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Moving from the software to the business case

Action fields for a successful SAP S/4HANA transformation

Staying innovative, exploring market opportunities and inspiring customers: The migration of ERP / SAP ERP systems to SAP S/4HANA provides companies opportunities to tap into new sources of information and to link them in a profitable way. However, the technological transformation goes hand in hand with the a significant organisational change. Best practices from the healthcare & life science sector showcase, that starting a project with a profound change is crucial for success.

In the healthcare sector, the development of product innovations is particularly exciting to observe: Drugs are being tailored more and more individually to the need of patients and end-customers; high quality standards have to be met and a large variety of regulatory requirements have to be taken into account in almost every decision.

To meet these requirements, pharmaceutical companies must constantly review and adjust their organisations' processes to identify improvement possibilities. The starting point is usually the production line, for example, when ERP systems are combined with an IoT platform. Hence key performance indicators (KPI) for batches, quality criteria or the product's path in internal logistics are made more visible. Some companies are already extending this perspective to the entire product life cycle by digitally mapping all steps from R&D to patient feedback. The competitive advantage that is gained by the increase in transparency and operational performance can be significant.

"Technologies should enable a holistic view on all stages of the value chain."

 
In order to stay competitive and to react fast to market changes end-to-end processes are required. As a consequence, processes between purchasing or risk and sustainability management are established or improved. This is why many companies are using the migration from ERP or SAP ERP systems to SAP S/4HANA to increase their end-to-end business process integration. Pioneers recognise that this transformation is more than a simple technological change and become active in the following fields of action.

Action point 1: Clarify challenges from a business and IT perspective

As central component of SAP S/4HANA, SAP HANA can connect any data that the company wants to link. In addition to the pure ERP funtionality, this creates a basis for big-data analyses. Other use cases such as quality documentation or the simulation of product properties can also be mapped.

At the start of a S/4HANA project, the existing process landscape and data flow should be outlined: What type of master and transaction data is created, maintained, used and deleted in which system? Increasing the data quality is the key for all future data-based business models. At the business process level, the following has to be clarified:

• Which processes are currently managed in which system – and does this make sense in the future? For example, a quality process that was implemented in SAP in a highly customised way for traditional reasons could possibly be realised in a specific laboratory information management system in a more forward-looking way.

• Are there any company-specific traditional customisations that can not be transferred to S/4HANA? These should be identified, and either standard processes or other solutions for migration need to be considered. What roles and authorisations need to be revised in the course of the migration, for example, in IT, IT security and at the management level? What organisational changes might be necessary as a result?
  
  

Action point 2: Support the transformation with change management

The advantages of S/4HANA are oriented towards a higher degree of standardisation – i.e. the basic functionalities of SAP support a large number of business processes, so that individual customisations are rarely necessary. The technological change is therefore linked to a cultural change. Employees learn new work methods, redesign work processes or become familiar with their underlying principles.

"Change assessments provide a picture of the willingness to change in the organisation."

But which 'pain points' are crucial for the success or failure of this reorientation? Here, change assessments provide a picture of the willingness to change in the organisation. They illustrate decision-makers or project leaders where and which activities should be initiated for a successful transformation. The following graphic comprises the typical dimensions analysed in a S/4HANA pre-project by msg industry advisors. The three core dimensions are technologies, processes and organisation.

Figure 1: Six fundamental dimensions for a successful SAP S4/HANA transformation. © msg industry advisors

Technologies

The results of the technological system analysis by msg.fit serve as the starting point for the assessment. Here, not only the technically necessary changes (Z-analyses) are carried out, but also their application and the required organisational sonsequences for a S/4HANA transformation. This fundamental information is used for the subsequent change assessment (organisational change management) and is supplemented by interviews.

Processes

S/4HANA leads to a change of perspective: instead of working in modules, end-to-end processes are used. For example, when data from simulations in product development is linked to data from purchasing and manufacturing in order to be able to assess the feasibility of products better. Companies with a hierarchical culture, in which departments and teams work sequentially instead of collaboratively, will find it more difficult to switch to this approach than those that already have experience with agile working methods and processes.

A process analysis should start with the 'basics' and assess in the first project phase whether the systems and processes are 'SAP S/4HANA-ready' or whether further preliminary work is necessary. A clear "status quo" of the process landscape with a classification into business and IT processes is also essential. Here, one should already start with "streamlining", i.e. prioritise and exclude processes and in-house developments for the migration. Assessing the risks and effects of the project on the current business processes, e.g., financially and organisationally, is also of great benefit.

Organisation: Change impact

Every company 'works' differently. It's therefore essential to implement change management together with the company and to integrate all levels in the upcoming changes. A clear strategy and a strong commitment from the management are essential to empower the teams and employees in identifying the necessary change topics and to implement the respective measures. Success stories should be used as a guide: When and why has a transformation been successful?

"All stakeholders have to be on board in good time."

It's also important to name the key stakeholders as well as potential 'change drivers' that have to be addressed. If possible, this result should be mapped and used to develop an agile change approach.In addition, the change assessment can be used to evaluate the extent to which employees are open to and ready for the upcoming changes down to an individual level.

Harmonisation of systems, processes and organisational structures

In light of the above, the main focus of change management is to empower employees to shape the transformation and to cope well with the necessary change successfully. It's not about simply 'surviving' the introduction of a new software; it's about getting ready to think and work in a network-oriented and collaborative way. Thus, ensuring the future success of the company. This is not trivial – hence it is even more important to prepare and manage a SAP S/4HANA project with a holistic change management approach that takes into account the technological and human concerns.

 The analysis includes the six important dimensions of an organization, which are addressed by an S4/HANA transformation

Figure 2: Change management services provided by msg advisors for SAP S/4HANA migrations. © msg industry advisors

Management tips:

• It is essential to define the goals of the project as precisely as possible: What needs and has to be changeed in respect to business processes, data models and the structure of the organisation?
• Outline the changes to expect in terms of technology / technological infrastructure, processes and organisation.
• Assess dependencies of the key strategic projects for the S/4HANA transformation. Create a roadmap to visualize these dependencies.