Accenture Value Realization Sapphire

Copyright © 2009 Accenture All Rights Reserved. Accenture, its logo, and High Performance Delivered are trademarks of Accenture.

Value Realization: Maximizing

Return on SAP Investments

Sapphire 2009

2Copyright © 2009 Accenture All Rights Reserved.

In recessions, winning companies take and sustain

advantage over their competitors

Winning companies (*) take distance

from losing ones during and after

recessions.

Post-recession results divergence

between winning and losing

companies is significant.

On leaving a recession, winning

companies tend to keep their

leadership and generate sustainable

advantages through time.

Average

ROIC related

to the

industry

Winners

Losers

Note: (*) = Winning companies are those that managed to obtain better results –as measured by the ROIC– than those of their industry peers during

the 6 years following the 1990-91 recession.

Source: Accenture’s analysis.

Exit from recession

Review of financial results of 850 companies throughout a 10-year period


In down markets, winning companies differentiate

themselves by strengthening operating models

through process and enabling technology

They act decisively as soon as problems start to appear in the horizon (ie. Leading

indicators), investing in new capabilities to strengthen business operating models

They set priorities based on detailed knowledge of how the company creates value (eg.

products, customer segments, key processes, technology, people, finance)

They leverage IT to support key value drivers (value drivers, which are known and

understood).

They work together with customers and stakeholders in order to align their value

propositions to changing environments

“In the cost-cutting discussions we're having right now - and there are many - I remind my team that the next generation of technology and services will be born out of decisions we make at this unique moment in time”Anne Muclahy, CEO Xerox, April 2009


Yet even in good times, companies are challenged

to achieve the full benefits of their technology

investments

• While companies are slowly improving implementation performance, few claim

success at capturing the full business value targeted by their systems investments

• We found that top performers took a distinctly different approach to implementing

and leveraging their enterprise systems

In 2006 > 55% declare to have reached the majority of their targets but only 6% could claim a full success

Accenture Research

Source: Accenture, New Growth from Enterprise Systems: Achieving High Performance through Distinctive Capabilities, 2006


Rationale for Value Realization in Systems Integration Programs

• There is significant value in increasing the confidence that technology investments will result in targeted benefits – translating into shareholder returns

• Many companies are looking for real business transformation, not just technology implementation, to drive business performance

• Further, many companies are looking to develop truly “innovative”solutions that create competitiveadvantage and differentiatedcapabilities

• The ability to capture businessbenefits (cost/revenue) in advance of end-state technologyis increasingly important,particularly in the currenteconomic situation

ILLUSTRATIVE BENEFITS PROFILES FOR SYSTEMS INTEGRATION

Accelerate Realization ofbenefits/ value

Increase

Total Bene

fit/ Value

Business Performance

Time

Go-Live

Accelerated value creation with quick wins

Traditional systems benefit curve

High performance implementation


Three Foundations of Business Led Value

Realization

Successful Value Creation

Program

Established linkages between strategic objectives and their

process and technology enablers

Processes and tools for end-to-end process management and value tracking

Organization and governance to drive the

best possible process and technology

decisions for the business

LinkStrategic

Objectives to Process & Technology

Enabling Process and

Tools

Effective Process

Governance


Share-

holder

Value

Analysis

Capability

Assessment

Value Area /

Metrics

STRATEGIC

What are the key influencers of stock

price?

What are the key drivers of value creation

and cost reduction defined in BO?

OPERATIONAL

What are our current capabilities

compared to our industry peers?

How can SAP be leveraged to enable

those capabilities necessary to target

value opportunities and cost reductions?

TACTICAL

Are we realizing our business case? Have we realized typical SAP implementation benefits?

How are we performing as indicated by our business performance metrics?

Critical Business Questions to Drive Process

and Technology Decisions

SAP Value Realization -

Growing shareholder value by

building business capability enabled

by SAP functions and features to

improve business performance.

Value Realization asks and answers criticalbusiness questions: Strategy

Linkage


Value Trees Assist in Linking Process

Capabilities to Key Strategic Objectives and

KPIs

CPG High Performance

Research

Critical Value Drivers

Linkage to Process Enablers (Distinctive Capabilities)

Business Case

Benefit

Procure to PayCost Reduction

> $XXX million2%-4% (Expected 3%)$$,$$$

(less transportation)

Spend Analysis – Non Tech

Enabled

Value Source Baseline ($M) Target Opportunity Annual Benefit ($M)

Spend Analysis – Tech

Enabled$$$,$$$ 4%-6% (Expected 5%) > XXX million

> $XXX million2%-4% (Expected 3%)$$,$$$

(less transportation)

Spend Analysis – Non Tech

Enabled

Value Source Baseline ($M) Target Opportunity Annual Benefit ($M)

Spend Analysis – Tech

Enabled$$$,$$$ 4%-6% (Expected 5%) > XXX million

Key Benefit Drivers

Demand aggregation, volume discount, retail management, earnings capture, contract management, and

sourcing alternatives

Compliance with contracts; reduced off contract spend

Develop a supply strategy through analysis of current global spend, future demand, supplier, performance, risk, target costing and real time changes

Key Assumptions

CompanyStrategy

InnovativeProcess

Capability

Standard Process

Capability

Transformation & Quick Win

Opportunities

Design Approach

90%

10%

Strategic Market Domination

Establish cross-category portfolio of global dominant brands within high growth/ value markets

Innovation

Marketing

Differentiated,

consumer insight &

technology-driven

brands, under

continual renewal

Culture of Continuous Renewal

Highly flexible organisation that seamlessly executes and embraces operating change whilst

promoting innovation, but with relentless focus on ROI and margins

Customer

Management

& Distribution

Tailored service

and distribution

approach to ensure

availability

Regulatory

Expertise

Deep cross market

regulatory

understanding

driving product

strategy and

positioning

Flexible &

Low-Cost

Operations

Rigorous cost/

WCAP mgmt &

imbedded

performance mgmt

culture

Strategy

Linkage


A Healthy Tension Should Exist Between

Efficient Delivery and Business Objectives

Establishing the “healthy tension” between Business Needs and Program

Execution

Program Governance

Defined roles, responsibilities & decision

rights to manage the healthy tension

Process Ownership

– business value focused –

Ensuring process design & systems choices meet business

needs

Inherent bias toward best fit solution for each business need

- highest adoption

SI Delivery

– execution focused –

Ensuring successful systems implementation

Inherent bias toward common solutions, for lower cost and faster

execution

Governance


Compliance

and Quality

Program Account Management

Value Realization Leadership

Commercial and

Program ManagementArchitects Office

-

ASIA

LA

EMEA

NA

SAP Delivery Leads

O

Contract / Finance

Management

Support Services

Service

Management

Transition Services

Program Managers

Change Management

Integrating Value Realization into Program

Governance

Example Value Realization Organization as Part of an SAP Implementation Program

Governance

PMO

Project Executive Sponsorship

Value Realization

Lead

Transformation Road Map

Quick Wins Innovation Value Added

Early Value Capture

New Differentiated Capabilities

Capability & Knowledge

Transfer

Benefits Tracking

Strategy & Timing of Process Capabilities


Value Realization Activities Align to Traditional SAP Implementation but are Often Not Fully Employed

PROCESS STRATEGYDevelop holistic process deployment

strategy; Assess Current Process Performance & Gaps; Identify

Transformation Opportunities; Link to the SI Business Case

PROCESS TRANSFORMATION & INNOVATIONImplement high-value strategic process Improvement projects; Accelerated

benefits in advance of end-state technology;

VALUE REALIZATIONTrack process and technology design and implementation decisions back to

strategy and business case; put in place process metrics; build process governance

QUICK WIN OPPORTUNITIES






Can be estimated as of program structure

Scalable and resourced based on ROI opportunity

Value Realization Components as Part of SAP Implementation

Governance


• Turns process models into

process assets – single

source data for all things

process

• Links process to people and

applications

• Supports continuous

improvement through

process analytics

Business Process Lifecycle Management Methods

Enable Performance Management at a Process

Level

Tools

Business Process Lifecycle Management Framework


Performance Management Tools Make

Available the Metrics and Information for

Tracking Value Realization

Tools

Tools

Functions

Operatio

ns

Improve

roadmap

s

Improv

e

results

AdoptLaunchOrganize

Express

strategy

Formaliz

e

roadmap

s

Settle

busin

ess

target

s

Depl

oy

Busin

ess

adopt

ion

Mea

sur

e

pro

gre

ss

Au

dit

Best

practices

Supp

ort

Capi

taliz

e

Tools

Functions

Operatio

ns

Improve

roadmap

s

Improv

e

results

AdoptLaunchOrganize

Express

strategy

Formaliz

e

roadmap

s

Settle

busin

ess

target

s

Depl

oy

Busin

ess

adopt

ion

Mea

sur

e

pro

gre

ss

Au

dit

Best

practices

Supp

ort

Capi

taliz

e

HighPerformance

SC

AccentureBusiness Process

Repository

MasteryAssessmentTool

11

ABPR

Business StrategyRefine Corporate

Vision &

Strategic

Objectives

Target Setting

Cascade Targets to

Lower Level M etrics/

Organization

Set Targets for

Key M easures of

Accountability

Operate

Develop Plans

to Achieve

Targets

Allocate

Resources (all

categories) to

Achieve Plans

Review,

Challenge &

Finalize Plans &

Forecasts

Monitor

Develop Action

Plans, Re-allocate

Resources and

Update Forecast

M onitor Key

M easures of

Business

Perform ance

Determ ine Key

M easures of

Success

Portfolio Value

Assessm ent Enablers

Leadership &

Capability

Incentives and

Rew ards

Standardized

Processes

Integrated IT

Architecture

Review Perform ance

with Executive

M anagem ent

Determ ine Key

Value Drivers

Data Structures &

Controls

Business StrategyRefine Corporate

Vision &

Strategic

Objectives

Target Setting

Cascade Targets to

Lower Level M etrics/

Organization

Set Targets for

Key M easures of

Accountability

Operate

Develop Plans

to Achieve

Targets

Allocate

Resources (all

categories) to

Achieve Plans

Review,

Challenge &

Finalize Plans &

Forecasts

Monitor

Develop Action

Plans, Re-allocate

Resources and

Update Forecast

M onitor Key

M easures of

Business

Perform ance

Determ ine Key

M easures of

Success

Portfolio Value

Assessm ent Enablers

Leadership &

Capability

Incentives and

Rew ards

Standardized

Processes

Integrated IT

Architecture

Review Perform ance

with Executive

M anagem ent

Determ ine Key

Value Drivers

Data Structures &

Controls

High PerformanceBusiness

Framework

EnterprisePerformanceManagement

(EPM)

Phase I:

Mobilize and Gather In format ion

Phase II:

As-Is Review

Phase III:

Opportunities and Actions Identification

Phase IV:

High Level Business Case and Action Plan

1 weeks 2 weeks 3 weeks 2 week

Planning

Performance

KPI’s

Tool

usability

KPI’s

Methodology

Phase I:


Phase II:

As-Is Review

Phase III:


Phase IV:



Phase I:


Phase II:

As-Is Review

Phase III:


Phase IV:



Planning

Performance

KPI’s

Tool

usability

KPI’s

Methodology

Planning

Performance

KPI’s

Tool

usability

KPI’s

Methodology

BusinessSolutionsHigh Spot

Review


Starter Questions for Discussion

How effective have programs you’ve been involved with been at

Value Realization as described?

What components of the value realization approach have you most

often seen employed?

What are the major obstacles incorporating value realization

formally in SAP programs?

What other approaches or tools have you seen used that would

enhance value realization?


Detailed Client Experiences


Selected Application of VR Methods

Global Consumer

Products company

14 weeks project defined to identify the improvement of

the Advance Planning capabilities based on Business

Solutions High Spot Review Methodology

Global specialist in

energy management

Implementation of business transformation program

identifying and measuring the expected value from the

different initiatives (High Spot Review) with the help of

Value Realization tools

Global Consumer

Products company

Implementation of a continuous Process Improvement

initiatives based on Value Realization during and after

SAP Implementation, built on Lean Six Sigma

Methodology.

World’s leading

automotive supplier

After the implementation project, implementation of a

General Group methodology (5 steps©), not limited to

SAP, structuring a path towards excellence (roadmap for

each function)


Example: High Spot Review Methodology.

Planning

Performance

KPI’s

Tool usability

KPI’s

Methodology

Objective: Benchmark your overall

Supply Chain Planning

performance with other

companies in the same industry,

and/or with Best Practices.

Examples:

Forecast Accuracy

Days of Inventory

Number of stock-

outs

Objective: Understand how your

planning tool is used (or not

used), and quickly check where

the main gaps between IT and

Organization and Processes are.

Examples:

Past due orders

(deliveries, planned

orders, stock transfer

orders, …)

% of Planned Orders

converted to Production

Orders

% of Purchase

Requisitions converted to

Purchase Orders

Phase I:

Mobilize and Gather Information

Phase II:

As-Is Review

Phase III:

Opportunities and Actions

Identification

Phase IV:




Example: Global Transformational Program based

on High Spot Review

Processes efficiency assessment

Country key data collection

Best practice handbook

Map of assessed initiatives

Lagging KPIs

Initiative description

Governance model

Consolidated business case

Leading KPIs

Action plan

System Usage Indicators

IT cost monitoring

2

3

4

1

5

6

7

8

9

10

1112

2 months 4 months 3 months

Approach

definition

Identification

of key

initiatives and

value drivers

Business case

formulation,

target setting

and deployment

plan

Implementation

of action plans

and performance

monitoring

KPI 2 Inventory turns (New equipment)Divisions CE, PS, MH

Products New equipment

Baseline Index 2001 COGS DIVIDED BY Average inventory net value

Quarterly measure 12 rolling month COGS divided by avg 12 rolling month inventory at net value

Step 1: Calculate adjusted baseline2001 COGS and 2001 average inventory, after scope adjustment

Step 2 : Collect and adjust actual12 rolling month COGS and Average 12 rolling month inventory, at the end of the quarter, after scope adjustment

Step 3 : Compare and derive value

Cost

reduction:

XXXX

Cost

reduction:

XXXX

• No additional adjustment is needed as

the KPI is a productivity ratio

• No additional adjustment is needed

as the KPI is a productivity ratio

Cost of capital comparison (quarterly rate assumption: 2.075%1):

• Baseline cost = (Actual COGS DIVIDED BY Baseline Inv turns)2 MULTIPLIED BY 2.075%

• Actual cost = Actual Inventory MULTIPLIED BY 2.075%

1: Based on a 8.3% annual cost of capital, provided by FII during the Business Architecture phase

2: Baseline inventory level

Baseline CE PS MH Total

2001 COGS 115,257,000 31,186,000 20,321,000 166,764,000

2001 inventory 26,069,500 13,656,000 5,572,750 45,298,250

Inv turns 4.421 2.284 3.646 3.681

Actual CE PS MH Total

12 m COGS 126,358,499 34,964,377 17,551,144 178,874,019

12 m inventory 27,308,138 14,628,906 4,598,881 46,535,925

Inv turns 4.627 2.390 3.816 3.853

Cost of capital CE PS MH Total

Baseline 593,045 317,693 99,873 1,010,611

Actual 566,644 303,550 95,427 965,620

Domain Efficiency

BI 1,0

Fi-Co 4,6

Purchasing 2,8

CRM 1,9

Equipment/Project 3,6

Logistics 2,9

Manufacturing 3,6

Quality 2,0

Sales 3,3

Service 2,8

Country efficiency assessment

0

1

2

3

4

5

BI

Fi-Co

Purchasing

CRM

Equipment/Project

Logistics

Manufacturing

Quality

Sales

Service Country name

General information Business information Project information

Financials Businesses Systems & processes

in EUR 2001 2002 2003 Sales in EUR 2001 2002 2003 Existing systems & gaps

Revenue: Electrical distribution - medium voltage

REX Electrical distribution - low voltage

REX % Industrial control and automation

Employees REX in EUR 2001 2002 2003 2003 %

2001 2002 2003 Electrical distribution - medium voltage

Production Electrical distribution - low voltage

Administration Industrial control and automation Switch deployment timing

Total

Markets

Facilities Sales in EUR 2001 2002 2003

# Employees Residential

Production sites Buildings

Distribution centers Industry

Sales offices Energy and infrastructure

Sales outlets Key initiatives - Switch related

Customers Initiative

Sales in EUR 2001 2002 2003 2003 #

Distributor / wholesaler

Key stakeholders Contractor, panel builder, electrician

Overall management buy-in OEM

Engineering systems integrator

Prime contractors, contracting authorities

Electric utility

Global strategic accounts

Names & positions Brands

Country management Sales in EUR 2001 2002 2003

Merlin Gerin

Square D Key initiatives - beyond Switch

Telemecanique Initiative

Switch deployment

Others

Production

Destinations, in EUR 2001 2002 2003

Intra country

Business/ initiative owners Intra geographical zone

Intra operating division

Extra operating division

Decision making process

Value realization teamIdentifies projects to be reviewed:- Current projects- Planned projects- New projects

Projects list

Project ownersFill in Initiatives descriptions

Meet performance

criteria?

Sort based on scope criteria

Yes

No

Business Unit committeeReview, set priorities and select projects

Country/ entity committeeReview, set priorities and select projects

Approved projects

Need higher committee approval?

Operating Division committeeReview, set priorities and select projects

Company-wide committeeReview, set priorities and select projects

Projects list

Approved projects


Approved projects


Yes Yes Yes

Committed projects

No No No

Re-assessment process (every 6 months)

Initiatives description

All capabilities

All projects

SUMMARY

YEARS

in GBP 2003 2004 2005 2006 2007 2008

REVENUE INCREASE

A. Additional sales 252 565 5 959 255 10 055 734 12 671 251 14 641 293 15 064 400

Gross margin % 25,5% 25,4% 24,3% 23,9% 24,0% 23,9%

A'. Gross margin increase 64 365 1 510 690 2 447 743 3 034 273 3 508 652 3 600 218

COST SAVINGS

B. Cost savings 70 867 1 656 416 3 286 195 3 559 311 3 705 340 3 794 621

ADDITIONAL COSTS (incl HR costs)

C1. Amortisation of investments (20 260) (102 967) (102 967) (82 707) 0 0

C2. Other 1 time charges (478 458) (235 342) (10 000) 0 0 0

C3. Recurring expenses (25 628) (516 492) (544 416) (544 416) (544 416) (544 416)

C=C1+C2+C3 Total including HR costs (524 345) (854 801) (657 383) (627 123) (544 416) (544 416)

D=A'+B+C INCREMENTAL EBIT (389 114) 2 312 305 5 076 556 5 966 462 6 669 576 6 850 423

FCF (474 634) 2 212 151 5 179 523 6 049 168 6 669 576 6 850 423

10 year NPV 22 077 410

12,50%

Payback (in quarters) 6

Benefits growth 2% 43% 78% 89% 98% 100%

- 2 -

Volume actual SKUi is the actual weekly unit sales volume for SKUi.

Volume forecasted SKUi is the forecasted unit sales volume for SKUi (Rolling weekly forecast) (One month in advance).

n refers to the total number of SKUs considered.

Business PurposeBusiness Purpose Levers to improve performanceLevers to improve performanceThe ability to plan demand with accuracy is a key influencer

to the efficiency of operations. A high accuracy in planning helps

the company optimise manufacturing and supply chain costs while

providing the end-customer with the highest possible service level.

CalculationCalculation

DefinitionDefinition This indicator measures sales unit forecast accuracy by comparing the actual unit sales to the sales unit

forecast.

• Improve forecasting process and level of coordination between functions

• Improve the understanding of market macro-economic trends

• Use statistical modelling to better understand demand history

Sales forecast accuracy ratio = 1n

Volume actual SKUi)׀ - Volume forecasted SKUi) ׀

(Volume forecasted SKUi)i = 1

n

( )-

Forecast vol.

Actual sales vol.

Forecast vol.

Actual sales vol.

SKU1

SKU2

50

65

27

22

Sales forecast accuracyWeek

= 1 -

- 65)׀ ׀ (5050

+

2

- 22)׀ ׀ (2727

= 76%

}

}

SKU1 forecast error = 30%

SKU2 forecast error = 19%

Calculation methodology used is MAPE (Mean absolute percentage error)

Week

2 - Sales forecast accuracy

unitsunits

unitsunits

DomainInitiative name

• Description, objectives

Key points

• Countries, regions

• Divisions/ Businesses

• Functions

Local / corporate stake?

Scope

• Opportunity to reuse(other countries, divisions, functional areas)?

- xxx

• Coverage by Switch (specify % and modules)

- xxx

• Initiative owner:

• BPO:

Misc

• One time

- IT

- HR

- Training

- Others

• Recurring costs

- IT

- HR

- Training

- Others

Costs and phasing

• Value drivers, improvements derived and ramp-up details

Value drivers and expected improvements

• Organisational impacts (gap with

as is...)

- Populations

- Gap with as is

• Complexity/ feasibility

- Technical

- xxx

Risks

- xxx

Barriers

• Leading

- xxx

KPIs

• Lagging

- xxx

5-year NPV:

Payback period:

Scope & boundaries

Action leader…

Action sponsor…

Start date … End date …

Brief action description & objectives

…

Key performance indicators

Baseline• …•

Target• …•

Work plan

Major steps

• … … …••••••

Processes in scope• … ••••

Facilities in scope• …•••• Linkages with other on-going initiatives

• … •

Team members

Direct contributors• …••••

Steering Group• …••••

Baseline situation…

Target…

Expected Impact

Plannedend date

Start date

Action description

Scope & boundaries

Action leader…

Action sponsor…

Start date … End date …

Brief action description & objectives

…

Key performance indicators

Baseline• …•

Target• …•

Work plan

Major steps

• … … …••••••

Processes in scope• … ••••

Facilities in scope• …•••• Linkages with other on-going initiatives

• … •

Team members

Direct contributors• …••••

Steering Group• …••••

Baseline situation…

Target…

Expected Impact

Plannedend date

Start date

Action description


Example: Global Consumer Products Company

Integration of implementation and Process

Improvement

Implementation Timeline

Implementation Scope

Process Optimisation, Harmonisation and Consolidation

Initiatives generation

Design and implementation

Continuous improvement launch

Geographical:

USA

Canada

UK

FR

GE

Functional:

Purchase to Pay (PtP)

Order to Cash (OtC)

Human Resources (HHRR)

Finance & Control

Processes design

Drivers for change: Corporative control of

businesses Decision-making on

National level growth vs. Regional level growth Rationalization of costs and IT management

Roll outs

SAP implementation: Common Data &Processes

Drivers for Change:1.Non-efficient organization (duplicated) 2.Aligned processes but with a multiple-

country/multiple-division scope


Example: General Group Methodology (5 steps©)

Functions

Operations

Improveroadmaps

Improve results

AdoptLaunchOrganize

Express strategy

Formalize roadmaps

Settle business targets

Deploy

Business

adoption

Measure progress

Audit

Best practices

Support Capitalize

Strengthen the vision

• Clear deliverables

• Key Performance

Indicators

• Documents &

standards

• Better collaboration

between functions &

Information System

Focus on payback

• Local projects in line

with Plant maturity

• IS aligned with

business

• Group short term

targets focused on

key deliverables

People efficiency

• Teams motivation

• Training

reorganization

• Back to basics

• Management

implication

– Objectives +

Methods

Robust results

• Deployment speed,

and associated

benefits

• Focus of hot topics

• Speak with data

• Benchmark

Capitalization

• Up to date

information

• Continuous

improvement

• Innovation

Accenture Value Realization Sapphire

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