SAP can deliver amazing results or mediocrity, but that depends on you!
If your company has decided to implement or upgrade SAP the results you achieve depend on several things. Some of the keys to business results and SAP success depend on business reasons and your 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 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’ll have in the end is just another system, more integrated and requiring more discipline, but just an IT system. In the end, you’ll never realize the promise of what a properly implemented global ERP application, such as SAP, can do for your business.
“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 helps to ensure greater company “ownership” and control of an ERP project. The whole reason a company undertakes this type of an IT strategy — a global ERP system like SAP, is for business benefit.
Past the Marketing, 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 it should rarely be the single driving factor for implementing ERP. Depending on your IT infrastructure and what SAP will replace, there may be ROI opportunities, and real cost savings available, but the big “GET” with an SAP implementation is the opportunity to transform the business. It is important to go beyond just cost reductions and consider areas of helping your organization become more competitive in the marketplace.
If you go into an SAP implementation with your eyes wide open about some of the cultural changes with SAP, you will benefit tremendously. The software will enforce a measure of discipline breaking down silos, breaking down walls, and requiring more inter and intra departmental cooperation. It’s important to know up front that there will be cultural and business process changes. That type of business transformation is not easy but it is important to compete in today’s economy. You can ignore the change management!
It is precisely because of the business process revolution that executive sponsorship, senior management involvement, and the very best talent for the project team the company has to offer are critical for SAP implementation or upgrade success.
After the “pain points” and the “cultural changes” along with the importance of senior management involvement, what do you hope to get from your technology investment?
Properly thought out, properly planned, and properly implemented, SAP gives you the opportunity to effect a business process revolution where true order of magnitude changes are possible. 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 can be a tremendous justification for an ERP or SAP implementation for some companies, here is a list of the Top 10 Reasons for an 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 like CRM, SRM, BI/BW, APO, and other technologies are making some difference for some companies, but even they aren’t 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 “benefit laden” functionality in the initial implementation or whether you will work to get the “core” package installed and then do a “Wave II” add on project after the business has had a little time to stabilize.
I personally tend to favor a staged or “phased” approach because it gives the business an opportunity 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 as a change enabler to Transform your Business
Determine from the very beginning, even before the project 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. Right here on this site I’ve 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 crucial employee performance measures that are used in their reviews? Look forward, what is the direction of your company, your marketplace? What should you be positioning yourself for? What benefits do you hope to get from your implementation or upgrade? These and many more questions like this must be answered clearly before you even begin your formal project planning. This should become your project charter.
Armed with this, you can make the most intelligent decisions about scoping your SAP implementation. SAP is a massive application and contains some sort of solution to address nearly any performance measure or business benefit imaginable. And while it may not be a 100% perfect fit for that particular 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, or a standard SAP bolt-on, you can implement an application that will enable significant changes in your enterprise. Davenport, et. al., classify ERP potential three ways, Integrate, Optimize, and Inform. Basically, the process of implementation, improvement, and then data analysis in an ERP application.
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, it is crucial to ensure that your implementation partner provides consultants who are more than just SAP application consultants, they must be true business analysts.
Some of the steps to getting there include doing more of the up front 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 more likelihood to deliver on-time and on budget with real business benefit.
You need Solution Experts for your SAP, ERP, or IT Implementation or Upgrade Project
To transform the culture, you must have SAP consultants who are also business savvy. They must be business consultants who understand when it is time to “push back” because even though there may be a technical solution, there is a deeper business process issue that needs to be addressed. You need real consultants who won’t just design technical “band-aids” but who have the experience and the skill to look at a problem and understand whether it is a technical issue or a business issue related to people or process (i.e. analyze people, process AND technology). A true solution expert will help to resolve underlying business process problems, look for ways to make them more efficient or productive, and then apply technology to the process to automate it. A solution expert is a business consultant first and knows how to apply technology to business processes.
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 or generating revenue combined with efficiencies or cost reduction. When you begin any SAP project these two key factors should be built into the project planning process. Otherwise, why are you doing an ERP project anyway if not for some business benefit?
Right from the beginning of the project this communication must be set, and the communication repeated and reinforced throughout the project. Weekly team meetings should emphasize these key business benefit components and rewards recognizing and encouraging these benefits should be liberally used.
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 companies departmental or individual performance goals along with any key company metrics… From these derive a set of KPIs. Additional sources for deriving KPIs 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. Either for enhancing revenue or reducing cost.
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, you’ll be spending a lot of time and money on them and you’ll be entrusting your business to them as well.
4) Use good project management techniques. Glitz and glamor during the sales cycle won’t deliver an SAP solution. Make sure your implementation partner has a 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, it 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, get it corrected quickly or GET RID OF THEM IMMEDIATELY! That may be a dangerous method of them 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 the 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’ll cover effective RFP writing. How to be sure your implementation partner candidates are proposing apples to apples.