Business transformation can be a daunting endeavor. For companies in the midst of such projects, all manner of automation challenges and roadblocks to standardizing business processes can threaten or even completely derail the pace of progress.
Such obstacles also present project managers with countless opportunities: to lead courageously, to emphasize cross-departmental collaboration, and to engage both business and IT leaders in setting aligned direction, making design decisions, and driving change management.
Just as importantly, these challenges can reveal opportunities to standardize, automate, and simplify, reducing manual processes in order to build flexible, scalable platforms for growth. That’s according to Vikas Malhotra, Senior Director for Transformation at Medline, who believes in the power of simplification to unlock business transformation.
In a previous role, Malhotra navigated the simplification journey for a large chemical company that initially sought a technical upgrade of its systems rather than what he calls “a true business transformation.” After an initial failed attempt, the company changed tactics and succeeded by focusing on program simplification.
Malhotra speaks to ASUG about advising the company through that simplification journey ahead of this week’s ASUG Best Practices: SAP for Chemicals conference (June 21–22, in The Woodlands, TX; register here), where he’ll go deeper with attendees on the importance of simplifying IT to power business transformation.
“Be Current and Stay Current”
An early adopter of SAP S/4HANA Cloud, public edition, the company—which had run on SAP ERP Central Component (SAP ECC) since 2013—initially experienced difficulties integrating the cloud ERP platform and did not engage any system integrator that could have provided support. “We had been trying to replicate what we had in 2013 in 2021, and that didn’t position us for 2030, which is where we wanted to go,” he says.
This upgrade, attempted from mid-2018 to the end of 2019, was an IT-led project rather than a business-led one with minimal governance from C-suite executives. Malhotra reflects that little to no time was spent preparing a true business case or investing in change management. “Very quickly, we fell flat on our face,” he recalls.
The company’s second effort was “more thought-through,” Malhotra continues. Its simplification journey had started as a technical upgrade project, but following an assessment phase conducted with Deloitte, the company concluded it could instead seize the opportunity for a business-led transformation. Replacing SAP S/4HANA Cloud, public edition, with an SAP HANA Enterprise Cloud (HEC) environment, of SAP S/4HANA on Microsoft Azure Cloud, the company renewed its efforts.
Such a project, Malhotra knew, could streamline and automate key processes, eliminate key person risk in the business, simplify the IT landscape by reducing technical debt, and drive standardization across the enterprise.
“We had spent so much time in Microsoft Excel workbooks,” Malhotra says. “Upon taking an inventory of all the work, we realized 60–70% of our time was being lost in these workbook streams, doing manual work.”
Part of the company’s problem was that, in implementing SAP ECC back in 2013, it had completely customized its system, preventing it from upgrading or taking advantage of advancements that SAP had made to its products. According to Malhotra, the company’s new “cloud-first” strategy to “be current and stay current” involved implementing a CRM, ERP, integration, and analytics solution in the cloud while taking a fit-to-standard approach.
“We swung the pendulum in the other direction,” he says. The company resolved only to customize if it provided a competitive advantage in the marketplace or was essential for risk and compliance.
A steering committee with C-suite executives (the chief financial officer, chief human resources officer, head of global sales, head of manufacturing, chief information officer, head of legal, and head of procurement) was convened to approve every customization, an added level of governance that helped to drive standardization. Having included more than 800 customizations in SAP ECC, the company achieved less than 75 customizations in its SAP S/4HANA program.
Emphasizing Change Management
“These kinds of transformations are very challenging,” Malhotra says. What made the company’s 20-month approach successful, in his view, is that the project was deemed a strategic initiative and personal goal for the company’s chief executive officer. “It was one of four goals, and it was directly tied to every employee’s bonus,” Malhotra says. “This pushed our project to the top of the chain. Whenever there was a conflict for resources, we got the resources we needed to get the project completed.”
In preparing for transformation, the company’s IT department halted projects on SAP ECC that were not directly adding value. The department also freed up key IT personnel to pursue SAP S/4HANA training and certification, meaning the transformation furthered their career development goals. On the business side, the company brought in people from outside to assist with the project. However, Malhotra reflects that those external hires could have been utilized for ongoing projects such as closing the books at the end of each month, enabling experts within the company to focus on transformation.
Malhotra reflects that he would have, in hindsight, provisioned for time to re-evaluate the company’s initial global design decisions, made remotely during the pandemic, before building, given that much of that work was subsequently revisited. “If people can get together to do global design in person, it will be all the more power to them,” he says.
The company engaged with Deloitte and TCS as system integrators, which Malhotra looks back on as a positive experience and also utilized SAP Max Attention, but the most vital work was conducted internally across departments.
“I cannot express how important it was to get the organization as a whole ready for this transformation,” he says. “From a top-down and bottom-up perspective, it was important to have buy-in and to ensure people understood the reasons why. Change management was imperative, from communication to data. We spent time cleaning up our data before transforming, and that helped us from a quality-of-data perspective and minimized the issues we had post-implementation.”
In addition to implementing its HEC environment, SAP S/4HANA on Azure, and successfully going live in early January, the company selected Salesforce as its front-end customer portal, established an EHANA and MS Azure global data warehouse with Tableau reporting, created new integrations with ENOSXI and SAP Cloud Platform Integration (CPI), and redesigned its sales portal with a go-to-market strategy for its products. More recently, the company was in the process of upgrading procurement and business consolidations.
Looking back on the project as a whole, Malhotra believes strong governance, with C-level leadership and support, was essential to its success, as was the time taken at the beginning of the project to position the enterprise for impending transformation. Malhotra reflects that nearly nine months were spent preparing the organization for change at all levels, a time in which IT resources were freed up, trained, and certified. At the same time, the company upgraded other areas of its infrastructure and network. System integrators Deloitte and TCS provided valuable industry perspectives, and SAP supported the transformation by providing key insights into the technology involved.
“Having an understanding of your key pain points at the beginning of the process will inform your decisions during transformation,” Malhotra notes. “And once you get to the end of the transformation, there has to be a quantified way to measure success.”
After the transformation, the company was able to close books on its current timeline with no new control deficiencies, reported a 50% reduction in the number of custom objects in its landscape, reduced its number of reports by more than 50%, and reduced manual activities such as manual journal steps, controls, and close steps while increasing its percentage of automated finance reports from 33% to 50%.
Such efficiencies enabled the business to free up talent in multiple departments, which proved crucial to the success of investments and acquisitions.
“The fact that people from the business could be re-deployed to take on critical projects is because they’d freed them up through simplifying the landscape,” says Malhotra. “It’s easy to complicate. It’s complicated to simplify. Bringing this project home in 20 months was a big deal.”