Many companies are struggling to come up with answers to a new reality which is forcing them to reconsider their markets, revenue model and value proposition. During these times of economic downturn, managers are struggling with uncertainty, declining revenues and squeezed budgets. An article in FD Outlook(1) (June, 2012) provided a nice insight in the difference in mentality between European and US based organizations in dealing with these challenges. In Europe, the main management focus remains on the financial thresholds, whereas in the USA a strong shift towards a strategic and operational focus is seen. The result of this changed focus is that both business operations and governance have a strong strategic orientation, which forces the organization towards “the initiation of innovation, processes and investments which will deliver on promise”.
As Osterwalder(2) describes in the book on ‘Business Model Generation’, this shift towards business model innovation is an important element in dealing with the challenges companies face today. Successful companies have embraced business model innovation and have found a way to handle the (especially technological) challenges which allow disruptive new business models to come into play.
“Business Model Innovation is hardly new. … But the scale and speed at which innovative business models are transforming industry landscapes today is unprecedented. … Ultimately, business model innovation is about creating value, for companies, customers, and society. It is about replacing outdated models.”
These new business models are highly innovative and require new organizational and operational models along with the design and implementation of new, innovative processes. All the good reasons therefore to embrace business model and process innovation in dealing with (and providing answers for) the challenges faced by companies today.
In ICT, we also still see a strong focus on the financial thresholds and less on the possible strategic value creation. The Total Cost of Ownership (TCO) is too often one of the main drivers for ICT management. In a rapidly changing ICT environment which is characterized by trends such as Big Data, Could and In-Memory Computing, Mobile and Social Media and Complex Event Processing (or ‘the internet of things’), this is however not the way forward. Few companies realize that the increasingly complex ICT environment will only increase their TCO in the future. Even fewer companies realize that capitalization of their IT platform will provide them with the capabilities required for business innovation, strategy execution and operational excellence. Research from MIT CISR(3) shows that companies operating from an innovative business model can actually make money from their IT Platform. This appealing concept of the IT platform as a capability for value creation and enabler of innovation strategies is further investigated and described in a series of articles from Ross et al. on ‘Working Smarter’(4,5,6).
By taking a different approach towards the IT platform and rethinking the IT platform as an enabler for change instead of a cost element we will be able to capitalize on our IT investments. When realizing innovative business models and processes, three main factors are identified for successful implementation of process innovation(1,3): the IT backbone, the Skills of People and the capability to Measure the strategic and operational indicators. In order to capitalize on the IT platform, it must be solid enough to boost confidence and guarantee performance, it must be flexible enough to support innovation and it must be smart enough to provide full strategic and operational intelligence.
Looking at SAP’s product portfolio I see a lot of elements in place that support the concept of the IT platform as a capability for value creation and enabler of innovation strategies. SAP traditionally has offered a solid IT backbone and current developments such as cloud and in-memory computing and the rapid deployment of targeted solutions (RDS) show SAP’s acknowledgement of the requirements placed on the IT platform by this new adagio. Shorter implementation cycles, design thinking, real-time reporting and big data processing capabilities are only some of the examples of SAP’s commitment to a strong, yet (more) flexible and customer oriented IT backbone.
An important and perhaps somewhat disregarded capability towards Process Innovation is the shift SAP made towards more standardized, out-of-the box functionality. This shift for sure has a technological background since the support for cloud solutions favors standardized solutions. The business function framework in the SAP Business Suite, Best Practice implementations and Rapid Deployment Solutions however also show that the shift from ‘make-to-order’ towards ‘assemble-to-order’ implementations have a deeper, more profound foundation. Characteristics of these implementations are out-of-the box solutions, standardized content, shorter implementation cycles and a (business) process oriented approach targeting specific processes and customer challenges.
Process Lifecycle Support
Another important capability of SAP is the support for end-to-end process lifecycles. Pursuing the BPM approach, improved tools for process management and process measurement have come into play over the past year(s). In the process lifecycle management area, we see improved integration between
- process design (Capability Based Planning, Process Repository and Business Process Blueprinting),
- solution design (Solution Builder, Process Composer, Pre-Defined Content from Best Practices, Industry Solutions and Rapid Deployment Solutions),
- solution implementation (Solution Manager) and
- solution governance (Solution Builder, Solution Manager).
I am currently also working on another blog regarding the integration of and the closed loop approach for these End-to-End Process Management capabilities in SAP in more detail, so stay tuned for that one…
Maybe even more important, the process measurement tools provided in the recent releases have dramatically improved by introducing the Process Observer, an “Infrastructure for Core Process Monitoring & Analytics” in the SAP Business Suite. Activation of this process monitoring framework provides the capability to extract operational process information from the SAP Built-In processes. This operational process information provides basic information for several process monitoring tools available from SAP such as Operational Process Intelligence (HANA), Process Gateway (NetWeaver Gateway) and Business Process Analytics (Solution Manager, BI). This enhanced process monitoring capability on top of the SAP Business Suite thus provides the information required for operational excellence, for strategic insight and therefore fulfills one of the requirements (measurement) for successful business model and process innovation.
SAP’s process innovation capabilities
All in all, SAP has positioned itself pretty decent to support the move towards the ‘IT platform as a capability’ adagio and SAP’s customers are in the front row when it comes to capitalizing on their IT investments. Now all it takes is to evangelize the message that the IT platform is actually capable of creating value, not just making costs, and that the path towards business and process innovation is paved with SAP products supporting the BPM Lifecycle.
1 Nieuwe bestuurscode – Kennis is een bonus waard”, FD Outlook, Jaargang 5, nummer 2, Juni 2012 (Dutch)
2 A. Osterwalder and Y. Pigneur, “Business Model Generation”, ISBN 9780470876411
3 J. Ross, C. Beath and K. Johnson, “Driving Value from the Data Deluge: Lessons from PepsiAmericas“, MIT CISR Research Briefing, Vol.X, No. 3, March 2010 (Revised January 2011)
4 J. Ross and A. Quaadgras, “Working Smarter: The Next Change Management Challenge“, MIT CISR Research Briefing, Vol.XI, No. 1, January 2011
5 J. Ross and C. Beath, “Working Smarter: The Digital Economy Is All About Your People, MIT CISR Research Briefing, Vol.XII, No. 2, February 2012
6 J. Ross and C. Beath, “Working Smarter: Leveraging Information for Group Decision making“, MIT CISR Research Briefing, Vol.XII, No. 4, April 2012