Case Study Description of SAP's Platform Strategy in 2006
In face of globalization, outsourcing, changing regulations, and rapid technological innovations, companies in the 2000s were increasingly challenged to devise and implement adaptable business models. This entailed putting in place enterprise applications that were open-source, simple to implement, and easy to integrate within and without the organizational bounds. Because traditional enterprise resource planning (ERP) systems were generally complex, proprietary, and difficult to install, ERP systems providers had to reposition themselves strategically. SAP, the leading company in this space, faced this challenge by transforming itself from a closed-source software developer to an open-source software integrator. By opening up its proprietary software products as an open development and integration platform, SAP allowed its customers to modify their ERPs to suit their specific needs. This new strategy, however, would fundamentally affect the company's business architecture. In other words, SAP had to rethink how it would define its value proposition, identify and target its customers, deploy its resources, configure its business processes, manage its alliances, and develop and maintain its profit and growth engines. How could the company pull off this repositioning initiative? Would it be able to attract the global army of independent developers in supporting its new software platform strategy? How would the ongoing consolidation in the software industry affect the Company's new strategy? How would the main competitors such as Oracle, IBM, Microsoft, and a host of companies emerging in India react?
Swot Analysis of "SAP's Platform Strategy in 2006" written by Ali F. Farhoomand, Samuel Tsang includes – strengths weakness that are internal strategic factors of the organization, and opportunities and threats that Sap Software facing as an external strategic factors. Some of the topics covered in SAP's Platform Strategy in 2006 case study are - Strategic Management Strategies, Competitive strategy, Globalization, IT, Operations management and Strategy & Execution.
Some of the macro environment factors that can be used to understand the SAP's Platform Strategy in 2006 casestudy better are - – digital marketing is dominated by two big players Facebook and Google, increasing government debt because of Covid-19 spendings, talent flight as more people leaving formal jobs, competitive advantages are harder to sustain because of technology dispersion, there is backlash against globalization, central banks are concerned over increasing inflation, increasing household debt because of falling income levels,
wage bills are increasing, customer relationship management is fast transforming because of increasing concerns over data privacy, etc
Introduction to SWOT Analysis of SAP's Platform Strategy in 2006
SWOT stands for an organization’s Strengths, Weaknesses, Opportunities and Threats . At Oak Spring University , we believe that protagonist in SAP's Platform Strategy in 2006 case study can use SWOT analysis as a strategic management tool to assess the current internal strengths and weaknesses of the Sap Software, and to figure out the opportunities and threats in the macro environment – technological, environmental, political, economic, social, demographic, etc in which Sap Software operates in.
According to Harvard Business Review, 75% of the managers use SWOT analysis for various purposes such as – evaluating current scenario, strategic planning, new venture feasibility, personal growth goals, new market entry, Go To market strategies, portfolio management and strategic trade-off assessment, organizational restructuring, etc.
SWOT Objectives / Importance of SWOT Analysis and SWOT Matrix
SWOT analysis of SAP's Platform Strategy in 2006 can be done for the following purposes –
1. Strategic planning using facts provided in SAP's Platform Strategy in 2006 case study
2. Improving business portfolio management of Sap Software
3. Assessing feasibility of the new initiative in Strategy & Execution field.
4. Making a Strategy & Execution topic specific business decision
5. Set goals for the organization
6. Organizational restructuring of Sap Software
Strengths SAP's Platform Strategy in 2006 | Internal Strategic Factors
What are Strengths in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The strengths of Sap Software in SAP's Platform Strategy in 2006 Harvard Business Review case study are -
Superior customer experience
– The customer experience strategy of Sap Software in the segment is based on four key concepts – personalization, simplification of complex needs, prompt response, and continuous engagement.
High switching costs
– The high switching costs that Sap Software has built up over years in its products and services combo offer has resulted in high retention of customers, lower marketing costs, and greater ability of the firm to focus on its customers.
Organizational Resilience of Sap Software
– The covid-19 pandemic has put organizational resilience at the centre of everthing that Sap Software does. Organizational resilience comprises - Financial Resilience, Operational Resilience, Technological Resilience, Organizational Resilience, Business Model Resilience, and Reputation Resilience.
Ability to recruit top talent
– Sap Software is one of the leading recruiters in the industry. Managers in the SAP's Platform Strategy in 2006 are in a position to attract the best talent available. The firm has a robust talent identification program that helps in identifying the brightest.
Ability to lead change in Strategy & Execution field
– Sap Software is one of the leading players in its industry. Over the years it has not only transformed the business landscape in its segment but also across the whole industry. The ability to lead change has enabled Sap Software in – penetrating new markets, reaching out to new customers, and providing different value propositions to different customers in the international markets.
Cross disciplinary teams
– Horizontal connected teams at the Sap Software are driving operational speed, building greater agility, and keeping the organization nimble to compete with new competitors. It helps are organization to ideate new ideas, and execute them swiftly in the marketplace.
Successful track record of launching new products
– Sap Software has launched numerous new products in last few years, keeping in mind evolving customer preferences and competitive pressures. Sap Software has effective processes in place that helps in exploring new product needs, doing quick pilot testing, and then launching the products quickly using its extensive distribution network.
Training and development
– Sap Software has one of the best training and development program in the industry. The effectiveness of the training programs can be measured in SAP's Platform Strategy in 2006 Harvard Business Review case study by analyzing – employees retention, in-house promotion, loyalty, new venture initiation, lack of conflict, and high level of both employees and customer engagement.
Operational resilience
– The operational resilience strategy in the SAP's Platform Strategy in 2006 Harvard Business Review case study comprises – understanding the underlying the factors in the industry, building diversified operations across different geographies so that disruption in one part of the world doesn’t impact the overall performance of the firm, and integrating the various business operations and processes through its digital transformation drive.
Innovation driven organization
– Sap Software is one of the most innovative firm in sector. Manager in SAP's Platform Strategy in 2006 Harvard Business Review case study can use Clayton Christensen Disruptive Innovation strategies to further increase the scale of innovtions in the organization.
Digital Transformation in Strategy & Execution segment
- digital transformation varies from industry to industry. For Sap Software digital transformation journey comprises differing goals based on market maturity, customer technology acceptance, and organizational culture. Sap Software has successfully integrated the four key components of digital transformation – digital integration in processes, digital integration in marketing and customer relationship management, digital integration into the value chain, and using technology to explore new products and market opportunities.
Learning organization
- Sap Software is a learning organization. It has inculcated three key characters of learning organization in its processes and operations – exploration, creativity, and expansiveness. The work place at Sap Software is open place that encourages instructiveness, ideation, open minded discussions, and creativity. Employees and leaders in SAP's Platform Strategy in 2006 Harvard Business Review case study emphasize – knowledge, initiative, and innovation.
Weaknesses SAP's Platform Strategy in 2006 | Internal Strategic Factors
What are Weaknesses in SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The weaknesses of SAP's Platform Strategy in 2006 are -
Employees’ incomplete understanding of strategy
– From the instances in the HBR case study SAP's Platform Strategy in 2006, it seems that the employees of Sap Software don’t have comprehensive understanding of the firm’s strategy. This is reflected in number of promotional campaigns over the last few years that had mixed messaging and competing priorities. Some of the strategic activities and services promoted in the promotional campaigns were not consistent with the organization’s strategy.
Slow to harness new channels of communication
– Even though competitors are using new communication channels such as Instagram, Tiktok, and Snap, Sap Software is slow explore the new channels of communication. These new channels of communication mentioned in marketing section of case study SAP's Platform Strategy in 2006 can help to provide better information regarding products and services. It can also build an online community to further reach out to potential customers.
Low market penetration in new markets
– Outside its home market of Sap Software, firm in the HBR case study SAP's Platform Strategy in 2006 needs to spend more promotional, marketing, and advertising efforts to penetrate international markets.
High cash cycle compare to competitors
Sap Software has a high cash cycle compare to other players in the industry. It needs to shorten the cash cycle by 12% to be more competitive in the marketplace, reduce inventory costs, and be more profitable.
Aligning sales with marketing
– It come across in the case study SAP's Platform Strategy in 2006 that the firm needs to have more collaboration between its sales team and marketing team. Sales professionals in the industry have deep experience in developing customer relationships. Marketing department in the case SAP's Platform Strategy in 2006 can leverage the sales team experience to cultivate customer relationships as Sap Software is planning to shift buying processes online.
Workers concerns about automation
– As automation is fast increasing in the segment, Sap Software needs to come up with a strategy to reduce the workers concern regarding automation. Without a clear strategy, it could lead to disruption and uncertainty within the organization.
Slow decision making process
– As mentioned earlier in the report, Sap Software has a very deliberative decision making approach. This approach has resulted in prudent decisions, but it has also resulted in missing opportunities in the industry over the last five years. Sap Software even though has strong showing on digital transformation primary two stages, it has struggled to capitalize the power of digital transformation in marketing efforts and new venture efforts.
Capital Spending Reduction
– Even during the low interest decade, Sap Software has not been able to do capital spending to the tune of the competition. This has resulted into fewer innovations and company facing stiff competition from both existing competitors and new entrants who are disrupting the industry using digital technology.
High dependence on star products
– The top 2 products and services of the firm as mentioned in the SAP's Platform Strategy in 2006 HBR case study still accounts for major business revenue. This dependence on star products in has resulted into insufficient focus on developing new products, even though Sap Software has relatively successful track record of launching new products.
Lack of clear differentiation of Sap Software products
– To increase the profitability and margins on the products, Sap Software needs to provide more differentiated products than what it is currently offering in the marketplace.
Need for greater diversity
– Sap Software has taken concrete steps on diversity, equity, and inclusion. But the efforts so far has resulted in limited success. It needs to expand the recruitment and selection process to hire more people from the minorities and underprivileged background.
Opportunities SAP's Platform Strategy in 2006 | External Strategic Factors
What are Opportunities in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The opportunities highlighted in the Harvard Business Review case study SAP's Platform Strategy in 2006 are -
Harnessing reconfiguration of the global supply chains
– As the trade war between US and China heats up in the coming years, Sap Software can build a diversified supply chain model across various countries in - South East Asia, India, and other parts of the world. This reconfiguration of global supply chain can help, as suggested in case study, SAP's Platform Strategy in 2006, to buy more products closer to the markets, and it can leverage its size and influence to get better deal from the local markets.
Buying journey improvements
– Sap Software can improve the customer journey of consumers in the industry by using analytics and artificial intelligence. SAP's Platform Strategy in 2006 suggest that firm can provide automated chats to help consumers solve their own problems, provide online suggestions to get maximum out of the products and services, and help consumers to build a community where they can interact with each other to develop new features and uses.
Building a culture of innovation
– managers at Sap Software can make experimentation a productive activity and build a culture of innovation using approaches such as – mining transaction data, A/B testing of websites and selling platforms, engaging potential customers over various needs, and building on small ideas in the Strategy & Execution segment.
Increase in government spending
– As the United States and other governments are increasing social spending and infrastructure spending to build economies post Covid-19, Sap Software can use these opportunities to build new business models that can help the communities that Sap Software operates in. Secondly it can use opportunities from government spending in Strategy & Execution sector.
Leveraging digital technologies
– Sap Software can leverage digital technologies such as artificial intelligence and machine learning to automate the production process, customer analytics to get better insights into consumer behavior, realtime digital dashboards to get better sales tracking, logistics and transportation, product tracking, etc.
Developing new processes and practices
– Sap Software can develop new processes and procedures in Strategy & Execution industry using technology such as automation using artificial intelligence, real time transportation and products tracking, 3D modeling for concept development and new products pilot testing etc.
Remote work and new talent hiring opportunities
– The widespread usage of remote working technologies during Covid-19 has opened opportunities for Sap Software to expand its talent hiring zone. According to McKinsey Global Institute, 20% of the high end workforce in fields such as finance, information technology, can continously work from remote local post Covid-19. This presents a really great opportunity for Sap Software to hire the very best people irrespective of their geographical location.
Low interest rates
– Even though inflation is raising its head in most developed economies, Sap Software can still utilize the low interest rates to borrow money for capital investment. Secondly it can also use the increase of government spending in infrastructure projects to get new business.
Changes in consumer behavior post Covid-19
– Consumer behavior has changed in the Strategy & Execution industry because of Covid-19 restrictions. Some of this behavior will stay once things get back to normal. Sap Software can take advantage of these changes in consumer behavior to build a far more efficient business model. For example consumer regular ordering of products can reduce both last mile delivery costs and market penetration costs. Sap Software can further use this consumer data to build better customer loyalty, provide better products and service collection, and improve the value proposition in inflationary times.
Better consumer reach
– The expansion of the 5G network will help Sap Software to increase its market reach. Sap Software will be able to reach out to new customers. Secondly 5G will also provide technology framework to build new tools and products that can help more immersive consumer experience and faster consumer journey.
Loyalty marketing
– Sap Software has focused on building a highly responsive customer relationship management platform. This platform is built on in-house data and driven by analytics and artificial intelligence. The customer analytics can help the organization to fine tune its loyalty marketing efforts, increase the wallet share of the organization, reduce wastage on mainstream advertising spending, build better pricing strategies using personalization, etc.
Finding new ways to collaborate
– Covid-19 has not only transformed business models of companies in Strategy & Execution industry, but it has also influenced the consumer preferences. Sap Software can tie-up with other value chain partners to explore new opportunities regarding meeting customer demands and building a rewarding and engaging relationship.
Manufacturing automation
– Sap Software can use the latest technology developments to improve its manufacturing and designing process in Strategy & Execution segment. It can use CAD and 3D printing to build a quick prototype and pilot testing products. It can leverage automation using machine learning and artificial intelligence to do faster production at lowers costs, and it can leverage the growth in satellite and tracking technologies to improve inventory management, transportation, and shipping.
Threats SAP's Platform Strategy in 2006 External Strategic Factors
What are Threats in the SWOT Analysis / TOWS Matrix / Weighted SWOT Analysis
The threats mentioned in the HBR case study SAP's Platform Strategy in 2006 are -
New competition
– After the dotcom bust of 2001, financial crisis of 2008-09, the business formation in US economy had declined. But in 2020 alone, there are more than 1.5 million new business applications in United States. This can lead to greater competition for Sap Software in the Strategy & Execution sector and impact the bottomline of the organization.
Learning curve for new practices
– As the technology based on artificial intelligence and machine learning platform is getting complex, as highlighted in case study SAP's Platform Strategy in 2006, Sap Software may face longer learning curve for training and development of existing employees. This can open space for more nimble competitors in the field of Strategy & Execution .
Regulatory challenges
– Sap Software needs to prepare for regulatory challenges as consumer protection groups and other pressure groups are vigorously advocating for more regulations on big business - to reduce inequality, to create a level playing field, to product data privacy and consumer privacy, to reduce the influence of big money on democratic institutions, etc. This can lead to significant changes in the Strategy & Execution industry regulations.
High dependence on third party suppliers
– Sap Software high dependence on third party suppliers can disrupt its processes and delivery mechanism. For example -the current troubles of car makers because of chip shortage is because the chip companies started producing chips for electronic companies rather than car manufacturers.
Aging population
– As the populations of most advanced economies are aging, it will lead to high social security costs, higher savings among population, and lower demand for goods and services in the economy. The household savings in US, France, UK, Germany, and Japan are growing faster than predicted because of uncertainty caused by pandemic.
Instability in the European markets
– European Union markets are facing three big challenges post Covid – expanded balance sheets, Brexit related business disruption, and aggressive Russia looking to distract the existing security mechanism. Sap Software will face different problems in different parts of Europe. For example it will face inflationary pressures in UK, France, and Germany, balance sheet expansion and demand challenges in Southern European countries, and geopolitical instability in the Eastern Europe.
Increasing international competition and downward pressure on margins
– Apart from technology driven competitive advantage dilution, Sap Software can face downward pressure on margins from increasing competition from international players. The international players have stable revenue in their home market and can use those resources to penetrate prominent markets illustrated in HBR case study SAP's Platform Strategy in 2006 .
Consumer confidence and its impact on Sap Software demand
– There is a high probability of declining consumer confidence, given – high inflammation rate, rise of gig economy, lower job stability, increasing cost of living, higher interest rates, and aging demography. All the factors contribute to people saving higher rate of their income, resulting in lower consumer demand in the industry and other sectors.
High level of anxiety and lack of motivation
– the Great Resignation in United States is the sign of broader dissatisfaction among the workforce in United States. Sap Software needs to understand the core reasons impacting the Strategy & Execution industry. This will help it in building a better workplace.
Technology acceleration in Forth Industrial Revolution
– Sap Software has witnessed rapid integration of technology during Covid-19 in the Strategy & Execution industry. As one of the leading players in the industry, Sap Software needs to keep up with the evolution of technology in the Strategy & Execution sector. According to Mckinsey study top managers believe that the adoption of technology in operations, communications is 20-25 times faster than what they planned in the beginning of 2019.
Shortening product life cycle
– it is one of the major threat that Sap Software is facing in Strategy & Execution sector. It can lead to higher research and development costs, higher marketing expenses, lower customer loyalty, etc.
Capital market disruption
– During the Covid-19, Dow Jones has touched record high. The valuations of a number of companies are way beyond their existing business model potential. This can lead to capital market correction which can put a number of suppliers, collaborators, value chain partners in great financial difficulty. It will directly impact the business of Sap Software.
Technology disruption because of hacks, piracy etc
– The colonial pipeline illustrated, how vulnerable modern organization are to international hackers, miscreants, and disruptors. The cyber security interruption, data leaks, etc can seriously jeopardize the future growth of the organization.
Weighted SWOT Analysis of SAP's Platform Strategy in 2006 Template, Example
Not all factors mentioned under the Strengths, Weakness, Opportunities, and Threats quadrants in the SWOT Analysis are equal. Managers in the HBR case study SAP's Platform Strategy in 2006 needs to zero down on the relative importance of each factor mentioned in the Strengths, Weakness, Opportunities, and Threats quadrants.
We can provide the relative importance to each factor by assigning relative weights. Weighted SWOT analysis process is a three stage process –
First stage for doing weighted SWOT analysis of the case study SAP's Platform Strategy in 2006 is to rank the strengths and weaknesses of the organization. This will help you to assess the most important strengths and weaknesses of the firm and which one of the strengths and weaknesses mentioned in the initial lists are marginal and can be left out.
Second stage for conducting weighted SWOT analysis of the Harvard case study SAP's Platform Strategy in 2006 is to give probabilities to the external strategic factors thus better understanding the opportunities and threats arising out of macro environment changes and developments.
Third stage of constructing weighted SWOT analysis of SAP's Platform Strategy in 2006 is to provide strategic recommendations includes – joining likelihood of external strategic factors such as opportunities and threats to the internal strategic factors – strengths and weaknesses. You should start with external factors as they will provide the direction of the overall industry. Secondly by joining probabilities with internal strategic factors can help the company not only strategic fit but also the most probably strategic trade-off that Sap Software needs to make to build a sustainable competitive advantage.
