S/4HANA

ERP (Enterprise Resource Planning) systems form the backbone of corporate IT today and are used as a central datahub for the uniform planning, control, and documentation of a company’s value chain. The pressure on companies to prepare for digital transformation and the era of “Industry 4.0” does not stop at ERP systems. More than ever, they must become smarter, faster, more flexible and more integrated. 

01 What is SAP S/4HANA?

Companies worldwide rely on ERP solutions from SAP. S/4HANA is SAP’s answer to the challenge of making ERP systems fit for the future. As the latest generation, S/4HANA promises nothing less than the transformation of clients’ business processes with the help of artificial intelligence. The “S” stands for Simple, “4” for the fourth product generation and “HANA” is the name of the database technology on which the system is based (“High Performance Analytic Appliance”). As a real-time ERP suite, S/4HANA is based entirely on the powerful in-memory platform SAP HANA. This platform offers a significant simplification of data models and numerous innovations through the SAP HANA cloud platform. The role-based SAP Fiori interface makes S/4HANA particularly user-friendly and intuitive to operate.

SAP recently announced that support for the existing SAP R/3 and ECC systems will be extended until 2027. Although this reduces the immediate pressure on companies to change to S/4HANA promptly, experts assume that there will be a bottleneck of SAP experts from 2022 onwards due to the increasing number of S/4HANA transformation projects already planned. In addition, the COVID pandemic has already delayed planned projects. All in all, the pressure to change remains.

02 Advantages of SAP S/4HANA?

Organizations anticipate that SAP S/4HANA will offer numerous advantages to previous versions:

  • Industry-specific, end-to-end and automated best-practice business processes
  • Modern, role-based interfaces on multiple devices
  • Real-time data capturing, processing and self-service reporting
  • Access to new technologies such as AI, IoT and machine learning for e.g. business forecasts and scenario simulations and as a basis for digital business models
  • Increased transparency through harmonized master data from only one source
  • Standardization and reduction of complexity in the IT system landscape
  • Increased performance through HANA database (in-memory storage)
  • Lower IT operating costs due to reduced storage requirements

S/4HANA forms the basis for digitalization and introduces future business opportunities. Particularly due to the changing requirements of today’s VUCA world, future-oriented technologies such as embedded analytics, Fiori apps and artificial intelligence will become increasingly important.

In addition, unlike standardized system upgrades, the S/4HANA transformation offers many organizations the opportunity to address the standardization and harmonization of historically grown processes and system landscapes. Thus, organizations can leverage further efficiencies.

03 Reasons for Change Management

When transitioning to S/4HANA, organizations pursue the overarching goal of driving digital transformation holistically and thus laying the foundation for new digital business models. In addition, decision-making processes based on big data and AI ought to be improved, business is expected to be modernized, and the future security of the organization needs to be ensured.

Practical experience shows: The transition to S/4HANA is rarely solely an IT project. It affects business processes, collaboration between departments, and corporate culture at the same time. Christian Klein, CEO of SAP SE, refers to the transition to S/4HANA as “a genuine re-alignment of the organization”. Hence, organizational change management is becoming a key success factor.

However, organizations often lack the necessary capacities, especially when it comes to Organizational Change Management (OCM). There are still only a few services offered in the market – apart from IT- and process consulting – that focus on changes in the organization and among the people experiencing the change. The assumption that the SAP system integrator covers all the needs of the S/4HANA transformation can lead to enormous obstacles during the transformation. It is important to consider that system integrators and SAP consultants specialize in configuring and building S/4HANA systems, but rarely in managing the human elements of organizational change.

04 Challenges in S/4HANA Projects

Organizations who want to successfully shape their own digital future and get the most out of the S/4HANA transformation should set their focus on those affected in business units, not solely on the adaptation of processes and systems. This is also shown by the results of a survey on the main challenges of ERP transformation among SAP clients. According to the study, with more than 60%, people-related aspects account for the majority of challenges during those transformations.

Additionally, the introduction of S/4HANA does not only have an impact on a specific and homogeneous area of the organization, but affects a large number of business units. Therefore, numerous challenges have to be mastered simultaneously. The most significant ones

Missing awareness of necessity and urgency

SAP offers support for the older ERP systems R/3 and ECC until the end of 2025, which, at first glance, seems to be a long time away. Accordingly, many companies do not have a strong awareness of the urgency of switching to S/4HANA yet. In addition, the advantages of the new ERP system are difficult to grasp. As a result, we have observed our clients clinging to their old system.

Practical experience shows, however, that to reap the benefits of the implementation of S/4HANA, reorganization and restructuring measures, and in some cases even new business models are necessary. Combining different topics quickly leads to “change fatigue”, which makes openness to S/4HANA even more difficult.

Lack of company-wide standards

Replacing historically grown heterogeneous systems and process landscapes is often a major goal when introducing SAP S/4HANA. In addition to the fact that previous SAP versions are inherently characterized by a fragmented architecture – which is also reflected in a diverse process landscape – various corporate divisions have sought their own “paths” in SAP over the years in order to do justice to local individualities. However, in order for S/4HANA to play to its technological advantages, it is important to harmonize the process landscape and ideally follow the SAP standard. As a result, the various corporate divisions are often faced with the challenge of having to replace “their” processes with a company-wide global standard.

Frequently, this leads to resistance in the affected company areas and people. They are concerned that local individualities and optimized processes, which have been laboriously mapped in systems and processes over many years, will only be insufficiently covered by the new standard. As a result, there is little support in the affected areas of the company, often even direct rejection of the project. Project managers in S/4HANA projects must actively counter this resistance and be able to dismantle it step by step in order to ensure sustainable implementation. This is key for the company to reap the benefits and added value of S/4HANA’s implementation.

Changed user interface (GUI becomes Fiori)

SAP S/4HANA also fundamentally changes the user interface of SAP. Yesterday, it was the infamous SAP GUI (Guided User Interface); with S/4HANA, the new Fiori user interface is the new benchmark. It differs considerably from the familiar SAP GUI in its structure and functionality, as well as in its graphic formatting and availability on mobile devices. While some consider it a major breakthrough to design the user experience of SAP in a contemporary way, others see proven and practiced user behavior in danger. The fundamental question is: Do I have to learn SAP from scratch with Fiori? Broad acceptance and use of the new Fiori user interface is an important criterion if S/4HANA is to exploit its digitization potential.

New behaviors will be required

S/4HANA requires different user groups in the company to learn new skills and behaviors for the company to reach the potential synergies that S/4HANA promises. For example, with S/4HANA it is possible and also desirable for managers to access reports in real-time independently, which eliminates the time-consuming manual creation of PowerPoint presentations. In particular, the real-time dashboards based on the new Fiori user interface can be used for this purpose.

Regular employees can also expect numerous changes, for example in the fulfillment of maintenance orders. While in the past, order fulfillment documentation was often still paper-based with manual entry and scanning, in the future maintenance teams will work with mobile end devices, on which SAP-based apps transfer order documentation directly into the system. This makes all historical data directly available at the push of a button.

In the first step, these simplifications for users mean changing routines that have been in place for years. To implement these changes sustainably, new behaviors have to be practiced and encouraged.

Communication across many locations and corporate functions

S/4HANA is based on the idea that with a uniform data core, business units can exchange data virtually in real-time and that integrated business processes that are mapped in an ERP system bring about considerable efficiency gains. Accordingly, the introduction of S/4HANA affects virtually all departments along a company’s value chain – with the fundamental need to standardize an often very heterogeneous data landscape.

If these stakeholders are also distributed globally, companies that want to introduce S/4HANA are confronted with a high degree of complexity since a very large number of stakeholders need to be involved. These stakeholders have very different information and participation needs based on the type and degree of involvement.

05 Transformation Management for S/4HANA Projects

In order to master the challenges of S/4HANA implementation projects, we consider eight critical success factors:

1. Establishment of a strong transformation office

The Transformation Office is the linchpin for all change measures in a S/4HANA transformation project. It is responsible for analyzing the change impact, building up the change network, promoting communication and qualification measures and carrying out change controlling.

Based on our extensive experience from change projects and the background of your individual needs and framework conditions, we create effective structures for a powerful Transformation Office that efficiently and effectively implements the right change measures at the right time and can react flexibly to changing framework conditions. With us, you keep the overview and can make prioritized decisions.

2. Systematic and detailed analysis of the change impact

The foundation of a solid change architecture in S/4HANA projects is a comprehensive change impact analysis. The effects of the conversion to S/4HANA on different stakeholder groups can be very different and also vary in strength. Thanks to structured interviews with sponsors, project managers and representatives of the affected groups, which are supplemented by standardized surveys if necessary, we help to gain a sufficiently deep understanding of the actual change impact (necessary process adjustments, missing skills, effects on the business model, etc.). This is an important success factor for creating custom-fit change architectures, developing an appealing change story and maintaining an overview of the dynamic day-to-day project work.

3. Design of a change architecture, consisting of centrally and decentrally organized interventions

Based on the change impact analysis, a comprehensive change architecture is created for the program. We analyze which stakeholder groups are affected by which changes and to what extent, how they are currently reacting to the changes and how they should perceive the changes in the target state. From this, we derive tailored communication, qualification and involvement measures, which are provided with concrete milestones and integrated into an overall plan. The result is a systematic approach that also provides orientation for the program management and sets a clear direction.

4. Build up and support a global change network

S/4HANA conversions usually affect large numbers of users distributed across the globe. An exclusively centralized approach often does not do this justice. Therefore, we use multipliers as a critical success factor and build up a global (change) network with our clients. For setting up our change network, we use blueprints for target operating models, integrating project work and change management activities. In addition, we provide coordinated qualification measures and extensive toolboxes for members of the change network.

The sponsor network ensures that executives are equipped with the necessary skills to lead during the transition. The establishment of a common exchange platform offers an opportunity to continuously involve executives in the transition, to regularly inform them about news from the project and – where appropriate – to use them as sparring and feedback partners for the project, thus ensuring their acceptance.

The change agent network consists of coordinators (e.g. for regions or corporate divisions) and change agents, whose responsibilities and interfaces are clearly defined with dedicated role descriptions. While the coordinators for transformation management and program management are the extended arm of de-centrally organized corporate structures and implement locally-specific change measures, the change agents are closer to the end-user and maintain an informal relationship at eye-level in order to identify and solve challenges at an early stage. The goal is to ensure that all locations, corporate functions, and divisions are sufficiently involved in the change process.

In addition, we collect feedback from these networks in order to find out how change measures are received by the various stakeholder groups. This enables an agile adaptation of said measures over the course of time.

5. Development of an appealing overall change story

Another important success factor is sending a clear message in the form of a consistent change story. The change story highlights the need for transformation and provides a clear picture of the opportunities, which the introduction of S/4HANA offers to the organization.

5. Development of an appealing overall change story

Another important success factor is sending a clear message in the form of a consistent change story. The change story highlights the need for transformation and provides a clear picture of the opportunities, which the introduction of S/4HANA offers to the organization.

Accordingly, the Change Story should answer the following questions: 

  • Why is the introduction of S/4HANA necessary?
  • What great opportunity does the introduction of S/4HANA offer?
  • What steps need to be taken to implement the change?

The change story forms the basis for the implementation of targeted communication measures.

6. Design and implementation of effective communication measures

Communication is a central building block. It enables end-users to understand what the introduction of S/4HANA means for them, to build acceptance for the new solution and to stay informed about the current progress of the project.

The conversion to S/4HANA usually affects all business areas in various cultural contexts. Therefore, targeted communication measures are a key critical success factor. Our portfolio of measures ranges from holding worldwide townhall meetings, creating extensive print media and public Q&A sessions, to building communities of practice in social intranets or programming mobile apps.

In addition to these centrally planned measures, we encourage all member of the change network to perform own change measures, in order to do justice to local individualities in an agile way. In order to do this with ease, we offer change tool boxes which have proven themselves in various projects.

7. Implementation of interactive and diverse qualification measures

If S/4HANA is to reach its full potential, employees need to develop new skills and often a new mindset. Accordingly, we see a customized qualification concept as a central success factor that meets the needs of the various target groups. We know from experience: Learning is successful when end-users have the opportunity to experience the change directly and realistically, in order to develop the new skills. At the same time, the training measures should remain cost-effective.

We recommend a systematic blended learning approach, in which the contents are conveyed virtually or in-classroom training sessions in a practical manner. We make sure that the learning content remains permanently available so that end-users can refresh the content if necessary and also qualify newcomers to the company accordingly.

8. Establishment of change controlling measures tailored to specific change goals

We use extensive change controlling measures to check the progress of the achievement of change goals. First, the desired change goals are provided with corresponding KPIs. With the help of the change network and other quantitative and qualitative feedback channels, these KPIs are then monitored and appropriate countermeasures are initiated, if necessary.

All KPIs are included in an overarching Change Cockpit. At a glance, this Change Cockpit provides an overview of the status of the change objectives along various stakeholder groups. It ensures transparency towards important stakeholder groups such as program management, the sponsor or a steering committee.

06 People as the Key to our Change Framework

We follow a “People Centered Approach” and pay special attention to the people who are involved in and affected by the project. All our activities are consistently aligned with this approach. This way, we ensure genuine value creation. We are convinced that people are the key to genuine, sustainable change.

In order to combine the eight success factors presented in an integrated, strategic transformation management approach, we have compiled valuable experiences, best practices and lessons learned from our S/4HANA client projects and used them to develop our CH/4NGE approach for S/4HANA projects.

This modular transformation framework comprises all elements necessary to successfully and sustainably implement S/4HANA transformation projects. Depending on the type and characteristics of the change, we can define the right approach for you by weighting the work packages differently.

After 25 years of experience in change management, our methodological toolbox is well-filled to successfully accompany organizations in their change projects. A customized procedure is important to us: We are convinced that every change project is unique. As a reliable change management consultancy, we have a solid methodological basis that ensures quality, speed, documentation and diagnostic possibilities to successfully accompany your unique S/4HANA transition.

Our approach is based on the typical program phases of IT projects and can be adapted to your chosen project approach, such as SAP Activate, in a flexible and timely manner.

At the beginning of all our change projects stands the Change Initiation as the basis of the change architecture. The results of this initial analysis and setup phase create a clear understanding of the change, enable the establishment of consistent communication and are the basis for refining and deriving a roadmap with concrete change measures.

As the project progresses, these measures from the Transformation Office are implemented and monitored in the organization in a target-group and needs-oriented manner. This is done in agile change sprints. This way, we can respond to new requirements or changed conditions at any time.

Conclusion

Organizations are investing a lot of money in the introduction of SAP S/4HANA. To ensure that transformation goals are achieved, change management should be considered an integral project component from the very beginning.

The eight success factors to successfully implement S/4HANA projects show that change management tasks are extensive and require specialized knowledge. Therefore, they cannot be handled “on-top” by the implementation team itself. S/4HANA projects require experienced change managers.

Our CPC experts for S/4HANA transformation projects have developed an approach that focuses on the people who ultimately have to accept and implement the change. As a leading change consultancy in Germany, we are happy to support you in your project: We are looking forward to present our change approach for S/4HANA projects in detail to you and develop your individual change strategy together with you.

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