tocico conference 2013 - c.ymcdn.com · the story of sap 2. the story of sap + toc 3. the...

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TOCICO CONFERENCE 2013

More VALUE faster from ERP

VISION

More Implementation Benefits

EFFECTIVE

Lower Implementation Costs

EFFICIENT

Simpler

Step 2.2

Better

Step 2.1

Faster

Step 2.3

Simpler

Step 1.2

Better

Step 1.1

Faster

Step 1.3

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© Goldratt Research Labs, LLC, 2013

Presentation Outline

1. The Story of SAP2. The Story of SAP + TOC3. The Experiment of SAP + TOC in SAP MENA4. A look to the future of SAP+TOC5. Q&A

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1. The Story of SAPSAP History

• SAP founded in 1972 in Germany by 5 IBM Engineers who believed the future was software (not hardware)

• 1979 launches SAP R/2 for mainframe computers• 1992 launches SAP R/3 as client-server application as 1st ERP

(Enterprise Resource Planning) software• 1996 SAP R/3 became partially internet enabled• 1997 SAP launches CRM, SCM and Data Warehousing solutions

and early 2000 launches MySAP.com• In 2004/5 SAP completed service-enabled ERP product to build

APPs without having to change core code of ERP. • This enabled SAP to capitalize on stand-alone APP market.

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1. The Story of SAPSAP History

R/2 – the first “ERP” 1979 R/3 – the first ERP 1991 – What SAP means to most people

MySAP – More than ERP - 2001

SAP Business Suite on Netweaver - 2005

1 Product 1 Product 6 Products >50 Products

>300 Products (not counting mobile and analytic “apps”)

SAP Business Suite on HANA -2012

The solution is Much more complex today than 10 years ago at the time that

NBNS was published

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SAP 2015 Ambitions

1. The Story of SAPSAP Future Strategy and 2015 Targets

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The Problem…Some Statistics

• 75% of all ERP projects fail to deliver expected benefits

• 75% of most other IT projects fail to deliver expected benefits

• 75% of reengineering projects fail to deliver expected benefits

• Recent McKinsey article disputes IT productivity gains

• Large scale study in Europe on data over 30 years! Show negative ROI & GETTING WORSE

Source: Gartner Group, Ziff-Davies, Mckinsey, FT (2001/2)

Newsflash! Good News!

Latest figures show a dramatic improvement to only a 72% failure rate for these initiatives!

BUT…..• Management Consultancies, SW

vendors and System Integrators will (probably correctly) claim a >90% success rate

• Customers continue to buy software and consulting services!

• How quickly could we grow if we had consistently happy customers?

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Bringing Value to Customers?

2000 –ValueSAP’sContinuous Business Improvement

2003 to date –Value Engineering –focus on building Business Cases using Benchmarks

2003 to date –Business Transformation Services, SAP’s MC arm

2011 to date –Moving focus to innovation with Design Thinking

1973 to date. How to consistently create value is still a mysterious black box

Hypothesis: We (IT organizations) have been asking the wrong question. Not

“how to achieve value from IT” but rather “how best to use IT to consistently

enable sustainable business growth”

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• As predicted in “Necessary but not Sufficient”, co-authored by Dr. Eli Goldratt, Carol Ptak and Eli Schragenheim, many of the “local optima” rules which acknowledged previous technology limitations were never changed.

• Example: Before implementing SAP, companies would do their MRP calculation once-per-month. After SAP, despite fact that SAP can diminish this limitation, it was still run once per month.

• SAP’s new HANA is a technology looking for problems to solve. • SAP BTS aims to ensure SAP customers benefit from SAP, not

just to RUN their businesses, but also to GROW and TRANSFORM their businesses.

• Chris believes NbnS and TOC can provide key parts of the knowledge to achieve these objectives…

1. The Story of SAPThe business case for TOC training at SAP BTS

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1. The Story of SAP2. The Story of SAP + TOC3. The Experiment of SAP + TOC in SAP MENA4. A look to the future of SAP+TOC5. Q&A

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Since 2000, Dr. Alan Barnard lead a number of joint Projects with SAP and SAP implementation to answer question of where value is lost and how the Theory of Constraints approach can help customers realize full value from their SAP implementation .

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011

ProgramDeploymentFactory

PhiladelphiaWorkshop

2012

2. The Story of SAP and TOCJoint Goldratt Research Labs + SAP projects

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1. THEORY OF CONSTRAINTS PHILOSOPHY..and how it can help to overcome improvement challenges?

“Finally, and most importantly, I wanted to show that we can all beoutstanding scientists. The secret of being a good scientist, I believe, liesnot in our brain power. We have enough. We simply need to look at realityand think logically and precisely about what we see.”

Dr. Goldratt, the creator of Theory of Constraints, said the two key abilities to “being anoutstanding scientist” are simply:

(STEP1) Have the courage to face inconsistencies between what we (expect to) see and the waythings are… and then

(STEP 2) Find a way to challenge the basic assumption(s) to resolve these inconsistencies.

Applying 2 steps to SAP Implementations• What are the important “inconsistencies” (performance gaps) within VALUE realization from

a Technology such as SAP?• What are the “basic assumptions” that can and should be challenged that could help resolve

these inconsistencies (close performance gaps)?

Dr. Eliyahu M. Goldratt1948 - 2011

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2. The Story of SAP and TOCApplying the Scientific Method to SAP Implementations

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Considering the incredible power of ERP systems today toenable organizations to:1. Execute key business processes faster with higher quality

AND2. Providing management with faster, more accurate

information for enabling better and faster decisions at alllevels…AND

3. Improving the user experience and productivity…

Why is it that so few organizations report that the financial benefits from their ERP implementation did

not significantly outweigh the costs incurred?www.goldrattresearchlabs.com

STEP 1: INCONSISTENCY IN ERP VALUE REALIZATION


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Why do so many ERP implementations fail to deliver onexpected value?A technology, such as ERP, can bring benefits, if and only if, it willdiminish a limitation for that organization to achieve more goal units.

What benefits, if any, should be expected if the technology does not remove or at least diminish such a limitation?

Also,Before the technology was available, certain “rules” were developedto “live with” this limitation.

What benefits, if any, will the technology bring if these “old rules” are not changed with the implementation of the new technology?

To resolve this inconsistency, what BASIC ASSUMPTIONS need to be challenged?

STEP 1: INCONSISTENCY IN ERP VALUE REALIZATION


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EXISTING VALUE FROM SAP

POTENTIAL SAP VALUE GAP

DIFFICULT TO QUANTIFY FULL

VALUE FROM SAP

NOT POSSIBLE TO LEVERAGE BEST

PRACTICES ON P1(JUST-IN-CASE)

DIFFICULT TO APPLY PROJECT PLANNING BEST

PRACTICES

DIFFICULT TO APPLY PROJECT

EXECUTION BEST

PRACTICES

DIFFICULT TO AGREE ON FURTHER

VALUE GAPS

DEFINE + QUANTIFY VALUE WITH TOC NBNS

ANALYSIS

WHY?

WHAT?

HOW? FOCUS & SIMPLIFY SCOPE WITH BEST PRACTICE (MUST-VS. NICE-TO-HAVE)

USE TOC CCPM FOR SAP PROJECT PLANNING

USE TOC CCPM FOR SAP PROJECT

EXECUTION

USE TOC VALUE GAP

AUDITS

BUSINESS CASE DESIGN/SCOPE PLANNING EXECUTION AUDITING

STEP 2: CHALLENGING ASSUMPTIONS TO ANALYZE ERP VALUE REALIZATION GAP


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VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUEAUDIT

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


2. The Story of SAP and TOCVALUE ERP - HOW SAP VALUE IS LOST AND HOW TO UNLOCK IT…

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VALUE ERP PROCESSSTEP 1 - USE TOC NBNS OR VV + TA TO QUANTIFY VALUE

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


1. What is the main power of the technology?2. What limitation does it diminish…AND what is the

Value of diminishing this limitation?3. What (old) rules helped us to accommodate the

limitation?4. What (new) rules should we use now?5. Do the new rules require any change in the way we

design / use the technology?6. How to cause this change?

NECESSARY BUT NOT SUFFICIENT ANALYSIS

Can you answer these for each of the main SAP product / service offerings?

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EXAMPLES OF LOCAL OPTIMA RULES FOUND1. Using Pricing Lists with One List Prices + discounts based on volume

purchased2. Using Min-Max or ROP to control stock3. Using standard product/service cost to determine profitability of

products or services4. Using Overall Equipment Effectiveness (OEE)5. Value Stock based on Standard Cost6. Judging financial decision based on local impact7. Measuring Budget variances to decide where to focus8. Focusing in Sales Presentation on benefits of your product / service (not

on 1st validating needs of client)9. Pushing based on forecast – the close stock to end consumer the higher

chance of a sale10. Not doing “testing” to see what customers really want / would be willing

to pay.

VALUE ERP PROCESSSTEP 1 - USE TOC NBNS OR VV + TA TO QUANTIFY VALUE

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


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US$ % of SR US$ % of SR

Sales Revenue 1,000$ 100% 0% 0% 1,000$ 100%Variable Cost 500$ 50% 0% 0% 500$ 10%

Thruput 500$ 50% 500$ 50%OpEx-Direct 300$ 30% 300$ 30%OpEx-Indirect 150$ 15% 150$ 15%

NP(BIT) 50$ 5% 50$ 5%

WorkCapital 300$ 30% 300$ 30%PE 6 6 Value 300$ 300$ Value Created -$

0%

% Change in Qty

0%

Now Future% Change in Price

0%

0%0%

0%

Using TOC’s Throughput Accounting to quantify impact of faster and more accurate business processes and faster and more accurate management decisions.

Simulation using above simplified model shows that:1. If a change can help increase average selling price by just 1% (e.g. using ERP to prevent pricing

mistakes) it will increase profits by 20%. 2. If a change can help reduce shortages/poor DDP which should increase sales, just a 1% increase

in sales will increase profits by 10% (e.g. using ERP to prevent LOST SALES)3. What is the VALUE if change can help ensure Compliance?

• VALUE ERP PROCESSSTEP 1 - USE TOC NBNS OR VV + TA TO QUANTIFY VALUE

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


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VALUE ERP PROCESSSTEP 2 - USE VV + S&T TO FOCUS & SIMPLIFY SAP SCOPE and SOLUTION DESiGN

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUAUDI

STEP 1 STEP 2 STEP 3 STEP 4 STEP

Q0: What is the ambitious (Viable Vision) financial target?Q1: How much do Sales have to increase to reach the VV target? Q2: Is existing Market(s) large enough to achieve the req’d Sales?Q3: How can this increase in Sales be accomplished?

What Decisive Competitive Edges (DCEs) will enable Co. to get customers to pay more and/or buy more)?

Q4: What changes are needed to build, capitalize & sustain DCEs? What process/policy changes are needed and how much additional OE and I will be required to implement these?

Q5: Can company and its value chain partners support changes? What else can constrain the organization’s profitable growth or make this specifically risky or difficult?

Given answers to the above five questions, we can identify what management should FOCUS on and what NOT…

Developing a VIABLE VISION for ANY company requires answers to:

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CURRENT PROFITABILITY

Current

Potential

Wasted Profitability

PotentialLost Sales

(existing customer)

Avoidable Costs

Lost Sales (new customer)

Company Profitability

Ensure Compliance / Perf. Sustainment

DCE1Sales Growth from existing

Capacity/ Customers/Products

Reduce Avoidable Cost & Investment

DCE2Scalable Growth from new

Capacity/Customers/Products

BUILD CAPATILIZE SUSTAIN BUILD CAPATILIZE SUSTAIN BUILD CAPATILIZE SUSTAINBUILD CAPATILIZE SUSTAIN

Protect

What IT Systems or IT System Change(s) Needed?

What Business Process/Policy/Measurement Change(s) are needed?

BUT HOW CAN WE HELP ORGANIZATIONS DEFINE WHAT CHANGES ARE NEEDED?

• VALUE ERP PROCESSSTEP 2 - USE VV + S&T TO FOCUS & SIMPLIFY SAP SCOPE and SOLUTION DESiGN

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUAUDI

STEP 1 STEP 2 STEP 3 STEP 4 STEP

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RULE 1 - IDENTIFYING & PIPELINING ONLY CRITICAL PROJECTS (ALAP)(decide when and what to do and what NOT to do )

RULE 2 - CRITICAL CHAIN PLANNING & BUFFERING

(Plans that reduce Multi-tasking and FlowTime,)

RULE 3 – EXECUTION MANAGEMENT , AUDIT REVIEW & BUFFER RECOVERY(align priorities, do frequent reviews, check what red

tasks are waiting for and how best to recover buffer & identify & break subordination conflicts )

New Planning

Rules

New Execution &

Feedback Rules

3.1.13.1.23.1.33.2.13.2.23.2.3

3.1.1 3.1.2 3.1.3 3.2.1 3.2.2 3.2.3

2.1 2.2

1

3.1.1 3.1.2 3.1.3 3.2.1 3.2.2 3.2.3

2.1 2.2

1

New Design Rules

RULE 4 –THROUGHPUT ACCOUNTINGAlways quantify Company wide impact of any local

decision using impact on ∆T (S-VC), OE and I

Global Impact = ∆T (SR-VC) - ∆OE(ROI) ∆I

New Holistic Decision

Making Rule

GOAL

NOT Change

+ VE + VE

GOAL

- VE - VE

25% Faster

VALUE ERP PROCESSSTEP 3 and 4 - USE CCPM PLANNING AND EXECUTION BEST PRACTICES

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


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VALUE ERP PROCESSSTEP 5 - USE TOC CMC FOR SAP PROJECT VALUE GAP AUDITS

VALUE SAP

QUANTIFY VALUE

FOCUSED SCOPE

CCPM PLANNING

CCPM EXECUTION

VALUE AUDIT


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1. The Story of SAP2. The Story of SAP + TOC3. The Experiment of SAP + TOC in SAP MENA4. A look to the future of SAP + TOC5. Q&A

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3. The Experiment of SAP+TOC in SAP MENAObjectives of Jan – April 2013 ValueERP Training

PROGRAM OUTCOMES

The VALUE-ERP Program, based on Dr. Eli Goldratt’s Theory of Constraints (TOC) and“Necessary but not Sufficient” analysis (the application of TOC’s 5 Focusing steps to improvingvalue from technology) is designed specifically to provide attendees the analysis tools and skillsto help their customers identify and unlock real VALUE from an ERP implementation.The VALUE-ERP program consists of 4 x 4-day interactive learning modules, covering both thetheory and application of the theory to actual cases. The program is facilitated by leading TOCexperts sharing their experience and insights on how to rapidly apply the TOC analysis, focusingand best practice processes, to identify what technology and changes in management rules andmeasurements are needed to really run, grow and transform companies within industries such asManufacturing, Distribution Retail, Projects, Construction and High Tech.

The Value-ERP program helps attendees understand and address the causes of the mostcommon mistakes that prevent organizations from realizing the full VALUE of ERP:1. mistakes in building the ERP business case2. mistakes in defining ERP project scope3. mistakes in ERP Project planning4. mistakes in ERP project execution and5. mistakes in analyzing/auditing the business for new opportunities for ERP to unlock value.Attendees will get the opportunity to apply these skills on specific cases they are involved with tocreate a roadmap of changes needed to help their customers receive full value from an existingor planned ERP implementation

PROGRAM OVERVIEW

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• To be shown at conference

3. The Experiment of SAP+TOC in SAP MENAResults achieved…

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1. The Story of SAP2. The Story of SAP and TOC3. The Experiment of SAP+TOC in SAP MENA4. A look to the future of SAP+TOC5. Q&A

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“THE ORIGINAL NBNS MAFIA OFFER”

CRAIG (CEO of Pierco Inc.) to ERP Vendor & Implementation Partner:“If you agreed to subcontract all my computer related logistics, I would be happy to pay you that much (1% of total sales revenue). You handle the data, my people will enter it, but you handle it. You make sure that my people have the information they need. Your computers, your software – I don’t want to know about them. I don’t want to hear about bugs. I don’t want to hear about new hardware. That’s your headache. What I want are the end results. The information available when my people need it, where they need it, and in whatever form they need it.”

From Dr. Eli Goldratt’s book “Necessary but not Sufficient”

4. A look to the future of SAP+TOC

What has been learned and how should this offer be modified to ensure win:win:win?

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The Mafia Offer Revisted….

• IT Outsourcing has become a major global industry over the last 15 years. Results have been patchy…

• SAP already offers Global licenses and Unlimited Licenses where customers can use the whole suite for a yearly fee

• We are looking at 2 versions in MENA:1. A Viable Vision offer with an Unlimited License offer together with

limited services as the unconditional amount and then fees based on the value generated

2. Offer that we will generate at least sufficient value to the customer to pay back the implementation before the system goes live

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The Future of SAP & TOC

• The limitations overcome by Enterprise Systems has changed with the advent of Big Data and Mobility. What is now the generic limitation?

• If we assume that “wall to wall” implementations have been done AND the “standard” TOC applications have been implemented (or the Viable Vision has been achieved), what then?

• HYPOTHESIS: The real power of the “new” technology is the ability to “experiment” quickly. TOC would still be used as the focusing method and Throughput Accounting as the Measurement – and the fulcrum against which data mining “rules” are developed

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1. The Story of SAP2. The Story of SAP + TOC3. The Experiment of SAP + TOC in SAP MENA4. A look to the future of SAP + TOC5. Q&A

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Q&A

SAP with TOC + TOC with SAPA Match made in heaven…

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ABOUT THE PRESENTERSCHRIS SIMS

Chris Sims is currently Head of SAP Field Services forthe United Arab Emirates, one of SAP’s fastest growingmarkets

After training as an accountant he moved toOrganizational Change Management and training forSAP implementations and then was a functionalconsultant and project manager on SAPimplementations. While running his own company inthe Philippines he wondered why so manyimplementation projects fail to gain significant valueand became interested in TOC.

After running his own small supply chain consultancy for a few years in SE Asia hereturned to his “roots” in SAP returning to the question of value and took over BTSMENA in 2010.

Currently the practice is growing at over 100% per year by revenue and planning tokeep the same growth over the next few years.

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ABOUT THE PRESENTERSDr Alan Barnard (PhD)

Dr. Alan Barnard is considered one of the leading experts in the world inTheory of Constraints (TOC) frequently working with Dr. Eli Goldratt, creatorof Theory of Constraints on large and complex projects around the world.

Alan is CEO of Goldratt Research Labs (USA), Chairman of RealizationAfrica (RSA), African Phosphates (RSA) and The Odyssey Institute (USA).Alan is also a board member of TOCICO and the Dr. Eliyahu M. GoldrattFoundation.

In 2009, Alan was awarded a PhD in Management of Technology &Innovation, from the Da Vinci Institute in 2009 with a thesis titled “How toidentify and unlock inherent potential within organizations (private & public)and individuals?”. Alan is also the author of 2 chapters in the McGraw Hillpublished Theory of Constraints Handbook.Alan is a past-President of SAPICS (2000 to 2002) and past-President of TOCICO (2003 to2005) and serve on the judging panels of the Logistics Achiever Awards and Technology Top100.

He has worked with global companies such as ABB, BHP, Cisco, SAP, Random HousePublishing, Tata in the Private sector and also with UN DP, UN WFP and InWent in the publicsector on applying for example Theory of Constraints to City Councils in DevelopingCountries in the Public Sector to help them identify and unlock inherent potential to achievemore with the same resources in less time.

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