Drivers for change are everywhere: Digital transformation in almost every industry; combating climate change through new mobility solutions in the automotive industry; transformation in the healthcare sector with new connected medical devices and virtual operating models for clinical trials; and new fintech-enabled business models to provide new services creating new revenue streams and lower operating costs, to name a few.
This poses the challenge of how to transform the existing business model and organization with technology at a reasonable cost for both business and IT, and how best to use the most powerful business transformation levers. Executives rightly expect SAP S/4HANA® to be part of their industry-specific solution. It should support new business models enabled by cloud, IOT, AI and other emerging technologies that will allow them to navigate disruption in retail (“home delivery within hours”, energy (“new services created as a result of smart meters”), healthcare (“AI- and big data-enabled predictive healthcare”), manufacturing (“smart factories to optimize production sustainably”) or transportation (“carbon-neutral route scheduling with ETA predictions”).
If you think your business transformation consists of putting old wine into new bottles using the latest technology, you are wrong.
Business priorities guide the journey
This is why the SAP S/4HANA journey is not just a technology implementation. Rather, it is an opportunity for business transformation, supported by digital enablers. CxO business priorities will ultimately guide the SAP S/4HANA journey and shape the positive business case that will harness SAP S/4HANA to the fullest degree.
With this insight, the program manager can focus the transformation on how to optimize business processes on the journey to S/4HANA to achieve the C-level priorities. A crucial starting point must be the standardization and harmonization of these processes. It undoubtedly sets a great foundation on which to get your company future ready.
From a business point of view, the elimination of unnecessary business process variants reduces complexity, harmonizes different approaches from the past, and provides a great opportunity to set new standards. From a technical point of view, the elimination of unused or outdated output formats, such as fax machines, ancient EDI standards, or archaic file formats, and the switch to state-of-the-art technology can boost your process lead time.
Don’t get me wrong. These tasks must be performed during your business transformation, but in themselves, they’re not enough to deliver the full business benefit that the move to SAP S/4HANA offers. To achieve this, business leaders must consider new ways to harness the power of S/4HANA early within the design, build, and run phase, as my colleague Günter Knorr has previously argued.
S/4HANA offers businesses a new digital core as a platform for integration and innovation.
The business value of this lies in developing new sources of competitive advantage and being able to react swiftly to recover from disruption.
So, what needs to be done?
Here are ten practical ways to realize this potential as you plan and deliver your S/4HANA journey. They reflect our own five-step approach to delivering Digital Core Transformation with SAP S/4HANA and typically form part of the ‘Building the roadmap and business case’ phase.
Think beyond just your own organization: Bring your suppliers on board as early as possible.
Where suppliers are a critical part of your value chain, don’t wait for the S/4HANA implementation to be well advanced before you bring them on board. Share data and co-innovate on the product or service development cycle from the outset.
Integrating suppliers in this way need not be expensive. Seamless integration of suppliers with real-time data is possible in varied subcontracting / tolling scenarios without custom developments. Consider deploying new functions independently of rollout plans for the core functionality in the automotive and chemical industries where supply ecosystems are strategically important.
Empower service-oriented architectures in areas where you can’t wait for S/4HANA or where you can leverage outsourcing of functionality.
A good way to accelerate results and lower the cost of your S/4HANA journey is to outsource the code for regularly recurring special processes from your existing SAP ECC in sales. In automotive for example, a good candidate might be a process in which a customer’s winter tires are automatically ordered and made available at the car dealership when the weather forecast algorithm predicts snow.
Microservices also offer great opportunities to bridge “transition scenario” gaps where some parts of your system landscape are still running with ECC and other parts are already live with S/4HANA. Microservices help you tackle the use cases for verifying this technology. You can make tremendous time savings if you start thinking about your approach and use cases early in your program.
Incorporate process mining to leapfrog to the next level.
Intelligent process design, supported by process mining techniques, achieves rapid results in areas like procurement, accounting, and supply chain. This can accelerate your transformation, build competitive advantage, and save millions of euros or dollars.
Start with use cases that will benefit you most, and use SAP standards in combination with intelligent automation techniques. Use best in class KPIs to guide your first steps and close the gap on your competitors, even if your process runs in a non-SAP environment. Don’t forget that S/4HANA as a platform includes all the to-be capabilities you need to remain competitive, such as pricing engines.
Not all of SAP’s recently acquired companies are fully integrated in the system, but you don’t have to wait for SAP to do this – you can tackle the challenge yourself to seize competitive advantage.
Implementing functionality without waiting for the core to be rolled out can make sense when it allows you to realize strategic targets sooner. We call these projects ‘speedboats’. When considering them, it’s key not to lose sight of the target-system landscape and planned innovations in SAP’s roadmap, because large-scale custom developments are expensive, and reversing them even more so.
Intelligently integrating your existing and future tools selection will give you competitive advantage by incorporating them into S/4 without losing the power of HANA’s capabilities and keeping the core clean. As an example, in the manufacturing sector you might retain the software tools you’re already using to give you competitive advantage, such as manufacturing execution systems and intelligent asset management initiatives, and integrate them as a complement to the S/4 core.
Boost your current and future business models with artificial intelligence-driven integration.
Thinking out of the box and with a non-siloed approach can improve your current business model, help to generate new ones, and distinguish you from the competition.
SAP may not provide everything you need to build your new business and target operating models. However, the openness of SAP allows you to integrate non-SAP artificial intelligence (AI) for a variety of goods and services, such as forecasting weather condition-dependent models in the farming seed business. The ability to integrate historically siloed data in combination with AI techniques can generate use cases with demonstrable ROI. For example, asset location data (e.g. from trucks or trains) can be used for new business models across business functions.
Maximize the innovation potential of pre-packaged and out-of-the-box solutions.
SAP’s newest standard functions enable you to lower the total cost of ownership and avoid reinventing the wheel far more than you might think. For example, SAP’s extended warehouse management (EWM) offers a wide variety of functions that were previously missing (and which you will miss in “stock room management” as well). Using clever settings in the SAP standard allows you to generate innovative solutions that fit your needs.
You can also drive innovation with out-of-the-box functionality using new acquisitions in the SAP portfolio outside the S/4HANA core – e.g. Ariba for procurement – and the accompanying data exchange to lower implementation and ongoing costs.
Recognize where an SAP-only approach doesn’t meet your needs.
The functional coverage of SAP products may be huge, but it is limited in some areas – so it doesn’t have to be SAP for all and everything.
For example, to provide a good user experience for their people most large companies aim to have one user interface for all their SAP and non-SAP applications. That’s not feasible with SAP’s approach due to the missing integration within SAP’s products and SAP’s product strategy, as mentioned in point 4, above. A holistic IT strategy is needed here to cover all non-functional requirements. Similarly, standardized print formatting and the associated (license) costs are still an issue, and a clear strategy for all SAP and non-SAP applications must be elaborated to avoid overpayment and to reduce costs.
Integrate third-party content into S/4HANA to differentiate your use cases.
Best practices, datasets, and other content from third parties can help you create unique sector-specific use cases that build competitive advantage.
In automotive for example, automatic line feeding for car production sites requires in-depth know-how that not every OEM will have. Collaboration and co-innovation with strategic suppliers in this area can make OEMs more cost competitive.
In life sciences, contractual constraints require an intelligent setup in the system to meet or exceed product margin targets. Incorporating and leveraging common practices from the retail business can provide valuable solutions, such as product segmentation.
Source the technologies you need for integration use cases by leveraging the SAP Cloud Platform, or any other cloud platform.
Cloud platforms offer new technical possibilities that allow you to do more with less.
A small use case example might be introducing a pay-per-use business model. This can be incorporated easily using the SAP Cloud Platform or other cloud platforms at low costs. For large use cases, take note of numerous failed projects where organizations have tried to solve their business needs in the ECC core with high sunk costs. SAP Cloud Platform, or any other platform provider, can help you both to avoid repeating past failures and to reduce the amount you spend.
Use intelligent data management to identify what internal and external business intelligence you need to get ahead of the competition.
State-of-the-art data management breaks down information silos, bringing the insight and control you need to achieve your vision of an intelligent enterprise.
One area to focus on is data exchange with partners. Use the available data to speed-up your innovation lead time, for example by sharing relevant data with your partner ecosystem.
The other area is today’s systems of record. You can harness the data they contain without much additional effort in your S/4HANA journey, by breaking down your corporate strategy into each stream of your transformation project. S/4HANA has the techniques you need to make this happen.
These ten recommendations are designed to help SAP S/4HANA program managers maximize the value of the move. They emphasize that this is a business-driven transformation, for which a unified business and IT vision must ultimately be translated into actionable plans for change.