You’ve heard the horror stories -
78 percent of enterprises cannot meet their digital transformation business objectives and 73 percent garner no business value from their digital transformation. Only 18 percent rate their use of digital technology as “
very effective.”
Why the frequent failures? Implementing digital technology within an enterprise can be a monumental logistical undertaking. And the failure of transformation projects frequently lies not in the technology, but in the project design itself. In this white paper, we’re utilizing our knowledge and experience — gained during hundreds of SAP S/4HANA conversions — to help decision makers become more proactive during their digital transformation planning and execution.
We’ll spotlight the 10 key areas for success in
SAP S/4HANA implementations, using insights from our executives and experts in SAP’s Chief Customer Office, a group dedicated to facilitating successful transformations. And rather than explaining why projects fail, we’re going to tell you what makes them succeed.
No. 1) Own It: Aligning the Business
It may sound simple, but it’s true: Internal and external business alignment is the most important ingredient of any successful implementation. Time and again,
as Deloitte shows, successful transformations realign the organization to a singular vision; failed endeavors typically do not.
“A well-documented set of tangible — and intangible — business outcomes is essential at the outset of any transformation project,” said Steve Shander, SAP’s Chief Customer Officer. “Every single person involved in the project must be able to answer a simple question: ‘Why are we doing this?’”
This is true from the business to the system integrator to SAP. But you, as our customer, must own the overall program. Heavy reliance elsewhere will only have negative effects long-term. And every business must account for one critical consideration from Day One, according to Shander. “Is this project transformational for the business?” Shander said. “Or is it just fixing the plumbing? If it’s not transformational, you may not be reaching high enough.”
One More Tip: Internally, project ownership must come from the business organizations that will adopt the actual solution in order to run the business. The IT organization should only be a facilitator.
No. 2) Establish Authority: Creating Clear Governance
Just as a society needs rules and regulations to function, a company’s transformation project requires clear governance to accomplish its goals. It’s not about laws though; it’s about effective decision making. Decisions must be made quickly to avoid impeding overall progress, and they must be made in a “sticky” way — to avoid the stop-and-go of changing decisions and ensure sustained progress.
A lack of governance in a digital transformation project creates a lack of accountability, a lack of clarity about roles and responsibilities, and an inability to make good, consistent decisions in the face of change and uncertainty.
Here are some well-defined steps you should take in creating clear governance:
- Create a project charter that plainly defines how decisions are made and who has the authority to make them
- Establish a decision making process that ensures decisions are made at the correct level of the project - about 85% of decisions should be made by empowered business process owners, while approximately 10% should be escalated to the PMO (specifically when a decision impacts multiple workstreams) and less than 5% should be sent to the Steering Committee (when a decision requires scope changes, funding, or is not being resolved in a timely way)
- Track any issues, risks, and decisions clearly — and regularly
- Set formal processes for escalations and for approving scope items (and changes)
- Make timely decisions that last, rather than revisiting them again and again
“Making decisions on a timely basis is critical to keeping a project on track, and if you’re re-making decisions constantly, that’s worse than not making a decision at all,” said Scott Meyers, CFO of PDC Energy, who recently completed an SAP S/4HANA implementation. “An effective project governance structure expedites decision making and — along with an effective program management function — drives resolutions that make the project a success.”
No. 3) Stabilize and Elevate: Staffing the Project with Winning Resources
The importance of an engaged and highly skilled project team should be obvious when it comes to digital transformation, but believe it or not, many enterprises miss the boat on this step. Research has shown that up to 84 percent of CEOs are deeply involved in and committed to transformational change. However, just 45 percent of frontline employees at larger firms (and 58 percent at smaller firms) are visibly engaged in transformations.
Ultimately, staffing and cultivating winning resources from the start is the only way to powerfully counter this frequent pitfall. “Staffing for transformational projects must pull from the best and brightest in your organization — from finance to operations to purchasing to sales,” said Joe McDonnell, a Project Success Executive Advisor in SAP’s Chief Customer Office. “Don’t allow an ‘illusion of staffing’ to occur with a part-time team that divides the tactical operations of your day-to-day business and the overall strategic initiative that will improve company operations. Your people must be dedicated to the transformation effort full time.”
One More Tip: Make sure your project team gets the appropriate training for both SAP S/4HANA (what you are implementing) and the Project Methodology (how you are implementing). Relying solely on contracted third parties for this knowledge means abdicating control of your future.
Case Study: Aligning the Business
A global lithium and specialty chemicals company recently completed a three-year digital transformation with SAP S/4HANA. A key factor in their success was their highly engaged executive and management team, which drove the vision and maintained the focus on business outcomes from the transformation.
“The team had about 200 full-time people, including our system integrator,” said one executive. “It takes a village to make this kind of implementation happen, from the people involved in the project who were implementers to users to managers of the information to the executives. They all influenced the design, the testing and, ultimately, the implementation.”
Partnering with an experienced SI with chemical industry best practices was essential to realizing process improvements. And with the full engagement of SAP from beginning to end, clear executive guidance, decisive project management and optimal technical support, the customer experienced a strong sense of collaboration and long-term partnership — and experienced unequivocal success in their transformation.
No. 4) Tell Everyone You Know: Organizing Your Change Management Strategies
As discussed earlier, your expected business outcomes must be determined and documented in a transformation project. Achieving those outcomes will be a necessarily broad pursuit, and it may fundamentally change the day-to-day operations and activities of your workforce. Organizational Change Management (OCM) calls for effectively communicating the need for change, evaluating how it will impact your organization at a detailed level, and developing strategies to ensure those changes are communicated, orchestrated and adopted within the workforce.
This isn’t just about “training” and “newsletters” — from the beginning, senior executives must communicate the need for change and elucidate why change is a good thing for employees. Employees must believe in and embrace change in order to successfully transform.
To get there, a strategy and workplan must be developed and implemented by professionals who understand OCM. “Change agents come from the business and give back to the business — communicating on a peer-to-peer level that ‘This will work,’” Jodi Gustafson, SAP CCO Executive Advisor, says. “They must be capable of smoothing the inevitable speedbumps that come with adoption of new processes and systems.”
Organizational change as part of a transformational initiative must be carefully planned and executed from the beginning. The process starts with an understanding of the total impact to all stakeholders, including employees, vendors and customers.
“Communication and clarity are key,” Gustafson said. “Transformation is not just about installing some technology and pushing a button. Everyone must be on the same page in order for transformation to be successful.”
No. 5) Make Beautiful Music: Conducting the Project
Buy-in from employees is essential. But coordinating and managing your resources is just as important. Nothing can kill project morale faster than the question, “Do we have any idea what we’re doing here?” A well-orchestrated system will help avert the chaos that can result from conflicting, poorly understood activities and plans.
According to Steve Heotaky, vice president of the Project Success Team in SAP’s Chief Customer Office, four things are necessary for effective program management:
- Understanding and enforcing an implementation methodology
- Constantly analyzing progress and identifying issues, conflicts and roadblocks
- Creating and executing action plans to resolve any issues
- Communicating project progress and roadblocks honestly and openly
Some other key elements to consider when developing your workplan include:
- Each project member should understand the ins and outs of the transformation blueprint
- Each workstream should be able to provide specific input on estimates and durations — and must actively engage in and manage risks, issues and in-progress decisions
- Alignment between single projects and overall larger programs that require greater interdependence among workstreams is vital
- Entry and exit criteria for all milestones (e.g. testing, data loads, mock cutover) should be determined and enforced
One More Tip: Avoid a “watermelon project” — one that’s green on the outside, but red on the inside. Accurate, honest and informed reporting of the project’s status is key. Steering Committee members must remain engaged, questioning the status quo, double-checking within the workstreams for which they have responsibility, and actively monitoring risks and issues and ensuring they are driven to solution or mitigation.
No. 6) Do What You Need to Do: Developing a Formal Data Strategy
Everyone knows that getting the data element right is absolutely essential for any system — new or old — to work properly. And yet, over years of project assessments, the executive advisors on SAP’s Chief Customer Office Project Success team consistently find that data is the biggest stumbling block in implementation projects. It is — all too frequently — misunderstood, understaffed or straight-up underestimated.
Recent research revealed that
fewer than 50 percent of documented corporate strategies mention data and analytics as fundamental components for delivering enterprise value. This could have incredibly negative effects on digital transformation efforts, and the financial impact of poor data could rise to tens of millions of dollars for modern businesses. Simply put, data must be a primary accelerant of an organization’s move to SAP S/4HANA. You must develop a formal data strategy, plan for ongoing master data management post-go-live and give each element its own distinct business owner. Once you’ve gathered and appropriately corrected and cleansed the data, you must ensure you don’t revert to old habits, by putting long-term data governance in place.
“The entire process must be integrated,” said Darren DeVoue, Project Success Executive Advisor from SAP’s Chief Customer Office. “The business has to take ownership of the data as an asset and put processes and people in place to ensure the sanctity of master data.”
One More Tip: Craft a strategy for accessing historical data that precedes the SAP implementation and learn what data is necessary in your SAP solution (along with where it resides).
No. 7) Challenge the Status Quo: Adopting a Fit-To-Standard Mentality
Every executive’s greatest fear is the same when it comes to digital transformation: Replacing an old dysfunctional legacy system with a new dysfunctional legacy system.
However, at SAP, we’re prepared. Our standard leading business practices serve companies by encouraging them to adopt business processes supported by the software — helping save capital so they can enhance or modify core SAP business processes only where absolutely necessary (and/or where it brings or preserves key competitive advantages).
“A ‘fit-to-standard’ mindset with industry-specific and pre-configured best practices as well as a strong governance process is key to getting solution design and build right,” Heotaky said. “That means having a minimum number of modifications and extensions so your team — and the software — can focus on what it does best.”
Early in the design phase, workstream leads should review the end-to-end standard SAP process to ensure a fuller, deeper understanding of how the system is designed to work, and to validate standard SAP business practices before adopting them in their company. This detailed exploration process should document acceptance or deviation from standard business processes, along with the associated business case, so the deviation change request can be adjudicated by the governance body (i.e. Steering Committee or Change Control authority).
Some key benefits of a fit-to-standard approach include:
- Accelerating new technology deployment adoption
- Standardizing business operations with best practices that are documented, proven and ready to use
- Redirecting time and money to focus on more strategic, value-add work
- Minimizing long-term maintenance costs when non-essential modifications are maintained over the life of the software system.
- Delivering business outcomes quickly by aligning technology capabilities with processes
No. 8) Test, Test, Test: Working with the Customer to Meet Business Requirements
Your business will never achieve its desired outcomes with an ineffective testing process. This one element can easily stand in the way of your modernized development and operations processes — and of true digital transformation. Simply put, a comprehensive testing plan is mandatory. And it shouldn’t only include “day-in-the-life” test cases — it should include “edge cases,” such as negative testing, error message handling and performance testing. Some other best practices include:
- Two or more separate integration test cycles focused on remediating defects and re-establishing a testing baseline
- Testing with customer data, not just “dummy data.” Test both your data loads and functionality at the same time
- Testing against a set of user requirements, and making sure you are testing workstreams from end to end (“Order-to-cash,” “Procure-to-Pay,” “Record-to-Report,” etc.)
- Establishing clear “Go”/ “No Go” criteria, defined and agreed upon by the business and IT leadership
- Separation of duties and appropriate application access built into user roles, to ensure internal control and external compliance; make sure testing is done with role-based user security enabled.
- Detailed knowledge transfer from consultants to the business
“You have to remember that this is your system,” DeVoue said. “The customer must have an active and leading role in testing efforts to ensure your business winds up where it wants to be.”
No. 9) Check Your Tool Belt: Setting the Platform Up for Long-Term Success
Despite their best efforts, many companies fail to use the digital tools at their disposal during the transformation process. High-performing and innovative tools can hold countless advantages for companies moving to SAP S/4HANA.
Where are they most useful? Consider the following areas:
- SAP Solution Manager
- Security/user access
- Test automation
- Data cleansing/master data management
- Training development and delivery
“Your system integrator and its expert consultants should be helping you determine the tools necessary to keeping your software up and running — and to help you truly accomplish your transformation goals,” Heotaky said. “This isn’t a short-term switchover; this is a long-term, company-wide evolution.”
One More Tip: Determine your system and interface monitoring strategies to detect failures, and identify all requirements and processes needed for high availability and disaster recovery. Before wrapping the project, make sure you own or have access to the tools storing the project’s work product.
No. 10) Just the Beginning: Designing a Run Strategy
One day, like it or not, the mother bird will push the baby bird out of the nest. How can you ensure your business will be prepared for that moment?
“Determine your moment for ending hypercare by establishing definitive criteria with numerical benchmarks and a criticality ranking of open defects,” Heotaky said. “The ‘run’ phase shouldn’t just begin at a set time, it should begin when agreed-upon system quality levels have been established and maintained. You have to make sure that when the time comes, you’re ready.”
Even still, the end of hypercare — and the project — is just the beginning of the journey. How will your solution be supported after go-live? What mechanisms and organizations have you put in place to communicate what’s next on your journey? Are your support organizations well-staffed and receiving the knowledge they need? Will your company utilize an internal Center of Excellence? Will you maintain your SAP system using internal resources or external Application Management Services (AMS)? Can you transition some project team members into run roles for system optimization activities? Which organizations will support new rollout versions, enhancements, features and projects?
“These are all questions you need to answer when designing your run strategy,” Heotaky said. “They must be forward-looking, and all encompassing. This is about setting the stage for your digital future.”
You’re Not Alone
By embracing these 10 pillars of SAP S/4HANA transformation, our research has found, businesses working with SAP have seen greater than 70% project satisfaction in each of the 10 focus areas. That data factors in more than 300 projects over the last five years.
By managing these 10 key areas effectively, you have a much higher probability of achieving a successful outcome, meeting or exceeding your business outcome objectives, and setting up your enterprise for the next step of transformation.
Keep this white paper at your side as you embark on your digital transformation journey. Let it be your guide. And don’t bother worrying about what makes projects like these fail — worry about what makes them successful.
Key Lessons CFOs Have Learned from SAP S/4HANA Implementations
- Start communications early with an experienced change management staff
- Create measurable business success criteria from the outset
- Build in a project contingency on the financial front
- Identify top-performing internal resources and assign them full-time to the project
- In strategic and high-risk areas, quickly identify and replace underperforming resources
- Make sure stakeholders delegate to power users
- Don’t underestimate the effort and cost to clean and prepare data for the project
- Make tough calls quickly; do not delay
- Be prepared for IT headcount and support structure to grow post go-live
I would like to thank the following SAP team members for their help in developing this piece:
Scott Porter – Executive Advisor SAP Chief Customer Office (retired)
Steve Heotaky – Vice President SAP Chief Customer Office
John Hart - Executive Advisor SAP Chief Customer Office
Joe McDonnell - Executive Advisor SAP Chief Customer Office
