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Defining the Four Levels of SAP-Enabled Change (Part II)

by Guy Couillard

March 2, 2012

 

Defining the Four Levels of SAP-Enabled Change (Part II)
(Editor’s Note: In the first part of this column, which you can find here, we covered the first two level of SAP-enabled change).
Level 3: Cross-functional integration
The strategic intent associated with cross-functional integration is simple: the organization will do whatever it takes, technologically AND organizationally, to achieve its business process improvement goals. What most drives customers to this level of change are the industry best practices embedded in SAP solutions.
Change management here must address governance of the overall transformation, not just the SAP aspects. For example, leveraging the shared services capabilities of SAP may involve creating new organizational entities, and shutting down others. In this case, the technology aspects are relatively simple, often more so than for levels 1 and 2 discussed earlier, as SAP is designed “out-of-the-box” as a cross-functional integration engine. If there is a good fit with the organization’s business, configuring the solution is relatively straightforward. Designing the new organization becomes the real challenge.
In terms of governance and change, all of the practices described in the previous levels continue to apply. In addition, efforts must be made to educate senior management on how SAP will enable a refocused business strategy. Current performance dashboards will need to be revisited. For instance, an organization that only measures results and has no process activity metrics will need to deploy new key performance indicators. 
To meet project timelines, speedy decision-making by business process owners is critical, even though these decisions may span business functions. A key objective of change management at this stage is to get business owners to realize that consensual decision-making — where everything is “socialized” — is not optimal. Guiding principles and clear accountabilities for value realization become essential. Furthermore, the concept of an SAP Center of Excellence needs to evolve beyond a concentration of technical expertise toward an operational business process management enabler.
Given these requirements, it is obvious that developing these organizational capabilities must occur, in parallel, or preferably prior to SAP project initiation. If no actions are taken, the organization may find itself in a situation where it talks about cross-functional integration, but only achieves some level of process standardization and transparency. 
Publicizing a goal and failing to achieve it can breed cynicism and will make the next change initiatives harder to implement. 
Level 4: Value chain transformation
The most challenging level of SAP-enabled transformation involves leveraging technology to transform the business model. An example might be deploying SAP PLM to completely outsource product design and servicing to key collaborators to focus on marketing, sales and distribution. All while maintaining process visibility throughout the extended value chain. 
We have seen another example from a manufacturer of electronic components for the TV industry with operations in Europe and North America, who had grown through acquisitions and was finding itself under pressure from Asian competitors. Realizing that margin erosion was inevitable in their industry, they chose to leverage a variety of SAP solutions to offer turnkey fully equipped TV studios. This took advantage of higher margins in services delivery, while providing a privileged channel to their manufacturing operations.
The design, governance and change management associated with this level of transformation have historically been the playground of large management consulting firms. However, with the emergence of business process management solutions that incorporate reconfigurable industry business processes, having the ability “in house” to change operating model can become a unique source of competitive advantage. After all, when everyone can buy the technology off-the-self, it is the speed at which you can innovate and generate value that becomes the new competitive advantage. 
Three competency areas become essential at this level: Business strategy modeling and IT architecture; achieving process maturity from a business and IT standpoint; and lastly the capability to deploy and adopt innovations. Here, the SAP Center of Excellence is part of a broader innovation design and adoption organization.
Benefits and limitations of the model
Any attempt to fit in the complexities of modern IT-driven transformation into a limited set of categories runs the risk of oversimplification. For instance, the same SAP project might have elements of each of the four levels outlined here. And some of the more sophisticated governance and change practices assigned to a specific level might certainly apply to others. 
Despite these limitations, this framework can be an effective executive alignment tool. In our workshops, we use it to surface different expectations about what the project will achieve. If stakeholders have different ideas about the level of change SAP will bring, they are unlikely to commit the right type of resources to the project. Identifying these perception issues early is critical.

(Editor’s Note: In the first part of this column, which you can find here, we covered the first two level of SAP-enabled change).

 

Guy CouillardLevel 3: Cross-functional integration

The strategic intent associated with cross-functional integration is simple: the organization will do whatever it takes, technologically AND organizationally, to achieve its business process improvement goals. What most drives customers to this level of change are the industry best practices embedded in SAP solutions.

Change management here must address governance of the overall transformation, not just the SAP aspects. For example, leveraging the shared services capabilities of SAP may involve creating new organizational entities, and shutting down others. In this case, the technology aspects are relatively simple, often more so than for levels 1 and 2 discussed earlier, as SAP is designed “out-of-the-box” as a cross-functional integration engine. If there is a good fit with the organization’s business, configuring the solution is relatively straightforward. Designing the new organization becomes the real challenge.

In terms of governance and change, all of the practices described in the previous levels continue to apply. In addition, efforts must be made to educate senior management on how SAP will enable a refocused business strategy. Current performance dashboards will need to be revisited. For instance, an organization that only measures results and has no process activity metrics will need to deploy new key performance indicators. 

To meet project timelines, speedy decision-making by business process owners is critical, even though these decisions may span business functions. A key objective of change management at this stage is to get business owners to realize that consensual decision-making — where everything is “socialized” — is not optimal. Guiding principles and clear accountabilities for value realization become essential. Furthermore, the concept of an SAP Center of Excellence needs to evolve beyond a concentration of technical expertise toward an operational business process management enabler.

Given these requirements, it is obvious that developing these organizational capabilities must occur, in parallel, or preferably prior to SAP project initiation. If no actions are taken, the organization may find itself in a situation where it talks about cross-functional integration, but only achieves some level of process standardization and transparency. 

Publicizing a goal and failing to achieve it can breed cynicism and will make the next change initiatives harder to implement. 

Level 4: Value chain transformation

The most challenging level of SAP-enabled transformation involves leveraging technology to transform the business model. An example might be deploying SAP PLM to completely outsource product design and servicing to key collaborators to focus on marketing, sales and distribution. All while maintaining process visibility throughout the extended value chain. 

We have seen another example from a manufacturer of electronic components for the TV industry with operations in Europe and North America, who had grown through acquisitions and was finding itself under pressure from Asian competitors. Realizing that margin erosion was inevitable in their industry, they chose to leverage a variety of SAP solutions to offer turnkey fully equipped TV studios. This took advantage of higher margins in services delivery, while providing a privileged channel to their manufacturing operations.

The design, governance and change management associated with this level of transformation have historically been the playground of large management consulting firms. However, with the emergence of business process management solutions that incorporate reconfigurable industry business processes, having the ability “in house” to change operating model can become a unique source of competitive advantage. After all, when everyone can buy the technology off-the-self, it is the speed at which you can innovate and generate value that becomes the new competitive advantage. 

Three competency areas become essential at this level: Business strategy modeling and IT architecture; achieving process maturity from a business and IT standpoint; and lastly the capability to deploy and adopt innovations. Here, the SAP Center of Excellence is part of a broader innovation design and adoption organization.

Benefits and limitations of the model

Any attempt to fit in the complexities of modern IT-driven transformation into a limited set of categories runs the risk of oversimplification. For instance, the same SAP project might have elements of each of the four levels outlined here. And some of the more sophisticated governance and change practices assigned to a specific level might certainly apply to others. 

Despite these limitations, this framework can be an effective executive alignment tool. In our workshops, we use it to surface different expectations about what the project will achieve. If stakeholders have different ideas about the level of change SAP will bring, they are unlikely to commit the right type of resources to the project. Identifying these perception issues early is critical.

 

Guy Couillard, president and founder of OTA (www.ota.ca), is a consultant focusing on the management of large scale change associated with the deployment of large technology projects such as SAP. Couillard specializes in the conceptual integration of the different disciplines related to the successful adoption of IT-driven innovations, namely risk management, organizational change & knowledge management, communications and branding, value realization and program management. 

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