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 Editions of this series: MarketTrends@ERP (1) Market trends and expectations from usersMarketTrends@ERP (2) Market trends and optimization of processes – 3 

 

Looking back some weeks of heavy interaction with customers and partners which same as we all, are facing tough economic times – this is what found my interest and wanted to share with you.

 

Key findings

We can see that companies will trim their budgets in economic tough times for sure. They might slow hiring plans, perhaps extend the use of their assets, maybe slow down projects and shift upgrade plans.

But feedback also shows that companies will not postpone strategic business initiatives like:

  • investments in business intelligence and performance management software to support decision making – insight
  • Product innovation and development in high-tech and other industries that compete with short product lifecycles – innovate
  • Anything that helps companies to imprive and standarize processes, as well as better manage risk in a global business – efficiency

Leading global experts, like Bain & Company, suggest the top 5 strategies to weather the current economic conditions are: 

1.       Slash operating expenses

2.       Improve cash flow & liquidity

3.       Optimize working capital & debt

4.       Act now on efficiency initiatives

5.       Focus on customer retention

Source: Bain & Company, 2008

But how to develop the insights to this priorities? We did hear mainly two main tasks:

  • Companies should capitalize and analyze existing data to identify new improvement opportunities 

For example: Watch your cash – Install a tight cash management system, reduce and postpone spending and focus on cash inflow. Have a weekly report on your cash position and the mid term development based on expected payments and receipts.

  • Companies should leverage detailed understanding of business processes to qualify opportunities 

For example: Start working capital initiatives – a lot of companies have poor processes to monitor their working capital. So it comes as no surprise that the potential savings from optimizing a company’s working capital can be substantial.

 

To optimize business processes, business best practise plays a crutial role. So the recommendations we did hear where mainly around:

  • Leverage operational expertise to identify breaks in workflows and processes
  • Identify outdated processes, bottlenecks, redundancies and manual steps
  • Take the 80/20 approach and develop a short list of initiatives

 

During these tough times, many companies will focus on cutting costs, but the best companies will also look to gain competitive advantage for the long term. With the economic and energy issues going hand in hand, one opportunity is to use the energy and environmental crisis to your advantage.

While it certainly makes sense to control IT spending in a downturn, equally important is taking a long view on technology investments. Recessions are often a very good time to undertake infrastructure updates, process improvements, and application deployments. Technology buyers have maximum purchasing power in a down economy, internal and external resources are more readily available, and the implementation process can often be a catalyst for the kinds of new ideas and innovative business models that lead companies out of recessions.

Another crisp description we could see in the attached document for the 6 priorities for today´s economic climate

Manage cash

Liquidity management becomes an integral part of an organization’s core processes. The ability to reduce leverage and increase cash flow through working capital practices enables organizations to support long-term cash needs.

Run lean operations

You can reduce internal costs by improving employee productivity and streamlining operations. A deeper look into your operating model through crossenterprise visibility can result in significant savings.

Drive compliance activities

Ready your organization now to support the next wave of regulations that the International Financial Reporting Standards (IFRS), the Registration, Evaluation, Authorization and Restriction of Chemicals (REACH), and others will bring.

Get closer to your best customers

Segment customers by risk, size, and value so that you can optimize sales potential by offering targeted, value-based pricing.

Reatin your top talent

Create programs to retain top talent and to build a team that can help your company achieve its five-year growth objectives. As others reduce capacity, be opportunistic and leverage this unique opportunity to recruit the right team.

Protect and nurture your brand

In tough times, retaining profitable customers and reaching out to new ones requires greater innovation and dedication. This can be done through new products, services, and strategic acquisitions.

http://www.sdn.sap.com/irj/scn/go/portal/prtroot/docs/library/uuid/a0ca7566-b2a3-2b10-f790-a440782261ac

 

Downturns are an opportunity to refocus energy and efforts. While they bring uncertainty, they also offer the chance to put some of the more tactical building blocks in place to meet the overall, longer term goals of the business.

Thanks to the contributors and let me know your thoughts and watch out for the next blog.

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2 Comments

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  1. Tao Zhang
    Dear Mr. Sven Denecken:

    Firstly thanks for your article, I learnt so many helpful experience from you weblog! It can give me big support to optimizing our SAP solutions, in order to weather the storm. I think this is the task for all SAP solution consultant! But it’s great that we have the SAP Community Network, we can learn each other to get the best practice here.

    So thanks again! Have a good day and nice weekend.

    Best regards
    Tao

    (0) 

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