybe first we can start with what we just talked about and saying that what our customers are asking us for.
Our customers are asking us to help them innovate their operations and become more sustainable and really what that has boiled down to when you dig into it with customers is that they typically have environment health and safety management programs.
However, they really run at an individual operational entity level and so it is difficult to compare different factories, it’s difficult to compare different operations, and it’s very difficult to get proactive and move beyond very reactive, “oh no an incident happened how do we deal with that?” setting. But rather identifying risk before it turns into an incident and dealing with it.
You cannot remove risk from these operations but you can manage them. And that’s really what our customers are asking us for. And when we — we’ve gone out and we’ve worked with I think close to 50 co-innovation customers now and working with means going with our teams into their operations interviewing people throughout the company and determining what the problems are and where software can help.
What we found consistently is that it’s an information flow problem. It’s an information flow from the corporate level where the purse strings are, the ability to spend money down to the individual level and some of the problems we find is that there is a really strong and meaningful commitment to safety at the corporate level in the boardroom, however it’s very difficult to understand where to spend the money, because you have this very large sophisticated operations and it’s difficult to know where to make the investment and getting beyond a better laminated sign on the chain link fence outside the operation is tough.
And then when you get to the operational level oh gosh, every — these days margins are razor thin, the current economic situation most of your line level management or leaders are really focused on hitting outcomes, hitting on, hitting their targets. And they may be in a position to make bad decisions, here we say can we put in a bigger pump to increase production, well if you put in a bigger pump how do you know that in your, in your facility that’s not going to burst a seal somewhere?
That’s really standard process safety management, but doing that in a consistent repeatable way successfully is rather difficult and then at the individual worker level understanding the operational environment in knowing how to behave, take the right processes, be safe is a challenge, but we are completely missing the inbound engagement conduit if you will, when they see something wrong how can one, an individual worker if they see something wrong report that.
All to often, when there is a problem and we do an investigation after an incident, well gosh the workers who are in that environment knew that there was something wrong, they didn’t have a means to communicate.
Tom Raftery: Okay, so how do you fix that?
Jeremiah Stone: Well there is a lot of discussion these days in the enterprise software community moving from systems of record to systems of engagement and this is something we focused quite a bit on and I like to show you a couple of applications right now where we are taking what would be a typical approach to a system of record to identifying a risk, which would be sort of one of SAP’s typical enterprise applications at a specialist enterprise health and — environment health and safety management professional level and moving that both directions.
And so if we look at this you could imagine that you are going to have your EHS professionals that are site level managers but they are the only ones that really have that information today and they don’t have a means by which they can push that information up to corporate nor do they have a means where they can gather at large scale that information from the workers.
And what I’d like to do is that I’d like to show you how we are addressing that today in terms of a mobile application. So I am going to share with you now my iPhone. Hopefully this, comes through, can you see my iPhone?
Tom Raftery: Yep.
Jeremiah Stone: Okay, so what I’d like to do is I’d like to show you our safety issue application. Our safety issue application, let me back out of here, this is the entire application and so we are trying to really take a note out of consumer design and have one screen application without lots of tabs and drill through menus. And we have designed this application around the, “if you see something, say something” design principle and actually John Astill one of the mentors has worked on this app, that’s part of his sustainability activities.
And I’ve got a example here, I raided my son’s toy chest this morning, and just to give you an example here. You can imagine here is our little repairman out in the setting. And he notices there is something wrong with this hauler. Rather than walking all the way back to the shop, he can simply take a picture of what’s wrong with the hauler. He can say okay, I am going to use that photo, he can press the record button here and record description of what’s wrong, I am not going hit that record button because then you loose the screencast. Maybe enter quick description here, “Axle wearing too quickly on hauler,” accept that description and then simply submit the safety issue.
And so you can see there that in a few seconds we have gone from seeing something wrong, recording a description with audio and then and then sending that off to the safety experts and this is uploading like it would to YouTube or anything else. And what you haven’t seen me do is enter my name, or enter where I was, or any of those such things because we are using location based services, we are using the enterprise backbone to say who saw the thing that was wrong, where are they, et cetera.
And because we also have the entire asset infrastructure in the background, we can similarly then say, oh well actually we know which truck that was, because we have near field communications et cetera. So that’s how you get more information into the system.
Tom Raftery: But nobody ever reads these reports, do they?
Jeremiah Stone: That’s an interesting point. Now imagine you are in this world where you drop the hey I saw something wrong into the box on the wall or you submit that paper issue, how do you know what happened if you were the person that reported that. I am glad you asked that because as you can see here we have the ability to capture the safety issue, but we also have this button here that says my issues.
So if I click into that my issues what’s it’s going to do is it’s going to look for every issue that I have submitted. And I can drill in, and I can see the real time status on that issue and if it’s being worked on or not. So now I am creating mutual accountability with the safety organization, you say nobody every reads that, well guess what, you would actually know if anybody had ever, ever read it, because we are tied into the core SAP system in the background.
And now there has been a workflow sent to the responsible safety mentor and we are are using that enterprise backbone now to facilitate communication.
So, now, rather than dropping that paper form off or submitting a form, it just goes into somebody’s inbox, now we are using much, much the same in any kind of social media. We are using mobility and social media now to push that information to the responsible safety person and along with a GPS of where we are, okay it’s not picking up, but well I think I must be in my Faraday shielded office here. But, this would then be picking up my my GPS, it would also be passing out through to the application. So now the safety manager and the employee have a relationship driven by the application.
Tom Raftery: But now the safety manager has gone from receiving one notification every three months to receiving 300 everyday.
Jeremiah Stone: That’s correct.
Tom Raftery: How does he work with that or she?
Jeremiah Stone: Well I’m not going to drill into that right now, but that’s the thing we’ve always been really good at, at SAP is how to deal with the large volumes of data. And so we have the ability to sort, slice and dice this information coming in, we have heavy duty analytics to show trending, to hot spot on the basis of the information put in. We also have as you see here this little flag, immediate action required, yes or no to help to raise it or lower the priority.
And our safety manager tells us hey that’s okay, my problem in the past was really a lack of data, not too much data and I want more data. There is a well known, in the industr,y sort of a ratio between near misses to incidents, its about 300 to 1, about 300 observations or near misses to an individual incident. And if you actually go into the day to day — any of these companies and they say, oh you know, we had 100 reportable incidents but we had 6,000 reported near misses.
Well they are usually quarter, a couple of orders of magnitude off between an observation or near miss and an actual incident. And so these professionals actually want more data not less.
Tom Raftery: Cool.
Jeremiah Stone: And we give them the tools to deal with that data, but now I’m going to show you how we expose that data to people who aren’t used to dealing with that data and that’s that upper level of management that I talked about before.
So that upper level of management, who is not giving any data at all, if we were to throw 300 observations at them per day, they wouldn’t have any idea what to do with it. But if we take those people who are good at dealing with the area and we expose the output of their analysis to upper management in a mobile device as you see here in a way that they can consume it, we can get better investments.
So what you’re seeing now is incident root causes and so somebody would have entered a safety observation with the iPhone app on the left and then there is a safety professional in between who has processed that, done an investigation, identified root causes.
Now we have the ability, let’s say your upper management are rather visual learners, I can drill in here to a word cloud and rather than looking at this with boxes and rows et cetera, we can expose the root causes to management or other users, let’s say you’ve got people coming into the organization now that are not used to looking at spreadsheets their whole life but they are used looking at Tag clouds or something that you get online and we can give them their information in a way they can consume it.
And so here we can see okay we’ve got a training problem, but let’s just say for the sake of argument that we’ve got a non-millennial here looking for the root causes and they want to look at a pie graph and then they want to say okay well I understand the root cause, but I understand what injuries have been happening.
So I’m going to add another dimension here, so now I’ve taken my route causes along the bottom here; defective equipment, lack of training, we still see that spike on lack of training that we saw before but now we’ve added that body part that’s been injured and now I’m just going to sort by occurrences.
So now we can see we’ve got a — main root cause is lack of training and we have arm injuries. And so the probability here is that we’ve got new equipment, we can dig a little bit further, we probably have new equipment in the setting and people are getting hurt by that.
We talk about environmental spills, we talk about explosions but big problem with sustainability is it’s also how you’re treating your labor force and the long-term consequences of what we maybe perceiving as smaller incidents, but let me tell you if you lose a finger, you lose an arm that’s a catastrophic incident to you as a worker.
So, we want to be able to help with that as well, and also from an employer point of view, your long-term liabilities with regard to workers compensation, et cetera, and what’s great about this app is we know that managers work in primary in email, well I can now send this to let’s say my safety manager, update training and go ahead and send that off and I can go ahead and you know I’m really amazed I should have you in there.
Well and anyway I can send that off to you Raftery at Greenmonk or whatever and then what this would give you is all of the data but also that graphic and say okay let’s look at this data I’m looking at, let’s work on this together.
So we’re really trying to move from what would have been a system of record approach to safety and risk, to a system of engagement approach by pushing out the ability to identify risks, here we can see we can take a picture there, the ability to identify risks in the operational setting and also the ability to understand what those risks are and take action at the management level.
Tom Raftery: And what kinds of industries would typically be interested in solutions like this?
Jeremiah Stone: So that the types of industries we tend to work with in solutions like this tend to be what we refer to as asset intensity industries, so these are industries that have lots of trucks, planes and also large equipment and they are high risk. So you typically think of oil and gas, both upstream on the exploration and production side and downstream on the refining side.
Also think of any type of large construction, so we’re staying in the energy field here, you could do a thing of utilities, what some people refer to as large construction companies with generation capacity. And anybody who is going to be putting up say a windmill farm or solar, et cetera, it’s going to be a same challenge here in terms of people in it and with lots of stuffs moving in, lots of heavy machinery, mining, mill, production.
I mentioned utilities, that also would include utilities like phone, et cetera and then transportation logistics, think of your airlines, US, FedEx, US Post that sort of thing. There is definitely a large demand in those types of industries for this, because they are large far flung organizations where training is a big deal, they are very fast moving and risk is also a big deal and so you see the potential to have major issues there.
Tom Raftery: And what about the current economic climate, is that impacting on sales?
Jeremiah Stone: I’d say it’s driving sales even more quickly. We’re seeing in this portfolio about a 35% compound annual growth rate over the last three years since the crisis onward, and that’s because companies are becoming even more loss averse in the current environment.
So it works both ways, when you’re trying to grow and you are investing you don’t want to have incidents because you want to be fast and agile to market, but also when you’re concerned about potential production stoppages or issues with regards to your liability, say an environmental spill or people spill or people incident, you want to control that as well, and so it’s really a cycle proof investment area in that sense, because it’s both something you need when you’re growing quickly and investing and something when you are at more of a steady state and you’re looking to control loss.
Tom Raftery: We are coming on time to wrap up now, just one last thing, where do you see things going from here?
Jeremiah Stone: Well what we’ve done today is we’ve taken our portfolio as we have it and as I mentioned we have these base capabilities in your incident management risk assessments, workers safety management, management changed and we’ve moved these into more systems of engagement at both the individual worker level and the corporate level.
Where I believe we are is we barely built the foundation for what we can do here, and the next step will be utilizing our abilities to deal with big real time data and so not just having the intelligent sensor of the human pushing data in, but imagine the internet of things pushing information into a system like this and then imagine taking predictive analytics and start to not only identify a risk when we see it from a professional point of view but now put algorithms at that.
Let’s point R at that from a particular algorithm point of view and start to identify latent and hidden risk in our operations. We can have predictive safety as well and then just have to utilize our assets as well in the cloud, so for example the recent success factors, acquisition, you’ll notice something that you don’t see on the screen here is training, qualifications, ongoing learning, informal learning via collaboration.
The true moving the system engagement, we should be utilizing Jam here from SAP to help grow communities of practice and communities of expertise around safety across companies and across even value chains and we’re starting to see that as well, so I think we’ve really barely taken the first step with what we can do here.
Tom Raftery: Well, fascinating. Jeremiah that’s been great. Thanks a million for talking to us today.
Jeremiah Stone: Thank you so much Tom. Bye, bye.