Blog | The hidden costs of complexity

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By Ryan Poggi

Ryan Poggi SAP PHILIPPINES_1

Global corporations must watch the startup activities in the Silicon Valley the same way a Jack Russell looks at Dobermans.

The startups have an agility and flexibility that their larger, established brethren crave, but they are weighed down by complexity.

In fact, the top 200 global companies lose 10.2 percent or $237 billion of profits due to the hidden costs of complexity (Global Simplicity).

Complexity hides throughout organizations indecision making, business processes, and technology. Complexity is so insidious that it prevents organizations from bringing good ideas to the marketplace profitably, and it wastes time.

According to BCG?s Complexity Report, large organizations can spend between 40 to 80 percent of their time on non-value added activities. These companies are working harder, but not realizing results because they are spending time on activities that deliver marginal value to the organization.

Left alone, complexity doesn?t get easier. Companies just get used to it. But a willingness to endure doesn?t lead to a competitive advantage in a digital world where 90 percent of the world?s data was generated in the last two years and business networks are expected to grow by 40 percent, where 9 billion people are mobile, and 212 billion ?things? will be connected.

Business transformed by simplicity

A new rule of order, where simplicity takes center stage, is fundamental to business success in the digital age. In a business run with simplicity at its core, business managers from throughout the organization make decisions in the moment with less effort and more impact. Here?s how the transformations start.

At a large telecommunications firm, a regional sales manager is mapping out leads for the coming quarter. He initially decides to target a big sales deal for a government agency that looks like impressive numbers, until he runs a real-time forecast of the project?s profitability, analyzing the deal structure, profit, and margin.

He aggregates the data from his mobile device without sending a request out to a business analyst and waiting for a response.

Instead, he immediately gets the insight he needs and realizes that a smaller sell has much higher margins. He can improve the company?s overall financial health and bring more value to the company with less effort.

Similar in-the-moment business decisions are anticipated in the food industry where engineers are developing the best chip to dip or the tastiest cookie with the fewest calories.

These engineers need information from multiple business units, including focus group feedback, ingredients information, costs, and more, to turn the testing into a product ready to go to market.

The data is not neatly stored in one system or even in the same format. But the disparities don?t slow the process, the engineer continues testing and improving his product until he has a winning formula.

When the chip is released, marketers immediately start tracking customer trends, targeting specific customers, and developing personalized campaigns.

A high volume of data across different channels can be converged and analyzed in real time to fine-tune the campaigns. With so much immediate feedback, the marketing team can put their time and money into customer segments that will provide the highest returns.

Staying with the new chip example, consider what happens when the taste engineer does find a magic recipe and the marketers reach a chip-hungry customer base.

The company now has the good problem of needing to put their bags of chips on shelves throughout North America, and they can because they have simplified the overly complex process of supply chain logistics.

Managing the deliveries and tracking the inventory by Excel spreadsheets is too cumbersome and slow. It also doesn?t respond and adapt automatically when trucks face unexpected delays or when product orders spike randomly.

To accommodate the unexpected, everyone within the supply chain needs access to the information from whatever device they have at hand so that deliveries will reach their destination on-time and accurate, and all the participants can keep their businesses running smoothly.

In businesses that thrive on simplicity, re-imagining business models, business decisions, and business processes is not just possible; it?s a standard, daily activity.

Simple innovation

Reaching this level of simplicity requires technology that is designed specifically to reduce complexity. With SAP S/4HANA, SAP has introduced a new business suite natively designed on the most modern in-memory platform, SAP HANA.

The solution simplifies enterprise software and leverages the advantages of a highly mobile user base, the costs savings and efficiencies of the cloud, and real-time demands. Early adopters are already experiencing results.

Industry leaders across South East Asia are already reaping the benefits of reduced complexity in their businesses. In Indonesia, PT Delami Garment Industries, one of Indonesia?s leading garment producers, are implementing this new SAP S/4HANA technology in their organization.

The company?s current IT system was not integrated, which led to multiple issues such as poor stock visibility, difficulty in data collection from their stores and outdated and inaccurate data, which limited intelligent decision making.

In order to prepare for their planned business expansion, real-time data collection for better stock visibility was necessary.

Leveraging the business benefits of SAP S/4HANA, PT Delami is expected to develop better planning capabilities, leading to improved stock visibility and the maintenance of healthy inventory levels, with minimized stock to sales ratio.

SAP S/4HANA?s in-memory technology will enhance the company?s business processes, data accuracy and allow for better distribution efficiencies, including facilitating a more balanced demand and supply scenario.

An example of proven results can be seen within the SAP company itself. After deploying SAP Simple Finance, SAP reduced its overall footprint by moving regulatory and managerial accounting on one common platform.

According to SAP CFO Luka Mucic, his team is able to give better advice on strategic and operational plans that impact business performance.

DSB has also moved its financial processes to SAP Simple Finance. Finance users at the digital services provider are able to perform reporting and analytics on item levels, and reconciliations of costs and accounting can be done at any time.

Based on the experiences with SAP Simple Finance and SAP Business Suite on HANA, SAP S/4 HANA promises to provide the agility and flexibility that large corporations lost in their rise to success. They can break away from the pack and experience the responsiveness and dynamics of their early, upstart years.

These obvious benefits have resulted in close to 400 customers around the world signing up to implement SAP S/4HANA to pave the way for a successful business future.

The author is the managing director SAP Philippines

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