KC Sahu, SVP-SAP Practice, Wise Men Consultants
CIOs are under tremendous amount of pressure to reduce costs, achieve high operational efficiency as well as automate their IT environment. SAP has been the top choice for most CIOs as it supports execution activities, streamline back-office and lower costs. However times are changing and it is crucial to understand how technology fits can create revenue and increase profitability. I would also like to point out here that Technology is not voodoo.
“Implementing SAP technology solution acts as a catalyst to enhance and improve existing processes and programs and to increase revenues for most organizations”
Corporations implement large projects in SAP or any other ERP to gain advantages like revenue growth, higher profit margins, new customer acquisition, customer retention, product line profitability, incentive programs and monitoring, market penetration/market share, time to market and many others. Even though companies expect these from their ERP or SAP implementation/upgrade, they rarely achieve these goals because they don’t view technology in the right light. Companies invest millions in SAP based on the underlying assumption that technology will CAUSE an increase in revenue and profits but in the real world technology provides KEY INSIGHTS to help businesses to increase revenue and profits.
After an SAP/ERP implementation, many companies see a lowering of costs due to smoother workflow, and an integration of operational and accounting functions. Using SAP to drive revenue and profitability requires building another layer of data collection, data analysis, tools and processes on top of the operational layer. A focus on process improvement, business process automation, efficiency gains, cycle-time reductions and other business process management related issues is not enough. For technology to work correctly business operations must be built on well-defined programs and strategies that are then converted into processes with clear performance metrics and KPIs.
To ensure success, ERP, SAP, CRM, APO, BI, and other tools must be driven by business needs and to provide key information relevant to business decisions and processes. For example, no amount of technology is going to make the 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 saying 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 fit-ins like CRM to facilitate changes in sales and marketing programs and strategies. 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 in turn drives the technology in the direction of enabling necessary change. Below is a six step strategy for a SAP-centric approach to increase revenue growth, profitability, and competitive advantage:
1. Build a long term business plan; define business, marketing and competitive strategies keeping in mind the current and future value proposition.
2. Draw out goals and KPI’s to support those strategies.
3. Determine which business processes and groups will be affected by these process changes: sales, customer service, shipping, marketing, etc.
4. Define the necessary reports that will be needed with both leading and lagging indicators.
5. Operationalize strategy by assigning responsibility and defining the supporting processes
6. Implement the necessary technology solutions like SAP BI, SAP CRM, SAP ERP functionality, etc.
CIOs who follow six step approach, soon realize that solution/technology is the last step in the process. Implementing SAP technology solution acts as a catalyst to enhance and improve existing processes and programs and to increase revenues, profitability, and competitive advantage for most corporations. Also to mention, below are the success factors which plan an important role of in any SAP implementation:
1. Effective Communication Both Internally and with the clients
2. Strong Corporate Management Support
3. Clearly defined scope and Project Plan
4. Proper Methodology as Guidelines and helping Tools
5. Effective Team Dynamics & Management
6. Motivate, Appreciate, Reward of resources
7. Change Management
Key idea for using technology as a catalyst lies in the question which you need to ask yourself as the CIO is: Does the technological team in charge of implementation/upgrade/ enhancement know the reasons for the investment? How will they map those business expectations into the technology? Answers to these questions are required to be clearly defined, communicated and reinforce with the project team.
To summarize and mention the takeaways SAP supports critical business processes. To implement SAP successfully, you have to know what you want SAP to deliver. And to understand what SAP should deliver, you need to clearly define business operations and strategies that are will be converted into processes with clear performance metrics and KPIs. To ensure business impact, SAP must be based on clear business goals and the right resources. One needs to translate their business goals into specific project deliverables. Without clear deliverables, one cannot scope their projects correctly. Also, one needs to align their resources employee skills, methods and technologies to make sure that the project can deliver the results planned and create the expected impact.