Dr. Lu Bainian, Chief Architect of Business Innovation at SAP China, Outlines Process Reengineering and Organizational Innovation Strategies for Pharmaceutical Enterprises

Approaching 6 p.m., Dr. Lu Bainian appeared in the hotel’s interview room, having just delivered a keynote address titled “How Pharmaceutical Retail Enterprises Can Achieve Digital Transformation” to senior executives from chain pharmacies across China. As soon as he entered the interview room, Dr. Lu asked the reporter, “Did you attend the speech?” He then mentioned that during his presentation, he had inadvertently strayed from the intended topic, shifting from the planned subject to discuss corporate innovation.

“A teacher is one who propagates the doctrine, imparts knowledge, and resolves doubts.” This left the deepest impression on the reporter regarding Dr. Lu Bainian. He would often pose a question, employ a rhetorical structure, and promptly provide the answer, much like a teacher instructing in a classroom.

Dr. Lu Bainian was among the first cohort of young people to take the National College Entrance Examination after the Cultural Revolution. He studied at Shaanxi Normal University, stayed on as a faculty member after graduation, and later pursued advanced studies at the University of Cambridge before returning to China to become a professor. He has served in various roles, including Deputy Director of the Department of Mathematics at Shaanxi Normal University, Pre-sales Director for Greater China at BO Company, and Senior Consultant at Oracle. Currently, he serves as Chief Business Innovation Architect at SAP China. A veritable “frequent flyer” delivering lectures across the country, Dr. Lu’s weekly itinerary, as detailed by a reporter, took him from Kunshan in Jiangsu Province to Zhangzhou and Longyan in Fujian Province, and then to Shenzhen in Guangdong Province, covering half of South China.

The formal interview began with the question, “What is SAP?” Dr. Lu Bainian then recounted his “classic” joke: “When I try to explain what SAP is, people often don’t know and mistake it for SPA.” In reality, SAP has extensive applications worldwide. The “SAP” logo frequently appears on advertising boards during NBA games because SAP provides technical support to the NBA. Airlines and oil companies also use SAP management software. In China, successful SAP adopters include Nongfu Spring, Sanquan Food, Laobaixing Pharmacy, Huawei, and BGI Genomics.

SAP, an acronym for “System Applications and Products,” refers both to the German company SAP SE and to its suite of enterprise management software solutions. These solutions encompass Enterprise Resource Planning (ERP), Customer Relationship Management (CRM), enterprise performance management, human resources, supply chain, and manufacturing. Currently, SAP’s flagship offering is its SAP S/4HANA system.

As we understand it, SAP was founded in 1972 and is headquartered in Walldorf, Germany. With tens of thousands of employees worldwide, the company has expanded its business to more than 100 countries and regions, and 80% of the Fortune Global 500 companies utilize SAP management software. SAP provides a comprehensive suite of management software solutions, ranging from enterprise back-office operations to business decision-making and product operations, helping enterprises achieve efficient management, drive innovation in products and business processes, and implement refined corporate management.

SAP is listed on multiple stock exchanges around the world. According to data from the New York Stock Exchange, its market capitalization reached $104.312 billion (as of December 16). It is a constituent of the DAX 30 index, alongside companies such as Bayer, BMW, Volkswagen, and Siemens.

“Every time I introduce SAP to people, I ask anyone who knows about SAP to raise their hand. Few do. How can you not know? SAP is actually the management mastermind behind the Global Fortune 500,” said Dr. Lu Bainian.

A reporter asked why SAP, as an enterprise software company, is able to meet the needs of every industry and develop corresponding software and processes. Dr. Lu Bainian stated that SAP categorizes global enterprises into 28 major sectors and collaborates with the industry associations of these 28 sectors to understand their business requirements and key management priorities, while integrating SAP’s established operational expertise. This approach ensures that software design remains aligned with industry-specific demands and effectively addresses the distinct management needs of different industries.

As the world’s largest enterprise management software vendor, is SAP experiencing innovation stagnation and outdated concepts? Dr. Lu Bainian responded that, in fact, SAP does not provide all its services independently but instead collaborates with consulting firms and enterprise IT companies. He cited that SAP’s partners can be represented by the letters A, B, C, and D: A for Accenture, B for BearingPoint, C for Capgemini and EY, and D for Deloitte, among others.

“SAP provides management consulting, and the software itself is also a Fortune 500 company. So why isn’t it well-known? It’s because SAP collaborates with consulting firms. While external clients may engage consulting services from firms like Deloitte or BearingPoint, the underlying technical support is provided by SAP, which plays a behind-the-scenes role. This operational model is known as an ecosystem,” said Dr. Lu Bainian.

Subsequent services are also entrusted to specialized consulting firms, which tailor the software according to the executing company’s business needs—a process known as “two-stage innovation.” In this regard, SAP’s open business layout ensures its ability to provide native software and services to industries such as manufacturing, consumer goods, retail, high-tech, and healthcare, thereby establishing a robust ecosystem that has sustained years of business leadership and rapid growth.

SAP is, in essence, a comprehensive set of organizational processes and operational standards. Implementing SAP software requires enterprises to standardize and streamline their existing business processes to meet SAP’s operational requirements. “While typical consulting firms may offer recommendations tailored to a company’s specific needs, SAP is different; it necessitates a business process reengineering effort to achieve the standards of process-driven management,” said Dr. Lu Bainian.

“Some enterprises may find the implementation of SAP quite painful. For instance, in certain state-owned enterprises, the shift toward process-driven management often necessitates workforce reductions and the elimination of redundant departments, thereby affecting the vested interests of some individuals. Nevertheless, SAP adoption is beneficial for corporate development; it can facilitate a company’s initial public offering (IPO) and help meet compliance requirements.” Therefore, SAP sales representatives frequently assert that “short-term pain is preferable to long-term suffering,” emphasizing that standardized management is exchanged for long-term, process-oriented operations, although it indeed causes short-term growing pains.

“Once, a beer manufacturer was sold at several times its actual value after implementing SAP, simply because the acquiring company’s due diligence was straightforward, with clear visibility into procurement, sales, and inventory,” said Dr. Lu Bainian, citing this example.

Talent is the key to SAP’s continuous innovation and vitality. According to Dr. Lu Bainian, senior management has established a college at Stanford University to anchor innovative talent, ensuring a steady influx of innovative and high-tech professionals into SAP.

Upon learning that the reporter had familiarized himself with his published work, *Innovation Design Thinking*, Dr. Lu Bainian steered the conversation toward corporate transformation and innovation. “Corporate innovation is the lifeline of every enterprise’s sustainable development and constitutes its core competitiveness. From manufacturing-oriented to sales-oriented enterprises, and further from sales-oriented to service-oriented enterprises, innovation is indispensable. Whether it is transformative innovation, which carries significant risk and yields results over a longer timeframe; category innovation, which involves considerable risk but delivers performance gains more rapidly; market innovation, where risk and performance are balanced; or operational innovation, primarily internal to the enterprise and associated with lower risk—all these forms of innovation are highly sought after by businesses.” Thus reads the introductory page of the experiential training section in *Innovation Design Thinking*.

“SAP is a German company. Germans are often perceived as rigorous, or to put it another way, rigid. So why have Germans been able to drive sustained global innovation?” The key lies in the fact that innovation follows methodologies and established processes, said Dr. Lu Bainian.

“Germany proposed Industry 4.0 and quickly released a detailed 90-page plan. We also introduced ‘Made in China 2025,’ extending the planning horizon from five years to ten to encourage corporate innovation. However, regarding specific implementation strategies, many are still ‘crossing the river by feeling the stones.’” In Dr. Lu Bainian’s view, Chinese people possess strong capabilities in top-level design, a trait rooted in traditional Chinese culture. This reflects the distinction between “Dao” (the principle or direction) and “Shu” (the method or technique): while the former tells you what to do, the latter requires self-exploration on how to do it. Consequently, redundant resource allocation is not uncommon. In reality, innovation does have its own roadmap and methodology.

Dr. Lu Bainian published a book titled *Comprehensive Performance Management*. It was initially titled “Corporate Performance Management,” but the publisher rejected this title, arguing that the term was unfamiliar to most readers. Dr. Lu proposed creating a new acronym, CPM (Corporate Performance Management), analogous to established terms such as ERP and CRM. Ultimately, however, the title was changed to *Comprehensive Performance Management*. This monograph, the first by Dr. Lu on topics including organizational structure innovation, resource allocation, innovation, and enhancement of corporate competitiveness, has been widely recognized by numerous enterprises. A key concept featured in the book is the methodology of innovation.

In recent years, Dr. Lu Bainian has acted like an evangelist, promoting his “Innovation Methodology.” Wherever he goes, he typically explains the pathways to innovation through a combination of lectures and gamified practice. His training course on Design Thinking for Innovation includes several small-scale innovation games. According to Dr. Lu, innovation requires three essential elements: novelty, value creation, and scalability. First, innovation must be novel, representing something unprecedented. Second, it must create value and generate tangible benefits. Third, its outcomes must be scalable and replicable on a large scale. Only when these criteria are met can innovation yield social benefits.

Last Friday (December 16), Dr. Lu Bainian visited BGI Genomics to host the “SAP HR Forum for Growing Enterprises.” In the afternoon, he conducted a workshop on “Innovation Design Thinking,” focusing on performance management and corporate empowerment. “It’s ‘Innovation Day’—a day dedicated to innovation as we step into BGI Genomics,” Dr. Lu told reporters in an interview. It is reported that SAP and BGI Genomics are engaged in comprehensive cooperation in areas such as big data, human resource management, and performance management.

How can pharmaceutical and healthcare companies like BGI Genomics achieve digital transformation? The key lies in “process reengineering” and “innovation methodologies.” Dr. Lu Bainian posed a question to reporters: Who do you think is at the center of current hospital operations? He then provided the answer: Hospitals remain self-centered. He illustrated this by detailing his own patient journey, which involved registering, undergoing tests across different departments, consulting with attending physicians, and finally picking up medication—a process that requires patients to run around extensively. What would a patient-centered model look like? In such a scenario, patients would not need to rush about; instead, the hospital would provide mobile services, and medications might be delivered to the patient’s home before they even return.

This process constitutes business process reengineering and innovation. “Within the pharmaceutical industry, there are pharmaceutical manufacturers, raw material suppliers, and life sciences companies. SAP systematizes all your processes and enables computer-based management.” How, then, is innovation achieved? It involves identifying issues within existing processes to enhance efficiency and improve user experience. For instance, the digital transformation of retail pharmacies centers on systematic management, integrating procurement, sales, and inventory control; refining pharmacy SKU and category management; dynamically adjusting offerings based on customer demand; and even enabling predictive sales analytics.

Regarding innovation, Dr. Lu Bainian emphasized that the most critical approach is to adhere to a structured methodology and iterate rapidly, akin to taking quick, small steps. Innovation should be controllable and sustainable. For pharmaceutical companies, Dr. Lu stated that it is essential to break down information silos as soon as possible and achieve resource integration. This will enable the maximum identification of issues in organizational processes, products, and services, thereby leveraging systematic solutions to support the development of the pharmaceutical industry.