Business Solutions with SAP

Using SAP to Improve Revenue and Profitability

January 17th, 2009 by

SAP ROI - Increasing Revenue and Profitability

For years CIOs have been under pressure to help cut costs, improve operational efficiencies, and automate the enterprise; CIOs implementing SAP have largely been effective at streamlining the back-office. They’ve also succeeded at optimizing the extended supply chain because SAP is well-suited to supporting execution activities, and therefore have been a good fit for reducing costs. However, times are changing.

 To successfully move IT and SAP in the direction of revenue and profitability growth it is important to understand where technology fits into the puzzle–, technology is not magic. When SAP is considered in its proper context as a “change enabler” or “change lever” rather than a “change driver” it is easier to understand how and where it can properly fit into a revenue and profitability context. In other words, technology works best when the rules, metrics, criteria, and the means to acquire, process, or analyze information which supports revenue and profitability are understood and defined. Organizations take on large projects like SAP or any other ERP system to achieve several business benefits, often those might include:

* Revenue growth
* Profit margins
* Customer acquisition and retention
* Sales conversion
* Customer profitability
* Product / product line profitability
* Incentive programs and monitoring
* Market penetration / market share
* Marketing program performance
* “Smart” growth (i.e. “good” customers vs. “bad” customers)
* Time to market

And even though these are the expectations companies have for their ERP or SAP implementation, upgrade, or other applications they rarely achieve these goals because they are looking at the application and technology investment in the wrong way.  They are looking at the technology as if somehow it will cause these things to happen rather than providing the key insights and information that management needs to enable them to happen.  Even though that is not said, when companies invest millions in SAP that is the underlying assumption that somehow the technology will just “cause” revenue and profitability increases.

For example, no amount of technology is going to make your sales people sell more if they are paid on salary, without commissions, and do not have objective sales targets and other performance measures. This comes back to the old adage of “what gets measured gets done” and it is no different with the sales force. However, depending on how you structure your sales and marketing programs SAP contains a number of tools, reports, resources, and other data analysis methods as well as bolt-ons like CRM to facilitate a change in sales and marketing programs and strategies.

In other words ERP, SAP, CRM, APO, BI, and all of the other technology tools must be driven by business needs, and to provide key information relevant to business decisions and processes to ensure success.  And even though that seems self-evident it is still not occurring even to this day at many organizations who implement these technologies.  They often start out with that ideal, however they usually get caught up in the technology and lose sight of the business drivers. 

Since doing SAP project work since 1994 I can only recall a couple of projects where the client spelled out the business drivers, and then communicated and reinforced them to the project team and the larger organization throughout the project.  If the project team performing the implementation does not know the underlying business drivers, or the reasons for the investment, how will they build those expectations into the technology?

What are the CIO and SAP Roles in Revenue and Profitability?

It is healthy that C-Level sponsors are beginning to press IT in the direction of supporting revenue growth and profitability, however, SAP by its nature is part of the execution processing and post-execution analysis process. This is where the expectation of driving revenue and profitability with SAP has to be decoupled from corporate planning and execution. The business side of the equation must be defined first, this supports the business case which in turn drives the technology in the direction of enabling necessary change.

The senior management discussions for the this global ERP system must be focused on what information and processes the organization needs to make the right management decisions, to be more competitive, to focus on the wider marketplace.

In many implementations the reason SAP works to reduce costs is because the reductions are based primarily on improving and integrating operational and accounting execution activities. Using SAP to drive revenue and profitability growth requires building another layer of data collection, data analysis, “tools,” and processes on top of the operational data that is processed. To work correctly this new revenue and sales support layer must be built on well defined sales and marketing programs and strategies that are then converted into processes with clear performance metrics and KPIs. A focus on process improvement, business process automation, efficiency gains, cycle-time reductions, and other business process management related issues is not enough.

Sales and marketing must do their part in integrating their strategies into clearer plans, programs, metrics, KPIs, and other measurable criteria that can then be executed on with IT / SAP supporting these processes. ERP systems like SAP do not exist in a vacuum; they are dependent on data from plans, strategies, and historical analysis based on some concrete or perceived KPIs and business metrics. Until a company’s customer touch points (sales, marketing, customer service, shipping, etc.) are able to provide quantifiable plans, goals, metrics, and KPIs for what is important, it is difficult for SAP initiatives to directly affect revenue and profit.

I’ll bet many C-level executives in SAP shops didn’t know that the ERP application contains standard functionality to integrate sales planning, sales forecasting, marketing expenditures, and product or service execution with financial budgeting and multiple dimensions of profitability. For example, over the years I’ve worked on clients that have used one or more of the following methods from standard or enhanced SAP functionality (and there are many, many more possibilities):

· Points loyalty program (ERP pricing and SIS or CRM)
· Trade Promotions Programs (CRM, bolt-on, or custom ERP app)
· Marketing Effectiveness (CRM, custom reporting, BI/BW)
· e-sales with catalogs and configurable products (R3 Internet Sales or CRM – they use the same backend)
· Sales or Marketing program budgeting (ERP CO and internal orders with SD user exits)
· Sales forecast to actual (ERP Sales and Operations planning, CRM, BI/BW)
· Order templates (Generic quotes as templates, ERP, R3 Internet sales, CRM)
· Potential Planning (customer potential buying and planning against marketing plan – ERP, CRM)
· Ticklers, Marketing, Sales activities and campaigns (limited ERP functionality or with CRM)
· Customer churn (standard ERP functionality, custom report, BI/BW, or CRM)
· Customer $$ sales growth, month over month, year over year (SAP ERP functionality, custom report, BI/BW, or CRM)
· Order frequency trends (standard SAP functionality, custom report, or with CRM)
· Upselling, cross-selling, product allocation, substitutions, free goods (standard SAP ERP functionality).
· Web based reports and mobile device sales support (ERP mobile device functionality or CRM)
· Commissions and incentives (SAP ERP functionality or CRM).

One of the things the companies that have implemented these solutions and others had in common was there were already reasonably well defined sales and marketing processes and programs in place. As a result, the SAP technology was used as a change lever to enhance and improve those existing processes and programs to achieve a measure of revenue growth, profitability, and competitive advantage.

Where to begin with a business and market centered approach to SAP?

  1. Develop your longer term business plans, define marketing and competitive pressures along with current and future value proposition(s).
  2. Define the business strategies to support them.
  3. Determine the goals that support those strategies.
  4. Derive your KPIs for those goals. To be successful these KPIs must include both lagging indicators (financial) and leading indicators (pointing to growth).
  5. From those metrics and KPIs determine which business processes and departments will be affected, sales, customer service, shipping, marketing, etc.
  6. Define the necessary reports that will be needed to report on those goals and KPIs. These reports should use both leading and lagging indicators.
  7. Operationalize the strategy by defining the processes that will support them.
  8. Assign responsibility for the reporting requirements to the proper department heads.
  9. Create an internal progress communication process.
  10. Implement the necessary technology solution(s) to support the new paradigm (SAP BI, SAP CRM, SAP ERP functionality, etc.)

By following these steps you will see business centered results that are enabled or empowered by technology, not the other way around. Below are some examples of key ideas for defining strategy, processes, and technology to help with revenue growth and profitability. While in no way comprehensive the following outline provides some steps to begin on this journey. Some type of plan or steps to produce metrics which can be turned into an IT and CIO supported system strategy for revenue and profitability growth are listed.

1. Senior executive sponsorship is needed to drive integration of sales, marketing, and customer service processes. Many of them can be very difficult to “pin down” on key measures for sales and marketing drivers. Without C-level direction here it will be difficult at best to achieve and impossible at worst.

2. Set clear expectations of cooperation between those processes which “touch” the customer.

3. Determine how baselines and benchmarks for KPIs will be determined. The best baselines, benchmarks, metrics, and KPIs will require interdepartmental support. Some of the KPIs, though not all, should be outside of the silo. For example, some of the KPIs should cross over sales and marketing together. Some should cross over sales and customer service, or shipping, etc. The more the KPIs are structured within a silo the more possibility there is for finger-pointing and deflection. It has to be everyone’s job to promote revenue and profitability.

4. Senior level sales and marketing managers must set specific KPI’s, strategies, and plans around customer “touch points” as they relate to revenue generation and profitability. For example:
  a. What processes or sales functions require your sales force to be in the office rather than in the field? How can these be automated or delivered remotely?
     i. Web based?
     ii. Hand held?
     iii. E-delivery through automated e-mail notices or text messages?
  b. What are important new markets and how do you conduct pilots or rollouts to new markets?
     i. Do you have preferred customers as partners who would be willing to cooperate and “pilot” new product or market rollouts?
  c. What about new products?
     i. Do you know what your concept to engineering to market to customer cycle times are?
     ii. Where are the bottlenecks in each of these sub-processes?
     iii. How can they be streamlined?

5. How will you measure customer retention, customer loyalty, and most of all, conversion of retained or loyal customers to actual sales? (after all, what difference does it make if you have retained and loyal customers if they don’t buy more of your products, or pay for premium services or products?)
  a. Do you have (or need) some type of metrics around defining “good” customers (high revenue or sales compared to the cost of doing business) vs. “bad” customers (low revenue or sales compared to the cost of doing business).
  b. How do you measure customer “churn” or attrition of “good” customers?
  c. How do you measure sales growth into the existing customer base?
     i. How do you segment or stratify that data, by product line, by geography, or by customer sales volume?
  d. How do you target new customer acquisition?
     i. In spite of what some salesmen may say, companies do not sell “everything” to “everyone,” so what are your target markets?
     ii. What are your key criteria to focus your sales efforts on your target markets?
     iii. Where are your “invest” opportunities for sales growth and how do you measure the effectiveness of that investment?
     iv. How do you integrate marketing, sales, and customer service into customer acquisition?

6. Define processes and reporting points for each of the key customer “touch” points, whether it is sales, marketing, service and support, or new product / new market entry.

7. What is your strategy for getting company knowledge about products or services closer to the customer?
  a. Are you tracking service or repair trends?
     i. Do you have standard defect codes or service delivery categories?
     ii. Do you have a solution database?
  b. How is engineering, R&D, or new product development integrated into the sales, marketing, and support feedback cycle?

8. What tools do you need to capture customer intelligence based on contacts, visits, and other information traditionally maintained in CRM systems?

9. What external data sources and information do you need for customer acquisition?

These and many, many more questions must be answered within your sales, marketing, and customer service organizations to drive strategies, plans, programs, and ERP investment opportunities for increasing revenue and profitability.

Once you define your revenue and growth plans and strategies, determine the key metric for how performance will be measured by developing a set of KPIs. From this set of KPIs, and from the plans and strategies that are developed, take the time to prioritize them based on a simple cost / benefit analysis. What costs the least (in terms of time, cash, resources, etc.) and has the biggest payback? Depending on your business, you may weight some of the cost factors differently, but try to keep the priority process as objective and clear as possible by creating some type of scoring protocol. Using some type of objective method to prioritize will help to keep the politics, personalities, and emotion out of the process. The approach may not produce a perfect result, but it will be focused on results rather than personalities.


Please see the article on Screening Methods to Find the Right SAP Consultant. This type of process analysis, business strategy, and help with development of the best possible plans for implementing your SAP solution is exactly why SAP consultants with real experience are necessary.

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Planning For a Smooth Go-Live: Part 3

October 24th, 2008 by

 SAP smooth go-live process issues

3.      ERP or SAP Process issues 

Let me start with a caveat to this section.  No matter how good, thorough, experienced, or conscientious a consultant or a core team member is, there will always end up being a few process gaps, and an occasional completely missing process discovered at go-live.  Now that the caveat is out of the way, there are many reasons for the process problems: inexperienced consultants, company employees who miss some of the process exceptions, inadequate training, insufficient integration testing, lack of user acceptance testing, and other reasons. 

The bulk of the items causing process problems generally fit into three core areas, 1) design or blueprinting, 2) change management, and 3) testing. 

SAP / ERP Design and Blueprinting 

Your business probably developed numerous processes and exceptions over many, many years.  Some of those processes were also developed as the need arose, and in an ad hoc manner and may have many inherent inefficiencies.  SAP projects are generally tasked with replacing all of those years of collective knowledge and processes, as well as any “broken” processes in six months to a year, and on very large projects in maybe a couple years.  That is no small task and to be successful it truly takes an experienced consultant.  As I’ve previously written about, this is one of those areas that all of the fakes end up costing your SAP project and your company big money.  And I mean big money over and above what you pay them.
A good blueprint should translate your scope into all of the key business processes that your company does, and then the key process components needed to support those processes.  I generally prefer a blueprint that has inputs (or some type of process trigger), the process itself, and then the outputs.  It should also contain the key master data requirements, any necessary FRICE (Forms, Reports, Interfaces, Conversions, and Enhancements) development objects, and the key business areas affected.  If there is sufficient time in the Blueprint phase, the Blueprint itself should also begin to capture some of the key change management issues.

Poor blueprints (missing processes, too generic, too high level, etc.) cause serious project delays and flared tensions by constantly dragging your project back into “Design” mode when you should be in full project execution.  It takes up the time and effort of other integrated teams, and generally causes a “drag” on the overall project.  Obviously this burns up budgets too.  Worse still, a poorly designed Blueprint is often blamed on the company, the department, or the key resource on the project who is responsible for that area.  Unfortunately those “smokescreens” are often used by consultants who are not that skilled at extracting the necessary information needed for a good blueprint.  It’s always easy to “blame” the client through the backdoor by putting the responsibility on a core team member, or some other portion of the company / client team.
If there is a genuine issue with a team member, an experienced consultant should raise this issue during the process when it is encountered.  Frankly, if it suddenly comes up AFTER the blueprint is due, it should be seen as nothing but an excuse by the consultant.

ERP Project Testing 

Another area to begin addressing processes is during testing.  Any integrated application like SAP should include at least 4 primary types of testing.  No matter what name is used, they are generally individual transaction tests (sometimes called “unit tests”), transaction strings or processes within the same module like Sales and Distribution (“module tests”) and then full-blown cross module tests that test entire process chains from start to finish (true “integration tests”), and then finally tests that involve the wider user community often called “user acceptance tests” or “day in the life” scripts, etc.
During testing, while it is important to follow the scripts to be sure that all of the proper “boxes” are checked off, it is equally important to test more.  “Integration tests” and “user acceptance tests” serve as the last opportunity to find and address process gaps.  Sadly some consultants (and some consulting firms) see this as an opportunity to absolve themselves of responsibility for potential problems or shortcomings.  As a result, they will often strictly enforce that the script must be followed to the letter and no deviation is allowed and no exception processing is allowed.  There is a legitimate need to control the process to ensure that the work is done and that the known processes work sufficiently as designed, however there should also be some mechanism to address gaps or exceptions.  One simple method to accommodate this is to create a space on the signoff sheet that directly solicits comments about any process gaps and any exception processing that might be needed.  Final signoff of the testing should not be signed off until this commentary is converted into additional testing scripts or some manual process defined to address the processes.

For final integration testing you may wish to pick random documents from your current business operations to run those through the system with the converted data.  This will give you the best test to ensure things are working correctly.  For example, you may wish to choose 10 or more each of the sales orders, purchase orders, production orders, reports, etc.  The key is to use something that is meaningful and can be verified back against your current system.  

ERP Project Change Management 

Unless you completely re-design and re-write SAP to do all of your processes exactly the way they were done before, there will be change management issues to deal with.  And unless you also re-write the user interface, there will still be training and user acceptance to accommodate.  If you’re going to re-write everything, why bother with a packaged system application at all?  On the other hand, if you are putting in a package application such as SAP, Oracle Apps, or others, there are change management issues to deal with.
Change management generally encompasses a few key areas:  Training, communication, organizational change, process / job changes, and post production support.  Some change management is necessary on every project and if your company handles change reasonably well it may not be a struggle.  However, if your company has many employees who have done the same job for a long time, without much change taking place within the organization it will take a tremendous amount of “hand holding” to get them through even small adjustments. 
You will need to assess your own organization and its ability to absorb change for whether change management resources should be budgeted.  From a project perspective however, one of the key things to be wary of are consultants who want to add new functionality without understanding the impact on the organization. 
Business Change Management analysis case in point:  I was at a client where SAP’s Handling Unit Management functionality was the best fit I had ever seen.  They had high dollar custom made steel transportation racks that needed to be inventoried and returned, the packing was consistent and uniform, their production volume was not intense as a sheer number, and they already had wireless bar codes with some warehouse automation.  From a functionality standpoint it was almost a “no brainer” and a great ROI on the automated tracking, inventory, and return of the units.  However, a more careful look at the organization showed a very different picture.  The staff responsible for maintaining the data and processing the transactions had not been reliable with data maintenance or with processing in the past.  Also, because of the organization there was virtually no chance that would change in the future.  

A less experienced consultant with limited project or change management experience would have seen this as a great opportunity to throw some “gee whiz wow” new functionality at a company.  They keep billing for the new work (a scope change), they would be needed almost indefinitely for production support, and they’ve got a great candidate to blame for why you have to keep paying them.  Sadly I’ve seen this scenario played out over and over again.  On a recent project I saw this with the implementation of SAP’s Customer Service and Solution Database functionality.  The company had an “ugly” but mature and working solution, they were downsizing the customer service area, the SD scope for the project was already pretty significant, sales were beginning to slow, portions of the business were being spun off, and employee morale was already low.  The consultant convinced them to “replace” their solution database and customer service functions from a CRM application that they did not even retire.  So there weren’t even any software license savings.  The consultant got to stay on, support an unnecessary process (the legacy app was not going away and worked fine), and was needed for post production support.  

 The process related issues will quickly separate experience from inexperience.  There are lots of good consultants out there, and then there are lots of less than satisfactory fakes in the market as well.  Unfortunately it is it the “good” consultants who are often penalized for smooth and successful go-lives by early roll offs.  Meanwhile fakes and less skilled consultants are rewarded by extensions to support poorly designed processes and inadequately prepared user communities at go-live.  The old adage rings true here that “you get what you pay for” as long as you have a way to separate the genuine articles from the fakes.  In the end, there are many hidden ways you end up paying as much or more for inexperienced consultants, not the least of which are the many hidden ways their SAP implementation approach impacts your business.  A truly seasoned consultant may cost a little more up front, but at go-live with the quality of delivery and the overall satisfaction of the solution it can pay dividends for many years.  

 In essence, the need for careful process understanding can not be underestimated.  The amount of change your company can absorb, the impact of processes being brought into a package application like SAP, and the cost to your implementation budget should all be considerations. 

Four Part Series on SAP Project Planning for a Smooth Go-Live:

Planning For a Smooth SAP Go-Live: Part 1
(introduction, security and authorizations)

Planning For a Smooth SAP Go-Live: Part 2
(master data, data transformation methods)

Planning For a Smooth SAP Go-Live: Part 3
(process issues, blueprinting, testing, and change management)

Planning For a Smooth SAP Go-Live: Part 4
(custom development, costs and consequences of inexperienced developers)

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SAP, ERP III, SOA — Learning Organizations through Social Media Collaboration

April 27th, 2007 by
Knowledge Management

Knowledge Management


SAP Knowledge Management Introduction

Everyone’s heard the buzzwords, ERP, SAP, SOA, you name it. In the technology area they’re everywhere. These are just acronyms for ways companies try to leverage technology for competitive business advantage. Reduce costs, streamline operations, increase revenue, and transform your organization [1].

Since ERP applications like SAP have entered the business world there remains one area that enterprises struggle with –, the realm of capturing and then converting employee “know how” into ERP solutions–, Knowledge Management [2],[3]. I call part of that ability to leverage both employee “know how” and to collaborate with the broader customer community ERP III. For a detailed explanation of the different versions see ERP vs. ERP II vs. ERP III Future Enterprise Applications .

There is a simple and inexpensive way to implement ERP III, enabling your ERP application to transform your enterprise into a learning organization. ERP III is a way to capture that employee “know how” to develop business solutions to create real competitive advantage. In this post we look at this idea in the context of SOA (Service Oriented Architecture), however it can be more widely applied and adopted to virtually anywhere in the enterprise.

Background for SOA, Knowledge Management, and ERP III

The ERP revolution began with integrating the “back office” functions of the enterprise: purchasing, ordering, financials, HR, distribution, inventory, etc. The idea is that the whole enterprise relies upon a common set of data from a single database which provides one version of the truth–, a single version to rely upon or correct. Next came ERP II, extending the ERP application from the back office to the extended supply chain, to the web, to the banks, and beyond.

Enter SOA or Service Oriented architecture, the idea of “universal” and completely reusable application services that can be “plugged in” to other applications. This SOA architecture would then allow for the rapid assembly of dynamic process and application chains as business and opportunity needs arise. SOA (or sometimes SaaS) holds tremendous promise to enhance and extend the idea of ERP II even further, but an idea that will take time and tremendous effort to do effectively.

ERP III and the Learning Organization

The next generation of business transformation is ERP III, or the customer integrated ERP enabled learning organization.[4] However, SOA’s success and timeliness are directly tied to how well an enterprise is able to create a “learning organization” within its development and IT ranks.

This learning organization approach is one of the key backbones to a successful SOA initiative as well. The cornerstone of effective SOA re-use policies and procedures, service standards, and validated service development is directly correlated to how well the enterprise’s developers are able to collaborate and coordinate their efforts (especially in an ad hoc manner).

A learning organization starts with knowledge management and is best supported by a culture which generates and also consumes information.

Service Oriented Architecture, or “SOA” requires a level of participation, collaboration, and information exchange like never before to be successful. True “SOA” requires a blending of technology, collaboration, and cooperation with highly structured standards to achieve a significant level of trust in the development work. While many suggest that this level of collaboration, integration, and reliability within the enterprise may take enterprises as long as 10 years to accomplish, the methods defined in this paper can dramatically reduce that time and effort. [5]

What is Knowledge Management? [6]

A learning organization starts with knowledge management and is best supported by a culture which generates and also consumes information. There seems to be no widely accepted “definition” for knowledge management, and as I review the information on Wikipedia about Knowledge Management I find a rambling discussion of high level theoretical constructs with little substance. As a result I am offering my definition here, and some clarification, which helps to distinguish knowledge from information.

“Knowledge Management is not information management. It is the process of transforming unstructured data into contextual information and then applying that information. Knowledge as “contextual information” is the ability to draw on information and combine it with experience by applying it to a particular situation or circumstance when it is needed. Knowledge Management is the process of capturing, codifying, and disseminating information so that it provides some value in a particular context.” Bill Wood, R3Now Consulting, originally drafted in the late 90’s, updated in 2006.

My personal opinion is that the reason there is little consensus on a Knowledge Management definition is because most “knowledge management” discussions surround information management. What people call “knowledge” is the codification or classification of information. Often “knowledge management” is referred to as the systems that help to capture and codify knowledge but this is still just information in a structured context. They do not take knowledge to the next step of infusing it into the enterprise (or creating a learning organization) by creating methods to take that information and apply it in a value added context for day to day activities. It is only with the application of information coupled with experience and context that something becomes “knowledge”–, it is NOT a system.

Sytems can facilitate knowledge management. Systems contain information, not knowledge. Knowledge is the application of information in a relevant context. Systems do not add context, situations add context.

For the enterprise to continue to “wring value” out of the ERP implementation or other technology investments, the enterprise must change. For effective enterprise level change to take place technology must support the capture, organization, and implementation of the unstructured knowledge and information contained in people’s heads, or jotted down on crib sheets. This is not an easy task.

Knowledge is not data and information. Data consists of facts, observations, occurrences, numbers, and things that are objectively perceived.

Information is a collection of various aggregated or synthesized data points. From there, Knowledge is the mix of information, experience, and context adding value [to a particular situation]…

Knowledge Management is the systematic process by which an organization maximizes the uncodified and codified knowledge within an organization.

Original author(s) unkown, further adapted and modified by Bill Wood.

Why is Knowledge Management So Misunderstood?

Before beginning it is crucial to understand the often misused, misunderstood, and even abused concept of “Knowledge Management.” Contrary to so many of the technology offerings out there, knowledge management rarely (if ever) is a system, however systems can facilitate knowledge management. Systems contain information, not knowledge. Knowledge is the application of information in a relevant context. Systems do not add context, situations add context.

Systems, by their nature and design are information tools. Too many times the term “Knowledge Management” is used to describe information gathering and classification systems–, information systems. Some even call their systems “knowledge bases,” and maybe they are bases for knowledge, however, they are not knowledge management systems. Until information is learned, and then applied, it is not knowledge, it is merely information.

Knowledge Management, Collaboration Tools, and ERP III – Current and Future State

The initial process of implementing SAP requires taking structured and unstructured data, along with the processes from legacy systems and “institutional knowledge” and then you place this information into a highly structured application. At its most effective, the initial SAP implementation captures some cost savings, process improvements, and revenue generating opportunities. However, no initial implementation is able to capture the vast unstructured information and knowledge that resides in people’s heads.

It is only with the application of information, in a particular context, coupled with experience where something becomes “knowledge”–, it is NOT some system.

The SAP enterprise current state, with the application you’ve implemented, and possibly some of the ERP II enhancements, still has the possibility to deliver far greater benefit without significant cost. To capture and leverage that benefit requires an enterprise wide cultural transformation. People must begin to both act and think differently. And this change has to occur not just in the larger enterprise but within the IT organization itself.

To extend the SAP application’s usefulness and achieve greater benefit it is critical to a) capture useful “unstructured” information, b) then organize, classify, or categorize it, and then c) translate it into more useful application solutions. This process also facilitates the implementation of SOA within the SAP environment.

The first step toward the future state is to create a collaborative learning organization. A learning organization is an organization that is constantly acquiring and applying new information and thereby gaining knowledge. Once that information is captured, it can then be structured into solutions, some process based, and others technology based. Some of the solutions can be translated into additional, value added SAP enhancements, additional SAP functionality, or market-based business opportunities around innovation and customer focus.

A Collaborative Knowledge Management Model for a Learning Organization

Based on my time at Grant Thornton (and later Hitachi Consulting) as the SAP Knowledge Manager, I made use of the best resources I could find in the arena of “Knowledge Management.” Based on that research, and leveraging the pioneering efforts of other true knowledge managers, I created the model you see here. It is consistent with much of the literature that exists today, however, in the late 90’s when it was developed, and then in 2000 when it was instituted, it was a pioneering effort.

1) Raw Data: The unstructured data, ideas, “crib notes,” and thoughts that we all have. However in this instance, it is the raw data surrounding the job or responsibility that the individual performs within the enterprise. Sometimes these are the “workarounds” to get something done when you run into obstacles or roadblocks, other times they are just shortcuts or techniques to perform a job or function.

Knowledge Management Process

2) Organized Information: This is the process of capturing and classifying that raw data. This is where the “knowledge bases” and other types of information systems come in. Many enterprises make it this far. Sometimes these are the “workarounds” to get something done when you run into roadblocks or obstacles. Other times they might be the shortcuts or techniques to more efficiently perform a job or function.

3) Acquired Information Experience: This is the interaction with the organized information. This can be through search functions, employed taxonomies, reports, or other methods of accessing the organized information. This is after the capture of the information in steps 1) and 2) above, and involves its wider availability than in the individual who originally developed or “held” the knowledge or information. Few organizations or enterprises make it much further than this. However, this is the beginning of the true learning organization.

4) Applied Experience (Knowledge!): This is the practical application of the organized information after it has been acquired. Whether this acquisition is through word of mouth, training, or some type of information management system (that is wrong named a knowledge management system) or through a “knowledge base”. This is where the cost savings, revenue opportunities, continuous process improvement opportunities, and real competitive advantage begins to come to fruition.

5) Refined Experience (accurate intuition and forecasting): This is more of the inherent “knowing” what to do in a broad variety of contexts that may not be directly related to the task or issue at hand. It is when an individual can draw on that level of inner experiences mixed with intuition and make the right decision or provide the right answers when there is not enough information to make such a determination under normal circumstances. This can also be a type of “making the complex appear to be simple.”

There is a simple and effective method to capture the unstructured information, organize and classify it, and then disseminate it in such a way as to create a true learning organization. This method, outlined below, will help to move your organization through the 5 steps noted here.

Practical and Inexpensive Ways to Move Toward ERP III and SOA Today!

Since I am not a big fan of reinventing the wheel I look for existing ways to solve current problems. To that end, the key to moving ahead on ERP III is to create a collaborative culture, from the collaborative culture, you create a learning organization by using some of the existing collaborative tools. The answer lies in using some of the popular web technologies making a splash today.

Enter the “cool” and the “fun” factor in the enterprise–, “social networking” is one of the hottest, and most vibrant collaborative uses of technology anywhere–, these sites connect people for personal exchanges. While not appropriate for the types of personal exchanges on the world wide web, that same technology can be used to create a collaborative environment around cost savings, process improvements, system enhancements, revenue opportunities, customer acquisition, customer retention, customer experience, enhanced products, better services, and general business improvement for competitive advantage. The list of possibilities is only limited by what you can imagine can be leveraged from participant knowledge. The same technology options which can enable SOA are available to capture the uncodified end user “raw information.”

Forums are One Effective Method of Acquiring, Categorizing, and Synthesizing Unstructured Data and Information

Forums or other social media outlets can also be used to capture SOA related standards, common development services, and to do code or object reviews. They can be used to capture SOA best practices while facilitating broader development community participation in standards, services, and object re-use policies. The collaborative nature, and the ability to offer code improvement suggestions, bug fixes, standards exchanges, or development and solutions discussions, in a threaded forum will prove invaluable to an organizations SOA initiatives.

To make this a reality, the key is to leverage tools, and define a process that captures the unstructured information . Once it is captured, methodically move that to process changes or to structured application solutions within SAP or an SOA initiative.

Defined below is a set of free tools, along with proposed solutions on how to apply those tools in a practical manner. Please keep in mind, this is ONE solution option. There are many more and there are also some very specific and interesting ways to incorporate this type of solution DIRECTLY into the SAP application. Here is one method to get started:

1) ANY networked PC (you don’t really need “heavy duty” hardware here unless you just must have blistering performance)

2) Download the free Uniform Server application that works on Windows. It contains Apache Web Server, MySQL, and PHP (including PHP My Admin). You only need to unzip this file to a local directory, and then double-click (or execute) the Start Server file.

3) Download and Install the latest PHP Bulletin Board open source application: (Set up the MySQL database and copy the web files to the proper local directory of the newly created web server from step 2). To see the forums in action, go to the PHPBB site at:

4) Structure the Groups to match the business department (create a new forum “group”), and then create 4 sub-areas under each department link. A) Cost Savings, B) Revenue Generation, C) Process Improvement, D) System Changes.

5) Structure additional groups to match SOA service development. An SOA topic with sub-forums for A) standards, B) services, C) objects, etc.

6) Have the users create the hyperlinks in their SAP user menu. A hyperlink for that departments topic in the bulletin board is easy to add to the SAP user menu (right click on the favorites menu, then add a web address, it’s really that simple.)

7) Adjust department and user goals to include evaluating forum contributions, based on points earned for participation, and aligned with the forum structure that applies to them (for example, cost savings, revenue generation, SOA standards, etc.)

8) For the system changes option, create an inexpensive interface to read the MySQL table for this area and generate a separate approval / response process. This way the changes, and responses to those change requests, as well as the details of the change request, are captured in an easily searchable database.

9) To produce the most useful solutions, follow a “PDCA” process (Plan, Do, Check, Act). After a discussion thread has reached a certain point where the exchanges have stopped, reduced to a trickle, or a specific date deadline, have someone review the entire threaded discussion, capture the most salient posts (by using the hyperlinks to the posts), and then summarize those hyperlinks into a single post. Call a meeting with the key stakeholders, review the salient points and produce a position paper or some other summary document and then publish that for final review.

The PHPBB forum software contains several developer implemented modifications that are available, and fully supported at no charge [7]. For example they have a “cash” modification that is nothing more than adding a point system based [8] on how active a forum participant is. In combination with the ability to develop groups, and to have moderators approve posts, this is an effective way to manage the information “clutter.”

Goals can be based on the number of points. Posts can be reviewed and approved by the department supervisor, or even a skip-level manager as the moderator. This ensures that the submissions are both high quality, and that they are being reviewed.

Over time, in areas such as manufacturing maintenance, or any other similar situations, enough quality information could be captured to create solution databases. This would facilitate the introduction of PM (Plant Maintenance) [9] for both preventive and predictive maintenance programs.

The searchable nature of the forums allows for quick and easy information retrieval in the short term. Over a longer period of time, the information can be structured and implemented as various types of system solutions to address recurring themes or various business opportunities.

Collaboration, virtual discussions, and even “debates” will ultimately occur in such a way that they help to refine various business issues or problems. In the future, as the issues arise again, going back through the old dialogs may yield a new perspective or new direction for the future. In the end, the cultural change to a learning organization will begin, and along with it new information and ultimately new knowledge will emerge to use for competitive advantage.

ERP III, Knowledge Management, Collaboration, and Learning Organizations – The Conclusion

Competitive advantage and the emergence of the extended enterprise through SOA, and the extended supply chain demand greater collaboration. This collaboration is a key component of creating the learning organization.

SOA and additional benefit realization from an SAP implementation depend heavily on the ability of an organization to capture competitive advantage from the knowledge of the employee base. Even skilled IT contractors must rely heavily upon the acquired knowledge and wisdom of those who actually perform the enterprise’s processes on a day to day basis.

No matter how skilled an IT professional may be, there will always be some things that escape detection or discovery because of the nature of intangible “knowledge” that exists within any individual or organization. The key to leveraging the IT investment in SAP and in implementing an effective SOA program is in finding ways to create collaborative communities to expose that knowledge. This collaboration can become the basis of a “learning organization” that is a key to transforming both the enterprise and the IT infrastructure that supports it. Using today’s “social networking” tools, as a means to advance that collaborative culture is one of the most cost effective ways to accomplish the task of organizational transformation.


[1] SAP as a Change Enabler

[2] Knowledge Management—Emerging Perspectives:

[3] Knowledge Management Journal – Business process modeling through the knowledge management perspective:

[4] Learning Organization from Wikipedia –

[5] Hitachi Consulting, where I previously worked in the SAP practice as a functional consultant and the SAP Knowledge Manager has published a white paper on SOA that explains both its promise and its drawbacks; SOA – CIO Savior or Nemesis,

[6] One important distinction to note here is that this paper will focus on the implementation of the “learning organization” in practical ways throughout the enterprise. This “learning organization” approach has far reaching affects beyond SOA, it has the ability to transform business through the use of enabling technologies.

[7] For example, see this forum which lists many of the validated and approved modifications, along with full support information and enhancement options.

[8] Forum with information for installing, updating, and enhancing or modifying the “cash” (i.e. points) modification to the PHPBB forum.

How to access the modifications while the modification database is unavailable (it is currently undergoing a complete update and re-write).

[9] For example, see SAP’s Plant Maintenance solution:

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