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.

Keep Calm the End of R/3 is Near! Free Webinar - 10.04.2018, 14:30 CEST

Russell Gomersall

Or how Business Flows helps you from falling off the digital cliff

SAP's announcement to prolong mainstream maintenance until the end of 2025 will reassure SAP customers, that they receive adequate time to migrate to the new S/4 HANA digital platform. Taking into consideration the pressure on companies to ‘digitalize’, this seems like a fair amount of time. On the other hand, experience of past and current business transformation initiatives left many stakeholders uncertain about if or how to proceed with current deployments of SAP’s Business Suite and when best to change to the new technology. Considering this, 2025 seems nearer than you may think.

This will be the reason why many customers are currently evaluating S/4 HANA and rethinking their business transformation strategy.

During evaluations many questions relate to the major shift in technology such as

  • In memory technology

  • Fiori Apps (UI and mobile applications)

  • Cloud

  • Application architecture and integration

To answer this, SAP and implementation partners such as Steeb offer ‘value maps’ with pre-scoped solutions for various industries.

As a starting point we believe this approach is of great value. Nevertheless, one must consider that simplification as proposed by SAP and the shift to new technologies can result in companies neglecting the requirements of their existing organization and processes.

Taking the magnitude of the strategic shift into consideration, we believe the evaluation needs to go deeper in order to answer questions such as

  • What are the core business drivers we want to excel in and how can SAP’s digital platform help us achieve these targets?

  • How much simplification can the company afford and in which areas do we need to stay ‘complicated’?

  • Which deployment strategies fit to my companies setup?

  • How are organization and people impacted by the new technology?

 We recommend to focus on 3 elements in preparation of your S/4 HANA evaluations:

  1. Scope your core operating models by defining E2E scenarios

  2. Define strategic Business Drivers and map them to the scenarios

  3. Define your enterprise structures and deployment entities (regions/countries/sites) and create sub-scopes of your processes

In Business Flows we offer accelerators for this preparation. 

  • Comprehensive E2E business process reference model for industrial enterprises

  • Business/Value driver library

  • S/4 HANA Capabilities (mapped to Scenarios)

  • S/4 HANA Simplifications (mapped to Scenarios and Processes)

With this prepared, you can engage with business functions (experts) from your organisation and S/4 HANA experts (typically SAP or system integrator) to identify fits and gaps of the S/4 HANA solution, elaborate answers to the above mentioned questions as well as define a high level migration strategy. 

In our webinar we would like to present to you our approach to S/4 HANA evaluations based on Business Flows and show examples on how to define feasible scenarios for your migration and identify the key opportunities and threats.
On the bottom line, we believe in the context of 2025 the End of R/3 is Near but you can Keep Calm if you go about it the right way. 

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. 



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!