How An African Safari’s “Big Five” Can Inform Digitalization Road Maps (Part 2)

Stefan Henkel and Bastian Naul

Part of the Digital Finance Transformation” series that provides a framework for CFOs to move forward confidently on the journey toward digital transformation

In this series, we have presented a big-picture perspective on the five steps required for a digital transformation. In our previous blog, we used an African safari as a metaphor for the importance of “capturing” each one of the “Big Five.” In our discussions with CFOs, we often find that they are looking for more specifics. Here are more insights on each of those steps.

Prepare: Align expectations, timelines, and requirements procedures

Temporal dependencies such as regulatory requirements, market influences, and competitive factors have a decisive impact on the project timeline and deliverables. Therefore, it is important to discuss all those factors with your stakeholders and align and agree upon them, since the influence of a single one might lead to a chain reaction.

Organizational requirements regarding resources and restrictions in technical and/or functional requirements will influence the scope and thereby also the timeline, as well as resource utilization. A strategic approach might necessitate working with iterative, or “agile,” project methodologies instead of the classic “waterfall” concept. (Agile allows for change and deploying on a continuous basis rather than one big deployment at the end. Waterfall is a sequential list of tasks where most are dependent on previous tasks.)

Introduce best practices

Elaboration of your digitalization roadmap will depend on multiple factors and decisions. In the context of the data quality and future use of existing data sources, as well as considering existing and new processes, we distinguish between brownfield and greenfield approaches. Recommendations for the roadmap are highly dependent on each company’s situation, especially regarding specific challenges and fields of action. Bringing the best-practice approach to your stakeholders allows them to develop a clear and structured understanding of a proven and established way forward based on how others have solved similar issues. Of course, best practices never perfectly fit an organization’s specific requirements but should serve as a basis to derive a tailor-made digitalization roadmap.

Explore: Identify gaps and deltas (company-specific vs. best practices)

It’s important to know about relevant changes, options, and challenges before defining and blueprinting your digitalization roadmap. For example, some companies decided years ago to implement costing-based profitability analysis (COPA) in the ERP environment. Nowadays, with the new technologies, options, and features, most companies opt to implement account-based profitability analysis, which is highly recommended to unleash the full potential of your system.

COPA groups costs and revenues according to value fields and costing-based valuation approaches, both of which you can define yourself. It gives you access at all times to a complete, short-term profitability report. Cost of goods sold is recognized after goods are billed and before being shipped.

Account-based profitability analysis is organized in accounts and using an account-based valuation approach. The distinguishing characteristic of this form is its use of cost and revenue elements. It provides you with a profitability report that is permanently reconciled with financial accounting. Cost of goods sold is recognized after goods are shipped and before being billed.

To move from costing-based to account-based profitability analysis, a clear strategy is required, as this type of change in the landscape will have a big impact downstream.

Implement: Realize, deploy, test

Does it really make a difference how you go about realizing the digital journey? Yes! For example, missing a legal requirement could result in noncompliance.

Depending on whether you selected the agile or waterfall methodology in the preparation phase, the approach going forward will be different. Nevertheless, general steps such as realize, test, and deploy activities stay the same. This is valid as well for the solution quality and stability when you are considering standard and non-standard requirements. For sure, implementing a specific approval workflow for non-standard requirements or change requests helps to differentiate the critical from the non-critical.

In the end, we recommend future-proofing the environment by sticking to standards and best practices where possible.

Challenge the status quo

Continuously compare and improve. The business world is moving fast, and technology is changing even faster. Good consultants are rare and often occupied with other customer projects. Hence, for a successful journey, it is important to have an experienced internal project manager take the lead, working closely with the external consultants. Being in contact with peers and market experts to compare your own journey against others is key. We are all a big community, supporting each other in the journey and working together toward a great future! 

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Stefan Henkel

About Stefan Henkel

Stefan Henkel is a senior business transformation consultant in the business unit CFO Advisory within SAP, with a focus on SAP S/4HANA Finance. In recent years, Stefan has actively driven international customers’ digital transformation projects from different industries and within different roles

Bastian Naul

About Bastian Naul

Bastian Naul is a principal business transformation consultant in the business unit CFO Advisory within SAP, with technical and functional knowledge in the areas of finance, controlling, and SAP S/4HANA. He has worked on various projects within national and international companies to facilitate the implementation of digital transformation strategies in finance.