SAP is known to improve business efficiency, but did you know that it can also transform your business operations? While many are aware that SAP offers strong benefits, they may not use the program to its full potential.
If your company decides to implement or upgrade SAP, the results you achieve depend on several factors. The main elements for success are well-established business reasons and commitment to excellence in staffing your SAP project. That excellence in staffing is not just your internal resources but also the vendor you select to guide you through the process.
SAP can deliver amazing results, but that depends on you!
SAP as a Corporate Lever for Change
The key to optimal results from SAP or any major IT investment is to use the technology as a lever for change. If your focus is on the ERP technology rather than the business, all you will achieve is another system. Yes, it will be more integrated and require more discipline, but it will not automatically provide the needed changes to your business. In the end, you’ll never realize the promise of what a properly implemented global ERP application, such as SAP, can do.
“The software is less important than the changes companies make in the ways they do business. If you use ERP to improve the ways your people take orders, manufacture goods, ship them and bill for them, you will see value from the software. If you simply install the software without changing the ways people do their jobs, you may not see any value at all—indeed, the new software could slow you down by simply replacing the old software that everyone knew with new software that no one does… To do ERP right, the ways you do business will need to change and the ways people do their jobs will need to change too. And that kind of change doesn’t come without pain.
The important thing is not to focus on how long it will take—real transformational ERP efforts usually run between one and three years, on average—but rather to understand why you need it and how you will use it to improve your business.”
Christopher Koch, The ABC’s of ERP. CIO.com, November 17, 2005.
This focus on business processes and process change while using SAP as a change lever automatically ensures greater company control of an ERP project. After all, the whole reason a company undertakes this type of an IT strategy is for business benefit.
What do you hope to “GET” from an SAP implementation?
Too often in the consulting sales cycle, the focus is on your pain points. Pain points are an important ingredient for an SAP implementation, but they should rarely be the single driving factor for implementing ERP. Depending on your IT infrastructure and what SAP will replace, ROI opportunities and real cost savings may be available, but the big “GET” with an SAP implementation is the opportunity to transform the business. SAP’s potential goes beyond cost reductions and can help your organization become more competitive in the marketplace.
If you recognize and embrace the cultural changes that come with SAP during your implementation, you will benefit tremendously. The software will enforce a measure of discipline, breaking down walls and requiring more inter- and intradepartmental cooperation. The change management side of business transformation is not easy, but it is vital to compete in today’s economy.
Because of the business process revolution, executive sponsorship, senior management involvement, and top talent are critical for SAP implementation and upgrade success.
Along with improving pain points, implementing cultural changes, and encouraging senior management involvement, what do you hope to get from your technology investment?
When properly implemented, SAP gives you the opportunity to effect a business process revolution. SAP technology can enable your company or organization to make changes in how you manage your business, address market and competitive pressures, and at the same time enhance your value proposition.
While replacing numerous legacy systems, their interfaces, and the maintenance costs associated with those legacy systems is a reason some companies implement SAP or other ERP systems, here is a list of the Top 10 Reasons for a new or updated ERP implementation:
Benefit Improved management decision making Improved financial management Improved customer service and retention Ease of expansion/growth and increased flexibility Faster, more accurate transactions Increased revenue Cycle time reduction Improved inventory/asset management Fewer physical resources/better logistics Headcount Reduction Hawking, Stein, and Foster – Revisiting ERP Systems: Benefit Realization. From the Proceedings of the 37th Hawaii International Conference on System Sciences (IEEE, 2004) citing from Davenport, et. al., (2002).
Notice that most of the expected benefits are forward-looking and competitive in nature. Unfortunately, many companies have not implemented their SAP systems with this forward-looking benefits approach.
In recent years, as SAP customer participation in public information sharing events has increased (ASUG, Sapphire, etc.), many SAP clients are seeing more and more benefit. This benefit seems to be realized only with “Wave II” internal initiatives to add on additional automation functionality and reporting. SAP’s “New Dimension” products such as CRM, SRM, BI/BW, APO, and other technologies are making a difference for some companies, but even these products are not fully delivering on business expectations.
Every SAP implementation or upgrade should become an opportunity to evaluate the transformation of your business. Challenge your implementation partner and your own internal resources to make every SAP implementation or upgrade an opportunity for improvement. Decide up front whether you will dedicate the time, budget, and energy to implementing more advanced and beneficial functionality in the initial implementation– or whether you will install the “core” package first and then do a “Wave II” add-on project after the business has had some time to stabilize.
I personally tend to favor a staged or “phased” approach because it allows the business to evaluate the implementation vendor’s capabilities, develop some internal competence or expertise, bring some knowledge into the organization, and generally evaluate the company or organization’s ability to absorb the change.
How to Use SAP to Transform Your Business
Determine from the very beginning– before the project even begins– what the key performance indicators for your business are. SAP has done a great job of compiling an example list of KPIs that they include as part of their ASAP methodology. To provide further explanation, I have written extensively about the process and alignment of KPI indexes for business success.
What are the critical measures for each department within your business? What are your goals, and what are the employee performance measures used in their reviews?
Look forward: What is the direction of your company, your marketplace? What are you positioning yourself for? What benefits do you hope to get from your implementation or upgrade?
You need to clearly answer these and many similar questions before you even begin your formal project planning. The answers you provide should become your project charter.
Armed with this, you can make informed decisions about scoping your SAP implementation. SAP is a massive application and contains solutions to address nearly any performance measure or business benefit imaginable. While it may not always be a perfect fit for every measure, the application can be molded and shaped to fit nearly any requirement. Between the intelligent use of reporting tools and SAP’s generous “user exits,” pre-delivered enhancements options, and standard SAP bolt-ons, you can implement an application that is adapted to your enterprise.
Davenport, et. al., classify ERP potential in the following three ways: Integrate, Optimize, and Inform. In other words, an ERP application is designed for implementation, improvement, and data analysis. The key to ROI is getting to the data analysis stage as quickly as possible. I call this transforming the management culture from an operational and task orientation, to a strategic and analytical culture focused on competitive advantage.
To make that transition, you need to ensure that your implementation partner provides consultants who are more than just SAP application consultants. They must be true business analysts.
To find these analysts, you will need to do upfront work surrounding your ERP or SAP business case. A proper business case will help ensure a far better vendor selection process, a better business blueprint, a better-managed project, and a higher likelihood to deliver on time and within budget with real business benefit.
You Need Solution Experts for your SAP, ERP, or IT Implementation/Upgrade
To transform the culture, you need SAP consultants who are also business savvy. They must also be business consultants who understand when it is time to “push back.” Even though there may be a technical solution, sometimes a deeper business process issue needs to be addressed first. You need real consultants who won’t just design technical “band-aids” but who have the experience and the skill to determine the underlying cause of a problem (i.e. analyze people, process AND technology). A true solution expert will also find solutions to increase efficiency and productivity, and then apply technology to automate the process. A solution expert is a business consultant first and a technology expert second.
If you are successful in partnering with a firm that provides solution experts and not just technicians, you will go far in realizing many of the benefits that SAP promises in a shorter period of time. Not everyone on the entire project team needs to be a solution expert (although that would be ideal), but many of the team leads should be heavily skewed toward being solution experts and not just SAP technicians.
Using SAP or Other Technology to Transform Business Processes – Practical Suggestions
Key areas for solution experts to focus on during any SAP implementation or upgrade are growing your business and generating revenue, which involve improving efficiency and reducing costs. When you begin any SAP project, these two key factors should be built into the project planning process. Otherwise, how will the project be effective?
Right from the beginning of the project, this precedent must be set, and the focus on business growth and revenue repeated and reinforced throughout the project. Weekly team meetings should emphasize these key business benefit components, and the business should reward those who recognize and encourage these benefits.
1) Plan right from the beginning of the project (implementation or upgrade) for business growth / revenue generation and efficiencies / cost reduction. Build it into the project charter.
2) Gather all of your company’s departmental or individual performance goals along with any key company metric. From these, derive a set of KPIs. Additional sources for deriving KPI’s might be reports. What are the commonly used (rather than ignored) reports that people use to do their jobs? Are there any spreadsheets still “hanging around”? All of these are good candidates for deriving KPI’s from.
3) No matter how much effort it takes, be sure to read the resumes proposed by the implementation partner. Ensure that most, if not all, of the team leads are real SAP solution and business experts, not just SAP technicians. Pick your implementation or upgrade team carefully, as you will be investing money, time, and your trust of the business.
4) Use good project management techniques. Glitz and glamor during the sales cycle won’t deliver an SAP solution. Ensure your implementation partner has real methodology, tools, templates, and resources to ensure a successful project. Once you decide on an implementation partner, insist on a project plan and then publish it. Even if it has to be frequently adjusted or modified, the plan gives targets and goals to aspire to. If your implementation partner project manager doesn’t provide a project plan, or if they want to keep it hidden, either correct this matter or get rid of them immediately! The project manager may be trying to avoid some measure of accountability and responsibility.
5) With a true focus on business benefit, be prepared to spend more time in the project preparation and blueprint phases with your implementation partner and a few key resources. Get the scope and the project focus right from the beginning, and it will make a huge difference!
6) When contractors must be used, be sure your implementation partner uses screening methods to find the right SAP consultant.
The next edition will focus on rapid but effective project scoping. There is a simple project scoping method which will allow you to effectively scope even an initial implementation and then use it for a more effective RFP. In a future edition, I will cover effective RFP writing.
