Dr. Volker Bätz
Sep 18, 2024
The Advantages of Standardization
Introduction to Standardization
The immense advantage of standardizing technologies is immediately apparent to anyone who has ever searched for the right adapter or charger at some point in their life. However, in economically oriented areas, the role of standardization goes far beyond technological compatibility. Especially for companies and their increasingly complex IT structures, this topic holds not only central but above all, ever-growing importance. Efficient management and further development of configurable ERP systems would be unthinkable without valid and usable standards, as exemplified by the transformation from network-based SAP ECC systems to SAP S/4HANA®.
But what exactly is behind the term standardization, and why is it so crucial?
First and foremost, standardization refers to the creation of uniform processes, data structures, and system configurations within an organization. The goal is to ease the integration of different business areas through this uniformity, improve data consistency, and reduce the complexity of system management. This leads to more efficient use of IT resources and long-term reduction of IT costs. However, standardization can take many forms; it can meet either internal or external standards, or it can relate to various technologies and solutions. Is deviation from a standard always bad per se? Certainly not, but as is often the case, the dose makes the poison. Targeted and benefit-oriented application of these deviations can have positive impacts on value creation and uniqueness. However, it is crucial to know what you are doing. So let's start at the beginning, with the significance of standardization and its benefits.
The Importance of Standardization in the Transformation Process
Fundamentally, transitioning from client-server-based ERP systems to cloud-based solutions represents a paradigm shift. For SAP users, this change takes the form of SAP S/4HANA®, which also represents a significant technological shift. This offers numerous advantages for companies but also presents great challenges. The basic assessment from the manufacturer's side is initially very positive. SAP® Chief Evangelist for Cloud ERP Paul Saunders emphasized in an interview that “75-80% of all companies in the world are exactly the same.” This statement illustrates that the fundamental business processes in most companies are largely standardizable and can potentially benefit from synergy and specialization effects. For standardization is also the key to utilizing proven system and industry best practices and avoiding unnecessary and costly process variants. This can enhance not only the efficiency of systems and processes but also improve the integration level of various business areas, locations, and departments. The clean core approach plays a central role in this. Having a “clean ERP core” means that companies design their systems based on standardized and methodologically compatible processes and data models. This results in a more stable and maintainable IT landscape, allowing companies to fully exploit existing system benefits and forthcoming innovations. A clean core structure facilitates the introduction of new technologies and functionalities while simultaneously reducing reliance on costly and complex customizations.
When arguing for standardization projects, many of the arguments that can be made will undoubtedly be controversial. After all, the customization of IT solutions also results in positive effects, such as increased acceptance, higher ergonomics, or even the support of competitive advantages. Nevertheless, there are also numerous arguments for increasing the degree of standardization, some of which are listed below:
Efficiency Increase: Standardized processes and methods enable faster implementation and reduce the need for adjustments. This leads to shorter project durations and lower implementation costs.
Cost Reduction: Reducing customizations and employing best-practice solutions can help companies lower their total operational costs. Standardized solutions are usually less maintenance-intensive and require fewer specialized IT resources.
Quality Improvement: Standardized processes are based on proven best practices that have proven effective in practice. This results in higher process quality and a lower error rate.
Scalability: Standardized solutions allow companies to scale their systems and processes more easily to keep up with growth and changes in the business environment. This is particularly important in dynamic markets.
Compliance and Security: By using standardized processes and functions, companies can ensure better compliance with legal and regulatory requirements. SAP S/4HANA® offers integrated compliance and security features that are better utilized through standardization.
Innovation and Agility: Standardized systems enable the faster introduction of new features and technologies.
Companies can react more quickly to market changes and implement innovative solutions without having to undertake extensive customizations.
Better Data Quality and Transparency: Standardized processes and data models lead to a more consistent and higher-quality data base. This improves decision-making and enables better transparency across all business areas.
Simplified Integration: Standardized interfaces and integration options make it easier to connect SAP S/4HANA® to other systems and applications. This reduces the effort required for integration and allows for smoother communication between different systems.
Future-proofing: By using standardized solutions, companies stay at the forefront of technology and can more easily respond to future developments and updates.
Challenges and Resistances
Despite the clear advantages, standardization is not a simple process and can face significant challenges. Companies that have implemented individual customizations over the years often encounter resistance when it comes to giving up these customizations and introducing uniform standards. Business units accustomed to their specific processes and configurations are often skeptical of change. This skepticism can slow down the standardization process and requires careful planning and communication. Another critical aspect is the significant effort associated with standardization. Switching to standardized processes requires comprehensive process re-engineering, often accompanied by extensive data cleansing. Companies must thoroughly analyze and assess their existing processes to determine necessary adjustments. This can be time-consuming and resource-intensive, presenting additional challenges. Furthermore, it is essential not to forget that standardization also requires cultural and organizational changes. Employees must be willing to adopt new processes and workflows, which often entails training and raising awareness of the benefits of standardization. Without employee support, the standardization process can stall, and the desired efficiency gains may not be realized.
Motivation and conviction are, in most cases, not the problem. The argument for increasing the degree of standardization is indeed convincing. Rather, significant difficulties arise in the question of “How”.
The Path to Successful Standardization: A Systematic Approach
To answer this question, as is often the case, a systematic and structured approach based on the right information and facts is needed. One can proceed in several steps:
A pioneering first step is a comprehensive analysis of the existing system and process landscape, for example, using the RBE Plus approach of IBIS Prof. Thome AG. All relevant SAP and non-SAP systems, as well as the associated data types, should be considered. The goal is to evaluate the current processes and thereby identify the real value-creating activities, problem-solving routines, and company-specific details. Through this comprehensive analysis, companies can not only gain a complete picture of their current landscape and identify weaknesses but also gain a clear insight into what they truly need. This analysis should not be limited to superficial processes but should also include the deeper layers of system architecture. This includes master data, process data, configurations, executable files, and the technical infrastructure supporting the systems.
The findings obtained must be consecutively examined for their standardizability. It is important to consider various perspectives. Thus, the found results can be checked against standards that are company-specific, industry-specific, or manufacturer-specified. The latter are particularly relevant in the context of an SAP S/4HANA® transformation, as they include the potentials and innovations that accompany such a system migration.
Based on the detailed information obtained, the resulting possibilities, needs for action, and potentials must be derived. A key aspect of standardization is assessing the potential for internal harmonization. The unification of processes and data structures also generates the potential for consolidating previously isolated subsystems. Developing specific measures also includes identifying the potential for cleanup, whether by removing unused data and functionalities or by reverting to standard options. A clean and standardized system enhances system and process security and reliability and helps keep costs under control. Focusing on customer-specific changes is also crucial. Companies should not view the standardization process as a one-size-fits-all solution but as a foundation on which specific, business, and value-critical processes can be specifically adapted and optimized. This ensures that the unique requirements of the company are still considered while simultaneously reaping the benefits of standardization.
The Message Has Been Understood, but How Do I Start?
For your standardization project to be successful and carried out on schedule, concrete actions and a goal-oriented strategy are needed. Based on the extensive project experience of IBIS Prof. Thome AG, we want to share six tips that should be helpful for your endeavor:
When it comes to recording and planning a standardization project, you should start as soon as possible. At a minimum, the insights gained from the as-is analysis will help you increase your system efficiency and reduce planning uncertainties, even if months or years remain until planned implementation, such as a transformation.
When assessing your current situation, do not rely on subjective assessments or outdated documentation. Use versatile tools that include all data perspectives (360-degree view) and provide you with an independent view of the essential performance features of your systems - without neglecting the necessary complexity. Invest in quick and solid insights, not in the long-term buildup of costly resources. Important questions for the assessment should include: How high is the process variance? What improvements are possible and feasible? How secure and up-to-date are my systems?
Project the as-is towards the possible future state. Only if you are able to connect your current state with the possible changes of a transformation will you understand the full value of standardization.
Define your objectives - mandatory tasks, value-critical elements, and innovation potentials - to be iteratively reviewed during your standardization endeavor. Certainly, these objectives adapt throughout the process, but tracking them is absolutely essential given the multitude of tasks.
Consider, based on standardization, a cleanup of systems and processes to prepare for upcoming changes. It is crucial that these activities begin in a timely and prudent manner to avoid delaying or impairing the subsequent implementation project.
In parallel, companies should not neglect employee acceptance. Introducing standardized processes often requires a change in working methods, which must be supported by employees. Through targeted training and communication measures, companies can ensure that their employees understand the advantages of standardization and are ready to implement the necessary changes.
Standardization is more than just a technical process; it is a strategic approach that helps companies align their ERP systems with future demands. Despite the challenges this process entails, the long-term benefits of a standardized system and process landscape are undeniable. Companies that embark on this path lay the foundation for successful transformation and secure a sustainable competitive advantage.
By focusing on a clean ERP core, identifying and cleaning up unnecessary customizations, and synchronizing processes and data models, companies can fully exploit the advantages of standardization. This approach not only helps to enhance system and process security but also strengthens the company's market position and prepares it for the future. The key to success lies in careful planning, comprehensive analysis of existing systems and processes, and the involvement of all relevant stakeholders. With a clear strategy and a willingness to embrace change, companies can fully leverage the benefits of standardization and strengthen their market position sustainably.
