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Negotiating agility and value for your SAP S/4HANA transformation

What’s the best SAP S/4HANA roadmap for your business? As this blog shows, it depends on the net benefits you need to enable – and how agile you want the transformation to be.
 
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Sylvain Faure

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Sylvain Faure
Head of SAP CoE
5 minute read
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Why Green/Brown/Blue can signal danger

During my thirty years in the business, I’ve seen the fortunes of ERP rise and fall. And once again, we seem to be at the dawn of an ERP golden age - this time ushered in by the now-mature SAP S/4HANA. Believe me, the hype is real; SAP S/4HANA truly is a game changer. This is because SAP S/4HANA is more than ERP – it is a digital platform-ready ERP for enabling transformation.

But what, exactly, will this mean for your business? And what is the right roadmap for your organization?

Here is where it gets interesting. Because the answer really depends on what business value a move to SAP S/4HANA needs to deliver to your organization. The migration path you ultimately choose must lead to the enablement of these value drivers.

I understand that this advice may seem vague – but bear with me. Because the failure to start with a value-driven approach to choosing your migration “colorway” explains why so many businesses fail to make a clear business case for moving to SAP S/4HANA. The simplified version of a typical assessment journey goes like this: Start with a choice of three colors (Green/Blue/Brown); understand the (often technical) pros and cons of each approach; and then choose the one your organization is likely to fund.

Unfortunately, following this approach will likely derail your transformation. What follows below is a better way to approach SAP S/4HANA roadmap assessment – one that ensures SAP S/4HANA delivers the value your organization needs.

The importance of knowing your value drivers

The value you will derive from a move to SAP S/4HANA will be unique to your organization. And the only sure way to exploit this value and make sure your transformation pays is to fully understand your value drivers before evaluating roadmap options. You must also understand that cost and value are interdependent – and not every migration path will enable the specific value levers you need to pull, or at the same level of delivered benefits.

In other words, you need to look at the value case as whole, and ask instead what is the net value to your organization of a particular path?

For example, some companies will get big value from a greenfield implementation by completely overhauling their processes – but at a high cost and with a loss of implementation agility. But if your company needs to optimize (rather than restructure) processes and is operating with a lean staff level, a brownfield implementation followed by a series of incremental improvements would make more sense.

In the end, it is about balancing the choice between the net benefits you need to enable – and how agile you want your transformation to be (where agility allows you to balance priorities with other initiatives).

Stated in the simplest terms, the process to finding your optimal migration path should be:

  1. Identify the key value levers for your transformation;
  2. Understand which migration path will enable those value drivers; and
  3. Follow the best transformation path – the one that maximizes the specific ROI you need to deliver. 

The following sections flesh out this process, aiming to convince you of how – and why - a value-driven approach is the only one you should consider.

The case for agility in your roadmap

If you are currently evaluating a move to SAP S/4HANA, it is very likely that your last ERP implementation was done before the days of agile delivery– back when you were lucky to deliver releases to the business twice a year, and most ERP projects were rigid, lengthy journeys. And while the value potential of an SAP S/4HANA-based digital transformation has become appealing, many senior executives still view an SAP S/4HANA migration through the lens of those complex ERP projects – and see them at odds with the need for agility.

To be fair, we didn’t speak much about agility in those days. In the last few years, however, I’ve observed that my clients are placing a newfound premium on agility. Given on-going global business challenges, this is hardly surprising. The business needs agile solutions, delivered fast. My clients now ask: Can we deliver transformation value every day – not every year? Can we have a release to the business twice a month - and not twice a year as in the past?

The answer is a qualified “yes”. I say qualified, because how much your business needs or values agility should be in balance with your overall value drivers. And it is this balance that in turn will determine your migration path. An example here might help. Say your business is experiencing an upside in business mergers, or everyone is focused on a need to drive revenue. Business people are simply not free to work on a transformation project. And so, one of your business imperatives is definitely a need for program agility, perhaps at the cost of complete business transformation.

This will likely rule out a greenfield implementation, as by its nature, designing and deploying a global template in a greenfield implementation is not agile. Choosing a brownfield approach (i.e., a technical conversion) followed by some iterative process changes enabled by new S/4HANA capabilities will probably mean that you can still deliver the transformation you want in multiple drops without ending or radically delaying other organizational imperatives (ie: growth, merger, etc.). However, if part of the key SAP S/4HANA migration value drivers is the complete restructuring of the Chart of Accounts, a brownfield might not deliver the expected business value.

Another way to illustrate the balancing act between agility and value is using a “dream home on a lake” analogy.

The dream home on a lake – a fitting analogy

What does a dream lake house have to do with determining the right-sized pathway to SAP S/4HANA? A lot, actually. Because defining a roadmap to SAP S/4HANA where agility and value enablement are well balanced is much like shaping your dream lake house.

Imagine you have just acquired a lot on a lake with an old house, and you are now figuring out how to turn it into your dream place. The old house needs new electricity, new plumbing, some insulation work - but the foundations are good. While you like its overall layout, you wish the bay window facing the lake would be twice as big, and you would have preferred the wine cellar to be an integral part of the home instead of being underground in the backyard.

You hire an architect who designs a few options. After crafting some plans together, you realize that you have 2 clear choices:

Tear down the old house and rebuild (option A) Embark on a series of upgrades and renovations (option B)

Option A delivers the perfect dream home, but requires you to mobilize a serious amount of funding right away, and to stay close by for two years to oversee the construction. This is a huge commitment requiring you to prioritize the home project over some bucket-list travel.

Option B requires a 4month upfront project to redo the plumbing, extend the bay windows to two-thirds of the desired size, and remove an upstairs wall. All other renovations consist of a half dozen short projects (less than 2 months long each) that you can do on your own schedule in-between 2 bucket-list trips. As for the wine cellar, thankfully the existing one provides the perfect aging conditions, but you will never enjoy having a dinner with your friends in a luxury cellar built underground in your living room!

Which option you choose depends on how much you value maximizing your dreams (i.e., the perfect bay window, the perfect cellar) versus keeping the freedom to do other things you value such as travelling. Your desire for option A might also depend on how much financial pressure are you willing to sign up for. If a deep recession hits and your income significantly reduces, will you be willing or able to reduce your monthly expenses and still make the mortgage payments associated with option A?

Coming back to SAP S/4HANA

Building a business transformation roadmap enabled by SAP S/HANA is much like crafting the plan for your dream lake house. You first must understand the key value drivers and how each of them can be achieved, either through re-implementation, a.k.a. greenfield (option A above), or through renovations a.k.a. brownfield/bluefield (option B above), where extending the bay windows and removing an upstairs wall are akin to a selective data transformation, not a simple conversion.

Once you have a clear understanding of the value of each desired transformation item (the transformation backlog), their value, and how each migration option partially or fully enables them (green, blue, brown), you can then decide on the right balance between maximizing value (typically more green) and agility preservation (typically more brown/blue). Prioritizing between value creation and execution agility will result in the right-size approach for your business for enabling an agile, digital business transformation.

 

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Prioritizing between value creation and execution agility result in the right-size approach for enabling an agile, digital business transformation.

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Furthering the house analogy, your architect was sure to check elements such as electricity, plumbing, energy efficiency and the foundations, as those are essential for long-term sustainability. For an SAP S/4HANA roadmap, the foundational elements are integration, data and analytics (IDA) and the underlining infrastructure, as these are essential for your organization to enable enterprise-wide (i.e., integration), insight-driven action and automation (i.e., data and analytics) with collaborative, exception-based management (i.e., the ability to collaborate in real-time inside and outside of SAP S/4HANA).

Besides execution agility, value creation and the collaborative IDA foundations, other transformation dimensions you should consider when developing a roadmap include experience for both customers and employees, instance strategy, infrastructure and software license consumption model (e.g., RISE for SAP), technical debt elimination, and change management.

Wrap up

ERP systems are undeniably at the heart of modern digital transformation initiatives. However, without adequate insight into your migration choices and their implications in a rapidly evolving ecosystem, bringing your SAP estate to the digital age can seem like a daunting task. This is especially true when businesses are forced to bring greater agility into their digital foundations than before.

Therefore, the above considerations will be critical for organizations planning to undertake an SAP S/4HANA-based transformation. And like my dream house architect, individuals and organizations with expertise in developing a holistic transformation backlog aligned to your company’s goals for execution agility and value creation will prove invaluable to making the right choices and extracting maximal ROI in the long run.

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