Posted By: Andrew Hunt
We’ve all been there before. They usually happen at the start of Q1 or at the end of Q4 for next Financial Year.
Hint: It’s been described as “the value extracted from a process or project shown over time.”
That’s right – value realization. Let me paint the picture for you:
You’re sitting at one of those conference tables, likely littered with coffee mugs and paperwork, and there you are in one of those team visioning sessions, throwing around buzz words like synergy and collaboration, and you’re stuck once again defining the mission and goals.
Does that ring a bell for you? Great!
Value realization has become quite popular in recent years, appearing with increased frequency in sectors where it has never been used before. There’s a reason for that – successful companies have identified means for overcoming challenges to increase value from their initiatives and have developed a set of disciplines to manage investments.
Among these disciplines, value realization stands out as a critical discipline that reduces risk and can be built into each project phase to bring a value focus to the entire initiative.
A recent SAP Value Management Best Practices Survey; 630+ respondents; here were some of its Quantitative1 findings on value realization:
- 1.9x On Time Projects that deliver value on or ahead of schedule
- 1.5x On Budget Projects delivered on or below budget
- 1.5x On Value
(1) Performance of companies with high level of best practices adoption compared to those with low levels of adoption
With benefits like that, it’s no wonder “value realization” has become the business world’s favorite boardroom discussion. Down to business – I’m going to walk you through the process and tell you what it looks like.
Defining Vision, Mission, and Goals
I recall working with one of the world’s largest resources companies, where the team met to attempt to define what “Excellence” looked like.
We were aiming to define each of these terms (Vision/Mission/Goals) in a catchy elevator speech and found that wordsmithing this collectively was actually a bit harder than we initially thought.
The brief also required a definition on what we thought was most critical to the ‘Executive Leadership Team,’ as well as how we as employees could attain work-life balance. External factors, chiefly, the current economy, the technological landscape, and the industry we were in and environmental considerations, safety etc., were also part of the equation.
“Excellence is doing ordinary things extraordinarily well”.
John W. Gardner
You’ll be pleased to know as a team we got there and defined our Vision, Mission, and Goals for the coming FY. With hindsight, however, the results were academic only.
The Vision/Mission and Goals can be defined in a two-three day workshop – the Hearts & Minds – but it takes a lot longer. By Hearts and Minds, I mean real change in the company culture, working habits, and attitudes of the majority of the employees and other stakeholders. Key to this also is how well the leadership is respected:
- Do they exhibit integrity before their staff and stakeholders?
- Do they do what they say they will do?
- Do they drive efficiency and effectiveness with careful consideration for individuals?
After our Vision/Mission definition workshops, we drilled down and defined at a very granular level, the tactical project plans we needed to execute per individual per week.
This included clear milestones, measurements as well as qualitative and quantitative outcomes. This resulted in a one-page scorecard for the entire multi-billion dollar business. It looked a lot like this:
- Was this a successful Discovery Phase?
- Could it have been improved?
- What does history tell us?
- What is your community thinking in this space?
- Have you considered attending/hosting a Customer Success Day?
What to Define?
We considered what would occur if we did automate purchase orders, invoicing and service entry sheet creation. We also asked what is a realistic level of automation to start with and to increase/rework. It looked a lot like this:
- Did this mean we could lose headcount?
- Could we re-educate existing employees into more critical or strategic positions?
- What skills were missing to achieve this / did we need to change the team structure further?
We thought about how to reduce the number of requisitions coming through the system, how and when to measure our performance, and what should the perfect requisition look like…
Other questions included;
- Who should perform Automatic Goods Receipting & how do we handle Software//Corporate vs Site/Unloading Points?
- What are the appropriate tolerances, unplanned services, Inventory and MRP settings, Vendor Held or Consignment stock?
- An approach to Service Exchange, Free Issue Stores, Warehousing, Unloading Points, Barcoding, Warranty & Serialization?
- Do we have a One Time Vendor (OTV) or Non-Competitive Bid Waiver process?
- What are our governing policies, practices, processes & procedures?
- Should we split the teams into Services, Capital, Bulks & Critical items?
- What is the perfect organizational structure?
- Roles, Responsibility, Skills plus numerous additional considerations..
At SAP Ariba, we have a mature approach to defining value and creating a business case that ensures our customers are in pursuit of business outcomes (not software/technology).
We have more than a 100 people (pre-sales/post-sales) that support our customers in defining the Value Opportunity. This process has matured across the last eight years as we have perfected this model. Top line, we see our customers achieve a range of 2 to 4.5 percent savings (and more) in their source-to-pay transformations.
As a cloud company, speed to value is critical to our own success and expected from you as a customer.
We also have our goals and visions and strategy sessions and we use a fantastic approach, which we can perform in your business called “Design Thinking.” Have a chat with your CEE to request a session.
Enabling Real Value
The ANZ SAP Ariba Services team’s recently delivered a program for a large commodity company where they kicked off Upstream within a very short timeframe. The client faced some of the usual complexities relating to under-estimating the effort required for change management, the up-skilling of key people and how it’s a challenge to balance business as usual while learning new systems and processes.
However, they were very open to listening to our consultants on the ground, and they sought our advice as their ‘trusted advisor’. They explored our suggestions and recommendations and, excitingly, they actually executed them. They actually attended our Customer Success Day events, they accepted our invitations to connect with similar Buyers and they visited our other customers. Additionally, they attended meetings with other sourcing leads and hosted a Seller Summit where more than a 100 Key Suppliers attended and contributed.
These key activities delivered confidence immediately in the product and has led to a number of new exciting outcomes.
SAP Ariba Benchmark Program is an ideal place to begin the journey.
Have a chat with your CEE if you would like to explore these further.
Direction Measurement Optimization
How do you measure if you are improving, stagnating or heading in the wrong direction?
You need a reliable source of information that is consistent, available, accurate & flexible.
With the ability to see how and what was occurring across the procurement function, areas of focus could be identified and resources assigned. The noise from unplanned demand, urgent activities and reactive operations reduced and a smoother, more measured, more clinical, targeted sound could be heard. It also improved employee morale, which included some employees desiring deeper knowledge, greater flexibility, broader experiences followed due to the enhanced control.
The SAP Ariba Benchmark Program – world class, 70 + KPI’s, equal to that of a Hackett study, customized to your operation, and the Ariba Benchmark Program is a bit unique that we use your actual data from your application + your own additional inputs. Participation in this program is available in September and October.
A Tall Story Or Real Value?
I recently caught up with a good friend for a beer. We’d worked together for many years and know each other very well. He is a senior category manager for a large resources Giant.
Over the course of the evening, we talked about a number of topics and eventually we talked about work. He asked me what I was doing for SAP Ariba and I asked him how his company was finding the solution. I was expecting an answer such as, “it’s too complex, we need more training, I wish the solution automatically decided what my next activity should be.” Instead, he shared the following:
“Mate, it was awesome, we published an eAuction. Do you know what that is? Anyway, so we got the suppliers all competing with each other for 14,000 tons of Chlorate. We had three bidders – Chinese, Canadians and the Swiss. The Chinese incumbent was bidding around the same as the current price.
We’re all sitting back and watching the screen. We put it up in the boardroom. We were literally cheering at the screen and then in came the Canadians – bang – smashing the price and then a counter bid and before you know it, we’d locked in a new price that was $94 cheaper than starting point – that’s approximately $1.3Million in savings.”
Figure 1: Top Quartile Ariba customers are able to achieve 7.8% of sourcing savings (as a % of sourced spend)
You should check other customer success stories on the SAP Ariba website.
I was interviewing a Category Manager at a Heavy Industry Manufacturer recently and I asked her how her SAP Ariba Program was progressing. Here’s what she had to say:
“Well, you know the pain of change, the effort around implementation, the learning and all has been difficult. However, we did unlock around $700K in savings for IT Equipment last week. We conducted a 5 bidder RFP and awarded a new Supplier for IT Equipment Category.”
I asked, “Awarded last week? Are you planning an Integration?”
She advised one of the key decision points was the Vendor was a keen supporter of the Ariba Network (AN) and ready to begin an integration.
This may not sound that significant, however, the potential savings are real. APC Catalogue, AN transaction over the network means touchless Invoicing, PO transmissions, content rich search, greater compliance and many other benefits.
Figure 2: Top Quartile Ariba customers process 2.6X more invoices per FTE compared to average non-Ariba customer
Sometimes we can focus on what isn’t working rather than celebrating the successes, and building on them or learning from them and working out a way to apply them to other business challenges.
There is a huge amount of insight, networking, and information sharing available at SAP Ariba Live. This is where customers, suppliers, and organizations are invited to share their experience, learn of new developments, and see the power of intuitive and collaborative solutions.
Let’s be creators of our own successful history. See you at SAP Ariba Live!
Andrew Hunt has joined SAP Ariba as a Value Advisor Expert (Value Realisation). Similar to a Program Manager, he work’s with On Demand (Cloud/Business Network) Clients to embed and adopt solutions and gain leverage from the investment they have made. His portfolio includes both Private and Public customers across the Resources, Engineering & Construction, Agriculture and variety of Public Sectors.
His consulting background has provided him significant experience implementing end-to-end Strategic Procurement Solutions across a variety of geographies, helping clients achieve savings goals, reducing complexity of processes and increase governance and compliance.