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Value Realization: Maximizing

Return on SAP Investments


Sapphire 2009
Copyright © 2009 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.
In recessions, winning companies take and sustain
advantage over their competitors

Review of financial results of 850 companies throughout a 10-year period

Exit from recession


 Winning companies (*) take distance
Winners from losing ones during and after
recessions.
Average  Post-recession results divergence
ROIC related between winning and losing
to the
industry
companies is significant.
 On leaving a recession, winning
Losers companies tend to keep their
leadership and generate sustainable
advantages through time.

Note: (*) = Winning companies are those that managed to obtain better results –as measured by the ROIC– than those of their industry peers during
the 6 years following the 1990-91 recession.
Source: Accenture’s analysis.

Copyright © 2009 Accenture All Rights Reserved. 2


In down markets, winning companies differentiate
themselves by strengthening operating models
through process and enabling technology

 They act decisively as soon as problems start to appear in the horizon (ie. Leading
indicators), investing in new capabilities to strengthen business operating models

 They set priorities based on detailed knowledge of how the company creates value (eg.
products, customer segments, key processes, technology, people, finance)

 They leverage IT to support key value drivers (value drivers, which are known and
understood).

 They work together with customers and stakeholders in order to align their value
propositions to changing environments

“In the cost-cutting discussions we're having right now - and there are many
- I remind my team that the next generation of technology and services will
be born out of decisions we make at this unique moment in time”
Anne Muclahy, CEO Xerox, April 2009

Copyright © 2009 Accenture All Rights Reserved. 3


Yet even in good times, companies are challenged
to achieve the full benefits of their technology
investments

Accenture Research
• While companies are slowly improving implementation performance, few claim
success at capturing the full business value targeted by their systems investments

In 2006 > 55% declare to have reached the


majority of their targets but only 6% could claim a
full success

• We found that top performers took a distinctly different approach to implementing


and leveraging their enterprise systems
Source: Accenture, New Growth from Enterprise Systems: Achieving High
Performance through Distinctive Capabilities, 2006

Copyright © 2009 Accenture All Rights Reserved. 4


Rationale for Value Realization in Systems
Integration Programs

• There is significant value in increasing the confidence that technology investments will
result in targeted benefits – translating into shareholder returns
• Many companies are looking for real business transformation, not just technology
implementation, to drive business performance
• Further, many companies are ILLUSTRATIVE BENEFITS PROFILES FOR SYSTEMS INTEGRATION
looking to develop truly “innovative”
solutions that create competitive Accelerated value
advantage and differentiated creation with quick wins
capabilities Business
Performance Go-Live High performance
Incre
ase
implementation
• The ability to capture business Total
Bene
benefits (cost/revenue) in Traditional systems
fit/
Value
advance of end-state technology benefit curve

is increasingly important,
Accelerate
particularly in the current Realization of
economic situation benefits/ value

Time

Copyright © 2009 Accenture All Rights Reserved. 5


Three Foundations of Business Led Value
Realization

Established linkages between


strategic objectives and their
Link
Strategic process and technology enablers
Objectives
to Process &
Technology

Processes and tools Organization and


for end-to-end process governance to drive the
management and Successful
Value Creation best possible process
value tracking Program and technology
Enabling Effective decisions for the
Process and Process
Governance business
Tools

Copyright © 2009 Accenture All Rights Reserved. 6


Critical Business Questions to Drive Process
and Technology Decisions
Value Realization asks and answers critical
business questions: STRATEGIC
Strategy
Linkage

 What are the key influencers of stock


price?
Share-
holder
 What are the key drivers of value creation
Value
and cost reduction defined in BO?
Analysis
SAP Value Realization -
Growing shareholder value by OPERATIONAL
building business capability enabled
 What are our current capabilities
by SAP functions and features to
compared to our industry peers?
improve business performance. Capability
Assessment
 How can SAP be leveraged to enable
those capabilities necessary to target
value opportunities and cost reductions?

TACTICAL

 Are we realizing our business case?


Have we realized typical SAP Value Area /
implementation benefits? Metrics
 How are we performing as indicated by
Copyright © 2009 Accenture All Rights Reserved. our business performance metrics? 7
Value Trees Assist in Linking Process
Capabilities to Key Strategic Objectives and
KPIs
Linkage to Process Enablers
(Distinctive Capabilities)
Strategy
Linkage

Critical Design Approach


Value Drivers

Standard
Company 90% Process
Strategy
Capability

Innovative
Procure to Pay
Cost Reduction
Process
Benefit
Capability
Value Source

Spend Analysis – Tech


Baseline ($M)

$$$,$$$
Target Opportunity

4%-6% (Expected 5%)


Annual Benefit ($M)

> XXX million 10%


Business
Enabled
Spend Analysis – Non Tech $$,$$$ 2%-4% (Expected 3%) > $XXX million
Enabled (less transportation)

Key Benefit Drivers

Case  Demand aggregation, volume discount, retail management, earnings capture, contract management, and
sourcing alternatives
 Compliance with contracts; reduced off contract spend
 Develop a supply strategy through analysis of current global spend, future demand, supplier, performance, risk,
target costing and real time changes

Key Assumptions





Transformation
& Quick Win
Opportunities
Strategic Market Domination
Establish cross-category portfolio of global dominant brands within high growth/ value markets

CPG High Innovation


Marketing
Customer
Management
Regulatory
Expertise
Flexible &
Low-Cost

Performance
Differentiated, & Distribution Deep cross market Operations
consumer insight & Tailored service regulatory Rigorous cost/
technology-driven and distribution understanding WCAP mgmt &
brands, under approach to ensure driving product imbedded
continual renewal strategy and

Research
availability performance mgmt
positioning culture

Culture of Continuous Renewal


Highly flexible organisation that seamlessly executes and embrac es operating change whilst
promoting innovation, but with relentless focus on ROI and margi ns

Copyright © 2009 Accenture All Rights Reserved. 8


A Healthy Tension Should Exist Between
Efficient Delivery and Business Objectives

Establishing the “healthy tension” between Business Needs and Program


Execution Governance

Program
Governance
Defined roles,
responsibilities & decision
rights to manage the
healthy tension

Process Ownership SI Delivery


– business value focused – – execution focused –
Ensuring process design & Ensuring successful systems
systems choices meet business implementation
needs
Inherent bias toward common
Inherent bias toward best fit solution solutions, for lower cost and faster
for each business need execution
- highest adoption

Copyright © 2009 Accenture All Rights Reserved. 9


Integrating Value Realization into Program
Governance

Example Value Realization Organization as Part of an SAP


Implementation Program
Governance

Program Account Management


Value Realization Leadership

Architects Office Change Management Commercial and


Program Management

Compliance
and Quality
Project Executive
SAP Delivery Leads
Contract / Finance
Sponsorship
NA Management
Service
EMEA
Management

LA Program Managers
Value
ASIA
O
PMO Realization
Transition Services
Lead
Support Services
-
Benefits
Tracking
Transformation Strategy & Timing of
Road Map Process Capabilities

Quick Wins Innovation Value Added

Early Value New Capability &


Capture Differentiated Knowledge
Capabilities Transfer

Copyright © 2009 Accenture All Rights Reserved. 10


Value Realization Activities Align to Traditional
SAP Implementation but are Often Not Fully
Employed

Value Realization Components as Part of SAP Implementation


Governance

VALUE REALIZATION
PROCESS STRATEGY Track process and technology design and implementation decisions back to
Develop holistic process deployment strategy and business case; put in place process metrics; build process
strategy; Assess Current Process governance
Performance & Gaps; Identify
Transformation Opportunities; Link to PROCESS TRANSFORMATION & INNOVATION
the SI Business Case Implement high-value strategic process Improvement projects; Accelerated
benefits in advance of end-state technology;

QUICK WIN QUICK WIN QUICK WIN


OPPORTUNITIES OPPORTUNITIES OPPORTUNITIES
QUICK WIN QUICK WIN QUICK WIN
OPPORTUNITIES OPPORTUNITIES OPPORTUNITIES
Can be estimated as of program structure
Scalable and resourced based on ROI opportunity

Copyright © 2009 Accenture All Rights Reserved. 11


Business Process Lifecycle Management Methods
Enable Performance Management at a Process
Level

Business Process Lifecycle Management Framework


Tools

• Turns process models into


process assets – single
source data for all things
process
• Links process to people and
applications
• Supports continuous
improvement through
process analytics

Copyright © 2009 Accenture All Rights Reserved. 12


Performance Management Tools Make
Available the Metrics and Information for
Tracking Value Realization
Organize Adopt Improv Improve
Launch roadmap
e s
results
Tools

Operatio Settle
ns Express Busin Mea Best
busin
strategy ess sur practices
ess
adopt e Tools
Accenture target
s
ion pro
gre
ss

Business Process Functions Formaliz Depl Supp Au Capi

Repository e
roadmap
s
oy ort dit taliz
e

ABPR Planning Tool


Performance usability
KPI’s
Business KPI’s

Solutions Methodology

High Spot
1 weeks 2 weeks 3 weeks 2 week

Phase I: Phase II: Phase III: Phase IV:


Mobilize and Gather In format ion As-Is Review Opportu nities and High Level Business

1
Actions Identification Case and Actio n Plan

Review
High Performance Enterprise
Business Performance Mastery
Framework Management Assessment
High
Target S etting B usiness S trateg y M onitor
R efin e C o rp o rate
D eterm in e K ey

(EPM) Tool
D eterm in e K ey V isio n &
M easu res o f
V alu e D rivers S trateg ic
S u ccess
O b jectives
D evelo p Actio n
P o rtfo lio V alu e P lan s, R e-allo cate

Performance
Assessm en t R eso u rces an d
E nablers U p d ate F o recast
In cen tives an d S tan d ard ized
R ew ard s P ro cesses
S et T arg ets fo r R eview P erfo rm an ce
K ey M easu res o f In teg rated IT w ith E xecu tive
Acco u n tab ility A rch itectu re M anag em en t

C ascad e T arg ets to


L o w er L evel M etrics/
O rg an izatio n
L ead ersh ip &
C ap ab ility

D evelo p P lan s
O perate
Allo cate
D ata S tru ctu res &
C o n tro ls

R eview ,
M o n ito r K ey
M easu res o f
B u sin ess
P erfo rm an ce
SC
R eso u rces (all C h allen g e &
to Ach ieve
categ o ries) to F in alize P lan s &
T arg ets
Ach ieve P lan s F o recasts

Copyright © 2009 Accenture All Rights Reserved. 13


Starter Questions for Discussion

 How effective have programs you’ve been involved with been at


Value Realization as described?

 What components of the value realization approach have you most


often seen employed?

 What are the major obstacles incorporating value realization


formally in SAP programs?

 What other approaches or tools have you seen used that would
enhance value realization?

Copyright © 2009 Accenture All Rights Reserved. 14


Detailed Client Experiences

Copyright © 2009 Accenture All Rights Reserved. 15


Selected Application of VR Methods

Global Consumer 14 weeks project defined to identify the improvement of


Products company the Advance Planning capabilities based on Business
Solutions High Spot Review Methodology
Global specialist in Implementation of business transformation program
energy management identifying and measuring the expected value from the
different initiatives (High Spot Review) with the help of
Value Realization tools
Global Consumer Implementation of a continuous Process Improvement
Products company initiatives based on Value Realization during and after
SAP Implementation, built on Lean Six Sigma
Methodology.
World’s leading After the implementation project, implementation of a
automotive supplier General Group methodology (5 steps©), not limited to
SAP, structuring a path towards excellence (roadmap for
each function)
Copyright © 2009 Accenture All Rights Reserved. 16
Example: High Spot Review Methodology.

Planning
Performance Tool usability
KPI’s KPI’s

Objective: Benchmark your overall Objective: Understand how your


Supply Chain Planning planning tool is used (or not
performance with other used), and quickly check where
companies in the same industry, the main gaps between IT and
and/or with Best Practices. Organization and Processes are.

Examples: Examples:
 Forecast Accuracy  Past due orders
 Days of Inventory (deliveries, planned
 Number of stock-
Methodology orders, stock transfer
outs orders, …)
 % of Planned Orders
1 weeks 2 weeks 3 weeks 2 week converted to Production
Phase I: Phase II: Phase III: Phase IV: Orders

Mobilize and Gather As-Is Review Opportunities High Level
Information and Actions
Identification
Business Case
and Action Plan
% of Purchase
Requisitions converted to
Copyright © 2009 Accenture All Rights Reserved. Purchase Orders 17
Example: Global Transformational Program based
on High Spot Review

2 months 3 months 4 months 

Business case Implementation


Identification
Approach formulation, of action plans
of key
definition target setting and performance
initiatives and
and deployment monitoring
value drivers
plan
Domain
Divisions CE, PS, MH
Initiative name
KPI 2 Inventory turns (New equipment)
Products New equipment Key points Scope Misc
• Description, objectives • Countries, regions • Opportunity to reuse
Baseline Index 2001 COGS DIVIDED BY Average inventory net value • Divisions/ Businesses (other countries, divisions, functional areas)?

1 Processes efficiency assessment Quarterly measure 12 rolling month COGS divided by avg 12 rolling month inventory at net value
• Functions

 Local / corporate stake?


- xxx
• Coverage by Switch (specify % and modules)
- xxx
Step 1: Calculate adjusted baseline

2 Country key data collection 2001 COGS and 2001 average inventory, after scope adjustment
Baseline
2001 COGS
CE PS MH
115,257,000 31,186,000 20,321,000
Total
166,764,000
• No additional adjustment is needed as
the KPI is a productivity ratio
 5-year NPV:
 Payback period:
• Initiative owner:
• BPO:

2001 inventory 26,069,500 13,656,000 5,572,750 45,298,250

3 Best practice handbook BI


Domain Efficiency

1,0
Country efficiency assessment Inv turns
Step 2 : Collect and adjust actual
12 rolling BI
4.421 2.284 3.646

month COGS and Average 12 rolling month inventory, at the end of the quarter, after scope adjustment
3.681
Value drivers and expected improvements
• Value drivers, improvements derived and ramp-up details
Costs and phasing
• One time
- IT
- HR
Barriers
• Organisational impacts (gap with
as is...)
- Populations
5

4 Map of assessed initiatives


Fi-Co 4,6 - Training - Gap with as is
Service
Actual Fi-Co
CE PS Action
MH description Total • No additional adjustment is needed Key performance indicators
4 Country name - Others
12 m COGS 126,358,499 34,964,377 17,551,144
Start date 178,874,019
… End dateKPI is… a productivity ratio
as the Baseline Target
Purchasing 2,8 • Recurring costs • Complexity/ feasibility
12 m inventory
3 27,308,138 14,628,906 4,598,881 46,535,925 • … • … General information
-Business
IT information - Technical Project information

CRM 1,9 Inv turns


2
4.627 2.390 3.816 Brief action description & objectives
3.853 • • Financials
- HRBusinesses
- xxx Systems & processes

5 Lagging KPIs
in EUR 2001 2002 2003 Sales in EUR 2001 2002 2003 Existing systems & gaps
Sales Purchasing - Training

Revenue: Electrical distribution - medium voltage

Equipment/Project 3,6 Step 3 :1 Compare and derive value KPIs REX


REX % - Others
Electrical distribution - low voltage
Industrial control and automation
Work plan • Leading • Lagging
0 of capital comparison (quarterly rate assumption: 2.075% 1):
Cost Employees REX in EUR 2001 2002 2003 2003 %

Major steps
2001 2002 2003 Electrical distribution - medium voltage
Logistics 2,9 - xxx Start date - xxx
Planned
• Baseline cost = (Actual COGS DIVIDED BY Baseline Inv turns)2 MULTIPLIED BY 2.075% Production Electrical distribution - low voltage

end Total
date

6 Initiative description
Administration Industrial control and automation Switch deployment timing
•Cost
Actual
of cost = Actual Inventory
capital CE MULTIPLIED PS BY 2.075% MH Total
Manufacturing 3,6 Quality CRM • … … …Facilities Markets
Risks
Baseline 593,045 317,693 99,873 1,010,611 Cost
Cost • # Employees
Sales in EUR
Residential
2001 2002 2003
- xxx
Scope & 95,427
boundaries reduction:••
Production sites Buildings
Quality 2,0 Actual 566,644 303,550 965,620 reduction: Distribution centers Industry

Processes in scope Facilities in scope


Sales offices Energy and infrastructure

7
Sales outlets Key initiatives - Switch related

Governance model • … the Business Architecture phase


• … XXXX
Manufacturing Customers Initiative
1: Based on a 8.3% Equipment/Project
annual cost of capital, provided by FII during XXXX
Sales 3,3
• Sales in EUR 2001 2002 2003 2003 #
2: Baseline inventory level • • Distributor / wholesaler

• •
Key stakeholders Contractor, panel builder, electrician
Service 2,8 Logistics Overall management buy-in OEM

• • Engineering systems integrator


Prime contractors, contracting authorities
• •
Linkages with other on-going initiatives
Electric utility

8 Consolidated business case


Global strategic accounts

• …
-2-

2 - Sales forecast accuracy


Names & positions Brands

Expected Impact • Country management Sales in EUR


Merlin Gerin
2001 2002 2003

Square D Key initiatives - beyond Switch


Baseline situation
Definition
Decision making process
This indicator measures sales unit forecast accuracy by comparing the actual unit sales to the sales unit Telemecanique Initiative
forecast. …
Re-assessment process (every 6 months)

9 Leading KPIs
Business Purpose
The ability to plan demand with accuracy is a key influencer
to the efficiency of operations. A high accuracy in planning helps
the company optimise manufacturing and supply chain costs while
providing the end-customer with the highest possible service level.
Levers to improve performance
• Improve forecasting process and level of coordination between functions
• Improve the understanding of market macro-economic trends
• Use statistical modelling to better understand demand history

All capabilities
Team members
Action leader

Action sponsor
… realization team
Value
Switch deployment

Identifies projectsBusiness/
to be initiative owners
Others

Production
Destinations, in EUR
ProjectIntraowners
country
Fill in Initiatives
Intra geographical zone
2001 2002 2003 No

Calculation reviewed: Projects Initiatives Meet Yes Sort based

10
n
All projects Intra operating division
descriptions
(‫׀‬ ‫׀‬

Action plan )
(Volume actual SKUi - Volume forecasted SKUi)
list description performance on scope
Target Direct contributors Steering Group
Extra operating division
- Current projects
(Volume forecasted SKUi)
- Planned projects criteria? criteria
… • … • …
i=1
Sales forecast accuracy ratio = 1 - n
SUMMARY - New projects
Calculation methodology used is MAPE (Mean absolute percentage error) • •
YEARS Projects
Volume actual SKUi is the actual weekly unit sales volume for SKUi. • •
Volume forecasted SKUi is the forecasted unit sales volume for SKUi (Rolling weekly forecast) (One month in advance).
in GBP 2003 2004 2005 2006 • 2007 2008 • list

11
n refers to the total number of SKUs considered.

System Usage Indicators SKU1


Forecast vol.
Actual sales vol.
Week
50
65
units
units } SKU1 forecast error = 30% A.
REVENUE INCREASE
Sales forecast accuracy
Week
Additional sales
‫ ׀‬+ ‫(׀‬22 margin
‫(׀‬65 - 50)Gross - 27) ‫׀‬ % 25,5% 25,4% 24,3% 23,9% 24,0%

252 565 5 959 255 10 055 734 12 671 251 14 641 293 15 064 400
23,9%

Business Unit
committee
Review, set priorities
Country/ entity
committee
Review, set priorities
Operating Division
committee
Review, set priorities
Company-wide
committee
Review, set priorities

12
Forecast vol. 27 50 27
SKU2 units } SKU2 forecast error = 19% = 1- Gross margin= 76%
increase 64 365 1 510 690 2 447 743 3 034 273 3 508 652 3 600 218 and select projects and select projects and select projects and select projects

IT cost monitoring
Actual sales vol. 22 units A'. 2

COST SAVINGS
B. Cost savings 70 867 1 656 416 3 286 195 3 559 311 3 705 340 3 794 621
ADDITIONAL COSTS (incl HR costs) Approved Approved Approved
projects projects projects
C1. Amortisation of investments (20 260) (102 967) (102 967) (82 707) 0 0 Committed
C2. Other 1 time charges (478 458) (235 342) (10 000) 0 0 0 projects
C3. Recurring expenses (25 628) (516 492) (544 416) (544 416) (544 416) (544 416)
C=C1+C2+C3 Total including HR costs (524 345) (854 801) (657 383) (627 123) (544 416) (544 416) Need higher Yes Need higher Yes Need higher Yes
committee committee committee
approval? approval? approval?
D=A'+B+C INCREMENTAL EBIT (389 114) 2 312 305 5 076 556 5 966 462 6 669 576 6 850 423
No No No
FCF (474 634) 2 212 151 5 179 523 6 049 168 6 669 576 6 850 423

Copyright © 2009 Accenture All Rights Reserved. 10 year NPV


12,50%
Payback (in quarters)
22 077 410

6
18
Benefits growth 2% 43% 78% 89% 98% 100%
Example: Global Consumer Products Company
Integration of implementation and Process
Improvement
Implementation Timeline

SAP implementation:
Common Data &Processes
Processes design Drivers for Change:
1.Non-efficient organization (duplicated)
2.Aligned processes but with a multiple-
Roll outs country/multiple-division scope
Drivers for change:
 Corporative control of
businesses
 Decision-making on
National level growth vs. Process Optimisation, Harmonisation and Consolidation
Regional level growth
Rationalization of costs
Initiatives generation
and IT management
Continuous
improvement launch
Design and implementation

Implementation Scope
Functional: Geographical:
 Purchase to Pay  USA
(PtP)  Canada
 Order to Cash (OtC)  UK
 Human Resources  FR
(HHRR)  GE
 Finance & Control

Copyright © 2009 Accenture All Rights Reserved. 19


Example: General Group Methodology (5 steps©)
Organize Launch Adopt Improve Improve
results roadmaps
Settle
Operations Express business Business Measure Best
strategy targets adoption progress practices

Formalize Deploy Support Audit Capitalize


Functions roadmaps

Strengthen the vision Focus on payback People efficiency Robust results Capitalization
• Clear deliverables • Local projects in line • Teams motivation • Deployment speed, • Up to date
• Key Performance with Plant maturity • Training and associated information
Indicators • IS aligned with reorganization benefits • Continuous
• Documents & business • Back to basics • Focus of hot topics improvement
standards • Group short term • Management • Speak with data • Innovation
• Better collaboration targets focused on implication • Benchmark
between functions & key deliverables – Objectives +
Information System Methods
Copyright © 2009 Accenture All Rights Reserved. 20

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