Some personal musings on S/4HANA from someone with over 15 years R/3 experience across many business functions and R/3 roles.

The biggest change between SAP R/3 and S/4HANA does not come as technology. Instead, as individuals and organisations we must change our ERP mindset and join in with 21st century agile ways of thinking. 

I am aware of a number of organisations caught in a trap of chasing a lowest cost approach by batching software changes in their application portfolio. In some cases, the interval between upgrades has extended to an absurd cycle time of between 10 and 20 years. The dilemma between what has been achieved and what is needed is now so large the decision is overwhelming.

By way of contrast, 21st century consumer software uses DevOps, which is based on a Lean Six Sigma mindset:

  • Simple changes are created and replaced with a cycle time of hours
  • Work that ‘should not be done’ is continuously culled from end-to-end processes
  • Work that ‘should be done’ is simplified and automated, where possible, to improve value creation, cycle times, reliability and stability
  • The understanding of what ‘should be done’ is continuously re-examined in the context of the system as-a-whole so that
  • The majority of big improvements are business-as-usual and not a project

Paths to such a new mindset are difficult. To do so, we must face many hidden assumptions and long-held rules-of-thumb that have guided ERP decisions for the last 23 years. Some common, yet invalid, assumptions we need to reconsider before looking at S/4HANA are:

  1. Reducing costs is the goal – all decisions start and end with our cost goggles firmly in place. Unusual improvements and innovations are judged on assumed costs and quickly culled, even when there is a large improvement to customer value, system throughput, reliability and/or stability.
  2. Alignment is the vision – “If only we could align our services and processes across our extended enterprise we would solve the <<insert name of problem or objective>>”. A deeper assumption is “Our industry is so stable that …”.
  3. Efficiency is the objective – we define standard processes then extract efficiency of scale by levelling the capacity across the system. It is closely related to a deeper false assumption: Local optimisations add up to a global optimisation.
  4. Complex problems need complex solutions – in order to solve complex problems we need to understand all details and all interactions. Over time we add extra steps to respond to unexpected outcomes. Also known as the cycle of: “Yesterday’s solutions are today’s problems”
  5. Changes are slow – For stability we batch software updates into releases and projects with a cycle time of years. When there are risks batch changes into bigger groupings and extend the cycle time.

Unless we are prepared to selectively forget past thinking models based on invalid assumptions like these, we are fated to act the same old way long after Hasso Plattner and his team remove R/3 constraints in S/4HANA.

Thus the two key questions for S/4HANA have nothing to do with technology. Instead: For our organisation,

  1. What is the short list of S/4 work that ‘should be done’? And,
  2. What is the long list of R/3 work that ‘should not be done’?
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6 Comments

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  1. Yannick Peterschmitt

    Thanks for your post John. I guess that we are all making the same observiation “number of organisations caught in a trap”. I encourage all of you to attend the SAPPHIRE keynotes and learn from our most innovative customers, for which SAP S/4HANA is the enabler for completely new business models, like the possibility to reach millons of end consumers (B2C) with a personnal “product & service” offering. Here is the link to SAPPHIRENOW , where you can attend online as well. Hope this helps, Yannick

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  2. Carl Dubler

    I agree that we must change our “ERP mindset.” In addition, though, the IT department needs to change its own mindset of how it fits into the broader organization. IT leadership that can proactively connect the latest ERP technology with the strategic needs of the organization will get the freedom to do new things instead of being stuck in cost reduction mode. This is a constant theme in IT-business news lately (for example, here, here, and here).

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    1. John Rogers Post author

      Hi Carl and Yannick,

      Thanks for your observations. Carl especially like the links. Can also recommend The Phoenix Project by Gene Kim to all in IT.

      Lessons to share so far.

      1. It is part of a business led innovation – consider a side-by-side innovation centre where policy and rules come second to velocity. The CIO has a very important support role.

      2. All IT suppliers, internal and external, need to assessed for innovation readiness. A simply proxy is the skill levels applying Lean six sigma thinking.

      3. At the technical level the choice is greenfield, side-by-side, or in place. At the critical blockers in the thinking level, for success, greenfield is the first and best option.

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    1. John Rogers Post author

      Thanks Erich,

      I wholeheartedly agree with your recommendation. If there is only one video to watch for R/3 technical people, this is it!

      Kind Regards

      John

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