SAP Closing the Alignment Gap

8/2/2019 SAP Closing the Alignment Gap

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Copyright Forbes 2009

STRATEGY AND OPERATIONS IN THE ENTERPRISE:

Closing the Alignment Gap


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Survival in todays complex business environment

demands eective and decisive action. Using clear,

accurate and accessible information, companies can

develop a stronger competitive position by eectively

adjusting their strategies and processes to respond to

changing market conditions.

But to accomplish this, they need the visibility and

focus to ensure that their strategic priorities are in line with

their operational realities. Does the company have the right

resources in place to manage growth? Is front-line infor-

mation readily available to drive strategic decisions? How

are risks or regulatory challenges being managed?

Despite agreement on the necessity of aligning strategy

and operations, many companies still face signicant barri-

ers that may prevent them from achieving thi s. Executives

on both sides of the strategy/operations aisle express

concern that strategic priorities may be out of sync w

operational realities, in particular in critical areas such

risk management and talent allocation and retention.

Intensifying this split are the sudden shifts compan

have had to make to deal with the impact of the glo

recession and resulting economic volatility. But it is cl

that many executives believe the time to more closely alistrategy and operations is now, to protect the company

the short term and to help it map out the long-term grow

initiatives for the eventual economic recovery.

To identify the specic challenges enterprises face

closing the gap between strategy and operations, Forb

Insights, in association with SAP, surveyed more than 2

C-level and senior executives at global enterprises w

annual revenues exceeding $500 million. An additio

ten on-the-record and o-the-record interviews were c

ducted with senior executives to obtain rst-hand insig

into how companies are managing al ignment issues.

KEY FINDINGS Economic volatility has put companies under greater pressure to align strategy and operations. This alignment could be

more important post-recovery as they ready their plans to capitalize on new market opportunities.

Changing market conditions that affect strategy and operational execution are the number one barrier companies face

in aligning strategy and operations. Other top barriers cited by executives include: added pressure from the current

economy on short-term costs versus longer-term return on investment (ROI); lack of availability of timely, accurate data;

lack of effective communication of strategic goals to operational employees; and operational risks and opportunities that

are not incorporated into overall corporate strategy.

Alignment gaps may also arise due to differences in strategic and operational goals. Asked about short- and long-

term priorities, strategic functions focused on competitive differentiation, while operations is coming under increasing

pressure to boost efficiency and manage costs.

There are concerns that employee recruitment, retention and training are not aligned with strategy, or that resources are

not allocated properly to ensure that the workforce can achieve strategic goals.

Managing regulation and risk is another area of concern. Executives indicated that regulatory compliance issues

frequently impact strategic execution. A failure to incorporate changes to risk models into strategic plans may further

hamper alignment.


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CHRISTIAAN RIZY

DIRECTOR

STUART FEIL

EDITORIAL DIRECTOR

BRENNA SNIDERMAN

SURVEY MANAGER

MIKE BARLOW

REPORT WRITER

METHODOLOGY

FIGURE 12. Does your organization use enterprise risk management tools

and/or processes to identify risks and opportunities and assess their potential

impact?

As noted earlier, executives surveyed believe a sig-

nicant barrier to alignment is the fact that risks and

opportunities identied by operations are not incorpo-

rated into strategy. Yet this barrier may be an ongoing

issue for many companies. More than 40% of respondents

did not agree with the idea (were either neutral, disagreed,

or strongly disagreed) that their organizations are incor-

porating changes to their risk models into revised strategic

plans. (Fig. 11)

Moreover, some executives indicated their compa-

nies were not using risk management tools or processes

to identify and manage risks. (Fig. 12) This nding high-

lights potential alignment problems as risk issues may not

be fully considered in current strategic and operational

decisions. As companies manage through the current

economy, and as they prepare for the economic recovery,

the role of managing risk in daily and strategic decision

making is increasingly important to aligning operations

and strategy.

CONCLUSION: ALIGNING STRATEGY AND OPERATIONS

Undoubtedly, dierences exist between strategy and op

ations, and while economic volatility may be maki

alignment more important, its repercussions may also

driving a wedge between the two groups. Gaining a clea

picture of shifting customer demand may relieve some

this stress, while opening up additional lines of comm

nication can ensure greater transparency between strate

priorities and front-line risks and opportunities.

This can also be realized when companies achieve grea

clarity in strategic and operational priorities. In todays en

ronment, divisions can occur when operations teams

focused on containing costs at the same time that strate

priorities center on staying competitive. To capitalize on p

recession growth opportunities, companies may need to br

these groups closer together by giving both strategic and fro

line units a clearer view of changing market dynamics.

Companies must also be aware of other areas wh

gaps can occur that impede ecient decision maki

Regulatory compliance can challenge strategic succ

but when operations teams understand and address r

ulations, they can execute to goals more successfu

Acknowledgement of operational risks as part of strate

planning is important to ensure aligned and realistic ope

tional and strategic goals. Workforce recruitment, retenti

and training can be more closely aligned to operation

realities when transparency exists between strategic a

development priorities.

Successful alignment requires companies to have a cl

view of strategy and operations, the plans and the activit

Only with increased visibility can businesses identify t

barriers to alignment and close the gaps that may be ke

ing them from competing more eectively.

Yes No

Dont know

74%

21%

5%

The information in this report is based on the results of a survey conducted in

June and July 2009 by Forbes Insights in association with SAP. Forbes Insights

received responses from 206 executives and decision makers at leading global

enterprises in the Americas (36%), Europe/Middle East/Africa (32%), and Asia/

Pacific (32%). In addition, one-on-one interviews were conducted with another

ten executives at companies of this size.

Nearly three-quarters of respondents (74%) held C-level titles, including C

COO, CFO, and CIO. Their areas of responsibility included corporate managem

corporate strategy, business operations, R&D, finance, purchasing, sales and m

keting, human resources, and information technology.


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Demographics

COMPANY SIZE (by revenue)

FUNCTIONJOB TITLE

LOCATION

0% 25% 50%

0% 25% 50%

CEO/president/managing director

COO/head of operations

CFO/treasurer/comptroller

CIO/technology director

CMO/head of marketing

Other c-level executive

SVP

VP/director

Head of business unit

Head of department

Manager

Other

Business operations

Finance

Corporate management

Corporate strategy

Sales and marketing

Information technology

Purchasing/procurement

Human resources

Other

$500 million$999 million

$1 billion$4.9 billion $5 billion$9.9 billion

$10 billion$19.9 billion

$20 billion+

Americas Europe/Middle East/Africa

Asia/Pacific

12%

1%

24%

3%

1%

4%

1%

10%

2%

12%

13%

17%

9%

4%

42%

3%

1%

2%

24%

14%

1%

28%

28%

15%

14%

15%

36%

32%

32%


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ResultsWhat strategic priorities are most crucial to your organization today?

0% 30% 60%

What strategic priorities will be most crucial to your organization 12 months

from now?

0% 30% 60%

Staying competitive in a challenging market Staying competitive in a challenging market

Increasing efficiency and performance Increasing efficiency and performance

Managing and/or reducing costs Managing and/or reducing costs

Re- evaluating produc ts /ser vices to increase competi tivenes s Improving f inanc ial per formance

Improving financial performance Re-evaluating products/services to increase competitiveness

Analyzing and managing risk across the enterprise Fostering innovation

Maximizing allocation of human resources Finding/serving/retaining customers

Finding/serving/retaining customers Analyzing and managing risk across the enterprise

Fostering innovation Identifying merger/acquisition opportunities

Identifying merger/acquisition opportunities

Promoting collaboration within company and across business partnerships Maximizing allocation of human resources

Driving globalization

Driving globalization

Addressing regulatory challenges

Encouraging sustainability/corporate social responsibilityEncouraging sustainability/corporate social responsibility

Promoting collaboration within company and across business partnerships

Other

Addressing regulatory challenges

18%

8%

44%

13%

13%

54%

14%

4%

1%

14%

3%

44%

11%

30%

11%

22%

12%

42%

14%

45%

14%

19%

5%

16%

3%

31%

13%

31%

12%


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What operational priorit ies are most crucial to your organization today? What operational priorit ies will be most crucial to your organization 12 mont

from now?

0% 30% 60% 0% 30% 60%

Cost containment Improving overall efficiency and/or performance

Improving overall efficiency and/or performance Cost containment

Maximizing profitability New product development

Identif ying and addres sing shif ts in the competitive lands cape Maximizing prof itabilit y

New product development Identifying and addressing shifts in the competitive landscape

Research & development Research & development

Improving customer experience through sales, marketing, and customer service Improving customer experience through sales, marketing, and customer servic

Executing merger/acquisition opportunities Internal collaboration opportunities and business partnerships

Expanding into global markets Recruiting/retaining/training employees

Incorporating r isk eva luat ion and management into operations Incorporating r isk eva luat ion and management into operations

Internal co llaborat ion oppo rtuni ti es and bus iness par tnerships Exe cu ting merge r/acqu is it ion oppor tuni ti es

Recruiting/retaining/training employees Expanding into global markets

Achie ving sus tainab il it y/corpo rate soc ial respons ibil it y resul ts Comp ly ing w ith app li cable laws and regulat ions

Complying with applicable laws and regulations Achieving sustainability/corporate social responsibility results

Other Other

19%

11%

46%

12%

47%

17%

18%

8%

1%

17%

4%

29%

12%

23%

11%

23%

11%

37%

16%

39%

16%

18%

6%

1%

17%

5%

29%

14%

29%

13%


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What are the primary barriers that need to be overcome to align strategy and

operations within your organization?

Who is primarily responsible for resolving alignment issues between operatio

and strategy at your organization?

0% 30% 60%

0% 30% 60%

CEO

COO

Changing market conditions that affect strategy and operational execution

CFO

Current economy has put added pressure on short-term costs vs. ROI

CIO

Timely, accurate data is not available

Other

Operational employees do not understand strategic goals

No one

Lack of clear distinction between short- and long-term goals

Risks/opportunities identified by operations not incorporated into strategy

Dont knowLack of communication between front-line operations and strategy

Reporting structure is not aligned

Risks/opportunities identified by strategy not incorporated into operations

Communication gaps in the supply chain

Budgets cannot support operational goals

Corporate and business unit goals are not aligned

Regulatory issues restrict ability to align

Outsourced business processes not aligned with st rategy and/or operations

Operational incentives are not aligned with strategic goals

Other

4%

25%

49%

1%

1%

11%

9%

19%

9%

29%

16%

46%

17%

19%

9%

7%

17%

7%

1%

22%

11%

21%

10%


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SAP Closing the Alignment Gap