Value Driven Business Transformation

How to foster seamless business steering through harmonisation of operating models, value flows and management reporting.

- Ikemefuna Allen & Sabrina Reitz

The situation

Business transformation, in essence, focuses on fundamentally changing processes, systems, roles and technologies across the entire organisation. Such initiatives are founded on the hopes of achieving measurable improvements in efficiency, effectiveness and stakeholder satisfaction. Naturally, the decision to enact business transformation must be based on a sound understanding of the required changes, how to implement them, and what the implications are once they are implemented. It is imperative to take an embracing approach involving and ensuring alignment between all the stakeholders impacted.

Experience shows that this is rarely the case, with disjunct and misaligned efforts from the two worlds of Operations, and Finance & Controlling. Typically, accounting departments are left in the dark about business operations during process design phases of major transformation initiatives, while professionals from purchasing, production planning, and sales & distribution often seem not aware how their business operations impact accounting.

What follows 

The far reaching consequences of misalignment between Operations and Finance & Controlling have been felt at all stages of major business transformation initiatives across many industries. Areas impacted range from process design and systems testing through to hyper-care and running the daily business. To demonstrate this, we present several examples from major business transformation projects, and show how things went wrong.  They demonstrate how an apparently isolated problem can have impacts far beyond the radar of those responsible for implementing and championing the change.


Case 1: Misalignment between procurement, logistics, and accounting impacts system testing

Because involvement of local tax and finance departments into the project happened too late, the entire procurement process for certain materials had to be redesigned during testing phase. While making up for this, realignment across all related streams resulted in extra effort and the risk of delays in  go-live dates.


Case 2: Misalignment between production, procurement, and accounting during process design phase impacts process execution during  hypercare

The weighting step that is executed by a subcontractor was part of a recipe. During the process design, the production team only focused on processes relevant for core business. Therefore, the weighting process was not designed and consequently not configured in the ERP system. There was no account assignment. This problem was noticed during hypercare when the process had to be executed. As a result, no sales order could be created. Compounding the problem was the fact that there was no process concept. The whole life cycle of the process had to be adjusted within a productive environment.


Case 3: Misalignment between logistics, procurement, and accounting during process design phase impacts process execution during daily business

Assignment of logistic expenses to the right positions are critical from an accounting point of view. These involve cost of distributors. Incorrect valuation of cost of sales, cost of production, and time of sales recognition poses a compliance risk involving tax authorities. This can also have COPA impacts (COGS vs Production Costs), causing dissatisfactions of responsible executives in case of variable salaries. During a business transformation project, there was a lack of knowledge on two sides. Logistics was unaware about the fact that such regulation exists, and  accounting unaware about different type of contracts SCM had with its business partners. This problem was noticed during daily business, i.e. after go-live and hypercare.


The way out

 In our Business Flows reference model we demonstrate the real-live integration of business and accounting aspects of enterprise processes. We have compiled relevant content from decades of project experience and modeled these based on established standards. First started as an internal toolbox and training facilitator, our model has reached a maturity we are confident to share externally and that is valued by numerous subscription customers.  Based on our industrial reference content and the profound insight of our partner SR Consulting Professionals in financial and management accounting and enterprise architectures, we have developed a concise and pragmatic methodology for representing both value adding activities and their finance & controlling impacts.

We are ready to help you implementing your transformation with a methodology that works. Consistently.

The solution approach

Value Driven Business Transformation ensures seamless process design and systems implementation through early alignment between operations and Finance & Controlling on key aspects of the business including financial steering, operating models, end to end scenarios and value flows. To accomplish this, we have developed an integrated approach that couples the separated views of operations and accounting. This integrated and aligned business transformation approach allows business steering through harmonization of operating models, value flows and management reporting.

Valueflow_triangle_new.png

Business strategy forms the basis for aligning the operating model with the business & financial steering model. At this early stage, stakeholder from both Operations & Finance & Controlling come together and detail the future enterprise set-up. Based on the defined E2E scenarios and processes, posting rules are derived for the allocation of value flows.

  • Process specifies the interaction of people and systems when executing business operations.

  • Value flow is the set (scope) of postings resulting from business operations

  • Posting rules are business requirements on how the system is to be configured in order to reflect the business & financial steering model in the context of a given enterprise structure

Value_Flows_3.png

Deliverables

  • Business & Financial Steering  model

  • Enterprise structure

  • Value flows

  • Posting rules

In Summary 

An Integrated business transformation blueprint bridges the gap between finance, management reporting and operational streams during business transformation initiatives. In partnership with SR Consulting Professionals,  we have a comprehensive consulting offering including domain expertise, proven consulting approach and dedicated methodology. In addition, our reference content Business Flows provides accelerators which help kick-start your initiative. Get in contact now for a personal presentation on details of our offering.

Business Flows Release 3 available

- Rachael Föcker

When we created our Business Flows reference model and set of best practice methodology over three years ago, our objective was to provide a simple process repository for everybody. The challenge we saw, was finding the right balance of being specific as well as being relevant for a wide range of customers.

The use cases and feedback from customers show that we accomplished this job well, but also let us think about what we can do developing it further.
Since the beginning of the year we have been working on upgrading model contents, conventions and methodologies and are now happy to announce the new release. version 3, of Business Flows.

The main points we have changed or added for the current release are

Additional Content (Domains, Scenarios)

We now cover several additional domains:

  • Lead to Opportunity (L2O)

  • After Sales and Services (ASS),

  • Forecast to Plan (F2Pl) and

  • Master Data Management (MDM)

Especially ASS and MDM are hot topics as many industrial companies strategically want to transform their business model more towards offering services and solutions rather than just products. This in combination with ever shorter product-innovation-cycle-times and growing markets has a massive impact on master data processes.
They need to become better integrated, faster and more reliable in order to facilitate the core processes.

Simplified role model

We have decided to discontinue the roles on BPMN level and just provide the department role on process level.

The feedback on the value of roles associated with individual processes and process steps was ambivalent as most customers have very individual organizations and corresponding role definition and naming. The added value of having an example was diminished by the discussions on how best to adapt to the actual situation.
Also, frequently - depending on size of departments and organization the role model has to be more differentiated or sometimes less differentiated.

Use case related content in detailed process charters in BPMN

We encounter two main types of use cases for the most detailed process level modeled in BPMN:

  • Act as a modeling template to be copy/adjusted rather than starting on a white modeling canvas.

  • Provide content on the main activities, the degrees of automation, inputs/outputs etc in order to facilitate process workshops and business requirements sessions.

We think the latter use case is of greater value to Business Flows users for which we provide the BPMN processes and have decided to focus on accumulating relevant information into dedicated sections. We call this the process charter. 

The models still comply with the BPMN notation but are now structured according to the fixed scheme shown below.

BPMN.png

Each process charter contains two core lanes representing the Happy Flow and the Exception Handling.

Where the Happy Flow indicates the best practice processing, the Exception Handling supports process workshops as they indicate the essential questions to be clarified prior to a detail design.

Additionally where available, stewardship documents covering essential business requirements such as policies, guidelines, risks and controls are included.

Value Flows

The accounting impacts of business operations are often unknown or unclear to business professionals from purchasing, production planning, and sales & distribution. By the same token, experience has shown that Finance & Controlling departments are repeatedly left in the dark during process design phases of major business transformation initiatives.

Value Flows represent the impact of business activities and events in Finance and Controlling to trigger the discussion between Operations and Financial and Managerial Accounting. 

Value Flows enrich process documentation by establishing cross references between Key Value Flow topics within a business such as ‘Cost Of Goods Sold’ (COGS), inventory postings, and related E2E scenarios.

Value Flow.JPG

 

Value Management Framework

Business transformation is all about operationalising strategies. With our Value Management Framework we offer a structured approach on how to derive and prioritize your business drivers from your companies strategy and identify the appropriate scope and value drivers in order to achieve your objectives.

Our framework is inspired by SCOR performance attributes (strategic pillars) and metrics. Business Drivers represent trending industry hot topics for each strategic pillar. Whereby Value Drivers represent industry best practices required to achieve transformation objectives. Last but not least, System Capabilities (S/4HANA) provide the foundation for your solution design.

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Although the content of the above mentioned features are all prepared not everything is already available in the customer portal yet. We shall be publishing it step-wise over the next weeks in order to have finalized the publishing by mid September. Just in time for our customer event

Successful with process-driven SAP implementation

- Russell Gomersall

bpExperts and Software AG held a joint Webinar on the topic on how process management helps secure the success of SAP projects.

Although most companies have realized how important their business processes are for aligning business requirements within IT initiatives there is still a lot of room for improvement on how to exploit the potential across the whole process respective project life cycle.

Picking up this topic Joséphe Blondaut from SAG started the session by presenting the ARIS capabilities in the context of SAP projects. Based on this my part was to a present a specific customer use case of a mid-sized company which changed towards a process centric SAP implementation approach using ARIS across the whole process life-cycle. Having a good insight on how the projects were executed before and after the shift, it is a good study on where the major and measurable benefits lay. One main finding is that especially the repetitive character of roll-out tasks within typical SAP template projects (such as site verification, fit/gap, localization and defining roles and authorizations) allow a higher return of the upfront investments into BPM. You can see the recording of the webinar on our Youtube channel. We are looking forward to meeting you there for more videos on our webinars and trainings. 



On-demand best practice processes - Introducing Business Flows

bpExperts therefore proudly presents Business Flows! The first on-demand business process reference content accessible for all.

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Save the Date: BPM Day - How BPM can affect the company's success

On September 10th 2015 it´s time again for our annual BPM day. As usual, the focus will be on costumer use cases, this year under the motto "How BPM can affect the company's success ". It is our pleasure to offer you the opportunity to share experiences within a practice-oriented workshop based on selected presentations.

The BPM Day will take place on September 10th in Frankfurt. Please save the date now. Details on the agenda and about the event will follow soon. The event will be moderated in German, presentations will be held in German or English.

Participation is free. You can already sign up, as the number of participants is limited.

We are looking forward to meet you!