Describing challenges and opportunities transforming to SAP S/4HANA

Objectives

After completing this lesson, you will be able to:

  • Describe the challenges and opportunities transforming to SAP S/4HANA

Challenges and Opportunities Transforming to SAP S/4HANA

Before we talk about the challenges and opportunities that customers face when they transform to SAP S/4HANA, let us take a moment to reflect why change far beyond what is required from a technical point of view is inevitable.

In the 1990s SAP was heavily developing SAP ERP. Also during this decade, cell telephones became increasingly popular.

You (more or less) could be reached by anybody, anytime, anywhere – by voice or by text. This had a huge impact not only on communication but also on everyone’s behavior. If you could not reach someone you could leave a voicemail or send a text message. If you wanted to meet a friend you no longer needed to tell him exactly when and where to meet, but simply say: give me a call when you are ready.

Fast forward to today – we still use cell phones but the way we use them has changed entirely as technology dramatically advanced:

  • Some of you still do calls or send short message, but most likely you have a favorite app, sending voice messages or pictures
  • Your cell phone became your camera
  • If you travel, you will for sure have an app will give you a predication when you should start or when you will arrive

These are just a few examples. Our experiences in our private life determines nowadays also our requirements for business applications – and the expectations of customer to organizations and their processes. Processes and applications need to be:

  • Simple
  • Fast
  • Flexible
  • Supporting instant communications
  • Being accessible from anywhere, anytime

SAP ERP was built in the 90s. Like the cell phone, even though they will still run, they do not meet the requirements of today's world. Therefore, change is inevitable.

To meet these requirements we built SAP S/4HANA with key design principles such as the following:

  • Usage of our In-Memory database HANA
  • Choice of deployment between a public and private cloud
  • Goal to simplify processes and provide a new user interface that can be accessed also via mobile devices

Existing SAP customers who have been running one or multiple SAP ERP systems for many years find themselves faced with not only the move to SAP S/4HANA and process changes, but very often even with a bigger cloud transformation project requiring even more processes to be-redesigned. But also new SAP customers who have taken the decision to implement SAP S/4HANA must transform their legacy processes while implementing SAP S/4HANA.

The transition to SAP S/4HANA, Grow with SAP or RISE with SAP, has the goal to move to the Public Cloud or the Private Cloud. It requires to consider what is the right amount of systems that suits an organization best.

Taking into account the current state and the desired future there are three potential transformation paths that are possible:

  • New Implementation
  • System Conversion
  • Selective Data transition

Customers might have already made a decision which transformation path is the right one for their organization or they are still uncertain which path to choose, and they might not have defined when they will move to SAP S/4HANA as both value and costs are unclear.

Irrespectively of the current state, the future state and the transition path, business process will change when moving to S/4HANA initially but also continuously beyond, as an ERP system needs to evolve as any business keeps changing and an investment into an ERP must generate value.

In line with the initial business process change a new implementation is often referred to a greenfield (as a high number of processes will be impacted). A system conversion is called brownfield (as the number of process that you will keep is higher) or as blue field/goldfield or any other mixed color to indicate that it is a combination of both.

While the initial amount of process change might be different, over time you will touch gradually almost all your business processes. This (business process) change results in challenges but also opportunities for which you need to find answers which will drive your SAP S/4HANA transformations. So let us talk about what these challenges and opportunities are.

How Do You Ensure that Your Transformation Adds Value?

The transformation to SAP S/4HANA is for every organization a big project requiring a significant investment. Therefore, the first challenge that we discuss is: How does an organization ensure that the transformation adds value?

In order to ensure that the transition to SAP S/4HANA adds value to a business, an organization need to improve their business processes.

The starting point to any improvement is transparency on how processes are executed today. Most organizations that I have had the chance to work with had little or no transparency in their current process performance. Are there blockers that prevent the processes from running as efficiently as possible? Are there certain units of the organizations where processes are executed much better than in other units. The first step to achieve value is to gain process transparency.

In the next step, organizations need to validate the process improvement potential together with their business stakeholders and process experts, and make them quantifiable. By describing what value an organization can get from changing processes, it is possible to make an initial prioritization and focus where it matters most. Organizations also need to ensure that they overcome the resistance of any change by ensuring management buy-in. In summary, the next step that organizations must achieve is to make the value of change measurable.

If organizations have identified process improvement potential and qualified the value of the improvement, they then need to know how to realize the value. What are the new SAP S/4HANA innovations that they should consider to improve processes? Are there any changes that organizations can do prior to the move to SAP S/4HANA? Organizations need to re-design processes in order to realize the value.

During the transformation, organizations implement new SAP S/4HANA Innovations to realize the defined process improvements in close collaboration between business and IT, enabling their users on the new way of working. Once have gone live with SAP S/4HANA, organizations start to measure the value contribution of the process improvements gaining process transparency again.

Throughout each step organizations need to ensure alignment among all stakeholders and communicate actively to connect the dots from initial findings to process changes being implemented.

Providing process transparency, making the value of change measurable and identifying how to change processes also allows organizations to ensure that their SAP S/4HANA transition is not just an IT initiative, but a business initiative. By showing quantifiable business benefits, organizations obtain management buy in to provide critical business resources to the project required to make change happen.

How Does an Organization Make Their Transformation As Fast As Possible

ERP transformations in general are widely known as being over time and over budget – and are by no means fast. Therefore, the second challenge that organizations are facing is: How does an organization make the transformation as fast as possible?

Fast time to adapt means to:

  • Define target processes taking not only into account the already gained insights and recommendations but additional to leverage SAP Best Practice content, in other words don’t start from scratch but take SAP standard as the basis for future processes that are validated in Fit-to-Standard workshop
  • Be able to use the process design during the solution build, test and deploy which is supported by application lifecycle management with a tight integration avoiding data redundancy ('integrated toolchain')
  • To ensure collaboration among all stakeholders in Business and IT

Fast Time to Insights and Fast Time to Adapt get facilitated by our end-to-end business process transformation methodology that you will get to know in more detail later.

The key steps of this methodology are displayed as an infinity loop on the screen. Change does not stop with the move to SAP S/4HANA but continues infinitely afterwards.

To accelerate the overall transformation project, organizations need to shift up gears and shorten the lead time of the transformation phases.

Let’s have a look at two key levers:

On the one hand, organizations should aim for Fast Time to Insights.

Fast time to insights means to:

  • Gain quick insights 'where to change' by understanding how process are running today
  • Getting recommendations 'how to change'

On the other hand organizations should aim for Fast Time to Adapt of process changes in IT systems they prioritized in the beginning.

How Does an Organization Ensure that Change Is Manageable?

You've probably heard the saying: "never change a running process or system - it works". This is usually done to avoid any change, as change is always associated with risk. Transparency of process change, and collaboration can reduce risk drastically and thereby making change manageable, change which is inevitable to add value. Therefore, the third challenge is: How does an organization ensure that change is manageable?

Making the transformation manageable builds upon the answers of the two previous questions.

Manageable means that organizations:

  1. Follow a clearly structured transformation approach with a set of defined steps/milestone and objectives.
  2. Make the transformation targets as well as the necessary process changes not only transparent to everyone but ensure that everyone supports them.
  3. Have management buy-in for the project as it is a business initiative and not an IT-initiative.
  4. Break down silos between all business and IT stakeholders – using processes as the vehicle.
  5. Have sufficient human resources empowered to make decisions, in other words roles and responsibilities are clearly defined.
  6. Embed change management and enablement into your transformation as a critical success factor.

SAP S/4HANA Transformations are Business Initiatives

If customers want to drive their SAP S/4HANA transformation they need to find answers to the three questions and associated challenges:

  • How does an organization ensure that the transformation adds value?
  • How does an organization make the transformation as fast as possible?
  • How does an organization ensure that change is manageable?

SAP Signavio solutions will help customers to find answers for these challenges. In the next chapter, you will get to know SAP Signavio solutions before you get an overview how you can leverage them during your transformation to drive your SAP S/4HANA transformation to success.

The most important point again: SAP S/4HANA transformation are business initiatives and not IT projects.

Customers reduce the value SAP S/4HANA can provide to an organization drastically, if they only focus on a technical implementation or if they only implement what has been built in the past.  It's important for a continuous value generation to set the foundation of a continuous improvement journey. The investment that customers make into Business Process Transformation Management will not only unlock the value that SAP S/4HANA brings to their organization by changing business processes, it will also be essential to reduce the debts of the past, such as no longer required modifications or process enhancements.

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