SAP & ERP Consulting from the Customer Point of View

Use SAP Best Business Practices For Commodity Processes But More Carefully Evaluate Competitive Processes

The debate and discussion around SAP best business practices usually assumes an “either-or” mindset.  Either you use the SAP best business practices as they are or you abandon them (for more background on SAP’s “Best Business Practices” see What are SAP Best Business Practices Anyway).  Several commentators suggest you should not do a software vendor’s “best practices” because you are adopting the “herd” mentality and will not be competitive in the marketplace.  They completely ignore the reality that some processes do not need huge development investments.  SAP provides a number of tools and resources to evaluate its solutions for your enterprise’s business processes (see Using SAP Solution Composer for SAP Scope – Process Alignment).

Commentators who are broadly against “best practices” have failed to recognize that there are different types of business processes.  One type are what I call “commodity processes” or the things you must do to run business, that everyone does, but adds little or no value to reducing cost, increasing revenue, or improving margins.  The other type are “value added” processes where the process itself (not ancillary manual steps) directly aid in reducing cost, increasing revenue, or improving margins.  Some business processes justify custom development when a standard solution will not do certain business critical processes (see e.g. Lower SAP Application Support Costs – TCO – by Reducing Custom Solutions).

Value added processes must directly contribute to market share or address a specific pressure from a competitor or they are commodity practices which are good candidate for “best practices.”  By reducing costs or increasing revenue and margins you are directly affecting your competitive posture in the marketplace.

What Are Value Added Processes in the SAP Organization?

Let me clarify one thing here, a “value added” process can be any process in a company.  In one company or environment a process may be a commodity process, however in another company, or industry, that same process may be a value added process.  The test for a “value added” process is whether or not it adds to your business marketplace competitive advantage.  That generally means it has to reduce cost or increase revenue in more than a minimal way.  As an illustration ask yourself, if you significantly increase your margins on a slow moving, outdated, low volume product or service is it worth a huge amount of time and effort?  Was the investment worth it?

Management’s primary responsibilities are to increase revenue, reduce cost, and improve margins

A value added business process will generally have some type of reporting requirement attached to it.  Some way to measure its performance because the process is critical to the organization’s mission.  If you have developed KPI’s, goals, metrics, or reports for a particular portion of your business processing you can be sure it is a good candidate for special attention as a “value added” process (see Why Indexed KPIs are Critical for Business Performance and Success and Using Key Performance Indicators for Building a Strategy Focused Organization).

What are Commodity Processes in the SAP Organization?

In most companies “commodity” processes would include purchasing, warehousing, inventory, distribution, or other routine processes.  Commodity processes and those business functions that do not have a direct impact on your competitive position.  If you are a third-party logistics provider then your competitive processes would include warehousing and distribution.  It is the core of your business and what you do.  However in other businesses those would be commodity processes.  If you are a consumer products company then sales and marketing processes would be value added where purchasing and inventory would be more commodity processes.

Worse still, in recent years IT has been seen as a “commodity” resource to be outsourced.  As IT and technology functions have become more and more focused on cutting costs and shaving pennies from a few process areas they are finding smaller and smaller returns at more and more cost.  As new technology is rolled out and it stabilizes the business and senior management see IT as more and more of an expensive cost center with functions that can be performed elsewhere at a lower cost.  IT organizations everywhere must begin to aggressively focus on business integration and value realization or become prey to outsourcing themselves (see IT Outsourcing, Off Shore Support, Cost Cutting and IT Department Changes).

SAP Software Best Business Practice Processes

While I have long advocated for business process engineering rather than software engineering there are times when custom development is justified.  The key to understanding when you might choose one approach or the other is related to whether a process (or sub-process) is a “commodity” process or a “value added” process.

Considering cost, revenue, and margins separated from marketplace competitiveness is misplaced.  Unless there is some significant competitive advantage or directly aligned business driver then only standard functionality should be used.

When you consider your SAP software investment it would provide the greatest business benefit to pay special attention to value added processes. Do not waste time or development effort on commodity processes.  Spend the time, effort, and money on change management for commodity processes because after the initial change cost ongoing Total Cost of Ownership (TCO) for these SAP processes will be the least expensive (see Where do you Start with SAP Return on Investment or SAP ROI?).  Regression testing, patches, fixes, new functionality, and all of the other things you do with SAP business applications will be easier and less expensive for the commodity processes.

Related Posts:

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• Competitive Pressures and Value Propositions, Is Lean the Answer?
• Aligning SAP Scope to Meaningful Business Requirements
• ERP Business Case: Do You Really Need a New System?
• SAP Development Landscape and Systems: Misguided Practices Carry Huge Costs

Business to IT Convergence

This is part of an ongoing exploration of creating an SAP or Technology “Center of Excellence” within your enterprise.  For the background and key insights on this approach see the Series on SAP Competency Center or SAP Center of Excellence .

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The real future of technology is for IT to integrate with business, or in other words to “converge” business and technology.  The idea of “aligning” with business is too weak of a statement to define what IT and SAP must do within the enterprise to generate significant ROI.

Think about it, during the course of an SAP project the focus is on integrating the enterprise into a single data repository with dependent process chains.  Somehow that same level of integration is not required of the business and IT after you go live.

Product Convergence Lessons for Next Generation SAP Organizations

Convergence, convergence, convergence, what do I mean by convergence?  The idea behind convergence is the enabling of business with technology so that the two can not be distinguished from each other.  It means the lines between business and IT departments must be deliberately blurred.

Although the following examples are about product convergence they are great illustrations for how business and IT should integrate, or “converge” their functions.

• ARPAnet which was created by the U.S. Defense Department’s Advanced Project’s group eventually became the Internet.  This was originally an advanced data and communications “fabric” that could withstand a nuclear war and route both data and communications in the event whole areas of the network were unavailable.  That back-end technology was later combined with early graphical software to create the public Internet as a global information resource never seen before in human history.
• E-mail was a convergence of network technology with hardware, communication protocols, and then combined with software applications.  These combined to create a new form of communication which has transformed both business and social structures.  That convergence has extended to the Internet for various forms of “webmail.”
• The advent of the personal computer and its increasing power made the way for decentralized processing in the form of “client-server” based applications.  Central business functions and tools could run on a server but each user’s experience and application needs could be tailored at their individual workstations.
• ERP applications such as SAP’s ERP suite were made possible by the need for a centralized source of data, at the intersection of databases, network technology, and software user interfaces.  “Cloud” based applications or Software as a Service (SaaS) were an extension of that convergence to include remote hardware sourcing and access through the Internet.
• Social media was the next “extension” of collaborative technologies.  They converged the Internet’s ability to connect people with software applications that allowed people to communicate in new ways. LinkedIn, Twitter, Facebook, and others are moving forward by connecting people to share more information in real time.

Look at most of Apple’s products.  For many years the Mac PCs and laptops only had marginal market share, while it is increasing it was their other products, their “convergent” products which produced explosive market penetration.  What was the difference?  It was convergence, the convergence of the customer experience with the things people use (see Business Strategy and IT Strategy to Reproduce Apple Innovation ).

What is Really Different About Apple Anyway?

Since Apple is so successful today we will look at their example.  The iPhone, iPad, iPod, all have one thing in common–, they took the idea of usability around the convergence of several technology streams to the next level.  Apple leveraged technology, communication, and entertainment to create something MORE than just a Graphical User Interface (or GUI), they created something useful for entertainment.  Apple products are a pleasure to use–, they created a “user experience.”  In the iPhone, even with its irritating lack of integrated e-mail calendar integration, it is a powerful business and personal communications tool which would have been considered a miniature PC a few years ago.

Apple didn’t really invent anything new.  Apple found that place of “convergence” with quality technology products and user experience

Apple didn’t invent the cell phone, portable music (remember Sony’s Walkman?), Internet data delivery (think, music sharing streaming software).  What Apple did was converge these technologies with a great front-end and delivery system.  Or as Steve Jobs has said, they “put a Mac in a cell phone.”  Apple also went one step further, they sought to own the entire content delivery infrastructure and the hardware architecture for their devices.  For the iPod it was the music delivery system (think iTunes), for the iPhone and iPad it was the extension of iTunes to add an Application store, etc.

That is an example of a product convergence that has had huge market impact.

Business and IT Convergence Can Transform Your Company

If we take this product concept one step further and apply it to IT and Business there are ways to bring about “convergence” in the IT enabled enterprise.

Business-technology convergence and business-technology management are terms that spring from a simple idea: Technology is a means for achieving business objectives; therefore, managing business and technology together provides significantly better results than managing them in separate silos. By converging business and technology management, enterprises can nimbly respond to changing marketplace dynamics, technology evolutions and competitive pressures—capabilities that are especially important during an economic downturn. [FN1]

[C]onverged enterprises know when to change the rules to maintain a strategic advantage over their competitors—and to sense and respond to changes in the marketplace.

I am a strong advocate for the convergence of roles between business and IT–, how will the IT organization know and understand the business “rules” without participating directly in business?

The best convergence candidates are likely your power users or super users who participated in your SAP project.  They come from the business but have exposure to the system and the challenges around IT.  The IT folks should also work in the business areas to become “super analysts.”  They need to know and understand how business actually gets done so they can figure out the best way to apply technology for business objectives to be addressed.

Completing the SAP Convergence

On top of the business users being integrated into IT and IT integrated into the business, the steering committee must not be disbanded.  This need cannot be stressed strongly enough.  That group of senior level business individuals are a key part of the “glue” for a successful and ongoing transformation of the business.  They are one of the critical ingredients for convergence to occur.

If you continue to develop your key business users and maintain your steering committee you have a power organization structure in place to build on convergence of business technology. For more information on the importance of continuing involvement by the steering committee long after the SAP project has gone live see my previous post on Using Your SAP Steering Committee for Business Transformation .

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[FN1]  http://www.baselinemag.com/c/a/Business-Intelligence/The-Value-of-Convergence-236013/

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SAP project success

The “need” for industry-specific SAP configuration experience is probably one of the most over-rated ideas in the SAP consulting field.

The most successful SAP implementations require integration of the business requirements with application functionality.  To do this well requires three separate domains of expertise–, industry expertise, application expertise and consulting skills.  One of those domains — consulting skills — requires a skill with change management, communication, process engineering, people skills, and other factors.

The need for industry specific SAP consulting is often oversold

In a single domain of expertise, rather than 3 separate domains (industry, SAP application, and consulting), research indicates it takes at least 10 years to achieve “expert performance” levels.  For more background on the expertise required see Successful SAP Project Team Composition – Technicians or Experts? where this extract was taken from:

“[E]ven the most ‘talented’ need 10 years or more of intense involvement before they reach a level where they can consistently demonstrate superior performance in international adult competitions in sports, sciences and the arts… Even in cases of famous legends, such as prodigies like Bobby Fischer, the required time to reach grandmaster status was still around nine years, and it took another two decades before Fischer played for the world championship.  In many domains of expertise, most elite individuals take considerably longer than 10 years of intensive practice to win international competitions consistently.  Further, outstanding scientists and authors normally publish their first work at around age 25 after an extended preparation, and their best work takes an additional 10 years…[E]ngaging in particular practice activities produces dramatically elevated levels of performance over an extended period of time.” (Ericsson, K., et. al. 2007, ppg. 16, 17)

Just how talented is someone who has to understand an industry AND the SAP software AND solid consulting skills?  Put this in context of Chess Master Bobby Fisher’s game.  The Chess set has a board with 64 squares and each person plays with 16 pieces (32 pieces total).  SAP software settings combined with master data options provides more possibilities than that for a single stage of a business process chain with multiple stages.  Is an “industry specific” consultant with 3 or 4 years, and possibly 2 or 3 SAP implementations going to make much of a difference for your business?

Then there are the critical consulting skills necessary for a successful project, see Expert SAP Consulting to Reduce SAP TCO and Improve SAP ROI.  These skills can take several years and several SAP projects to gain competence with as well.  Long before I started doing SAP consulting I had numerous corporate training and education courses on managing conflict, facilitation, project planning, negotiation, communication, managing people, organizational change, etc.  Along with this training I had several years to put this training into practice before ever being exposed to SAP.  The expectation that you are going to see significant business-centered results from a “consultant” with a few years of SAP experience is optimistic at best but disastrous in practice.

As an SAP software customer what can you do to ensure the greatest possibility of success?  Focus on bringing in those with deep SAP business software experience and strong consulting skills.  That should be the key focus of your search for a consultant or for a system integrator.

Where does the industry experience come from then?

Integration of Industry and Business Experience in the SAP Software

Industry experience comes from you as a customer.  That is why it is so important to bring the best you can from the ranks of your business to the SAP project.  These are usually the people in departments or organizations that are depended on or have the answers for the difficult issues that arise.

The key to success in your SAP project is to combine your business and industry experience with the most seasoned SAP consultants you can budget for.

Those within your own company know that is usually takes 8-10 years to really start to know the industry.  Often it may take 15-20 years or more to become skilled within a particular industry. You need industry expertise from within your own company when you are trying to decide on strategic corporate direction, plan for the future, or determine new marketing and sales opportunities.

An SAP consultant with many years of SAP configuration can successfully translate your business requirements into more of the standard application functionality. What I have personally discovered is my broad industry and solution exposure in SAP has provided me insight into new ways to solve nagging industry problems in unrelated industries.

The Ivey Business Journal recently offered a great, insightful post about gaining value from consultants noting:

Clearly, a key ingredient in enabling a consultant to meet or exceed expectations is to avoid diluting value-adding expertise with the consulting firm’s unskilled or inexperienced resources. Consulting firms are too quick to dismiss the capabilities of client personnel, when in fact such personnel can orient the consultants, navigate political minefields, get to the data more quickly (as they understand the company and the industry), and facilitate the buy-in process. Companies must demonstrate leadership not by simply accepting a consulting firm’s proposal, but by applying their own considered perspective as to the best approach for embedding maximum, value-adding expertise in the project, while cost-effectively filling non-expert roles with resources from other sources…

Assessing whether a consulting firm can deliver the necessary expertise can be difficult if the company itself does not already have the particular expertise. Consultant credentials and resumes are carefully crafted to make the consultant appear to be the perfect fit for the role called for in the proposal.  But just because assessing consultants’ capabilities can be challenging, companies should not simply take refuge in a favorite or familiar brand.  Rather they need to invest the time to verify that the proposed team can deliver.

http://www.iveybusinessjournal.com/article.asp?intArticle_ID=927

Many of the larger consulting firms recruit smart graduates directly form college.  How much business experience do these smart grads have?  How much practical work experience do they have?  What do they have to draw upon?  The extent of their industry experience usually consists of the 1, 2, or 3 SAP projects they participated in.

To gain real value from your SAP implementation project hire the best possible SAP consultants you can find and bring the strongest employees you have to the project.  Set the expectation that the consultants are supposed to help the employees learn the software setup, and that the employees are to be relied upon for key business direction.  Let the employees know that they have been empowered to make the key decisions.  After this have weekly meetings with your internal employees to talk about lessons learned on dealing with consultants and how to ensure the company gets what they need from the SAP vendor.

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• SAP Consultants for High Speed SAP Projects