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If you’re looking to accelerate your organization’s digital transformation, the good news is that there are some proven principles you can apply. By employing Value Stream Management (VSM), some top enterprises are now better positioned to speed their transformation—and seeing multimillion-dollar savings as well.

If you’re not familiar with this concept, the basic premise is this: Through VSM, executives gain the visibility to align teams, workflows, and investments around one key aspect: customer value. In the process, they can break down the silos that stifle digital transformation. Following are a couple of real-world examples of what this means for leading enterprises.

Here are some highlights from a new Harvard Business Review Analytic Services Report, sponsored by Broadcom.

The Boeing Company

One of the world’s largest aerospace companies, The Boeing Company has been employing VSM for several years now. Through VSM, they optimized resource utilization and reduced waste.

“We always thought we were doing a good job of producing value until we started to work through this,” explained Lynda Van Vleet, Boeing’s portfolio management systems product manager. “In our first two years, we saved hundreds of millions of dollars. But that wasn’t our goal. I think a lot of organizations look at this as a way of saving money because you usually do, but if you start out looking at it as a way of creating value, that just comes along with it.”

The organization changed legacy approaches to product management and project investment. This enabled them to speed up their ability to innovate and pursue digital transformation. They created cross-functional teams that empowered employees to spend more time and effort on delivering customer value.

By establishing cross-team visibility, leaders were able to spot redundancies. For example, they saw how different IT organizations had their own analytics teams. “We had people in every organization doing the same thing,” explained Van Vleet. Boeing’s executives established a single analytics team to realign the work more efficiently and improve consistency.

Verizon

A multinational telecommunications company, Verizon offers another example of the power of VSM. Through their VSM implementation, they also gained advantages that translated to multimillion-dollar cost savings.

As Jason Newman, senior manager, systems engineering, Connected Solutions Group strategy and operations at Verizon, revealed to HBR, “We had some siloed organizations, and everything worked great within the silo, but as the company introduced products that crossed boundaries—the method of everyone focused on their own space wasn’t cutting it.”

By implementing VSM, the team has been able to foster the free flow of information across teams and gain dramatically improved visibility into value streams. Leaders have acquired deep information that has fueled more accurate, data-driven decisions about governance and staffing. 

VSM equips executives with the information needed to understand the impact of strategy shifts, including who is affected and which strategic goals might be jeopardized. Now, when executives are contemplating strategic changes, VSM gives them the information to quickly understand “who is impacted and which strategic goals might be jeopardized,” Newman stated. “Just the efficiencies gained from governing and staffing were multimillion-dollar cost savings.”

Conclusion

By employing VSM theories and tools, teams around the world are realizing massive benefits. To learn more about how some top enterprises have made VSM work in practice, be sure to read the briefing paper from Harvard Business Review Analytic Services, “Using Value Stream Management to Speed Digital Transformation and Eliminate the Silos.” Sponsored by Broadcom, this report features the insights of industry analysts and expert VSM practitioners, who share some of the key lessons drawn from successful VSM initiatives. You can also visit ValueOps by Broadcom to learn more about the benefits and how to get started with VSM.

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Explore ValueOps Value Stream Management, built to manage what you value most. 

Digital Transformation

Posted on Posted in Digital transformation, General topics Tagged with , , , , , , , ,

Fueled by strong sales of cloud-based software that more than offset a decline in revenue from on-premises applications, SAP revenue jumped in the third quarter compared to the year-earlier period.

Total revenue for the quarter ending Sept. 30 was €7.84 billion (US$7.72 billion), up 15%, according to company’s quarterly financial report, released Tuesday. SAP’s cloud and software revenue for the quarter rose 14% to €6.71 billion.

Cloud revenue alone rose 38% to €3.28 billion. Revenue for the company’s S/4HANA cloud-based ERP offering, in particular, nearly doubled, rising 98% to €546 million.

SAP results benefited from the strong US dollar, as dollar sales were converted to euros—for example, overall revenue growth in constant currency terms, which exclude the effect of currency fluctuations, was 5% rather than the nominal 15%.

Nevertheless, the uptick in cloud sales is good news for SAP, since the company has been pushing customers to migrate from its legacy Business Suite 7, which is usually run on-premises, ever since S/4HANA was launched in 2015. Selling cloud software and services is good business for SAP and other software providers, since, among other things, cloud subscriptions provide a more predictable revenue stream than renewals of licenses for on-premises applications.  

Despite the jump in revenue, SAP posted a 1% dip in operating profit to €1.239 billion due largely to rising costs in areas including research and development, sales and marketing, and the need for more outlay on the maintenance of the company’s cloud services. Licenses for on-premises software declined 38% to €406 million, reflecting customer migration to cloud-based software.

Unsurprisingly, the Germany-based software giant was most eager to talk about its success in the cloud.

“The trust in SAP is reflected in our accelerating cloud momentum,” said CEO Christian Klein in the company’s earnings press release. “It’s clear that our transformation has reached an important inflection point, paving the way for continued growth in the future.”

Despite the negative news on operating profit, investors greeted SAP’s results warmly, with the company’s share price rising $5.69—or 6.25%—to $96.70 in mid-afternoon trading in the US.  

Like much of the tech sector, SAP is facing headwinds caused by the ripple effects of Russia’s invasion of Ukraine, as well as a bearish economic climate. Hence, the positive news on the company’s cloud business appears to have been enough to inspire confidence in SAP’s overall outlook.

SAP has made major headway on its transition from a license- and maintenance-based business to a usage-based, cloud-first company, due in part to a long string of acquisitions in the past decade in addition to the introduction of S/4HANA, which brings the company’s ERP platform to the public cloud of the customer’s choice.

However, the company has a long way to go. Just 12% of current and intended SAP ERP users in the US and Europe responding to a recent survey by digital transformation services provider LeanIX have completed the transition to S/4HANA. Another 12% said they have postponed the start of their move to S/4HANA, and 74% of enterprises that were polled are just at the evaluation and planning phase of their ERP migration.

ERP Systems, Technology Industry