Value Lifecycle Management

Best Practices inValue Management

Realizing Value From Your IT Investments

Ervin R. Martinez, Ph.D.Senior Principal, Value Management

SAP World Tour Trinidad & Tobago – August 12, 2010

VALUE

Are we investing in the right initiatives?

Are we realizing the full value potentialof these investments?

How do we enforce benefit commitments withthe same passion that we drivebudget commitments?

What governance, practices, and competenciesare required to ensure benefits are achieved?

Value Management Provides Answers to KeyQuestions From Top Executives…

© SAP 2010 / Page 2

Value ManagementThe New Change Management

In the early days of IT, projects failed because technologywasn’t ready or was inappropriately suited to businesscomplexity - then, technology got better… a lot better

Later, projects failed due to the inability to align people to theprocess and to the technology change

Intense focus on change management and programmanagement has led to the following: Projects get done ontime, on budget, and people use the new systems

However, what was lost in the process was “what is the realbenefit to the business of the transformation program?”

Today’s big challenge is Value Management… on time, onbudget and “On Value”

3

Opportunity Awaits You

© SAP 2010 / Value Workshop / Confidential / Page 4

97%of respondents think

there is more opportunityfor VM out there

2009 Value Management (VM) Survey Results

187 Global Companies Surveyed

66%of respondents have NO

formal managementmethodology or approach

for adopting VM

SAP/AMR Value Management Survey Results 2009

The Business Case for Value Management

percentage ofbenefit realizationachieved throughhigh best practiceadoption

2009 Value Management (VM) Survey Results

100+ Global Companies Surveyed

2.4xHIGHER

return on investmentfor companies withhigh best practiceadoption

4xMORE

companies with highbest practiceadoption attain value“on” or “ahead” oftime


2.4xMORE

companies with highbest practiceadoption deliverprojects “on” or“below” budget

57%L

M

H

39%

65%

119%L

M

H

72%

173%

27%L

M

H

11%

43%

48%L

M

H

29%

71%

1.6xHIGHER

SAP/AMR Value Management Survey Results 2009

Leading Companies Have Something inCommon—Adoption of VM Best Practices


PERFORMANCE BENCHMARKING (17%)structured, on-going measurement and comparison process todiagnose and recommend improvement opportunities

JUSTIFICATION (29%)formal collaborative business case development approach that resultsin a proposal with achievable benefits and timelines.

VALUE REALIZATION (19%)value-based implementation approach that focuses on process designand promotes a culture of accountability and measurement

BUSINESS STRATEGY & IT ALIGNMENT (34%)seamless alignment of IT and business in multi-year planning andexecution processes; Clear strategic goals translated to operationalobjectives

GOVERNANCE & PORTFOLIO MANAGEMENT (22%)active leadership involvement in program enablement

ORGANIZATION EXCELLENCE (10%)execution skills in change and program management

Top VM Adopters

Best Practices of Companies AttainingBenefits On or Before Plan


69%

63%

56%

41%

41%

38%

28%

28%

0% 10% 20% 30% 40% 50% 60% 70% 80%

Executive sponsor actively participating in businesscase development

IT and business jointly driving the business case

Program scope is managed considering impact to therealization of the business case

Project success criteria a combination of KPIs, newcapability. on time, on budget and financial

Solution design attributes are linked to business caseand value

Adoption of new processes/systems and benefitattainment in business unit leader's goals/incentives

Performance baselines for project KPIs prior toimplementation

Strong linkage between business case and businessprocess change qualitative/quantitative targets

Value Management AdoptionMaturity Model

Defining Value

Discussion Questions:

1. How does your approachto articulating value varyacross each of thesetypes?

2. What other ‘types ofvalue’ does yourorganization use to justifyinvestments?

A balanced view between strategic and tangible benefits is crucial.This is the only way to keep all stakeholders engaged.


The Four Value “Buckets”

As Defined by Your Peers

Value Management Is Not Easy


Tips For Adoption

1. Give people a vision they canvalue

2. Present solutions andbenefits with simplicity andclarity

3. Be consistent in driving VMprocesses within commonapplication platforms to forceadoption and lowercollaboration efforts

4. Embrace a commonmethodology andmeasurement plan tomanage value

INSPIRATION—a common vision everyone can value

ART—present ideas & benefits with simplicity and clarity

DISCIPLINE—adopt consistent VM processes

SCIENCE—common methodology & measurement of value

Combine equal parts of all ingredients and mix well with amotivational leader or executive sponsor. Embed intoorganizational culture for optimal results.

Challenges to Executing on Value


What makes executing onvalue hard?

No clear translation of mission to execution

KPI’s for success are not defined upfront ortracked/reported on an ongoing basis

Business cases are not required for projectapproval

Limited or no business accountability forbenefit achievement

Lack of business commitment of best andbrightest leaders

Decentralized ad-hoc governance structure

Discussion Questions:

1. Which of these resonatewith you?

2. Which are mostprominent in yourcompany?

3. Which are you able totackle well? Why?

4. What are we missing?

SAP Value ManagementExperience, Thought Leadership, Process & Tools


ValueManagement

Lifecycle

Business Need

InvestmentApproval

On-Time, On-Budget, On-Value

SAP Value Management Offering Portfolio

VM Education and AwarenessValue management bestpracticesBusiness case art and science

Value AcademyOnline value networkCxO communityCollaboration withassociations

Business process benchmarkingBusiness case builder – Value LifecycleManager

Business Content & Methodology

Value NetworkSAP VMPortfolio

Value EngineeringIT/Business alignmentPerformance assessmentRoadmapping

VMOCustom Value AcademyValue governanceSAP partnership

A Robust Toolset is Utilized Throughout theValue Lifecycle

Benchmarking

Determine the value ofadopting an SAP solutionand industry best practices

A customized confidentialreport for each participantAn aggregate report withkey finding from the overallstudy

Evaluate how a specificprocess can reach the stageof excellence and the valuepotential

Quantification of achievedorganization benefitsDocumentation of thesuccess factors formanagement andimplementation teamsAssessment ofimplementation bestpractices utilized during theimplementationOpportunity to showcase thesuccess within the broaderSAP and partner ecosystem

Actual Customer Results Executive Insights

White papers focusing ontopics in three key areas

Solution ThoughtLeadershipIndustry and FunctionalExpertiseTop ten reasons for usinga SAP solution

Driven by customerexperiences andbenchmarking results

Value LifecycleManager

Online collaborationenvironment for identifyingand understanding valueFind 80% of industry specificcontent needed forOrganization caseAccess to more than 500Kindustry and process specificpain points, solution enablersand best practicesLinks benefits to KPIs andindustry benchmarksReal-time sensitivity analysisto test business case results

Available Benchmarking and Best PracticesSurveys

Human CapitalManagement

Human CapitalManagement

Talent ManagementTalent Management

Financial Excellence

NPDINPDI

Customer ContactCenters

Customer ContactCenters

Sales EffectivenessSales Effectiveness

FinanceFinance

Financial ComplianceFinancial Compliance

Order to CashOrder to Cash

Enterprise Health CheckEnterprise Health Check

Trade PromotionManagement

Trade PromotionManagement

Best People and Talent

Product and ServiceLeadership

Total Cost of Ownership(TCO)

Total Cost of Ownership(TCO)

Business Intelligence/Analytics

Business Intelligence/Analytics

Organizational ChangeManagement

Organizational ChangeManagement

Enterprise DataManagement

Enterprise DataManagement

Strategic IT

Supply Chain PlanningSupply Chain Planning

TransportationManagement

TransportationManagement

Warehouse ManagementWarehouse Management

SRM/ ProcurementSRM/ Procurement

ManufacturingManufacturing

Enterprise AssetManagement

Enterprise AssetManagement

EH&S ComplianceEH&S Compliance

Operational Excellence

ResponsiveSupply Networks

High Performing Assets

Superior Customer Value

End-To-End Processes

= Best Practice Surveys

HR Shared ServicesHR Shared Services

Financial Performanceand Risk ManagementFinancial Performanceand Risk Management

Cash to CashCash to Cash

Finance Shared ServicesFinance Shared Services

Value ManagementValue Management

© SAP Value

Best Run ITBest Run IT

Detailed Benchmarking Results:On Demand Analytics

Business Case Development: Process, Tools,and Template

ExecutiveAlignment

DiscoveryWorkshops andData Collection

Business CaseAnalysis and

validation

Validation &Final Presentation

Process

Tool: Value Lifecycle Manager (VLM) Template: Collaborative Value Assessment

© SAP 2009 / Value Academy / Confidential / Page 17

24/7 on-demand application with certified data security

1 million content items – KPIs, best practices, case studies…

14,000+ users globally – customers, partners and employees

Customized to specific project scope in minutes

SAP Value Lifecycle Manager

Collaborative business casedevelopment and benefitsmonitoring tool

26 industries / 70 sub-industries

1 million content items (painpoints, best practices..); 15,000KPI's and benchmarking datapoints; 500 case studies

14,000 users; 1,900 customers;2,300 active projects

Customized to specific scope inminutes

24/7 on-demand solution withcomplete data security

Sample Analysis:Collaborative Business Case Development

Dynamic Benefits Monitoring

Learn more at:https://sapvalueengineering.com/VLM2/

https://sapvalueengineering.com/VLM2/

SAP Business Performance BenchmarkingDiagnose your business

SAP Performance Benchmarking

One of the largest globalbenchmarking programs8,500 survey submissionsOver 20 processes, including

Sourcing and ProcurementSupply Chain PlanningWarehouse ManagementTransportation ManagementManufacturingEAMEnvironment, Health, SafetyNPDIHuman Capital ManagementFinanceTrade PromotionManagementTCO

Comparison with industrypeersFree of charge

Sample Analysis:Performance of Primary KPIs and Potential Benefit

Learn more athttp://benchmarking.sap.com/US

Industry Specific Benchmarks Available:Example Spend Managed Strategically (Indirect)

Top 25%Average

KPIBenchmark

PerformancePotential Benefit

(in $ Million)

Procurement CostsAs % of Spend 0 – 2.9

Average AnnualSavings (in %) 0 – 4.4

Spend ManagedStrategically (in %) 1.1 – 3.7

Maverick Spend(in %) 0.1 – 1.0

89.074.769.0

Bot 25% Average Top 25%

68.9

15.8 7.2 6.4 1.2


1.5 0.63.0


1.1


5.03.3 5.82.0

Benefit of Closing Gap to Top 25%Benefit of Closing Gap to Average

http://benchmarking.sap.com/US

Characteristics of a Great Business Case

Checklist for Success

Clear problem statements defined

Linkage between initiative and corporate strategy is clear

Improvements are executable, goals are achievable

Benefits are quantified

Sponsorship is passionate, accountability is clear

Execution risks are understood and addressed

Execution plans are mapped and the organization is on-board

Returns are better than other investments

Why?

What?

How?

Why have we embarked on this initiative?

What do we want to achieve?

What challenges prevent us from getting there?

What is the recommended solution & associated benefitsand cost?

How should we implement?

How do we ensure value delivery? Why Now?

What are other similar case studies; Is our approachachievable?

Proof

Key Questions Addressed


© 2010 SAP AG. All rights reserved. / Page 21

AGENDA

SAP CONFIDENTIAL - Page 20 For SME Industr ies Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, per formance or cost savings.

Executive SummaryMay 15, 2010

Project Summary

TotalCosts $5,512K

TotalBenefits $6,415K

ROI 12.67%

0

2

4

6

8

10

12

Q1'10 Q2'10 Q3'10 Q4'10 Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12

Projected CostsActual Costs

Projected BenefitsActual Benefits

Cost Benefit Analysis

Board Ready Presentations

Business Case

Benefits Monitoring

SAP CONFIDENTIAL - Page 4 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industr ies and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.

Why does ABC, Inc.need to change?

Current systems are an obstacle to executing corporate strategyEconomic conditions require operational excellenceDynamic market conditions requires flexibility

How can SAP and XYZPartner help?

Comprehensive solution based on industry best practicesPreconfigured solution delivers fast time to valueProven implementation methodology that minimizes risk

What impact will SAPdeliver?

Recurring annual benefits of $1,729K – $3,107K and one-time benefits of $691K – $1,126KFive year NPV of $11,734K, IRR of 284% and a 3-month cost of delay of $234.7KEvaluation over a 5 year period with a payback period of 4.0 monthsTop 3 impact areas:

1. Reduce Days Sales Outstanding: One-Time Benefit2. Reduce Direct Material Costs - Non-commodity3. Reduce Indirect Material Spend

Executive Summary

SAP CONFIDENTIAL - Page 16 For SME Industries Internal Use Only - This page is from the VE Study prepared for SME Industries and subject to the terms, conditions andassumptions contained in the VE Study. Information contained herein is not a guaranty of future results, performance or cost savings.

ABC, Inc. Estimated Benefits: $1,729.3K–$3,107.1K Annualand $690.7K–$1,125.5K One-time

Conservative Estimate

Likely Scenario

One-time benefit

$524.7K$349.8KReduce Days Sales Outstanding:One-Time Benefit

$273.6K$228.0KReduce External Audit Costs$150.0K$75.0KReduce Total Finance Costs$42.0K$28.0KReduce DSO - Recurring Benefits

$0.0K$0.0KShortened Quarterly Close Process

$6.1K$3.0KIncreased Asset Utilization Due toReduced Asset Downtime (Due toPlanned Maintenance)

$320.9K$160.5KReduce Manufacturing Overhead

$240.0K$120.0KFree Up Capital from ReducedService Parts Inventory

$607.2K$308.0KManufacturing

$113.0K$75.3KImprove Procurement Productivity(FTE)

$1,075.2K$556.4KProcurement$509.8K$254.9KReduce Direct Material Costs - Non-

commodity$452.4K$226.2KReduce Indirect Material Spend

$465.6K$331.0KFinance

$20.0K$10.0KReduce Revenue Loss due to Stock-Outs

$225.8K$112.9KReduce Days In Inventory (DII)

$344.3K$172.1KReduce Total Transportation Spend

$88.9K$44.5KImprove Warehouse FunctionEfficiency

$60.8K$30.4KReduce Inventory Carrying Cost

$40.0K$20.0KReduce Inventory Write-offs(primarily due to damages/shrinkage)

$76.0K$60.8KReduce Unauthorized Deductions

$135.0K$108.0KReduce Uncollectible AccountsReceivable

$405.1K$256.9KOrder-to-Cash$189.2K$126.1KReduce Invoice Error Rate

$139.9K$70.0KReduce Order to Invoice Cycle Time(days)

$554.0K$277.0KSupply Chain Management

$1,729.3K $3,107.1KPotential Annual Benefits:

Potential One-time Benefits: $690.7K $1,125.5K

© SAP 2009 / Confidential / Value Academy for Channel Partners Page 17

Benefits Costs Analysis Indicates VeryCompelling Project Economics

5-Year Project Economics

NPV $11,734K

IRR 284%

Payback 4 Months

3 Month Costof Delay $234.683K

Benefit AssumptionsCost of Capital 8%Benefits begin in Month 10 ofYear 1

Investment Cost & Benefits Flow ($Millions)


Benefits Monitoring: Detailed Dashboard


Action Plan – Days in InventoryMay 15, 2010

Value Academy: Global Program


Palo Alto

Sao Paulo

Sydney

Singapore

London

Rome

Milan

Washington DC

Delhi

Canberra

100+ Value Academies globally1000+ certified companies2000+ attendees

Rio de Janeiro

Bogota

Santiago

Mexico City

Toronto

Seattle Chicago

Dallas

Dubai

Mumbai

Amsterdam

Cape Town

Boston

Philadelphia

St. Louis

IrvineHouston

Minneapolis

Atlanta

Caracas

Buenos Aires

Monterrey

ParisWaldorf

Johannesburg

Prague

SAP Value Academy

Interactive session providing companies an intro to strategy,methodology and tools to support Value Management Adoption

Key Benefits:

Learn a consistent and disciplined approach to define,measure and achieve value

Gain hands-on experience with SAP’s comprehensive set ofvalue assets

Access our growing, global Value Management Community

Build a value management adoption plan based on bestpractices

Attendee profile: includes a mix of business/finance and ITrepresentatives

Typical Roles: Business/IT liaisons; PMO/COE resources;Portfolio managers; LOB leads and business processowners; financial controllers

Cost: None - attendee fee covered by SAP for 2010 as aninvestment in customer success

Value AcademyGlobal Presence:

2500+ attendees1500+ companies140+ academies36+ cities20 countries6 continents5+ languages9.0 customersatisfaction average

Realizing Value

Executives expect programs that drive aggressive returns with theconfidence that the organization can execute consistently

Top performers have delivered successful IT enabled programs:

Active leadership involvement in program enablementClear strategic goals translated to operational objectivesBusiness cases with achievable benefits & timelinesStructured performance evaluation processBest practice adoptionSeamless alignment of IT and businessExceptional skills in change & program managementCulture of accountability & measurement

SAP has integrated best practice methodologies, practices, tools,and communities into a value management platform

VALUE

CO

ST

Identifying Gaps to the Market´s BestPractice: GPA Wins a Benchmarking Award

Highlights

Conducting an overall Value Assessment through severalareas of the companies by submitting more than 10Benchmarking surveys

Recognized with the 2010 Benchmarking Award by ASUG- Brazil

Sending additional Value Academy attendees in 2010

Grupo Pão-de-ÁçucarSão Paulo, Brazilwww.grupopaodeacucar.com.brIndustry: Retail –Grocery and Hardline

Attended ValueAcademyIn 2009São Paulo

“Benchmarking showed us the difference betweenour internal perception and the market best practicelevel. This vision will guide GPA´s businessdecisions.”

Edson Gomes do AmaralIT CoordinatorGrupo Pão-de-Áçucar


A Top Performer With State-of-the-Art VMTools: Braskem Publishes 2 Case Studies

Highlights

Prepared and approved a business case right after ValueAcademy session using VLM

Submitted 3 Benchmarking surveys in collaboration withbusiness areas

Published 2 Business Transformation Studies on SAPimplementations

BraskemSão Paulo, Brazilwww.braskem.com.brIndustry:Petrochemicals

Attended ValueAcademyIn 2009São Paulo

“Why you haven´t offered me this before”?

Stephan LepeckiCIOBraskem


http://www.braskem.com.br/

Building a Case for Change: Palacio de HierroBrings VM to Strategic Project Evaluation

Highlights

CIO attended the Academy and then sent other crossfunctional staff to another Academy

Piloted several performance benchmarking surveysaround HCM and Finance

Joined the Customer Advisory Panel

Over 10 people trained in VLM and Value Managementfrom Palacio de Hierro

Palacio de HierroMexico Citywww.palaciodehierro.com.mxIndustry: Department Store

Attended Value AcademyMay 2009, November 2009Mexico City

“Attending Value Academy was very rewarding, wealready have a project evaluation in Palacio deHierro & with this session we have new elements thatcan complement and improve it.”

Jose Luis ChaconControlling and Budgeting DirectorPalacio de Hierro


http://www.palaciodehierro.com.mx/

Thank You

Best Practices inValue Management

Realizing Value From Your IT Investments

Ervin R. Martinez, Ph.D.Senior Principal, Value ManagementEmail: [email protected]

SAP World Tour Trinidad & Tobago – August 12, 2010

VALUE

mailto:[email protected]

Documents

Value Lifecycle Management