value management organization - sapland.ru · lifecycle © sap 2009 / value academy / confidential...

Agenda

Value Management Organization

Value Realization

Value Optimization

© SAP 2009 / Value Academy / Confidential /

What is ‘Realized Value’ ?

Quantified benefit achieved– have projects met or

exceeded the level of benefit expected?

Realized Value is defined in terms of:

Timing of achieved benefit – was value realized before

target, on-time, or after target?


Does Process Change Impact Realized Value?

With a Business Case and Roadmap in place

many companies still run into Challenges

Roadmap

Business

Case

Best & Brightest

are consumed

with operations

Lack of Program

Value Metrics

“On-time, On-budget”

Focus

Lack of Ongoing

Value Review

Unable to Ensure New

Capabilities Deliver Value

Funding

Approved

Processes strategy

& objectives are

unclear

Confusion on

Program Charter

Lack of Org.

Readiness

Organizational Culture,

Technology Factors

Failure to achieve business results

Excessive TCO

Delayed Time to Value

Companies Face Many Challenges in Achieving the Intended Value of Their Investment

Budget is lower than

requested


Value Realization

Mission Alignment Organization-wide mission clarity

Scope and benefit reconciliation

Operational expectation setting & buy-in

Design for Value Translating benefits to process change

Mapping process change to solution design

Ensuring non-application designs: Policy, roles,

procedures

Measurement & Accountability KPI definition and specification

Integrating KPIs for management

Defining accountability

Creating organizational discipline by design

Value

Lifecycle


What is Collaborative Value Realization?

Collaborative Value Realization is the process undertaken to make the business case

actionable and measurable - it is the bridge between the business case and solution design.

Value Premise:

Business value results from process

change; technology is an enabler

Process change optimizes value

achieved

Approach Objectives:

Business and project teams with a

common vision and path for achieving

results

Defined framework of KPIs for value

tracking and management post-

implementation

Clear ownership and accountability for

on-going process change and value

results

Foundation for validating that design

and implementation activities support

business case objectives


Business Case is the Entry Point to Value

Realization

Direct Materials Procurement $119 M $149 M

Reduced Global and PO Price Gap $61 M $69 M

Reduced Spend via Parts Consolidation $13 M $19 M

Increased RFQ Automation $29 M $39 M

Reduced Spend via Delaying Purchases $16 M $22 M

Supply Chain Management $43 M $68 M

Reduced Inventory (One-time)

Reduce Obsolete Inventory

Reduce Inventory Carrying Costs $16 M $23 M

Reduce Expedited Transportation $17 M $26 M

Reduce Freight Costs $10 M $19 M

Manufacturing $5 M $7 M

Reduce Labor Expenses $3 M $5 M

Reduce Non-Labor Expenses $2 M $2 M

Conservative Estimate

Likely Scenario

One-time benefit

$189 M $254 M Potential Annual Benefits:

Potential One-time Benefits: $176 M

Quotation Management $7 M $10 M

Improved Margins for New Quotes $5 M $7 M

Improved Quoting-related Efficiency $2 M $3 M

Human Resources $7 M $10 M

Reduced Employee Turnover $4 M $6M

Increased Manager Self-Service $3 M $4 M

Finance/ Analytics $8 M $10 M

Improved Analytics-related Efficiency $4 M $5 M

Reduced Treasury Transaction Cost $4 M $5 M

$120 M $150 M

$15 M $26 M

Source: Company ABC data and SAP analysis

$176 M


Mapping Value to Process Change is the Key!!

Business Case Strategies

Benefit Targets

Value Mapping

Process change requirements

Connect the business case to solution design

Accountability

KPI Definition

Financial metrics

Operational metrics

Data sources/ownership

Baselines/Targets

Policies

Roles

Decision

Support

Dashboard

Value Enablers

Rethinking Execution Approaches With New

Business Commitment Is Essential

Implement Support and Improve

Co

sts

Go Live

Time

Build

Run

Process

Design

Build costs snowball when process design is not determined


Implement Support and Improve

Co

sts

Go

Live

Time

Readiness Requires A Well Defined Business

Process

Plan

Early process performance analysis & optimization lowers implementation costs and

moves the ownership to the business.

Build

Process

Improvement

Process

Analysis

& Design

Run


What is Value Mapping?

Value Premise:

Business value results from process change; technology is an enabler

Process change optimizes value achieved

Approach:

Start with each key benefit opportunity (e.g. reduction of days sales outstanding)

Determine what key process changes are required to help realize that benefit

opportunity

Determine how to measure the key process changes in a meaningful way

Develop KPIs that are meaningful, measurable and support the attainment of the

key benefit opportunity

Establish ownership of process changes and KPIs

Why Value Map?


Group key process changes from multiple Value Maps by functional team

Communicate operational program benefits for improved change management

Set expectations early for benefit delivery accountability

Maintain Value Maps as “living” documents to be reviewed during each phase of

the implementation and post implementation assessment

% of indirect spend off contract

Indirect spend as a % of revenue

Deductions as a % of sales

Distribution and Logistics Costs as % of COGS

Operational Charge Backs as % of Revenue

Department costs as % of SG&A/Revenue

Department Costs as % of Revenue

Sample Financial

KPIs

Sample

Benefit Areas

Sourcing and

Purchasing

Operational Execution

Distribution Revenue

Reporting

Enterprise Data

Management

Constituent Service and Compliance

Service costs per constituent

SLOB inventory as % of total inventory

Simplifying

our Business

Driving

Productivity

Benefit

Objective Business Imperatives

$ XXX

$ XXX

$ XXX

$ XXX

Benefits/Value

Implement warehouse operations and policy improvements

Reduce Indirect Spend

Improve service delivery costs

Standardize financial reports and process definition

Reduce of disputes and write off’s

Leverage global competency for master data definition

Reduce finished goods inventory

Value Realization: Benefit Case

Decomposition


$ XXX

$ XXX

Reduce financial reporting costs ($XXM)

Financial reporting costs as a % of SG&A

Financial KPIs Benefit Objectives

$xxM

Financial Reporting

Benefit Areas

Owner Process KPIs

Key Process Changes –

Visibility & Compliance

Automate manual processes and reduce dependence on offline un integrated tools for the analysis and reporting of financial information

Reduce the time required to “interpret” performance by developing and implementing a standardized set of financial KPIs across locations, agencies and countries.

Improve productivity by developing automating and implementing

a “package” of standardized financial reports that substantially reduce the number of ad hoc reports currently supplied

Use workflow to notify users of report availability to reduce manual effort and or distribution costs

Increase the use of ESS for basic report generation to reduce and/or eliminate the cost of basic reporting

Number of applications used

for AOP and forecasting

Average FTEs involved in Financial reporting

Percent of reports converted to workflow notification

Percent of reporting requirements managed through ESS

Value Map: Reporting Example

Owner

Bill Moore

Mike Jones

Rick Upton

Pete Rose

Pete Rose


KPI’s measure the value of the process

change!!

Business Case Strategies

Benefit Targets

Value Mapping

Process change requirements


Accountability

KPI Definition

Financial metrics

Operational metrics


Baselines/Targets

Policies

Roles

Decision

Support

Dashboard

Value Enablers

Measuring Drives Time-to Value

Measurement Is Essential to Improve Time-to-Value

No Measurement

of Value

Measurement

of Value

On-time or

Better

Source: 230 participants in ASUG/SAP Value Realization Survey Findings, 2006

Programs that measure quantitative benefit

attained Measurement drives benefit attainment

11%

On-time or

Better

73%


Key Performance Indicators (KPIs)

KPIs are defined at two levels

Financial KPIs – measure performance of specific Benefit Objective

Often impacted by influences external to program

Operational KPIs – measure performance of business process; tied to key process changes

Establish framework by which to measure if program is executing what it committed to

support the financial Benefit Objectives

Operational KPIs are the leading indicators that results are being achieved; Financial KPIs

typically lag

KPIs can be of different types

Program lifecycle

Measurement begins and ends with the life of the program

Commonly used to monitor system and process change adoption

Ongoing

Measurement begins during the program, and continues as a standing metric

Commonly used to monitor benefit realization, and process change impact and/or

compliance

Key Process Change Value Driver

Enable transactional capability to enforce and increase purchasing

users/buyers to execute orders against enterprise agreements/POs

minimizing compliance oversight to exception only situations (IS3)

Reduce Indirect Spend

KPI Owner Baseline/Target

% of orders against existing agreements/POs Mark Ford ??/TBD

Definition Calculation

The percent of total orders that utilize existing

agreements or POs

Number of orders that utilize existing agreements or POs / Total orders

Used by Reporting Frequency Drill Down Capability Planned Data

Sources

Reporting Method

COO

Global Procurement

Category Lead

Global Procurement

Analyst

Plant Manager

Buyer

Annually

Monthly

Total

Category

Sites

MM

EBP

ECC/BW

KPI Attributes: Indirect Spend

Example-Contract Compliance

Defining Value Attributes For Real Operations

Business Case

Strategies

Benefit Targets

Value Mapping

Process change

Solution enablers

KPI’s for performance

Accountability

KPI Definition

Financial metrics

Operational metrics


Baselines/Targets

Value Enablers

Policies

Roles

Decision

Support

Dashboard


Example: Value Enabler Map-Contract

Compliance

Key Process Change KPIs

A1 Develop Contract Management and Compliance discipline to manage contract/agreement

execution, value capture (i.e. discount/rebate), contract expiration notification, etc

% Spend to Contract

% Contract Compliance

Value Enabler Enabler

Type

Supporting Information Owner Planned

Completion

A1a Develop process to

manage contract

lifecycle including both

Legal Contracts and

Transactional

Contracts/Catalogs

Expiration risk

Rebate thresholds

Purchase discounts

Spend to target

Contracted savings

Process Importance: The contract lifecycle, including both legal and

technical contracts, is complex. The complexity of this end-to-end

process introduces risk of lost savings opportunity (unrealized

rebates or discounts, unexpected contract expiration, etc.). In

addition it may lead to faulty compliance. To avoid savings and

compliance shortfalls, a well defined contract lifecycle

management process with appropriate analytics must be in place

Challenge: Process complexity with cross-organizational

handoffs and multiple systems

Objective: Develop a process that eliminates the risk of lost

savings and compliance failure

[Name] [Date]

A1b Obtain mandate from

management through

clear communication of

Compliance policy

Consequences of

non-compliance

Governance Importance: Understanding that compliance is a management

priority and understanding the ramifications of failure to comply

are both necessary for meeting compliance objectives

Challenge: Providing a consistent message across all divisions

Objective: obtain a clearly articulated management mandate for

contract compliance and the consequences of non-compliance

[Name] [Date]


Example: Supply Chain Value Design Checklist

for Blueprint

Design Checklist

Team: Demand Planning

Key Process Change: Implement Consensus Forecasting to drive sales and operations planning

Process Change

Definition

Supporting Blueprint

Elements

Review

Status

Reviewed

By/Date:

Comments

Change

Characteristics

1. Provide 3 month mid term

forecast at the SKU level

2. Enable consensus

forecasting with workflow

Performance

Objectives

1. Consensus Forecast Cycle

Time less than two Weeks

2. Improve forecast accuracy

by at least 5%

Value Audits

Gates incorporated into the overall program plan

At close of Blueprint and at close of Realization (minimum)

Assess level of support of the Business Case by the total

solution (systems and processes)

Use Value Maps, Design Checklists, and Value Enabler plans

as basis for assessment

Assess impacts – positive and negative – to the Business

Case

New sources of value

Larger than anticipated favorable impact

Scope changes

Lack of solution design, enabler execution

Document identified risks, and mitigation strategies if

applicable, for achieving the Business Case results

Performance Management Process

Post-Implementation

Process confirmed during Realization

Documented process for value management post go-live,

including monitoring, reporting, and exception handling

Process steps

Tools

Participants

Roles/responsibilities

Timing/frequency

Establishes the use of KPIs for monitoring and tracking of

process change and value attainment

Identifies areas or processes that may need intervention to

reach target performance levels

Reinforces culture of performance management and

measurement post go-live


Quality Gates are Recommended to ensure

Value Attainment

Business process

design

Solution

development &

testing

Refinement of

cost and key

metrics of success

(KPIs)

Prototype (when

possible)

Gate #1 Gate #2 Gate #3 Gate #4 Gate #5

Value

Capture

Value

measurement

& TCO

Optimization

Every program has to follow the full project lifecycle:

specific criteria has to be met at each gate before more resources and funding are approved.

Value

Realization

Solution

implementation

& users

training

Value

Blueprint

Solution

blueprint &

operational

KPIs

Business

Case

Value

proposition

and

accountability

Project

Proposal

Project merits

and clarity of

the business

needs

High level

business case

Options and

resources

requirements

Project

category:

(value, risk

management,

innovation)

Detailed

business case

(cost, value,

timeline,

resources, SLA,

solution

architecture)

Options analysis

Business value

ownership

Risk

assessment

Solution

Implementation

User training

and knowledge

transfer

(consultant)

Establish

power users

Measure KPIs

baseline

Optimize

business process

and track every

KPI

Manage solution

support cost

Reward team

Benchmark

against best

practices and

continue

improvement © SAP 2009 / Value Academy / Confidential /

APPENDIX

© SAP 2007/

Challenges to Realizing Value

What are your organization’s top 3 challenges?

1. No business accountability for initiative success and benefit

achievement

2. Unclear connection between business mission and program

execution

3. Ineffective adoption of change, or an unwillingness to

change

4. Lack of alignment of process design with business case

5. Project success declared at go-live; focus then shifts

6. Definition of project success does not include quantifiable

value

7. No process to review benefits during the implementation

phases

8. Dynamic nature of benefit drivers (org changes, market

changes)

9. Lack of executive visibility to process performance progress

10. No structured performance management process after

go-live


Value Should be the Key Criteria for Project

Selection to Ensure Alignment to Mission

0

Mission

Alignment

& Readiness

1

Project

Preparation

2

Business

Blueprint

3

Realization

4

Final Prep

5

Go-Live

1. Align leadership

2. Translate mission to operational objectives

3. Clarify strategy & mission (including KPI’s for success)

4. Reconcile scope, budget and consensus business case

5. Validate process & organizational readiness

6. Communicate to inspire the enterprise


Integration of Value Realization Techniques

into Your Project Begins in Project Preparation

0

Mission

Alignment

& Readiness

1

Project

Preparation

2

Business

Blueprint

3

Realization

4

Final Prep

5

Go-Live

1. Place value as first guiding principle of prioritization

2. Establish VR disciplines for decision making

3. Ensure governance structure for business process ownership & accountability

4. Integrate value realization (VR) methodology into implementation methodology

5. Train teams on roles for VR enablement

6. Assign program business case owner for executive tracking and decision impacts

7. Map value objectives to process change (Value Maps)


Role of Value Mapping with Solution

Blueprinting

Provides value-centric process change objectives to help onboard the blueprinting team

Associates critical or unusual systems configuration or development requirements to specific

benefit objective

Defines the KPI requirements that need to be designed into the solution

Identifies new operational data that will be used to support new processes

Manages conflicting priorities between business process design requirements,

systems/technical solutions and project management

0

Mission

Alignment

& Readiness

1

Project

Preparation

2

Business

Blueprint

3

Realization

4

Final Prep

5

Go-Live

Audit For Value

Discipline Requires A Solid Methodology

0

Mission

Alignment

& Readiness

1

Project

Preparation

2

Business

Blueprint

3

Realization

4

Final Prep

5

Go-Live

1. Audit design and value enablers for full benefit realization

2. Review performance management approach for after go-live

3. Confirm executive alignment with performance strategy

4. Build dashboards for executive visibility and action


Managing to Performance Goals

Discipline Requires A Solid Methodology

0

Mission

Alignment

& Readiness

1

Project

Preparation

2

Business

Blueprint

3

Realization

4

Final Prep

5

Go-Live

1. Establish cadence for performance to objectives reviews

2. Reconcile metrics with management objectives

3. Monitor corrective action and impact on performance

4. Use dashboards to track performance to goals and alerts for risk


Graphical Value Map: Reduce Indirect Spend

P1

Contract Management and Compliance

discipline to manage contract/agreement

execution and value capture

P3

Automate sourcing activities such as

RFx/Bidding/Auction to reduce

processing, cycle times and add

incremental cost reduction

Use simplified single point of entry for master

data and purchasing documents

P4

Leverage supplier-side automation such as supplier self-service, ASN, PO notifications/status, ERS, to reduce manual effort

P7

Implement supplier performance score

carding for supplier rationalization

P2

Develop, formalize and implement strategic sourcing methodology to reduce supplier community, leverage global spend, and speed up sourcing cycle

P6

Use workflow to facilitate master data

creation and maintenance

KPI: % Contract Compliance; Spend to Contract

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Average Strategic Sourcing Event Cycle Time (Days)

Business Owner:

Project Team Owner:

KPI: Spend per procurement FTE ($MM)

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Procurement Transactions per procurement FTE

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Number of Suppliers per 80% spend

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Average Sourcing Event Savings %;

# Sourcing Events

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Procurement admin expense as % of total spend

Target Improvement:

Business Owner:

Project Team Owner:

KPI: Indirect material spend as % of SG&A

P5

Reduce Indirect

Spend Owner:

Example of Tabularized Value Map

Business

Objective

#

Value Driver

(Process Changes)

KPIs Comment

Process

Team

Project

Owner

Business

Owner

Reduce

Indirect Spend Indirect spend as a % of SG

& A

Reduce Indirect

Spend

IS1 Contract Management and Compliance discipline to

manage contract/ agreement execution, value

capture (i.e.. discount/rebate), contract expiration

notification, etc

Percent Contract Compliance

Spend to Contract

MRP

Reduce Indirect

Spend

IS2 Develop, formalize and implement strategic sourcing

methodology to reduce supplier community, leverage

global spend, and speed up sourcing cycle to enable

more sourcing events/year

Average Event Savings Percent # of Events

MRP

Reduce Indirect

Spend

IS3 Adopt automation of sourcing activities such as

RFx/Bidding/Auction to reduce processing, cycle

times and add incremental cost reduction

Average Strategic Sourcing

Event Cycle Time (Days

MRP

Reduce Indirect

Spend

IS4 Leverage supplier-side automation such as supplier

self-service, ASN, PO notifications/status, ERS, to

reduce manual effort

Procurement Transactions per

procurement FTE

MRP

Reduce Indirect

Spend

IS5 Use simplified single point of entry for master data

and purchasing documents

Spend per Procurement

Resource ($mm) MRP

Reduce Indirect

Spend

IS6 Items can be set up for purchase only through

approved suppliers and channels

--% spend/orders executed via

existing contract MRP

Reduce Indirect

Spend

IS3 Implement supplier performance score carding for

supplier rationalization

Number of Suppliers per 80%

spend

MRP

Value Drivers – Reduce Indirect Spend

Graphical value maps should be put Into Tabular Form for easy tracking

KPI Readiness

Value Enabler Status

Status/Planned Completion

Process Area KPI Business

Owner

Business

Alignment Baseline Target

Measurement

Process/Tools

Indirect spend Percent Contract Compliance

Spend to Contract

Larry

Taylor Complete Complete Complete Complete

Indirect spend Average Event Savings Percent

# of Events Larry

Taylor Complete Complete Complete Complete

Indirect spend Average Strategic Sourcing Event

Cycle Time (Days Nancy

Thompson Complete Complete Complete 01/15/09

Indirect spend Procurement Transactions per

procurement FTE

Nancy

Thompson Complete Complete Complete 2/11/2009

Indirect spend Spend per Procurement Resource

($mm) Nancy

Thompson Complete Complete Complete Complete

Indirect spend --% spend/orders executed via existing

contract Nancy


Indirect spend Number of Suppliers per 80% spend Nancy



Value Audit:

Example Business Case Impact Summary

Benefit Baseline

Target

Revised

Target

Impacts Action Required Target

Impact

Reduce

Indirect

Spend

7.8 M 7.9 M Some existing contracts will

not expire soon enough to

achieve planned benefits

Renegotiate contracts

where possible

0

Auctions implementation will

be delayed by 6 month

Revise benefit target -200 K

Supplier-side automation 3

months ahead of schedule

Revise benefit target +300 K


Dashboards

Data Transparency

Data source clarity

Calculation clarity

Baselines, Targets

Signed-off

Well socialized

Content

Meaningful format

Drill-downs for enhanced visibility

Cadence

Performance management process

Scheduled reviews

Accountability

Performance oversight

Coordination for continuous improvement

Supports the on-going Value

Realization process

Mechanism for communicating

results

Multiple views for target

audiences:

Senior executives

Functional leadership

Process managers


value management organization - sapland.ru · lifecycle © sap 2009 / value academy / confidential...

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