Survive and Thrive in Uncertain Times

Tagline...."Cash is the King, Queen and Royal Family..."



This was the most anticipated keynote session, being presented by the Vice-President of Product Strategy for SAP America, Jeffrey Word. We will be reviewing his presentation around Business Transformation. What are the things that companies can do to survive the current market? What can we do (as their service provider/partners)? What are their customers doing in the marketplace?



What is likely to be our future state?



There are 3 long term trends that are likely to dictate the future state of the global markets:

• Economic: Global business networks. Supply chains are now becoming global. What happens in one country can drastically effect another.


• Environmental: Natural Resource availability; Climate Change; Population Growth


• Social: Customer awareness, connectivity (and the maturation of the information age); accountability

We can think of many examples of each of the above that has led to the demise of some companies. In order to survive the current market, and more importantly what it will soon become, new strategies need to be adopted.

How things are and how they should be

Many companies have reacted to the global financial crisis in a rather dramatic fashion and I would say blinkered manner. The first column below is a poor approach, the second column a more desired approach:

Cost Focus

• Outsource Everything
• Cut Spending
• Squeeze Suppliers
• Sell to "best" customers
• Eliminate Headcount

Value Focus

• Partner Strategically
• Spend Wisely
• Collaborative/Win-Win approach with Suppliers
• Acquire "non" customers
• Increase Productivity

We will co-relate this to a set of priorities shortly, but first an example of knee-jerk reactions: In the recent crisis, General Motors announced they were cutting 20000 jobs. Did they know the 20000 staff that were ineffective that could be cut or they would just take x% from each department irrespective of their talents? I doubt the former very much. Also, think what this would do to the productivity of the teams once the cull ended. Do you think the once not-so-great employee will be happy and productive when the talented one was let go?

It is important to get a company lean and efficient before the fight for survival begins. A company must invest strategically that will pay back in 2-3 years, transform their business model & supply chain, as well as consolidate functions and platforms. Get lean and mean!!

Here are a few examples before we move on to the priorities for survival and to thrive after the crisis ends:

• Rohm & Hans: Moved to a single instance of SAP - i.e they consolidated and saved 30% of IT budget
• AVNet: Used BI to create achievable plans on their bottom line. 30% cost saving
• Pennex: Used embedded analytics to empower employees and transformed itself to a process orientated organisation, using SAP BI.

How do we find a way out of the crisis?

Clarity. This is the message from SAP - you need clarity. Specifically: Transparency and Accountability (risk management); be lean and agile (be more efficient); Collaborative and Customer Centric (engage your customers). I noticed in a later session that this same message is also being driven in the Service Orientated Architecture area, in regard to the approach to new business initiatives and how to approach them.

NITCA has established 6 priorities that will guide from being cost focused to value focused and gain the edge in the current market and to ensure success following the upturn (when it comes, that is). In short a company must become lean and efficient:

1. Manage Cash. As the tagline says "Cash is the King, Queen and Royal Family of a company". It is vital to know a company's net cash position to an accurate degree. Use modelling and enterprise level software, not excel spreadsheets.
2. Operational Excellence. i.e. Be efficient. Lower costs, improve quality of product, reduce process and lead times. The strategy must have a vision and guidance to the workforce - get employee buy-in.
3. Drive risk awareness and capture activities. Put simply, it is essential to know about risks so the executive level are aware of it e.g. Know a supplier's work process and accounting standards. Ensure a company is compliant with all legislation - financial, environmental, product safety, employee health and safety and social. Be aware of a company's bankers and to whom they are affiliated, including your own. An example here is Mattel, whom contract out their manufacture to Asia. In itself this is not an issue but this contractor in turn subcontracted the painting to another firm that used lead based paint (allegedly). Children died in this incident which nearly resulted in the company's demise. If Matttel knew their contractor was in turn subcontracting they could have investigated further and protected themselves.
4. Drive superior customer value. Pull the company supply chain together to know what customers want. Keep a grip on product design to point of delivery, especially when the product leaves physical involvement i.e outsourced.
5. Retain and enable your top talent. Good employees will need tools to be more efficient and hence more productive. It will be envitable that some workers will need to be let go, but it is important to identify the good workers in this process. Know the employees using Talent Management, such as their own personal development and use metrics and evaluations to keep this in control. Make them successful! But remember that productivity during lay-offs will always be slightly affected in the short term.
6. Credible sustainability. Increase short and long term profitability by holistically managing economic, social and environmental risks i.e. be sustainable from various aspects. This is not just to be politcially correct - company's that are have a low footprint on the environment and use good social and ethical values retain 15% more customers than those that don't.

IT, Be Ready!!

Stakeholders that are negative to changes to business process through IT are currently in a very weak position to challenge change when potential savings are presented in the boardroom. Hence, the IT department is in a unique position to drive immediate business value and streamline opertaional costs:

• Faster customer response
• Streamline process and eliminate ineffeciencies
• Consolidate application portfolio
• Hard facts for fast decision making
• Establish the foundation for rebound

In short, turn the IT department into a service organisation to the company.

What does SAP currently offer to assist in this?

SAP offers SAP Business Suite 7 to help in this exercise in making a company lean and efficient. It encapsulates ERP and supporting application such as CRM, SRM, PLM and SCM. Netweaver is a different platform which works in tandom with Buseinss Suite, but this will be reviewed in the next blog.

Put simply SAP is committed to making Business Suite completely servcie enabled - single processes that worj across the entire suite and can be just 'turned-on'. These services come in the form of Enhancement Pack. A company can choose which features to enable rather than enabling or implementing a whole application just to use a small feature of it. They have a large ROI and a low TCO and are much more flexible than the old implementation approach.

SAP also offer their new 'Best Run "NOW" packages' which target key functional areas identified by business leaders as been critical to success. These cover among others:

• Governance, Rosk and Compliance
• Enterprise Performance Management
• Information Discovery
• Cash, Liquidity & Financial Risk (this is on eof the most important)
• SAP Resource and Porfolito Management (RPM). This is the key package for IT to be able to keep their house in shape and give them credibility in the boardroom . It can track application landscapes, mulitple parallel projects with reporting on milestones and deliverables. It establishes the key fundamentals to deliver changes to a company.

So, do you want to thrive and survive, or sink? In one great advertising mantra "you have to spend to earn". In todays market a company should consider this as "you have to spend to save". So do i upgrade to ERP/Business Suite? Yes - the older SAP version do not offer this level of functionality and technical ability. This is not just financial investment but time and vision from the top down.

"If you are not part of the solution, you are part of the problem".

Chris Enstock

August 6th 2009