Examining Business Models


After completing this lesson, you will be able to Describe the importance of being able to quickly adjust business models.

Adjusting Business Models

ERP Challenges Today: Why Do We Need Clean Core?

Adapting to constant business change is necessary for companies in today's environment

ERP software is the backbone of a company's ability to manage and implement business processes. And SAP's ERP software has been there for decades, enabling companies to accomplish any goals that they wish to obtain from an ERP system. SAP has traditionally had SAP ERP, a version of ERP software that customers installed in their own data centers. However, with the emergence and proliferation of cloud-based technology a cloud-based ERP solution was needed for companies. SAP S/4HANA Cloud is that solution. Designed as a cloud-native solution SAP S/4HANA Cloud offers the best of both worlds for a customer. An ERP system, complete with the latest industry best practices, along with continuous innovation. In short, a ready to run cloud ERP.

SAP's ERP software, including the traditional SAP ERP and the newer cloud-based SAP S/4HANA Cloud, has enabled companies to effectively manage and implement their business processes.

As mentioned, traditionally, SAP's ERP system was installed and maintained in a company's data center. However, a cloud-based ERP system such as SAP S/4HANA Cloud receives updates on a continuous basis. This system requires a slightly different approach for customers when managing things such as extensions or integrations than what is applicable in an on premise-based environment. To facilitate this approach SAP has developed the "clean core" concept that customers can follow. In doing so, the effectiveness of SAP S/4HANA Cloud can be maximized.

Before looking at the specifics of each aspect of clean core for SAP S/4HANA Cloud, let's look at the challenges that make clean core a necessity for customers. A good way to conceptualize these challenges is to center them around three areas. The first is business adaptability, which we discuss in this lesson. Technological change and landscape challenges comprise the next two lessons respectively.

In today's dynamic and unpredictable business landscape, companies face a constant barrage of disruptions. Businesses must quickly adapt to these disruptions to remain relevant and thrive. A few of these disruptions can be summarized as follows:

  • Disruption of supply chains.
  • Changing customer preferences.
  • Regulatory compliance.

The Impact of Disruptions in Global Supply Chains

Global supply chains are the backbone of many, if not most industries, enabling businesses to source materials, manufacture products, and deliver goods to customers around the world. However, disruptions in these supply chains can have far-reaching consequences, impacting such things as production schedules, inventory levels, and customer satisfaction just to name a few.

Natural disasters, geopolitical tensions, and unexpected events like the COVID-19 pandemic have all exposed the vulnerabilities of global supply chains. These events highlight the importance of building resilience and agility into supply chain management strategies. Businesses that rely on a single source of supply for critical components or materials are vulnerable to disruptions. Any disruption in the supply chain can have a domino effect on the entire production process.

To effectively respond to disruptions in global supply chains, businesses must diversify their supply sources, build strong relationships with key suppliers, and implement robust risk management strategies. Investing in digital technologies, such as advanced analytics and supply chain visibility platforms, help businesses to gain real-time insights into their supply chain performance. This investment helps to identify potential risks before they become major disruptions.

Customer Preferences: A Moving Target

In addition to disruptions in global supply chains, businesses also face the challenge of constantly changing customer preferences. As consumers become more informed and capable, their expectations for products and services evolve, making it essential for businesses to stay agile and responsive to these shifts in demand.

The rise of e-commerce, social media, and personalized marketing has transformed the way businesses interact with customers, creating new opportunities and challenges for companies across industries. Today's customers expect personalized experiences, smooth omnichannel interactions, and ethical and sustainable business practices, forcing businesses to adapt their strategies and offerings to meet these evolving demands.

To stay ahead of changing customer preferences, businesses must invest in market research, customer analytics, and data-driven insights to understand their target audience and anticipate shifts in demand. Embracing innovation and experimentation, businesses must constantly refine their products and services to align with evolving customer needs and preferences, while also fostering a customer-focused approach throughout the organization.

Regulatory Compliance: Navigating the Ever-Changing Landscape

In addition to supply chain disruptions and changing customer preferences, another one of the key challenges businesses face in today's environment is the constant change in regulatory compliance. Government regulations and industry standards are constantly evolving, and businesses must stay on top of these changes to remain in compliance and avoid costly penalties.

For example, in the healthcare industry, the introduction of new privacy laws or changes to billing regulations can have a significant impact on how healthcare organizations operate. Failure to comply with these regulations can result in steep fines and damage to a company's reputation. As a result, businesses must be proactive in staying informed about regulatory changes and adapting their processes and procedures accordingly.

To effectively respond to changes in regulatory compliance, businesses can implement robust compliance management systems and processes. This response may involve regular monitoring of regulatory updates, conducting thorough risk assessments, and implementing appropriate controls to ensure ongoing compliance. Also, businesses can invest in training and education programs to ensure that employees are aware of and equipped to adhere to the latest regulatory requirements.

Disruption of supply chains, changing customer preferences and regulatory compliance are but a few of the types of disruptions requiring businesses to adapt quickly.

Case Study: Heidelberg Hotel Chain

Let's look at a concrete example of the need to quickly adjust business models in action. In response to the COVID-19 pandemic, the Heidelberg Hotel chain had to deal with all three challenges. The supply chains' simple products, such as napkins and masks became difficult to procure, with long lead times. Customer preferences shifted quickly with many preferring a contactless process for checking in and the ability to enter and exit rooms via their phone as opposed to a key card. Regulations were being issued (and changed) swiftly based on emerging science.

To meet these challenges, the Heidelberg Hotel decided to adopt SAP S/4HANA Cloud. With SAP S/4HANA Cloud's emphasis on fast deployment and easy adoption, as well as its modern approach for creating extensions, Heidelberg Hotels was able to move "on the fly," as changes in the business required.


In conclusion, disruptions to global supply chains, evolving customer preferences, and regulatory compliance are significant challenges facing businesses today. However, by adopting SAP S/4HANA Cloud ERP, organizations can mitigate these challenges and emerge stronger and more resilient.

SAP S/4HANA Cloud provides a complete solution for all challenges related to business change.

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