Business Transformation - Finance Transformation Leveraging SAP Solutions

Venu Kumar Nalabothula BIS Strategy, Planning & Innovation MillerCoors

Session Code: 2005

Georg Fischer Vice President Product Management – SAP Financials SAP AG

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• How can I obtain more insights about my business?

• How can I increase my sales revenue?

• How can I increase my profitability?

• How can I increase my market share?

• How can I plan my business functions (Sales, Marketing, Finance and Supply Chain) so they are aligned with Enterprise targets?

• How can I reduce my Supply Chain costs e.g. stock outs, inventory costs?

• How can I ensure adequate internal controls are operating in my enterprise?

• How can I reduce my procurement and SG&A costs?

• How can I optimize my working capital needs?

• How can I bring more innovative capabilities leveraging technology fast into my enterprise?

• How am I able to free up my talent to devote more time on value added insights?

Overview – Are we addressing these key questions?

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Overview – Are we addressing these key questions?

Global environment is highly competitive, companies must continue to grow, innovate and transform to remain competitive and survive in the market. Hence the need for Business Transformation!!!

• Competitors from emerging markets hone disruptive approaches • Product lifecycles are shrinking • Lot of consolidations are taking place in various industries • Competitive advantage is dissipating more rapidly than ever before • Companies need to transform – or risk becoming forgotten!

Mastering transformation is becoming a competitive imperative

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• Transformation is a fundamental change to the way a business operates • Bridging the gap between strategic intent and the capability to act • Major corporations successfully "reinvent" themselves • Business transformation is a MUST to maintain growth curve of the

company during these days of slow economy • Business transformation encompasses all functions – Sales, Marketing,

Finance, Supply Chain, HR etc. – both to increase sales and reduce costs

During Business Transformation • Complexities are great • Stakes are extremely high • Companies need to make the necessary mid-course corrections

What is Business Transformation?

• Increased revenues • Improved marketing ROI • Enhanced growth • Understand market trends and become a trendsetter • Stronger innovation • Reduced time to market • Reduced costs • Improved business processes • Faster adaptability to external changes • Increased customer satisfaction • Motivated employees • Increased ROI to shareholders

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Benefits of Business Transformation

• Kimberly Clark shifting from a paper provider to a CPG leader

• Apple’s stock increasing almost 40 times seven years after a decade of stagnation

• Procter & Gamble moving from soaps to laundry to skin care to health care – shows that successful transformation is possible

• Lenovo’s 2005 acquisition of IBM’s PC operation set up a far-reaching business challenge – to create a new global operating model that would meet its goals

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• RIM – Once a leader in Smart Phones for the corporations – slow to transform!

• Kodak – Once one of the most innovative companies – did not transform with speed!

• Nokia successfully moved from rubber boots to a global leader in mobile phones. What is its current market share?

Transformation is a journey – not a Project ! You need to continuously transform and adapt to changes

Case Studies of Business Transformation

Let us focus on one of the key functions in a company i.e. Finance and discuss how to approach transforming the Finance function using criteria that made several companies successful as well as how to utilize SAP capabilities to achieve that goal

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Transaction Processing

Business processes are not integrated

Time-consuming month-end close process

Complex finance and operational regulations

Consolidated reporting is very cumbersome

Organizational structure doesn’t align with current /future reporting needs

Inconsistencies in the setup and use of Chart of Accounts

Disparate fixed asset accounting systems

Redundant master data / inconsistent data

Cumbersome multi-GAAP reporting options

No standard way to achieve balanced segment reporting for SEC/IFRS

Risk, Compliance and Controls

Multiple compliance requirements

Limited visibility of the enterprise-wide risks

Compliance is silo-ed with Manual processes

Higher duties from not leveraging trade agreements

Increased risk of fines/delays

Increasing complexity of regulations and policies

High cost to establish and maintain compliance

Risk information not relevant

No consolidated view of risks

No strategic context

Ability to manage cash

Business Insights

IT systems take long time to run the reports due to volume of data

People are tied-up with transaction processing versus providing insights to customers

Long planning and budgeting cycles due to lack of integration

Lack of rolling forecasting capabilities to respond more quickly to business needs

Multiple versions of truth, since data is not integrated between planning and consolidation systems

IT systems are not quick to adapt to business changes in case of any mergers or realignments

Poor reporting capabilities related to customer and product profitability analysis

No single source of dashboard and score-carding capabilities to link strategy to execution

Strategy, Operating Model & Talent

Industry consolidation and globalization

Energy and commodity costs

Change in core product demand

Cancellation of major customer contracts

Performance standards and service quality

Non-transparent markets

Economic recession

Ability to provide support to other functions

Talent issues

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Challenges of Finance Organization

Today’s CFOs Strategist: Provide Financial leadership in determining strategic business direction Grow the Talent required to support Business Transformation M&A Financing

Controller: Provide and preserve critical assets of the Organization, and Create a risk-intelligent culture

Eliminate and/or simplify complex structures, processes and technology Accurately report on Financial position and operations (Int & Ext)

Business Partner: Ensure Business Transformation is integrated across all functions of the Enterprise

Accountant: Balance capabilities, costs and service levels to fulfill core responsibilities

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What is Finance transformation

Source: Deloitte Development LLC

Finance transformation: an umbrella concept that focuses on improving performance, stewardship and control of the company by enabling chief financial officer (CFOs) and their finance organizations to have greater impact on strategy formulation and execution across the enterprise.

Companies have begun to realize the value of Finance in transforming their business operations by providing strategic, insightful, value-adding and cost effective services

What is Finance Transformation?

• Improve the operational performance of all finance functions • Align Finance skills and responsibilities to stakeholder needs • Minimize non-value add activities to improve focus on business insights • Standardize and integrate systems and leverage enabling technologies in

corporate performance management • Reduce the cost of Finance function • Profit from innovation • Leverage shared services to deliver routine, high volume transaction

processing with economies of scale

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Benefits of Finance Transformation

Benefits of Finance Transformation

Leading Finance organizations are evolving to become value integrators and thereby

more effective executing on their core Finance activities, monitoring business performance,

driving the integration of information across the organization and managing enterprise risk..

Finance execution excellence

matters more than ever. CFOs that

have more efficient Finance

organizations are more successful at

driving operational excellence.

Deliver value through analytics and

business insight. Those that have

strong business insight are helping

drive greater value across their

enterprises.

By doing both well – executing core Finance activities efficiently and providing

the insight their businesses need – Value Integrators are helping their

enterprises make smarter decisions.

Source: IBM Institute for Business Value, The Global CFO Study 2010

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IBM CFO Study 2010 Highlights

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Integrate with Organization wide Transformation initiatives – e.g. Sales, Marketing, Innovation and Supply Chain

People and Talent Management

Governance Risk and Controls

Transformation

program to

simplify processes

across the

organization

Streamline the

applications

landscape

BIS capabilities to

industry standard

Optimize sourcing

model

Transaction Efficiency Process Financial

Transactions in an effective

and efficient manner

Report Financial results

and disclosures to

management and

shareholders

Achieve faster close times

Leverage shared services

Business Insights

Real time customer and

product profitability analysis

available to business

Perform detailed financial

scenario planning

Improve forecasting

capabilities

Provide insights to

customers

Increase the capability of

partners

Become trusted advisor

Collaboratively provide strategic, insightful, value-adding and cost effective services

Governance, Risk & Compliance

Manage risk effectively

and cost efficiently

Simplify internal control

structure by leveraging

the latest SEC/PCAOB

guidance, rationalizing

controls, and minimizing

testing, etc.

Strategy & Execution Help define the right

strategy together with

CEO

Ensure that investments &

operations follow strategy.

Finance Transformation

program to simplify

processes across the

organization

Reduce Finance

applications landscape

Ensure effective Change

Management

Grow talent to support

transformation

Finance Transformation Framework

Real Estate Lifecycle Management

Receivables Management

Invoice Management

Travel Management

Shared Services

SAP BusinessObjects enterprise performance management

(EPM) solutions

Treasury and Financial

Risk Management

Manage Enterprise Risk

and Compliance

Accounting

and Financial Close

Manage

Financial

Performance

PLAN &

EXECUTE

STRATEGIZE &

PRIORITISE

MONITOR &

ANALYSE

MODEL &

OPTIMZE

Ensure Regulatory

Compliance and Effective

Transaction Processing

Deliver Superior Service

at Reduced Cost Outperform Financial Objectives

and Create Sustainable Value

SAP ERP Financials Including Controlling modules

and Partner solutions

SAP BusinessObjects governance, risk, and compliance (GRC) solutions

SAP can help you in Transactional efficiency, Business Insights and Managing Risk

Leveraging detailed

financial information

across all business

dimensions is difficult

or impossible

Financial analysis and

reporting processes with

high volumes of data

can be very time-

consuming

Financial decisions are

often based on

incomplete, inaccurate

and often outdated

information

Deep insights into large

volumes of financial data Access to real-time

financial information

Fast and flexible

analytics and reporting

Make smarter financial

and managerial decisions Empower finance with

true real time

Accelerate key

financial processes

SAP HANA

Issues

Op

port

unitie

s f

or

Fin

ance

SAP can help you in providing Business insights

with HANA

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for Better Business Results thru Business Transformation

• Grow your top talent • Get closer to your best customers • Leverage ERP supported end-to-end, integrated processes with best practices • Run leaner operations – consider aspects of Lean Six Sigma • Gain deeper insights from thru enterprise performance management tools

With every economic crisis comes opportunity Some companies will go from good to great

Others will just fade away, making room for more innovative competitors

Senior Executives should strongly consider industry best practices that provide a balanced approach to moving forward by making smart investments in

Business Transformation

Source: SAP

#1 SAP provides guidance to its customers to jumpstart Business Transformation

#2 Work with your Business Transformation consulting advisors and IT Systems Integrators(SI) to help you navigate thru Transformation

Overview Managing Efficiency, Effectiveness and Risk with Strategic Focus

Develop strategy: The CFO's Finance Transformation strategy must be developed in the context of the organization's strategy and its requirements of finance, and industry best practices that serve as enablers of transformation.

Assess and Benchmark current performance: Benchmark baseline performance levels by assessing key metrics such as cost, headcount, monthly close, productivity and quality. SAP & ASUG Benchmarking is a great starting point

Develop a blueprint for end state: A detailed end-state vision and effectively blueprint to detail all planning elements of the operating model, people, process, and technology requirements across each major category of services by Finance team

Develop detailed plan: Develop the detailed plan, identify all necessary steps, risks, issues, dependencies, people and cost requirements.

Create a business case: A finance transformation business case should leverage outputs from the assessment & present business value and expected ROI from transformation.

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Adapted from: PWC CFO Study 2010

Transformation Best Practices

Obtain executive-level support: Executive sponsorship is critical to gaining the support and involvement of the organization in the transformational effort.

Create a high-performing team: It is vital that the core team be competent, have enterprise focus and have proven execution track record.

Execute few quick-win projects : A pilot project provides a low-risk, limited scope opportunity to establish quick wins and gain credibility.

Execute Change Management plan: Having a robust change-management process to address the impact that the transformation has on the organization and its people. This is very critical for the success of the Transformation.

Execute End State Blueprint: Deliver the business value thru superior execution by meeting project schedule, budget, scope and quality for all initiatives in the transformation.

Recognize and Reward your team: People are key assets of the organization. Transformation is not an easy journey – recognize and reward your people for their contributions and celebrate the wins!

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Adapted from: PWC CFO Study 2010

Transformation Best Practices Contd.

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Business Transformation is a journey, not a project Finance Transformation is an integral part of Business Transformation People are the most important asset of the organization Always consider enterprise-wide end-to-end business processes SAP Suite of Products provide industry best practices and enable implementation

of integrated end-to-end business processes

Streamline Application Landscape by exploiting full capabilities of SAP Disciplined execution of Strategies is key to the success of the Organization Continue to develop the business acumen of all business & IS teams to prepare

them to support business transformation Ensure IS Project Portfolio is fully aligned with the growth strategies of your

company Harness the creativity and innovativeness of the Business & IS team by

implementing Innovation Management Program across the company Streamline all Business Processes including IS Process – Apply Lean Six Sigma and

Value Stream Mapping methods Delight the customer by demonstrating Execution Excellence always!

KEY LEARNINGS

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Recommended Initiatives Strategic Benefits

Supply Chain Execution

Drive Cost reductions and efficiency gains

• Reduce Procurement Costs

• Reduce transportation and logistics Costs

• Analyze key manufacturing and supply chain processes and optimize

management of working capital to accelerate cash conversion cycles

and reduce operating expenses

Working Capital Management

Social Media

(Social Media Branding, Social Media Marketing

• Leverage social analytics to engage customers and enhance

relationships with consumers

• Integrate social media insights in Category Management with retailers

Trade Promotion Management

Trade Promotion Effectiveness

Trade Promotion Optimization

• Streamline promotional calendars, communicate promotions

• Incorporate pricing strategy, determine promos with sales lift

• Determine post-event analysis, true net effect of promotions, and

improve execution to derive significant benefits

Mobility • Get ahead of the tidal change in CPG due to consumerization of IT

• Mobile is the primary connection to improve relationship

management, targeted marketing and increase sales

Recommended Strategic Initiatives during Transformation (1/2)

• Obtain holistic view of all marketing drivers to drive growth

• Leverage deep understanding of consumer preferences

• Provide information advantage and reduce uncertainty and risk

• Identify right innovation and marketing opportunities

Consumer Insights, Analytics and

Predictive Analytics

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Recommended Initiatives Strategic Benefits

Demand-Driven Supply Networks

• Obtain real-time demand across customers and trading-partners

and respond faster and smarter with integrated business processes

Integrated Sales and Marketing • Fully Integrated processes from consumer insights to advertising &

trade promotions and in-store execution to maximize the sales

Collaborative Innovation • Develop the capabilities to Collaborate with consumers, retailers and

distributors for product innovation, develop deeper relationships,

reinforce brand loyalty, and drive growth

New Product Development &

Introduction • Transform innovation and product development operating models by

leveraging social media to understand customers preferences

Big Data & Demand Signal Repository (DSR) • Obtain near real-time in-store performance data to drive action

• Collect data from mobile, digital and social media to provide additional

holistic insights and engage consumers with relevant brand messages

Leverage existing SAP investments • Exploit SAP’s full benefits by incorporating their innovations & new

capabilities

• Transform application footprint by eliminating legacy systems

Recommended Strategic Initiatives during Transformation (2/2)

References “Leadership makes the difference during Times of Global Financial Crisis” white paper by Chakib

Bouhdary, Chief Strategy Officer of SAP AG.

“Leadership in Times of Crisis” white paper series by Chakib Bouhdary & SAP Value Engineering team

“The Global CFO Study 2008” by IBM Institute for Business Value

“The Global CFO Study 2010” by IBM Institute for Business Value

“Focus on Finance - Dare to be Excellent” - Australian General Practice Network

“CFOs: Not Just for Finance Anymore” by Dr. Howell, Tuck School of Business, Dartmouth College

“Why Finance Transformation Matters in Global Manufacturing” - A Deloitte Research Global Manufacturing Study

“Making finance more than just a scorekeeper” by PWC

Summary of SAP Product Functions – SAP AG

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References

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SESSION CODE: 2005

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