Intelligent technologies with SAP S/4HANA: How to identify what is relevant for your business
In this article, based on our project experience as digital innovation managers at dozens of customers, we showcase a guided way (or a ‘jump-start’) to explore the use of intelligent technologies in the context of SAP S/4HANA to automate and optimize your business processes.
Intelligent technologies and the impact they are having is no longer a futuristic vision or a playground for a few big names. Machine learning, robotic process automation, and the Internet of things have arrived in everyday life and provide concrete and tangible applications in business processes, from predicting delivery delays to proposing new purchase contracts. Although the path to becoming an intelligent, perhaps even partially autonomous, enterprise seems to be sometimes nebulous, there is a solid basis for starting this innovation journey in the ERP context. At this step, companies are faced with the major task of identifying which of the many state-of-the-art technologies and application scenarios are relevant for them, how they can be used, and what the added value is.
Let us summarize some of the frequently asked questions:
- What intelligent technologies exist and how do they work?
- Which use cases of intelligent technologies exist in which user department/process?
- What is the relevance and added value of these use cases for my business processes?
- What architecture, data, and knowledge are required so that I can uncover this business value?
In the next parts, we aim to set out a guideline that makes it possible to address these questions in a very targeted way. The guideline, which is part of Business Innovation Framework for SAP S/4HANA, is the result of numerous project experiences made by a variety of experts and consultants from intelligent technologies and SAP S/4HANA areas.
Value added by intelligent technologies in ERP
It is a simple but often forgotten truth: adopting intelligent technologies should never be a goal, but only a means on a way to tangible, identifiable business value. This includes, for instance:
- Accelerating business processes and increasing user efficiency/productivity by reducing manual activities
- Reducing error rates with intelligent system supports
- Enhancing decision-making through predictive analytics and reporting.
Increasing employee satisfaction and motivation is an essential value driver, which is sometimes underestimated. Who likes to get upset about things that are avoidable or spend time on tasks that are unnecessary? This is particularly important considering that new generations have very high expectations towards their employers when it comes to value-bringing activities and user-friendliness of IT systems.
Yet another way to approach the topic would be from a sustainability perspective. Reducing unnecessary process steps helps avoid ‘waste’ or “Muda” (a Toyota production environment term). The use of intelligent technologies therefore makes a valuable contribution to the sustainability of your company, although it is rarely evaluated in monetary terms at present.
So how and where to start?
From existing use cases to visionary ideas
Intelligent digital technologies are still mostly a black box for many companies in the context of SAP S/4HANA and are often associated with a high level of complexity and expertise. Businesses can be reluctant to address the new issues, as the influence and concrete possibilities are still largely unknown. This makes it even more important to get a meaningful picture in a timely manner: what is the end goal, how to reach it, and where to start?
Let us visualize this journey with three symbolic innovation horizons (see below).
SAP S/4HANA by itself is already the first innovation horizon for many companies and, with the available standard, undoubtedly lays the necessary foundation for intelligent processes. Many intelligent ERP capabilities such as automated purchase order confirmations or predicting slow- and non-moving stock are already prebuilt for the latest SAP S/4HANA releases. Activating them helps you optimize your current business processes, automate non-value adding tasks and process steps, and let people focus on tasks that need their attention instead of steps which can easily be done by the system.
Although the journey starts by building on a solid basis such as an SAP S/4HANA system, small innovations for particular functionalities should also be considered, such as new business applications being developed with SAP Fiori and agile methodology.
The next horizon expands the capabilities of SAP S/4HANA, enabling companies to create their own machine learning models or RPA (Robotic Process Automation) bots and deploy them in their processes. So, if there is no prebuilt intelligent capability for an existing business requirement yet, or if it is very specific for your company, we use existing digital technologies and apply them in other settings (moving into the outer horizon on the diagram above).
Finally, digital leaders also address another horizon that goes beyond the picture shown and are already looking at the influence of emerging technologies on future process design. The analogy to autonomous driving can be used here as an example. While some companies are just licensing manual gear, others are already dealing with autonomous financial systems, exploring how to use emerging technologies and studying their impact on business. Here, SAP draws its next joker from the innovation ecosystem: the Innovation Center Network, which deals heavily with strategic technology management.
A question that is often raised at this point: when should a company best deal with it and how exactly does this work?
When and how can intelligent technologies be addressed?
In practice, it is evident that the most effective approach is to highlight intelligent technologies and their effects already in the context of SAP S/4HANA preliminary studies, since the topics identified in this way can be considered in transformation planning. This saves important implementation time and ensures that the latest topics are incorporated directly into the transformation while a state-of-the-art system is set up and processes are defined. However, the approach listed below can be used at any time before, during, or after your journey to SAP S/4HANA.
How to identify where you can use intelligent technologies already?
Essentially, these are four key steps that result in a concrete roadmap with prioritized topics. The focus is on a holistic look at the use cases of intelligent technologies, rather than just examining individual use cases. The fifth step already goes beyond a roadmap right into the implementation of prioritized topics.
Step 1 – The first step is to align the strategic priorities and define the scope.
This step sets the foundation and the overall scope for the next steps and addresses the following questions:
- What goals does a company hope to achieve?
- Which business areas, processes, and general topics are in focus?
- What are the plans for the SAP S/4HANA transformation?
- Should the analysis be carried out on its own or integrated in an SAP S/4HANA pre-study?
- Which technologies does the company already have expertise in?
Once the scope is defined, key priorities for further data-driven analysis are set.
Step 2 – Fast and simple data-driven analysis as a supporting tool
In the second step, the approach can be supported by a data-driven evaluation using SAP Process Insights and a first recommendations in a one-time Process Discovery report (the given link also provides information on how to request this report).
A simple and fast data upload is used to evaluate SAP ERP system usage data and generate an interactive report. This report highlights the potential for optimization and automation of key process steps and provides recommendations for the activation of intelligent capabilities. In addition, there is a benchmark that compares your business process performance and functional usage with those of industry peers.
Analyzing the report results provides valuable insights into which activities are most manual and which aspects of process performance could be improved. Although this interactive report can be seen as optional for intelligent process discussions, it enables you to categorize and filter initial use cases based on their potential for optimizing your own processes.
Step 3 – Assess existing use cases in process workshops
To evaluate the relevance of the existing use cases for business domains such as procurement or supply chain, workshops with process and IT experts are crucial. Those workshops can best be structured by process (at least several hours for one line of business) to identify business requirements and pain points, discuss the value of selected use cases, demo them in the system, answer existing questions, and finally make a prioritization.
If new topics arise for which no intelligent capabilities exist yet or are only being planned – so we are in the second innovation horizon –experts make an initial assessment of which intelligent technology could be used to address the scenario. It is also important to identify ‘quick wins’ that help reduce potential fears that users might have in terms of dealing with new technologies and demonstrating the value added to their work.
Step 4 – Define an intelligent ERP roadmap for your business
To define the next steps, a roadmap featuring prioritized use cases can be employed, adding structure and a clear timeline. On top of it, a central target architecture combining use cases in building blocks provides additional guidance as a basis for decision-making.
Prioritization of use cases and topics should happen in close alignment between process experts/owners, IT experts, and innovation departments (if those are available). This allows us to avoid effort duplication and define responsibilities and timelines, also taking into account other projects, such as SAP S/4HANA transformations, that might be simultaneously taking place.
Step 5 – Implementation aka make intelligent processes real
Companies are increasingly addressing the topic of intelligent technologies as part of their SAP S/4HANA planning and preliminary studies. Why? Integrating prioritized use cases in the actual transformation project and further innovation governance within a dedicated innovation stream ensures achieving business value with intelligent cases early enough. Increasingly, companies are launching ‘speedboats’ as part of agile pilot projects in advance of the actual transformation program, to gain immediate experience and ‘fail early, succeed early.’
If a SAP S/4HANA program is already ongoing, activating selected intelligent capabilities is valuable and advisable; however, starting a full innovation stream withing an ongoing project is often a challenge as the schedule is busy, structures are defined, and resources are allocated.
If SAP S/4HANA has already been implemented, the use cases can be implemented successively as part of the continuous improvement of the processes and the added value can be realized to ensure that all capabilities of state-of-the-art technologies are used at all times and that no “outdated” ERP system is in use. Business process intelligence, in particular, will have an increasing influence here in the future.
Companies are increasingly concerned with the use and impact of state-of-the-art technologies on your core processes and systems. Some digital sprinters are already far ahead while others are just tying their shoes. This can and will lead to wide distances between companies and ‘lying low’ does not remain unpunished. With a pragmatic and comprehensive approach, it is already possible today to identify relevant use cases and the potential of intelligent technologies in SAP S/4HANA and create a custom roadmap to intelligent ERP as the foundation of an intelligent enterprise. Ideally, this consideration is already added to the planning of the SAP S/4HANA transformation, and the topic of innovation is explained from the start to the “key issue” so that it gets the attention it needs to avoid making it a topic for “sometime” and losing valuable time in the digital transformation to the competition.
Most importantly, digital transformation is not only about technologies and new systems. Building the right organizational skills and employee knowledge in this area is an essential and mission-critical factor that is all too often underestimated today. It is the users of the new systems that benefit tremendously because they can increasingly focus on essential and value-adding tasks. Employees are increasingly providing the right impetus, and, at the same time, it is the responsibility of managers to lead by example on the path to becoming a more effective, efficient, and sustainable company and to making intelligence and innovation its integral part.
About the authors:
As SAP’s team for digital technology and innovation management Middle and Eastern Europe, we are always available for questions and suggestions about intelligent technologies, technology foresight, agile project methodology, strategic partnerships, development of digital business models, and sustainability. Read more about how we approach digital innovation.
What is your approach to intelligent ERP and building future-ready skills and capabilities in your organization?