Talking Points
Here is a comprehensive, chronological list of distinct topics, claims, and statements from the transcript:
1. SAP S/4HANA implementations provide value but are complex and challenging, requiring an understanding of many moving parts.
2. Third Stage Consulting is an independent firm helping clients globally with digital transformations, including S/4HANA implementations. The CEO, Eric Kimberly, began his career as an SAP consultant in the 1990s.
3. SAP has significantly evolved from R/2, R/3, and ECC to its current S/4HANA offering. Many large enterprises are migrating to S/4HANA, leading to a shortage of skilled resources.
4. This training video is designed for project team members, consultants, and executives seeking to understand S/4HANA and achieve successful transformations.
5. Additional resources include a free "Guide to S/4HANA Implementation" white paper and a new podcast series called "Journey to S/4HANA" available at journeytos4hana.com.
6. The training covers an S/4HANA product overview (strengths/weaknesses), implementation best practices (planning/execution), and case studies (failures and a successful client deep dive).
7. S/4HANA, released a few years ago, is the most recent SAP offering, built for the cloud but also deployable on-premise, as a single cloud or multi-tenant SaaS.
8. S/4HANA is built on SAP's proprietary Hana database, which was developed to reduce dependency on Oracle databases. The Hana database is groundbreaking, designed to track data and transactions efficiently, speeding up real-time performance.
9. S/4HANA is best suited for large, complex, diverse, and multinational organizations with intricate needs. Legacy SAP customers (R3, ECC, Business One) are common clients, with a SAP-mandated migration deadline of 2030.
10. S/4HANA is not as robust or mature as its legacy counterparts like ECC, as it is a complete rewrite on a new architecture. It is still a work in progress, and organizations must identify gaps and risks during evaluation.
11. S/4HANA incorporates technological advancements and enhancements such as artificial intelligence and machine learning.
12. Despite its technological advancements, S/4HANA implementations are inherently challenging and risky. Capabilities are still under development or incomplete, and the transformation is complex for large organizations with deeply ingrained business processes.
13. Success requires objectively and independently evaluating if S/4HANA is the best fit for an organization's specific needs, understanding its weaknesses, and comparing it to other ERP systems.
14. Project success depends on aligning the entire team, from executives to project members and all stakeholders. This alignment must cover not only system choice but also future business processes, technology leverage, and customization needs.
15. Investing significantly in the non-technical aspects of S/4HANA implementation, particularly organizational change management, is more critical than focusing solely on technological features. This ensures people and operations can effectively adapt.
16. Organizations must have realistic expectations regarding implementation timelines and budgets, as projects frequently exceed initial vendor or system integrator proposals. Plans should be objectively assessed and adapted to reality.
17. S/4HANA implementations are highly complex due to the product's robustness, numerous integration points, and acquired systems (e.g., Ariba, Concur, SuccessFactors). Thorough upfront planning is crucial for realistic expectations, goal achievement, and alignment with organizational objectives.
18. Key enablers for digital transformation include the SAP S/4HANA technology itself, external implementation partners (system integrators, consultants), and the company's internal resources.
19. Digital transformation involves four primary layers: processes, technology, people/organizational change, and business operations.
20. Project success is largely dependent on decisions made and actions taken during the "implementation readiness" stage, which occurs prior to the main implementation. Failures are often traceable to missteps during this early phase.
21. Implementation readiness saves time and money by optimizing external consultant engagement, mitigates risks associated with internal involvement, process definition, and organizational change, and ensures alignment across the organization.
22. There are five major components of SAP transformation readiness: strategic and executive alignment, operational readiness, technology readiness, people readiness, and project governance.
23. The objectives of implementation readiness are to prepare the company for optimal engagement with the system integrator, ready the internal team for change, ensure early team engagement, and foster project ownership.
24. Three parties are typically involved in implementation readiness: the client organization (owning the project, making key business decisions), the system integrator (providing functional/technical SAP expertise), and independent consultants (extending client capacity, providing QA, OCM, and addressing non-SAP roles).
25. A sample implementation readiness plan for a multi-billion dollar global company involved a six-month phase to establish executive alignment, project management office (PMO), governance, and an organizational change management (OCM) plan before the system integrator's engagement.
26. Outputs from the implementation readiness phase augment, rather than replace, subsequent implementation activities, providing foundational decisions and initial iterations for key workstreams.
27. The "Strategic and Executive Alignment" workstream ensures executive consensus on project strategy, defines stakeholder assessments, establishes communication plans, and facilitates a go/no-go decision for implementation. Lack of clear project goals from executives often leads to project failures.
28. The "Operational Readiness" workstream focuses on making strategic business decisions about how the organization will operate, independent of SAP's out-of-the-box configuration. Many identified process improvements (30-50%) can be rolled out as "Phase Zero" changes before the SAP go-live.
29. The "People Readiness" workstream addresses strategic organizational change management, including assessing staff skills, building an OCM plan and team, and beginning activities like organizational design, redefinition of roles/responsibilities, and job description rewrites. This is distinct from the tactical, software-based OCM typically provided by system integrators.
30. The "Technical Readiness" workstream involves planning the migration from legacy systems, defining interim integration points for phased rollouts, initiating data cleansing and mapping, and mobilizing an internal IT SAP Center of Excellence to reduce reliance on external consultants.
31. The "Project Governance and Planning" workstream establishes the project charter, team, overall implementation plan (including internal and third-party activities), and identifies and mitigates risks. An overarching program management plan is needed beyond the system integrator's technical plan.
32. A critical best practice is to approach S/4HANA with "eyes wide open" by recognizing it is not a fully mature product. Organizations must conduct a thorough gap analysis to identify weaknesses and risks, which informs a better transformation plan.
33. Organizations must define a clear strategy and vision for what S/4HANA will achieve for the business, how processes will improve, and how the organization will look in the future. This clarity drives internal alignment.
34. Selecting the best-fit system integrator is crucial, considering factors beyond just cost or technical capability, such as cultural fit, methodology, and the individual team members' compatibility.
35. Organizations should avoid "cliff diving" or rushing into implementation by engaging system integrators before defining their future processes, organizational vision, and strategy. Rushing leads to higher costs, the system integrator making decisions, and technology driving business decisions.
36. SAP's Activate methodology is a useful starting point but requires adaptation to an organization's specific needs, such as choosing between agile or waterfall approaches. It is largely technology-centric and does not fully cover organizational redesign, internal alignment, or competency building.
37. Building internal S/4HANA and transformation competencies within the IT department and other teams is essential. This allows the organization to be an equal partner with the system integrator, rather than being overly dependent.
38. Organizational change management (OCM) is arguably the most critical factor for S/4HANA project success or failure. It encompasses a broad range of activities beyond basic training and communications, including change impact assessments, organizational readiness, stakeholder analysis, and benefits realization.
39. A strong project governance, quality assurance (QA), and risk management framework is essential to keep the project on track and proactively mitigate risks. Independent, third-party QA is highly effective, as system integrators may have conflicts of interest in identifying their own project risks.
40. Organizational change management for S/4HANA must be strategic, focusing on how the product will fundamentally change the organization, not just on tactical user adoption. S/4HANA represents a significant, disruptive change even for existing SAP users.
41. Executive alignment is critical for defining the strategic impact of S/4HANA on the organization, such as opportunities to consolidate operations, implement shared services, or standardize processes across global entities. These strategic decisions must be made early.
42. Organizational design is a key component of OCM, involving the definition of future roles, responsibilities, and operating models (e.g., shared services, common global processes). A gap analysis between current and future jobs/system capabilities is necessary.
43. S/4HANA's increasing automation capabilities (RPA, machine learning, AI) will likely impact jobs. Organizations need to plan for potential job displacement, retraining, or relocation of employees, linking this to benefits realization.
44. Introducing new technology inevitably brings cultural change. Organizations need a deliberate cultural change plan and strategy to guide their culture towards desired future states, such as a unified company mindset for M&A-driven growth.
45. S/4HANA training must be highly customized to the organization's specific business processes, job roles, and differences from current practices, going beyond generic system transactions. Tools like SAP Enable Now or other third-party systems can help tailor training materials.
46. S/4HANA implementations, especially cloud-based ones, require different IT skill sets than legacy systems. Organizations must develop a solid plan for upskilling, retraining, or hiring new IT staff to support S/4HANA long-term and reduce dependency on external consultants.
47. SAP's Activate methodology defines how to deploy S/4HANA technology, including configuration, building, testing, and data migration. It is an improvement over older SAP methodologies.
48. Activate is primarily technology-focused and does not provide a comprehensive roadmap for transforming the entire organization. It lacks coverage for critical aspects like organizational design, strategic change management, internal competency building, and overall program management.
49. The "cliff diving" phenomenon occurs when companies rush directly into Activate after selecting SAP, leading to a lack of clear vision, over-delegation to system integrators, unrealistic expectations, and technology driving business decisions.
50. Transformation complexity is influenced by the extent of process change, people change (job impact, openness to change), and the technology shift itself (e.g., migrating from an AS/400 green screen vs. ECC). Activate assumes a uniform starting point, which is often inaccurate.
51. Key implementation readiness activities—such as organizational design, business blueprinting, change impact analysis, and skill building—should be completed before beginning the Activate methodology. This upfront work saves time and money.
52. The five implementation readiness workstreams include strategic/executive alignment, operational readiness (business blueprint), people readiness (strategic OCM), technical readiness (architecture, data, IT COE), and project governance/planning (overall program management).
53. Independent third-party consultants, like Third Stage Consulting, can act as an extension of the client's PMO, providing project management, risk mitigation, and filling gaps in strategic OCM and process reengineering not covered by system integrators or Activate.
54. The implementing organization must maintain ownership and control ("driver's seat") of the project, leveraging external expertise in a targeted, deliberate way rather than completely outsourcing the transformation.
55. A project quality assurance (QA) framework, applied throughout implementation readiness and Activate, helps analyze projects, identify risks, and mitigate them in ways not typically addressed by the Activate methodology.
56. **Risk 1: Incomplete Product.** S/4HANA is a work in progress with recognized gaps compared to legacy SAP. Organizations must perform a fit-gap analysis and strategically plan how to address these deficiencies (e.g., best-of-breed solutions, customization, workarounds).
57. **Risk 2: Siloed Systems.** SAP's strategy of acquiring best-of-breed products (e.g., Ariba, Concur, SuccessFactors) means the S/4HANA suite is not fully integrated. This creates integration challenges that require significant time and resources.
58. **Risk 3: Activate Methodology Deficiencies.** Activate's agile focus may not suit complex, integrated S/4HANA projects that require more upfront planning. It is also weak in critical areas like solution architecture, integration, data migration, and comprehensive organizational change management.
59. **Risk 4: Product Complexity.** S/4HANA's comprehensive and integrated nature, while a strength, introduces immense complexity. Changes cascade across the system, increasing implementation risk and demanding robust project governance, resource allocation, and testing.
60. **Risk 5: High Change Management Impact.** S/4HANA implementations, especially for large, complex organizations or those migrating from legacy SAP (which is a reimplementation, not an upgrade), involve massive change for employees. Comprehensive OCM beyond basic training is essential.
61. **Risk 6: System Integrator Conflicts of Interest.** Large system integrators often have a conflict of interest, prioritizing their loyalty to SAP and their own revenue (billable hours) over the client's best interests. This necessitates careful client management and oversight.
62. **Risk 7: "Armies of Consultants."** System integrators frequently deploy more consultants than needed, driving up project costs due to a lack of transparency and accountability. This is a common reason for budget overruns.
63. **Risk 8: Lack of Realistic Planning.** SAP and system integrators often present overly optimistic plans regarding timelines and budgets, which are rarely achieved. Objective, independent assessment is needed to develop realistic plans.
64. **Risk 9: Lack of Effective Risk Mitigation.** Projects often fail due to insufficient proactive and objective risk mitigation. System integrators may not highlight their own risks, making independent third-party identification and mitigation crucial.
65. **Risk 10: Lack of Value Realization.** Organizations frequently over-focus on technology implementation, neglecting business value. This leads to bloated projects, budget overruns, and failure to achieve expected ROI. A realistic business case, benefit tracking, and scope management are vital.
66. **Risk Mitigation 1: Implementation Readiness Phase (Phase Zero).** Invest upfront in defining future-state business processes, requirements, organizational structure, architecture, and process improvements. This "business blueprint" is distinct from the system integrator's software design.
67. **Risk Mitigation 2: Strong, Independent Program Management Office (PMO).** Establish an internal, independent, or hybrid PMO with experienced professionals, detached from the system integrator or SAP, to provide objective oversight for the broader transformation.
68. **Risk Mitigation 3: Independent Quality Assurance (QA) and Risk Mitigation Framework.** Implement an objective, agnostic third-party QA function to identify and mitigate risks throughout the transformation, ensuring accountability beyond the system integrator.
69. **Reason for Failure 1: Product Complexity.** S/4HANA's broad and integrated nature, while a strength, is challenging for organizations to manage during implementation due to cascading changes and the extensive time needed for definition, configuration, and testing.
70. **Reason for Failure 2: Product Rigidity.** S/4HANA enforces standardized processes, which can create cultural and operational shock. This forces a difficult choice between costly software customization or painful business adaptation, which often goes unplanned.
71. **Reason for Failure 3: Unclear Total Cost of Ownership (TCO).** Organizations often underestimate the TCO, including the costs of additional modules or the expense of addressing product rigidity. Hidden costs also include ongoing internal IT support. Thorough pre-implementation vetting and contract negotiation are essential.
72. **Reason for Failure 4: Ineffective Program Management.** Relying solely on system integrators for program management is a mistake, as they have conflicting self-interests and typically only manage the technical workstream. An internal or third-party program management office is needed for overarching program control.
73. **Reason for Failure 5: Poor Organizational Change Management.** Failures commonly result from inadequate OCM, as SAP and its partners typically provide only basic user training, which is insufficient for managing S/4HANA's significant cultural, operational, and strategic impacts.
74. The following section discusses specific high-profile SAP implementation failures to highlight risks and common mistakes, not to discourage S/4HANA adoption.
75. **Case Study 10: Target Canada (2013).** Expanding into Canada, Target attempted a "greenfield" SAP implementation but only 30% of master data was entered accurately, leading to a collapsed supply chain, high costs, and eventual failure.
76. **Case Study 9: Revlon (2016).** Attempted SAP implementation while integrating the Elizabeth Arden acquisition, replacing existing ERPs. A pilot plant rollout failed, preventing product shipments and causing millions in lost sales, leading to shareholder lawsuits.
77. **Case Study 8: Woolworths Australia.** A six-year attempt to upgrade a homegrown system to SAP failed, marked by high executive and project team turnover and loss of institutional knowledge. Post-go-live, they couldn't generate store P&L reports, attributed to not defining future state business processes upfront.
78. **Case Study 7: National Grid (US Utility).** A three-year, multi-million dollar over-budget SAP implementation failed, resulting in incorrect employee payroll, 15,000 unpaid vendor invoices, and inability to provide financial reports, causing liquidity issues. They went live a week after Hurricane Sandy, exacerbating problems, and later sued their system integrator for $75 million.
79. **Case Study 6: MillerCoors (2014).** Consolidated seven SAP instances into one, managed by HCL, but went live with thousands of critical open defects. MillerCoors sued HCL for $100 million, with HCL countersuing, citing management dysfunction.
80. **Case Study 5: LeasePlan (European Vehicle Rental).** Despite a €92 million investment to roll out SAP's "core Leasing system," the product was deemed "not fit for purpose" and its monolithic nature couldn't support their flexible business model. They scrapped the project, salvaging only €14 million, and opted for a best-of-breed solution.
81. **Case Study 4: Hershey (1999).** Attempted to implement SAP, Siebel, and Manugistics during the peak Halloween season. The implementation failed, leading to over $100 million in lost sales and an 8% stock drop, and is widely considered one of the biggest ERP failures.
82. **Case Study 3: Hewlett-Packard (Early 2000s).** Attempted SAP implementation to consolidate ERP systems, but a "perfect storm" of problems resulted in $160 million in lost sales and contract backlog. The lesson highlighted the need to navigate multiple risks simultaneously.
83. **Case Study 2: Lidl (German Retailer).** Spent over half a billion euros on SAP implementation from 2011 to 2018 before discontinuing it. A major issue was the conflict between SAP's inventory valuation method and Lidl's business requirements, which neither the system nor the business could accommodate.
84. **Case Study 1: Waste Management (North America).** An 18-month SAP implementation took years to reach a failed pilot go-live. Waste Management sued SAP for over $1 billion (alleging fraudulent sales), while SAP blamed Waste Management for poor decision-making. Waste Management recovered $77 million in settlement but incurred significant disruption and costs.
85. **Lessons from SAP Failures (General Advice):** Organizations must set realistic expectations, conduct thorough due diligence on technology fit, proactively mitigate risks of operational disruption, and understand what augmentation (processes, OCM, third-party systems) new technology requires.
86. The following section presents a case study of a client who successfully implemented S/4HANA despite challenges, offering practical takeaways.
87. **Client Case Study: Company Background.** An alcohol and beverage company with over 5,000 employees had an aged (15-20 years old) technology and process landscape (legacy JD Edwards on AS/400 with 2 million lines of custom code). They sought to aggressively grow through M&A and global expansion, which was hindered by their old systems.
88. **Client Case Study: Tipping Points.** The technology landscape was a major tipping point due to outdated hardware and high-risk maintenance. The business was also evolving faster than the technology, with new operating models requiring manual processes for 6-9 months before system support caught up.
89. **Client Case Study: Transformation Timing.** The company initiated the transformation during a period of growth, akin to "changing the roof while the sun was shining," which is considered a more advantageous time for such initiatives.
90. **Client Case Study: Scope of Transformation.** The vertically integrated company replaced its "backbone" by implementing S/4HANA across sourcing, finance, planning, manufacturing, customer service, order taking, and logistics. Sales and marketing functions were explicitly excluded from the scope.
91. **Client Case Study: Technology Selection Process.** They engaged an independent, technology-agnostic consultant to evaluate market options and align vendors with their industry, complexity, and growth ambitions. A year was dedicated to preparing, selecting SAP, choosing an implementation partner, and readying the internal team.
92. **Client Case Study: Reasons for Choosing SAP.** SAP was selected for its strategic R&D investment in ERP evolution, a more focused product portfolio compared to competitors, proven scale and diversity for complex/global operations, and its ability to integrate the client's vertically integrated process work. This also marked a shift to a "best-of-suite" strategy.
93. **Client Case Study: SAP's Agility for Acquisitions.** SAP (e.g., Central Finance) offered agility for integrating acquired companies and their processes rapidly, aligning with their "integrate first" philosophy, which countered common perceptions of SAP rigidity.
94. **Client Case Study: SAP's Flexibility - A "Double-Edged Sword."** SAP provides flexibility for operating model changes and M&A integration, allowing for various co-manufacturing configurations. However, configuring new manufacturing locations or complex changes is not instantaneous and can still take weeks.
95. **Client Case Study: Transformation Results Summary.** The project was deemed a "top 5%" success, meeting macro goals for scalability and global operations. However, it fell short on user experience (not "Amazon-like") and efficiency in sourcing and planning, due to product/tool maturity. The project was completed on time and under budget in 18 months.
96. **Client Case Study: Biggest Challenges.** The primary challenges were unifying and uniting the company's vision and expectations, keeping multiple vendors (software and implementation partners) synchronized in a "one team" culture, and continuously adjusting to unexpected gaps while maintaining alignment.
97. **Client Case Study: Achieving Alignment.** Alignment was achieved through a strong "why" for the transformation, active executive sponsorship (e.g., the CFO's hands-on involvement), unified leadership reporting to one sponsor, active interest from company owners, and engagement of an agnostic third party. High-level executives from vendors were requested for the steering committee, and internal ownership was emphasized.
98. **Client Case Study: Importance of Executive Involvement.** Executive involvement and ownership were critical, with C-level executives actively engaging in process overview sessions and maintaining passion and awareness of team morale.
99. **Client Case Study: Addressing OCM Challenges.** OCM was prioritized from the start, with a "two-in-the-box" leadership model including an HR counterpart focused on OCM. An experienced OCM leader was hired, a strong methodology was followed, and transparency (sharing all progress) was maintained. The client took OCM ownership in-house when the system integrator's approach was misaligned.
100. **Client Case Study: Implementation Time and Budget.** The project was delivered on time and under budget within 18 months. Incentive structures were reevaluated and tied to program success. Business case realization, except for sourcing, took about a year.
101. **Client Case Study: Advice for Future Transformations.** Key advice includes thorough upfront planning, aligning executives, developing a realistic business case, robust due diligence on products, investing in talented people, being ready for daily surprises with flexibility and a strong team culture, and leaders maintaining close proximity to the project.
102. **Client Case Study: Technology is Least Complex.** The CIO stated that technology is the least complex aspect of transformations. Their technology challenges were due to having managed other facets (people, process, culture) so effectively.
103. **Client Case Study: Technology Expectation Management.** A key technology challenge involved setting realistic expectations for S/4HANA's user experience (not "Amazon-like"). Over-expectations also arose from being an early adopter of emerging SAP technologies like IBP.
104. The training course concluded by summarizing the S/4HANA insights, success factors, risks, failures, and case studies, encouraging further learning through the guide and podcast.