value lifecycle management
TRANSCRIPT
Best Practices inValue Management
Realizing Value From Your IT Investments
Ervin R. Martinez, Ph.D.Senior Principal, Value Management
SAP World Tour Trinidad & Tobago – August 12, 2010
VALUE
Are we investing in the right initiatives?
Are we realizing the full value potentialof these investments?
How do we enforce benefit commitments withthe same passion that we drivebudget commitments?
What governance, practices, and competenciesare required to ensure benefits are achieved?
Value Management Provides Answers to KeyQuestions From Top Executives…
© SAP 2010 / Page 2
Value ManagementThe New Change Management
In the early days of IT, projects failed because technologywasn’t ready or was inappropriately suited to businesscomplexity - then, technology got better… a lot better
Later, projects failed due to the inability to align people to theprocess and to the technology change
Intense focus on change management and programmanagement has led to the following: Projects get done ontime, on budget, and people use the new systems
However, what was lost in the process was “what is the realbenefit to the business of the transformation program?”
Today’s big challenge is Value Management… on time, onbudget and “On Value”
3
Opportunity Awaits You
© SAP 2010 / Value Workshop / Confidential / Page 4
97%of respondents think
there is more opportunityfor VM out there
2009 Value Management (VM) Survey Results
187 Global Companies Surveyed
66%of respondents have NO
formal managementmethodology or approach
for adopting VM
SAP/AMR Value Management Survey Results 2009
The Business Case for Value Management
percentage ofbenefit realizationachieved throughhigh best practiceadoption
2009 Value Management (VM) Survey Results
100+ Global Companies Surveyed
2.4xHIGHER
return on investmentfor companies withhigh best practiceadoption
4xMORE
companies with highbest practiceadoption attain value“on” or “ahead” oftime
© SAP 2010 / Value Workshop / Confidential / Page 5
2.4xMORE
companies with highbest practiceadoption deliverprojects “on” or“below” budget
57%L
M
H
39%
65%
119%L
M
H
72%
173%
27%L
M
H
11%
43%
48%L
M
H
29%
71%
1.6xHIGHER
SAP/AMR Value Management Survey Results 2009
Leading Companies Have Something inCommon—Adoption of VM Best Practices
© SAP 2010 / Value Workshop / Confidential / Page 6
PERFORMANCE BENCHMARKING (17%)structured, on-going measurement and comparison process todiagnose and recommend improvement opportunities
JUSTIFICATION (29%)formal collaborative business case development approach that resultsin a proposal with achievable benefits and timelines.
VALUE REALIZATION (19%)value-based implementation approach that focuses on process designand promotes a culture of accountability and measurement
BUSINESS STRATEGY & IT ALIGNMENT (34%)seamless alignment of IT and business in multi-year planning andexecution processes; Clear strategic goals translated to operationalobjectives
GOVERNANCE & PORTFOLIO MANAGEMENT (22%)active leadership involvement in program enablement
ORGANIZATION EXCELLENCE (10%)execution skills in change and program management
Top VM Adopters
Best Practices of Companies AttainingBenefits On or Before Plan
© SAP 2010 / Value Workshop / Confidential / Page 7
69%
63%
56%
41%
41%
38%
28%
28%
0% 10% 20% 30% 40% 50% 60% 70% 80%
Executive sponsor actively participating in businesscase development
IT and business jointly driving the business case
Program scope is managed considering impact to therealization of the business case
Project success criteria a combination of KPIs, newcapability. on time, on budget and financial
Solution design attributes are linked to business caseand value
Adoption of new processes/systems and benefitattainment in business unit leader's goals/incentives
Performance baselines for project KPIs prior toimplementation
Strong linkage between business case and businessprocess change qualitative/quantitative targets
Value Management AdoptionMaturity Model
Defining Value
Discussion Questions:
1. How does your approachto articulating value varyacross each of thesetypes?
2. What other ‘types ofvalue’ does yourorganization use to justifyinvestments?
A balanced view between strategic and tangible benefits is crucial.This is the only way to keep all stakeholders engaged.
© SAP 2010 / Value Workshop / Confidential / Page 9
The Four Value “Buckets”
As Defined by Your Peers
Value Management Is Not Easy
© SAP 2010 / Value Workshop / Confidential / Page 10
Tips For Adoption
1. Give people a vision they canvalue
2. Present solutions andbenefits with simplicity andclarity
3. Be consistent in driving VMprocesses within commonapplication platforms to forceadoption and lowercollaboration efforts
4. Embrace a commonmethodology andmeasurement plan tomanage value
INSPIRATION—a common vision everyone can value
ART—present ideas & benefits with simplicity and clarity
DISCIPLINE—adopt consistent VM processes
SCIENCE—common methodology & measurement of value
Combine equal parts of all ingredients and mix well with amotivational leader or executive sponsor. Embed intoorganizational culture for optimal results.
Challenges to Executing on Value
© SAP 2010 / Value Workshop / Confidential / Page 11
What makes executing onvalue hard?
No clear translation of mission to execution
KPI’s for success are not defined upfront ortracked/reported on an ongoing basis
Business cases are not required for projectapproval
Limited or no business accountability forbenefit achievement
Lack of business commitment of best andbrightest leaders
Decentralized ad-hoc governance structure
Discussion Questions:
1. Which of these resonatewith you?
2. Which are mostprominent in yourcompany?
3. Which are you able totackle well? Why?
4. What are we missing?
SAP Value ManagementExperience, Thought Leadership, Process & Tools
© SAP 2010 / Value Workshop / Confidential / Page 12
ValueManagement
Lifecycle
Business Need
InvestmentApproval
On-Time, On-Budget, On-Value
SAP Value Management Offering Portfolio
VM Education and AwarenessValue management bestpracticesBusiness case art and science
Value AcademyOnline value networkCxO communityCollaboration withassociations
Business process benchmarkingBusiness case builder – Value LifecycleManager
Business Content & Methodology
Value NetworkSAP VMPortfolio
Value EngineeringIT/Business alignmentPerformance assessmentRoadmapping
VMOCustom Value AcademyValue governanceSAP partnership
A Robust Toolset is Utilized Throughout theValue Lifecycle
Benchmarking
Determine the value ofadopting an SAP solutionand industry best practices
A customized confidentialreport for each participantAn aggregate report withkey finding from the overallstudy
Evaluate how a specificprocess can reach the stageof excellence and the valuepotential
Quantification of achievedorganization benefitsDocumentation of thesuccess factors formanagement andimplementation teamsAssessment ofimplementation bestpractices utilized during theimplementationOpportunity to showcase thesuccess within the broaderSAP and partner ecosystem
Actual Customer Results Executive Insights
White papers focusing ontopics in three key areas
Solution ThoughtLeadershipIndustry and FunctionalExpertiseTop ten reasons for usinga SAP solution
Driven by customerexperiences andbenchmarking results
Value LifecycleManager
Online collaborationenvironment for identifyingand understanding valueFind 80% of industry specificcontent needed forOrganization caseAccess to more than 500Kindustry and process specificpain points, solution enablersand best practicesLinks benefits to KPIs andindustry benchmarksReal-time sensitivity analysisto test business case results
Available Benchmarking and Best PracticesSurveys
Human CapitalManagement
Human CapitalManagement
Talent ManagementTalent Management
Financial Excellence
NPDINPDI
Customer ContactCenters
Customer ContactCenters
Sales EffectivenessSales Effectiveness
FinanceFinance
Financial ComplianceFinancial Compliance
Order to CashOrder to Cash
Enterprise Health CheckEnterprise Health Check
Trade PromotionManagement
Trade PromotionManagement
Best People and Talent
Product and ServiceLeadership
Total Cost of Ownership(TCO)
Total Cost of Ownership(TCO)
Business Intelligence/Analytics
Business Intelligence/Analytics
Organizational ChangeManagement
Organizational ChangeManagement
Enterprise DataManagement
Enterprise DataManagement
Strategic IT
Supply Chain PlanningSupply Chain Planning
TransportationManagement
TransportationManagement
Warehouse ManagementWarehouse Management
SRM/ ProcurementSRM/ Procurement
ManufacturingManufacturing
Enterprise AssetManagement
Enterprise AssetManagement
EH&S ComplianceEH&S Compliance
Operational Excellence
ResponsiveSupply Networks
High Performing Assets
Superior Customer Value
End-To-End Processes
= Best Practice Surveys
HR Shared ServicesHR Shared Services
Financial Performanceand Risk ManagementFinancial Performanceand Risk Management
Cash to CashCash to Cash
Finance Shared ServicesFinance Shared Services
Value ManagementValue Management
© SAP Value
Best Run ITBest Run IT
Detailed Benchmarking Results:On Demand Analytics
Business Case Development: Process, Tools,and Template
ExecutiveAlignment
DiscoveryWorkshops andData Collection
Business CaseAnalysis and
validation
Validation &Final Presentation
Process
Tool: Value Lifecycle Manager (VLM) Template: Collaborative Value Assessment
© SAP 2009 / Value Academy / Confidential / Page 17
24/7 on-demand application with certified data security
1 million content items – KPIs, best practices, case studies…
14,000+ users globally – customers, partners and employees
Customized to specific project scope in minutes
SAP Value Lifecycle Manager
Collaborative business casedevelopment and benefitsmonitoring tool
26 industries / 70 sub-industries
1 million content items (painpoints, best practices..); 15,000KPI's and benchmarking datapoints; 500 case studies
14,000 users; 1,900 customers;2,300 active projects
Customized to specific scope inminutes
24/7 on-demand solution withcomplete data security
Sample Analysis:Collaborative Business Case Development
Dynamic Benefits Monitoring
Learn more at:https://sapvalueengineering.com/VLM2/
SAP Business Performance BenchmarkingDiagnose your business
SAP Performance Benchmarking
One of the largest globalbenchmarking programs8,500 survey submissionsOver 20 processes, including
Sourcing and ProcurementSupply Chain PlanningWarehouse ManagementTransportation ManagementManufacturingEAMEnvironment, Health, SafetyNPDIHuman Capital ManagementFinanceTrade PromotionManagementTCO
Comparison with industrypeersFree of charge
Sample Analysis:Performance of Primary KPIs and Potential Benefit
Learn more athttp://benchmarking.sap.com/US
Industry Specific Benchmarks Available:Example Spend Managed Strategically (Indirect)
Top 25%Average
KPIBenchmark
PerformancePotential Benefit
(in $ Million)
Procurement CostsAs % of Spend 0 – 2.9
Average AnnualSavings (in %) 0 – 4.4
Spend ManagedStrategically (in %) 1.1 – 3.7
Maverick Spend(in %) 0.1 – 1.0
89.074.769.0
Bot 25% Average Top 25%
68.9
15.8 7.2 6.4 1.2
Bot 25% Average Top 25%
1.5 0.63.0
Bot 25% Average Top 25%
1.1
Bot 25% Average Top 25%
5.03.3 5.82.0
Benefit of Closing Gap to Top 25%Benefit of Closing Gap to Average
Characteristics of a Great Business Case
Checklist for Success
Clear problem statements defined
Linkage between initiative and corporate strategy is clear
Improvements are executable, goals are achievable
Benefits are quantified
Sponsorship is passionate, accountability is clear
Execution risks are understood and addressed
Execution plans are mapped and the organization is on-board
Returns are better than other investments
Why?
What?
How?
Why have we embarked on this initiative?
What do we want to achieve?
What challenges prevent us from getting there?
What is the recommended solution & associated benefitsand cost?
How should we implement?
How do we ensure value delivery? Why Now?
What are other similar case studies; Is our approachachievable?
Proof
Key Questions Addressed
© SAP 2009 / Value Academy / Confidential / Page 20
© 2010 SAP AG. All rights reserved. / Page 21
AGENDA
SAP CONFIDENTIAL - Page 20 For SME Industr ies Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, per formance or cost savings.
Executive SummaryMay 15, 2010
Project Summary
TotalCosts $5,512K
TotalBenefits $6,415K
ROI 12.67%
0
2
4
6
8
10
12
Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Projected CostsActual Costs
Projected BenefitsActual Benefits
Cost Benefit Analysis
Board Ready Presentations
Business Case
Benefits Monitoring
SAP CONFIDENTIAL - Page 4 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industr ies and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.
Why does ABC, Inc.need to change?
Current systems are an obstacle to executing corporate strategyEconomic conditions require operational excellenceDynamic market conditions requires flexibility
How can SAP and XYZPartner help?
Comprehensive solution based on industry best practicesPreconfigured solution delivers fast time to valueProven implementation methodology that minimizes risk
What impact will SAPdeliver?
Recurring annual benefits of $1,729K – $3,107K and one-time benefits of $691K – $1,126KFive year NPV of $11,734K, IRR of 284% and a 3-month cost of delay of $234.7KEvaluation over a 5 year period with a payback period of 4.0 monthsTop 3 impact areas:
1. Reduce Days Sales Outstanding: One-Time Benefit2. Reduce Direct Material Costs - Non-commodity3. Reduce Indirect Material Spend
Executive Summary
SAP CONFIDENTIAL - Page 16 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.
ABC, Inc. Estimated Benefits: $1,729.3K–$3,107.1K Annualand $690.7K–$1,125.5K One-time
Conservative Estimate
Likely Scenario
One-time benefit
$524.7K$349.8KReduce Days Sales Outstanding:One-Time Benefit
$273.6K$228.0KReduce External Audit Costs$150.0K$75.0KReduce Total Finance Costs$42.0K$28.0KReduce DSO - Recurring Benefits
$0.0K$0.0KShortened Quarterly Close Process
$6.1K$3.0KIncreased Asset Utilization Due toReduced Asset Downtime (Due toPlanned Maintenance)
$320.9K$160.5KReduce Manufacturing Overhead
$240.0K$120.0KFree Up Capital from ReducedService Parts Inventory
$607.2K$308.0KManufacturing
$113.0K$75.3KImprove Procurement Productivity(FTE)
$1,075.2K$556.4KProcurement$509.8K$254.9KReduce Direct Material Costs - Non-
commodity$452.4K$226.2KReduce Indirect Material Spend
$465.6K$331.0KFinance
$20.0K$10.0KReduce Revenue Loss due to Stock-Outs
$225.8K$112.9KReduce Days In Inventory (DII)
$344.3K$172.1KReduce Total Transportation Spend
$88.9K$44.5KImprove Warehouse FunctionEfficiency
$60.8K$30.4KReduce Inventory Carrying Cost
$40.0K$20.0KReduce Inventory Write-offs(primarily due to damages/shrinkage)
$76.0K$60.8KReduce Unauthorized Deductions
$135.0K$108.0KReduce Uncollectible AccountsReceivable
$405.1K$256.9KOrder-to-Cash$189.2K$126.1KReduce Invoice Error Rate
$139.9K$70.0KReduce Order to Invoice Cycle Time(days)
$554.0K$277.0KSupply Chain Management
$1,729.3K $3,107.1KPotential Annual Benefits:
Potential One-time Benefits: $690.7K $1,125.5K
© SAP 2009 / Confidential / Value Academy for Channel Partners Page 17
Benefits Costs Analysis Indicates VeryCompelling Project Economics
5-Year Project Economics
NPV $11,734K
IRR 284%
Payback 4 Months
3 Month Costof Delay $234.683K
Benefit AssumptionsCost of Capital 8%Benefits begin in Month 10 ofYear 1
Investment Cost & Benefits Flow ($Millions)
SAP CONFIDENTIAL - Page 20 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.
Benefits Monitoring: Detailed Dashboard
SAP CONFIDENTIAL - Page 20 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.
Action Plan – Days in InventoryMay 15, 2010
Value Academy: Global Program
© SAP 2009 / Value Academy / Confidential / Page 22
Palo Alto
Sao Paulo
Sydney
Singapore
London
Rome
Milan
Washington DC
Delhi
Canberra
100+ Value Academies globally1000+ certified companies2000+ attendees
Rio de Janeiro
Bogota
Santiago
Mexico City
Toronto
Seattle Chicago
Dallas
Dubai
Mumbai
Amsterdam
Cape Town
Boston
Philadelphia
St. Louis
IrvineHouston
Minneapolis
Atlanta
Caracas
Buenos Aires
Monterrey
ParisWaldorf
Johannesburg
Prague
SAP Value Academy
Interactive session providing companies an intro to strategy,methodology and tools to support Value Management Adoption
Key Benefits:
Learn a consistent and disciplined approach to define,measure and achieve value
Gain hands-on experience with SAP’s comprehensive set ofvalue assets
Access our growing, global Value Management Community
Build a value management adoption plan based on bestpractices
Attendee profile: includes a mix of business/finance and ITrepresentatives
Typical Roles: Business/IT liaisons; PMO/COE resources;Portfolio managers; LOB leads and business processowners; financial controllers
Cost: None - attendee fee covered by SAP for 2010 as aninvestment in customer success
Value AcademyGlobal Presence:
2500+ attendees1500+ companies140+ academies36+ cities20 countries6 continents5+ languages9.0 customersatisfaction average
Realizing Value
Executives expect programs that drive aggressive returns with theconfidence that the organization can execute consistently
Top performers have delivered successful IT enabled programs:
Active leadership involvement in program enablementClear strategic goals translated to operational objectivesBusiness cases with achievable benefits & timelinesStructured performance evaluation processBest practice adoptionSeamless alignment of IT and businessExceptional skills in change & program managementCulture of accountability & measurement
SAP has integrated best practice methodologies, practices, tools,and communities into a value management platform
VALUE
CO
ST
Identifying Gaps to the Market´s BestPractice: GPA Wins a Benchmarking Award
Highlights
Conducting an overall Value Assessment through severalareas of the companies by submitting more than 10Benchmarking surveys
Recognized with the 2010 Benchmarking Award by ASUG- Brazil
Sending additional Value Academy attendees in 2010
Grupo Pão-de-ÁçucarSão Paulo, Brazilwww.grupopaodeacucar.com.brIndustry: Retail –Grocery and Hardline
Attended ValueAcademyIn 2009São Paulo
“Benchmarking showed us the difference betweenour internal perception and the market best practicelevel. This vision will guide GPA´s businessdecisions.”
Edson Gomes do AmaralIT CoordinatorGrupo Pão-de-Áçucar
© SAP 2009 / Value Academy / Confidential / Page 25
A Top Performer With State-of-the-Art VMTools: Braskem Publishes 2 Case Studies
Highlights
Prepared and approved a business case right after ValueAcademy session using VLM
Submitted 3 Benchmarking surveys in collaboration withbusiness areas
Published 2 Business Transformation Studies on SAPimplementations
BraskemSão Paulo, Brazilwww.braskem.com.brIndustry:Petrochemicals
Attended ValueAcademyIn 2009São Paulo
“Why you haven´t offered me this before”?
Stephan LepeckiCIOBraskem
© SAP 2009 / Value Academy / Confidential / Page 26
Building a Case for Change: Palacio de HierroBrings VM to Strategic Project Evaluation
Highlights
CIO attended the Academy and then sent other crossfunctional staff to another Academy
Piloted several performance benchmarking surveysaround HCM and Finance
Joined the Customer Advisory Panel
Over 10 people trained in VLM and Value Managementfrom Palacio de Hierro
Palacio de HierroMexico Citywww.palaciodehierro.com.mxIndustry: Department Store
Attended Value AcademyMay 2009, November 2009Mexico City
“Attending Value Academy was very rewarding, wealready have a project evaluation in Palacio deHierro & with this session we have new elements thatcan complement and improve it.”
Jose Luis ChaconControlling and Budgeting DirectorPalacio de Hierro
© SAP 2009 / Value Academy / Confidential / Page 27
Thank You
Best Practices inValue Management
Realizing Value From Your IT Investments
Ervin R. Martinez, Ph.D.Senior Principal, Value ManagementEmail: [email protected]
SAP World Tour Trinidad & Tobago – August 12, 2010
VALUE