You're dog fooding, I imagine.
That favorite Silicon Valley phrase, test on yourself.
We call it drink your own champagne. Yeah. Because it hopefully feels like champagne.
This week on Bold Names, I'm talking to Christian Klein. He's the head of one of Europe's biggest tech companies, SAP. Christian rewrote the company's business playbook when he took over almost 6 years ago. He's going to talk to us about why it paid off and how he's working to futureproof the company. Now, thank you for joining us here on Bold Names today. You took over SAP in 2020 as the solo CEO. One of the first things you did was pretty dramatic. You announced a complete change of the business model and your share price dropped something like 20% in that day. What was the plan?
Yeah, I mean I started my career here, Tim, 27 years ago. Some people are saying I'm more a child of SAP. I started here actually even with 15 years as an intern. And when I became the CEO of SAP, it was pretty clear to me that the ERP, which made SAP so successful for 50 years, it's not going to last in the future.
Let me stop you there. ERP, that sounds like a very technical term for the layman out there.
It is actually enterprise resource planning. So when you want to do finance, supply chain, payroll, HR, everything integrated, then you need to buy an ERP. But that ERP was not really helping to grow our business in the future, and that's why I knew that I have to make a radical change. The cloud is the future, that was really evident. But then you needed to disrupt yourself. You need to disrupt the way how you develop a product. You need to disrupt the way how you service your customers, deliver the product, and even all the internal functions. It's a massive transformation and I was convinced that this is the only way to make SAP mid and long-term successful. And then you have to take the risk and you have to make sometimes in life these bold decisions.
I mean really the key was just for the laymen out there, you were selling software and clients were using that on their own hardware and you were moving to a business model where the software would live in the cloud, kind of very much like what Microsoft did for its enterprise business, right? I mean this is lots of companies were moving to the cloud today, it made sense, but back then perhaps there was some nervousness. This was in the heart of COVID era, shares fell as I said 20% that day. What was it like to go home that evening and see how investors were reacting?
Yeah, I mean I probably didn't drink a glass of water at home. I probably needed two or three glasses of wine. But then obviously also one day later, all the managers, the leadership team of SAP wrote me a nice, I would say even love letter and say, Christian, it's the right thing to do. We believe in the strategy and we're going to follow you. When of course the share price was down when we did this radical change, people there were of course concerns, questions, hey what about the future of this company, are we going to make it? And in these times you need to actually give people confidence. It doesn't help now to put even more pressure into the system. You need to be positive, you need to show a clear plan, you need to overcommunicate. Literally I was always there every month. We reported progress and see here, positive step, positive step. But then also finding the right balance in different times then to push the bar, to also show the people, hey this is not an industry where we can just stay in our comfort zone. And then finally what I say was what was very important is also the mindset of the people. When you are running a cloud business, it was always about customer satisfaction, don't get me wrong, otherwise this company would not have been successful. But now it's really about adoption. It's not about selling a piece of software and the customers implementing it. Now we are on the side of our customers with every step they go. And that was actually also a big shift in the way how we work with our customers. And that also of course required a lot of change management to really get this into the DNA of this company.
You know, I don't know if you know that looking at this at first blush that you would necessarily be seen as a change agent. I think a common business school perspective is you need to bring an outsider in to shake up culture. But I know that you've talked about this idea that actually being an insider helped you and I wonder why.
When you look back into this transformation, first it's always helpful to have a strong network. Because in order to convince people you need to understand how do the people work? How do the different functions of SAP work? Here in Germany, we have things called the workers council. So you can do a lot of things, but you cannot do everything against the workers council.
Let me slow you down there for a second. Workers council for those not deeply into European labor practices, a workers council is essentially a union in the US, right?
Exactly. Exactly. And so then you have the ecosystem with the millions of partners and they also saw a big change of their business model. So you have to understand how does this all play together in order to make this transformation work. If you lose one of those stakeholders, be the employees firsthand, but then obviously the customers, the partners, the investors and other parties like the unions, then you have a problem. And that's why I feel it was actually a big plus that I knew the company inside out. Am I saying that you always need to hire a CEO from inside a company? No. But at a special time like that, I would say it's rather beneficial.
Okay, so we've talked a lot about culture change here and I'm interested in this because I think a lot of companies are facing this really big change ahead with the rise of AI. Some have to look internally to make that change. Some are looking externally. Ultimately this probably means culture change for a lot of companies, right? What are you hearing from customers on what they see as the biggest opportunities for AI in 2026 in the B2B world?
I mean obviously what moves the needle is supply chain. When you look into manufacturing, inventory, logistics, companies spend a lot of money for production, for the inventory and everything. What you can really change from a business perspective with AI is actually resulting in huge benefits and a lot of value. The second piece obviously is when you look at the top line. Now with AI and with the business AI and with the LLMs, you can detect consumer trends even better. You can actually tailor your offerings even more personalized to the consumer's needs. And then these agents when they talk to each other, they can actually deliver you the best consumer experience because they know exactly what is on the inventory, what can be shipped by when. And that is of course when you think through how SAP did run such processes for over 50 years, this will fundamentally change. Because with these agents you can run that more tailored, more personalized, more intelligent.
Yeah. When you say the word agents, you mean AI agents. These idea of essentially AI programs designed to do specific tasks for the consumer or the client or whoever.
Yes. Exactly. Or the employee.
As you know, I'm based in San Francisco, kind of the heart of a lot of conversations around AI, startup AIs in particular. And I feel like I've had a lot of meetings in the last few months with AI startups who think they have the next big idea to revolutionize those boring functions within business, right? The really the things that your company is known for doing. And I presume you think you're probably better positioned to implement than they are.
