Hopefully you now have a more nuanced understanding of business value. Having covered this topic, we return to our discussion of the three-step process for building effective business use cases. If you are still unaware, go through the METHODOLOGY OF BUSINESS CASE.
We begin with the first step.
It’s likely that you already have at least one specific use case in mind for SAP HANA. However, as we mentioned previously, it’s preferable to develop multiple use cases as part of the overall business case. Also, keep in mind the “Levels of Value” section, when you’re developing the use cases. Specifically, try to map to each level of business value with one or more use cases.
The process of creating the storyline should not be conducted exclusively by IT. Rather, it is critical to involve the business side of the organization up front and throughout the process.
SAP HANA is a disruptive technology, so the typical approach to building a technical business case does not necessarily apply here.
Here are some questions to get you thinking about potential use cases:
Sometimes it’s easier to create use cases when you can place each one into a convenient category, or container. Below we list samples of potentially useful categories. Note that these categories may not be mutually exclusive. Some of your use cases can cross boundaries, especially in the case of innovations.
Consumer Products: (Supplier Risk Mgt., Track and Trace, Product Recall, Product Lifecycle and Cost Mgt., EPA Standards Compliance, Real- Time Warranty and Defect Analysis)
Financial: (Fraud Detection, Risk Analysis, Credit Scoring, Program Trading, Customer Profitability)
Manufacturing: (Supply Chain Optimization, Production Planning, Operational Performance Mgt., Real-Time Asset Utilization)
Retail: (POS/Fraud Detection, Business Planning, Price and Merchandising Optimization)
Telecom: (Investment Planning, Network Equipment Planning & Optimization)
Utilities: (Smart Metering, Demand Side Management, Balance and Demand Forecasting, Churn Management, Outage Management, Investment Planning, Grid Management)
Finance: (Planning and Budgeting, Consolidation)
HR: (Workforce Analytics)
IT: (Landscape Optimization)
Order Management: (Available to Promise, Price Optimization)
Sales and Marketing: (Marketing Analytics, Customer Segmentation, Trade Promotion Management)
Supply Chain: (Transportation Planning, Inventory Mgt., Demand and Supply Planning, Supply Network Planning)
After reading about the methodology and techniques discussed, some customers may feel comfortable building business cases on their own. The SAP HANA Use Case Repository and SAP HANA Value Calculator (described below) can provide invaluable assistance with this task.
Many other customers, however, will prefer to leverage the expertise of SAP’s Value Engineering (VE) group in constructing a convincing business case for SAP HANA. One of the ways in which the VE organization can help you construct an SAP HANA business case is through a Value Discovery Workshop. Over the course of this workshop, you will have the opportunity to identify, validate, and prioritize a number of SAP HANA use cases. These use cases can describe your organization’s internal usage, and perhaps also how your organization interacts with its external customers.
The workshop is intended to address business outcomes as well as technical feasibility. Therefore, the project sponsor, business unit representatives, domain experts, and IT staff should all participate. The workshop will provide you with detailed information on data, processes, roles, modeling, consumption, clients, and security requirements for your applications. In addition, it will help you identify the “degree of match,” potential value-add, and customer interest for each use case.
The figure below reproduces a sample “value map” created during the first portion of a workshop for a customer in the chemical industry.
The next illustration is an example of one of the process analysis output created at a later stage in another workshop.
Finally, after you have completed the workshop, VE resources may be available to assist you in building a formal business case. Please check with your SAP Account Executive for further information on this service.
SAP maintains a centralized SAP HANA website (https://www.saphana.com) that contains an ever-growing number of example use cases for SAP HANA. In the Resources section of the site, you’ll find sample use cases of SAP HANA that have either been implemented by a customer or discussed with a prospect.
Perhaps the most obvious way to use this site is to check the category for your industry to determine which of the existing use cases reflect your organization’s needs or strategic direction. You may not find an exact match, but it’s extremely likely that you’ll find one or more themes that closely resemble some of your business issues and/or conditions.
A second — and perhaps more useful — approach is to use the repository as a brainstorming tool. It can be quite enlightening to study use cases from industries that are seemingly unrelated to yours. In many instances, you will recognize a common thread that will encourage you to adopt a broader perspective than if you limited your exploration to use cases in your industry.
Whichever approach you adopt, a guiding principle is to focus on things that you can’t do today. In addition, always keep in mind that SAP HANA’s strengths are in applications that have never been built before. If you’re looking to SAP HANA for competitive advantage, then you are not likely to find a close match in the repository.
1. SAP HANA Use Case Categories
Currently, the SAP HANA website has SAP HANA Use Cases categorized by industry and selected process areas:
Now that you’ve developed a good storyline (refer, METHODOLOGY – STEP1-CREATE THE STORY LINE), it’s time to map it to the expected business value for each and every use case. No matter how captivating your storyline is, it must be backed up with hard numbers. Although it is important to have quantitative results, some quantitative measures are more difficult to obtain and monitor than others.
It is critical to acknowledge the value of IT investments through benefits measurement and post go-live monitoring. An SAP Value Management study determined that organizations that develop business cases and measure post-go live success are 1.9 times more likely to deliver projects on time. They are also 1.5 times more likely to deliver on budget and to realize up- front benefits.
In most current use cases, the business value for SAP HANA is measured in a similar manner to other business analytics investments. The capabilities of SAP HANA are seen across many areas of an organization with an increasing number of benefit scenarios. The one fundamental difference is that, the analytical use cases for SAP HANA consider how the availability of real-time data impacts the organization’s ability to realize value. The SAP HANA benefit quantification evaluates what the organization can accomplish now that it can better manage data and interpret the resulting insights at lightning-fast speeds. Data volume is exploding, resulting in the need to store and move significant amounts of data. As a result, it slows down the ability to analyze data. In addition, data variety is continually expanding with the usage of Facebook and Twitter. Therefore, the traditional processes that organizations have used to consolidate and analyze data are no longer suficient in the new environment of real-time data.
IT research firms have already concluded that investing in business analytics technology generates tangible benefits. Moreover, in 2010, IDC completed a study that concluded that business intelligence investments delivered the following return on investment:
In February 201,1 Aberdeen completed a real-time business study that found that organizations wanted more accurate operational information. A case study concluded that manufacturing organizations yielded a 2% increase in production eficiencies, returning tens of millions of dollars in savings. The independent study demonstrates that quantitative benefits are being realized with real-time information. Production yield is an excellent example of benefits quantification. Increased yield reduces the cost of operations. This section will help you identify these business areas and quantify the benefits.
SAP has come to realize that organizations can struggle with analytics benefits quantification. Organizations utilize various approaches to business case benefit development; however, they may not have the experience to transfer that approach to business analytics and SAP HANA business cases. To address this problem, SAP’s Value Engineering organization has taken the methodology that has been used for the past eight years and applied it to SAP HANA benefits quantification.
SAP Value Management has created a framework for analyzing benefits that also applies to SAP HANA. This framework, which is illustrated below, places benefits in one of four categories:
However, risk mitigation and compliance can deliver millions of dollars in savings.
It is important to understand that an SAP HANA business case, like an analytics business case, impacts numerous process areas within an organization. SAP realized that the underlying transactional systems by themselves release only a percentage of the overall benefits. Unlocking the remaining benefits requires information insight.
For example, procuremnt leaders rely on information to understand how an organization spends money in various categories such as materials, services and IT equipment. The procurement process controls the flow of money going out of the company for materials and services. This critical function ensures that an organization manages its spending strategically. The primary metrics that measure success in this area are overall spending managed centrally and year-over-year annual savings achieved by the procurement team. Spend that is not managed centrally does not leverage contracts negotiated with preferred vendors that include already secured discount levels. Without real-time business insight on spend, organizations are not fully optimizing savings with consolidated spend. The following SAP HANA case study illustrates a procurement business case involving a retail grocer.
The retailer had already invested in an ERP system that drove the procurement process with suppliers; however, it was implemented in a regional format. Thus, the overall spend managed by the organization was not visible at a national level. Supplier relationships at a regional level ran the risk of not capturing increased discounts and creating redundancies in the process.
Deliver national spend visibility and drive procurement savings
Shift from regional vendor relationships and contract terms to a national level
Significant data volumes residing with four regional data warehouses. Data created from regional procurement systems
Four regional warehouses housing ERP structured system data
No infrastructure in place to automate the data consolidation for a national view of supplier spend levels
Evaluate the SAP HANA solution as the database and analytics technology to enable a single view of consolidated supplier data
Develop a benefits case based on the regional grocer spend performance. The four major regions, each had consolidated supplier spend
The regional procurement spend performance was compared, and the grocer found that certain regions were outperforming others in year-over-year savings and negotiated discounts.
The grocer utilized SAP’s global benchmarking data to compare year-over-year savings and spend managed strategically with retail peers.
The grocer determined that additional savings would be possible if the organization better understood the underlying procurement data.
XXX calculated a conservative benefits estimate of $50 million in savings over a multiyear period.
Begin realizing $50 million in savings on supplier spend with one national view of vendor spend
Remove supplier negotiation and contract administration redundancies with one process, managed by a national supplier
Significant supplier data compression with transfer of spend and supplier data from four regional systems to one single instance of SAP HANA
Real-time and automated data transfer that was previously not possible with four different regional systems
Granular reporting analysis resulting in visibility on optimal supplier discounts and redundant buying
Elimination of vendor spend with contracts that do not offer maximum discount levels. Renegotiation of national vendor contracts demonstrating higher discount levels on aggregated spend
A tangible or “hard” benefit is defined as an outcome that increases revenue in for-profit organizations and reduces cost in all organizations. In addition, hard benefits can increase the cash flow that the organization utilizes to generate additional return on investments. An example of a cash flow benefit is the reduction of aging receivables. Efficiency gains can result in tangible benefits if resulting costs are removed from the gain. An example of a hard benefit efficiency gain is the reduction of people completing a manual reporting task.
As we discussed, quantifying SAP HANA benefits follows a similar approach to other traditional benifits quantification. The areas of improvement are derived by identifying areas of value within major business process areas. Common benefit KPIs are broken down within the process areas. A few of the key business benefit KPIs and key metrics are outlined below. SAP’s Value Engineering organization has a full repository of all business benefits.
Benefit: Optimized marketing spend through improved campaign effectiveness
Benefit: Increased sales conversion rate, thereby increasing annual revenue.
Benefit: Reduced annual spend with increased visibility on supplier metrics
Benefit: Reduced inventory levels and enhanced visibility of the short horizon of stock levels
Benefit: Improved insight into information and reduced IT effort to prepare the data
Benefit: Improved profitability analysis by product, region, and segment
Benefit: Improved worker utilization levels and reduce level of overtime
Benefit: Improved fraud detection, thus reducing the costs associated with additional insurance claims
The metrics and outcomes listed in the table span many major business process areas. However, they all have a common theme; namely, to manage information from diverse data sources and to deliver real-time insights for decision making. In each case, the results are measured in revenue, expense, and cash flow impacts.
Strategic or “soft” benefits are commonly linked to the tangible benefits measured above. The strategic benefits impact the organization’s overall strategies and can support the tangible benefits.
In some cases, productivity or efficiency metrics do not directly result in reduced costs. An example is a scenario in which labor costs are not reduced, but the organization utilizes appropriate metrics to deliver greater throughput with the same staff. The labour budget is not reduced, but the workforce is able to manage increasing workload. Often, improved employee engagement and work-life balance is another soft benefit outcome. Similarly, improved decision-making can generate indirect impacts on the organization, such as better execution of the corporate values for accountability. Many organizations find it difficult to drive accountability with the poor information. Department leads can’t drive improvements if there is no trust in the data comprising the actual results. In creating and evaluating a business case, you need to carefully consider both tangible and strategic benefits.
SAP HANA is an innovative technology that offers a fresh approach to information management. The ability to deliver innovations by managing complex analysis in real time reduces time to market and generates new revenue streams. These innovations are the most difficult to quantify because no baseline data exist. However, “first mover” advantage may result in the largest payoffs for a project.
SAP is constantly capturing new innovations delivered with SAP HANA to share the impact. We have multiple forums to share the benefits of SAP HANA. A business transformation study is a brief document published jointly with our customers to capture benefits realized along with the story of why the investment was made. It is critical to continually measure the post- implementation impact of SAP HANA to capture benefits. The best recommendation is to simultaneously explore innovative SAP HANA scenarios while developing existing process-improvement scenarios. A simple business case can be developed based on existing processes and then leveraged to fund breakthrough innovations.
SAP recommends multiple scenarios by which SAP HANA delivers maximum value to the organization. These scenarios can be incorporated into an analytics roadmap that prioritizes value and time to value. This strategy will enable IT to jointly manage the implementation with the relevant business functions.
Before calculating a benefit, an organization must identify a baseline metric derived from the current state process. After it creates this baseline, it can establish a target benefit range.
The simple steps listed below present a framework for calculating a baseline metric. We illustrate this framework using the example of a profitability report.
Document the current state process (e.g., profitability reporting).
Number of business analysts allocated to monthly reporting
Effort taken in hours to build monthly package
Associated IT effort to maintain profitability reporting
The Current state profitability level of the associated item tracked on the report
As stated above, an organization needs to establish baseline metrics before it can calculate the value of a benefit. However, baseline metrics in isolation do not allow the owner of the business case to comfortably develop a target improvement range. These metrics are simply utilized as a measuring stick of success. The baseline metric allows organizations to know how much they have improved after the technology has been implemented. In order to truly define a benefit beyond the current state baseline, SAP Value Engineering performs this function by providing a triangulated approach to benefits quantification. Specifically, VE provides SAP Benchmarking data that indicate average and best-in-class performance, past examples of measured success by other organizations, and the ability to collect current state processes to best calculate the benefit range.
After the analysis has been completed, the next step is to identify the associated value driver outcome(s). The benefit as described in the process areas is typically related to its impact on revenue and expenses. We strongly recommend that when you calculate a benefit you apply a benefit range with a conservative and likely metric based on the SAP Value Engineering approach described above.
One final point: It is common place to link benefits to an overall initiative involving process improvements through technology enablement. Benefits are more widely accepted when linked to key business initiatives such as improving spend management or improving pricing within a certain product category. As part of the initial business case development, discussions with the business unit sponsors ensure linkage to strategy and acceptance of the SAP HANA investment.
To make it easier for people to build a value-based business case, SAP Value Engineering and SAP HANA Solution Management released a web-based SAP HANA benefits calculator to our customers. The tool covers the most common benefit areas that most organizations would consider. The calculator provides two or three example benefits for each of five mega-process areas:
Customer Focus Procure to Pay Plan to Produce Record to Report Quote to Cash
The benefits calculator enables you to customize the revenue include the number of employees, and key baseline information for your particular organization. The benefit ranges are also based on the SAP Value Engineering triangulated methodology, that we just described. A summary report aggregates all the benefits to determine the overall financial impact.
SAP designed this tool to be a great launching point for calculating benefits. It generates ideas on how SAP HANA can impact your business, and it demonstrates how you can calculate these benefits. Your organization can then continue to develop benefits either in partnership with SAP VE or on your own.
One of the most valuable resources available to you when building an SAP HANA business case is the SAP Benchmarking database. SAP Benchmarking is a global program launched in 2004 to deliver empirical metrics, best practices, and high-impact strategies to organizations that choose to leverage the program.
SAP Benchmarking is managed through a customer portal, SAP Value Management Center (https://valuemanagement.sap.com). The link takes you right to the portal to sign in and utilize the surveys to capture baseline information and determine how you are performing against best in class organizations. This is a significant investment by SAP to allow organizations to measure performance and to build benefit cases.
This portal offers direct access to complete surveys and analysis of results. The data in the benchmarking resources are collected anonymously from SAP customers who have participated in the program. These data are incredibly deep and rich, and they enable you to benchmark your company’s current state and potential value against real-world experiences from other companies in your industry.
For SAP HANA, SAP offers the Business Intelligence and Enterprise Information Management data sets and surveys. In addition, SAP launched a High Performance Analytics survey to track the importance of complexity and speed in the data management environment.
As discussed previously, SAP HANA can impact many business process areas spanning the entire organization. The SAP Benchmarking program allows you to help choose a few key process areas to determine where SAP HANA best fits as a starting point. The program provides the flexibility to create a customized survey to capture the key metrics and best practices identified through the SAP HANA business scenario development. This process will provide the critical peer comparison that establishes the appropriate range of improvement. An organization can build a realistic benefit range improvement by leveraging peer benchmarking data.
We now shift our focus to the last and most vital stage in the business case process — packaging the business case in a manner that maximizes the likelihood that it will be funded. To accomplish this objective, the storyline and financial impact have to be communicated effiectively to the stakeholders and decision makers. In addition, the presentation needs to be easily consumable by senior business executives, because senior management buy-in and commitment are critical.
As mentioned throughout, SAP HANA is a disruptive technology.
Accordingly, previous “rules” about internal business cases may not apply to SAP HANA cases. Fortunately, SAP Value Engineering has significant experience creating successful business cases for SAP HANA, and it can assist with your final presentation.
Although there is no set format for final deliverables, successful presentations generally contain certain critical components, which we list below.
Most companies realize that the successful utilization of information technologies is critical to success in the modern business environment. Despite this realization, however, few companies actually realize the maximum value of their IT investment. SAP addressed this problem by introducing Value Engineering, a practice that focuses on driving the customer value that IT is providing to the business. Over the years, SAP has learned a great deal about how the best-in-class companies continuously select, execute, and measure successful business-driven IT projects. Utilizing an ongoing processes called Value Management, SAP Value Engineering has standardized and packaged these best practices to help organizations deliver value by aligning IT with business goals and processes, and through maximizing return on IT investment.
Value Management is a permanent management process that ensures that investments in information technology are delivered on time, on budget and on value.
The discipline of Value Management is a proven way to realize the promised value from IT investments and initiatives. The Value Management methodology is intended to keep companies focused on choosing the right projects, to clearly define ownership and accountability for business results, and to deliver on these agreed-upon commitments. The SAP Value Engineering team helps identify the appropriate strategic areas to enable companies to become best-run businesses.
Value Management Drivers and Lifecycle:
Value Discovery: How do you align your business and IT strategies?
Value Realization: How can the business value be captured?
Value Optimization: How can you maximize the value from your investment?
Many companies initiate technology projects with a strong focus on their business objectives; over time, however, they lose their focus. As a result, they never fully realize their expected results. Research conducted by SAP indicates that 98% of companies can extract more value from their initiatives, yet only 35% focus on measuring the value of these technologies after they have been implemented. This “virtuous circle” of proper planning, execution, and ongoing value analysis is critical to building a strategic IT function in successful companies. Failure to realize maximum benefit from IT is a common problem that can understandably discourage executives from making the strategic IT investments needed to compete in today’s unforgiving business environment.
SAP’s approach to value management focuses on helping you discover the right projects, measure progress during implementation, and optimize investments across your IT portfolio. This end-to-end process helps to ensure the business value of your IT investments.
Utilizing SAP Value Engineering is not a requirement for building a solid business case for SAP HANA. However, it certainly can make the process easier and more efficient.
If you’ve already identified several potential use cases for SAP HANA, VE resources can help you create a financial justification for the initiative. However, if you’re willing to invest the time in a more immersive process, VE offers a SAP HANA Value Discovery Workshop.
At this point, you have completed the Discovery portion of the Value Management Cycle. The remaining stages in the cycle are Realization and Optimization. The Discovery phase resulted in the all-important business case, but the other two phases are no less critical to the process. One strategy to ensure continued success throughout the implementation of the SAP HANA initiative is to maintain (or establish) a “culture of measurement” within the organization.
How serious is your organization about performance measurement? It’s nearly impossible to determine the degree of success of a project unless you have a way to compare the “before” and “after” states. In many organizations, such assessments are mostly subjective opinions that are not easily validated.
In contrast, objective assessments minimize the element of personal bias and enable historical comparisons of assessments for different projects. This kind of measurement philosophy needs to be deeply ingrained in the culture of an organization, ideally as a formal methodology.
Among other things, here are some of the questions that you should consider when measuring performance:
The purpose here is to explain why it is critical to build business use cases and to provide some guidelines to assist you with this process. Different organizations may follow widely varying approaches when building their internal justifications for SAP HANA.
Whatever your situation is, however, we strongly recommend that you keep the following points in mind during your journey:
1) When identifying use cases, try to go beyond ideas about what you could be doing Consider:
2) Think big, but start small with a quick win to build momentum in
3) Don’t view technology or IT as merely an expense or overhead. When leveraged properly, technology and IT act as a:
4) Track both hard and soft benefits during the financial analysis of use
5) Ensure senior executive buy-in and sponsorship from Day 1.