A strong interest in conversations on innovative capabilities that help navigate the current economic and geopolitical climate has grown tremendously. While these discussions tend to have many sides, the two trends that stand out are a change in the thought process of how projects get funded, and a laser focus on avoiding price leakage.
Working Capital and Pyramid of Projects
To keep up with the competition in the market, organizations have realized that it is not an option to stop innovation projects even though budgets are tight. This has propelled organizations to invent creative ways to fund innovation initiatives. Some organizations do it through a pyramid strategy which focuses on quick wins that bring sufficient value to show success, using them to generate a surplus of funding, and then using that value to fund the next wave of projects. This unique strategy focuses on developing a roadmap of shorter projects that drive positive business returns and using those returns for larger initiatives. For example, investing in working capital optimization can be a fast way of freeing up cash, which can be used to invest in other value-added projects. This becomes a virtuous cycle of business value generation and innovation.
The idea of working capital optimization is not new, but in the recent decadelong growth cycle, many firms have lost track of how their days payables outstanding and sales outstanding compare to industry averages. Bringing these metrics in line with expectations can yield significant business benefits by freeing up cash. By offering an easier way to adopt supply chain financing through dynamic discounting to the suppliers, stability of the supply network is ensured and cash shortages are avoided while gaining handsome returns on cash through early payments. There has been a growing wave of interest in supply chain financing over the last few years, allowing the customer to offer special terms to suppliers by investing unused cash in payables and earning a return on this cash investment. This is beneficial for the supplier, who might be cash-constrained if invoices are not paid quickly, and the customer, who earns a yield on unused cash. The focus on freeing up cash also allows more flexibility in taking on innovation projects.
Pricing for Success
Tracking and managing pricing are critical during inflationary and recessionary periods. Most organizations are concerned about their ability to maintain pricing in the impending recession. As price leakage becomes a significant issue when volumes are down, organizations are trying to reach their volume targets, which comes at the expense of margin. Further, tougher market conditions require more dynamic pricing mechanisms, going away from cost-plus and price-list paradigms that worked well in the long expansion. Finer-grained pricing mechanisms help to improve customer retention and satisfaction and enable tapping into previously underemphasized customer segments to grow the revenue base.
Adopting enhanced pricing capabilities can also be a quick undertaking. There are several pricing software options in the SAP ecosystem with varying degrees of integration with the ERP, CRM and commerce master data.
The most successful projects focus on a mix of pricing management with an improved sales compensation framework. The value goal of this capability combination is twofold—first, it allows a simple way of managing pricing directly in an existing quotation solution, which enables the business to maintain and track price performance; and second, it provides an integrated view of pricing thresholds that affect compensation in a margin-based way. This integrated view allows informed decision-making on the pricing strategy for each deal and a direct link back to compensation.
Businesses realize benefits from such initiatives as they safeguard the pricing policy and ensures profitability by incentivizing the sales force to adhere to a dynamic and optimized commercial framework.
Fending off tough economic times
In a rapidly changing economic ecosystem, freeing up cash by implementing enhanced working capital management procedures is a great way to fund innovation projects. Pricing management and sales compensation are imperative in this environment to address new market segments and motivate the sales force creatively. The focus in the SAP user community is increasingly on projects that provide business value in the shortest possible time, and the above discussed initiatives are fit for this.
⇨ To keep up with the competition in the market, organizations are fast realizing that it is not an option to stop innovation projects even though budgets are tight.
⇨ In a rapidly changing economic ecosystem, freeing up cash by implementing enhanced working capital management procedures is a great way to fund innovation projects.
⇨ Pricing management and sales compensation are imperative to address new market segments and motivate the sales force creatively.
Organizations are fast realizing that innovative capabilities can significantly help in navigating the current volatile economic and geopolitical climate. And while it is not an option to stop innovation projects even though budgets are tight, they can fund innovation initiatives by thinking creatively. In this article, you will learn how organizations can fund innovation initiatives by implementing enhanced working capital management procedures.
Access exclusive SAP insights, expert marketing strategies, and high-value services including research reports, webinars, and buyers' guides, all designed to boost your campaign ROI by up to 50% within the SAP ecosystem.
Always have access to the latest insights with articles, Q&As, whitepapers, webinars, and podcasts. Gain
the
inside edge. The SAPinsider Weekly helps you stay SAP savvy. Access exclusive bonus materials, discounts,
and
more.
This website uses cookies. If you continue to use the site you consent to our use of cookies in accordance with our Cookie Policy.ACCEPTRead More
Privacy & Cookies Policy
Privacy Overview
This website uses cookies to improve your experience while you navigate through the website. Out of these cookies, the cookies that are categorized as necessary are stored on your browser as they are essential for the working of basic functionalities of the website. We also use third-party cookies that help us analyze and understand how you use this website. These cookies will be stored in your browser only with your consent. You also have the option to opt-out of these cookies. But opting out of some of these cookies may have an effect on your browsing experience.
Necessary cookies are absolutely essential for the website to function properly. This category only includes cookies that ensures basic functionalities and security features of the website. These cookies do not store any personal information.
Any cookies that may not be particularly necessary for the website to function and is used specifically to collect user personal data via analytics, ads, other embedded contents are termed as non-necessary cookies. It is mandatory to procure user consent prior to running these cookies on your website.