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Survive Commoditization and Capitalize on Change
Part One
By Sam Sliman
President, Optimal Solutions Integration, Inc.
Commoditization and change are constant and powerful market forces every business must contend with when operating in today’s consumer-driven, global economy. A clear and accurate understanding of where your business stands in relation to these forces is essential for prosperity and vital to survival. Equally vital are the continual strategic adjustments and transformations you make to your business based on this understanding.
Part One of this two-part article examines how fully utilizing your current SAP investment enables you to better understand and more smartly maneuver your business in order to survive the ever-present threat of commoditization.
Part Two looks at how strategic, incremental, edge-innovations in your SAP landscape empower your business to not only avoid becoming a casualty of change; but to thrive amidst, and actually capitalize on, rapidly changing market dynamics.
SAP for surviving commoditization
Whatever your company’s product or service may be, commoditization is an ever-present threat, a staple in the natural cycle of business, one of those ‘not if, but when’ things.
For those businesses with the good fortune to be first to market with a new product, technology or game-changing service, the ‘when’ of commoditization may be many years off in the future. But for the majority of businesses operating in today’s mature markets, the moment marking ‘when’ their company’s product or service becomes a commodity draws ever nearer.
The good news? While the march of commoditization cannot be stopped, it can be staved off long enough for business leaders to devise and implement strategic adaptations and transformations that ensure their company’s survival -- Get their business right-sized fast. Wring maximum profit from core revenue drivers. Reduce costs with operational excellence. Avoid costly legal and regulatory missteps. Deliver that extra measure of customer value that keeps the competition at bay.
True, commoditization can never be entirely vanquished. But it can be postponed, delayed, and for best-run companies running SAP,commoditization can be averted for protracted periods. Thus, the expression ‘surviving commoditization.’
An article co-authored by SAP CEO Henning Kagermann entitled Reinventing Your Business Model (Harvard Business Review Dec 2008) begins with the startling, research-based finding that “few companies understand their existing business model well enough -- the premise behind its development, its natural interdependencies, and its strengths and limitations.”
The importance of understanding one ’s business is also central to the commoditization-related questions grappled with in this article:
- How can your company utilize the full capabilities of its SAP applications to accurately understand your current market climate?
- How can SAP help your company understand its current market positioning and business performance?
- How can SAP help your company accurately assess the relevancy and viability of its customer value proposition?
- And, ultimately, how can this complete and accurate understanding made possible by SAP help your company survive commoditization?
Fortunately for businesses running SAP, this understanding is available. It can be ascertained from data stored in the SAP applications that drive core business processes, data that can be accessed and analyzed in real-time via a broad array of reporting capabilities and business intelligence (BI) solutions.
Making fast, strategic and continual adaptations based on this accurate understanding is the key to surviving commoditization.
To accomplish this, best-run business can draw on the SOA-ready SAP NetWeaver Business Process Platform and a growing arsenal of SAP BusinessObjects Enterprise Performance Management solutions that offer comprehensive functionality covering everything from strategy management to profitability and cost management to business planning and consolidation management to spend performance management, and beyond.
Companies on older versions of SAP can tap the proven SAP Strategic Enterprise Management (SEM) solution as well as a slew of related SAP applications, such as Business Planning Simulation (BPS), Consolidation Planning (CPS) and Integrated Planning (IP), among others.
Diminishing revenue. Shrinking profit margins. Increasing competition. Escalating and increasingly outrageous demands made upon you by important customers and larger, upstream supply-chain partners. These are sure signs that commoditization is either in your company’s very near future or, more likely, already upon you.
By fully utilizing your SAP applications to detect the approach or presence of commoditization, and then adapting and adjusting your business quickly and accordingly, you can effectually slow and repeatedly reset the clock of commoditization, winning for your business longer life, sustainable growth, competitive advantage and greater market share.
