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 - – there is increasing trade war between United States & China, supply chains are disrupted by pandemic , increasing energy prices, increasing household debt because of falling income levels, technology disruption, banking and financial system is disrupted by Bitcoin and other crypto currencies, there is backlash against globalization,
increasing transportation and logistics costs, cloud computing is disrupting traditional business models, 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 -
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.
Highly skilled collaborators
– Sap Software has highly efficient outsourcing and offshoring strategy. It has resulted in greater operational flexibility and bringing down the costs in highly price sensitive segment. Secondly the value chain collaborators of the firm in SAP's Platform Strategy in 2006 HBR case study have helped the firm to develop new products and bring them quickly to the marketplace.
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.
High brand equity
– Sap Software has strong brand awareness and brand recognition among both - the exiting customers and potential new customers. Strong brand equity has enabled Sap Software to keep acquiring new customers and building profitable relationship with both the new and loyal customers.
Sustainable margins compare to other players in Strategy & Execution industry
– SAP's Platform Strategy in 2006 firm has clearly differentiated products in the market place. This has enabled Sap Software to fetch slight price premium compare to the competitors in the Strategy & Execution industry. The sustainable margins have also helped Sap Software to invest into research and development (R&D) and innovation.
Strong track record of project management
– Sap Software is known for sticking to its project targets. This enables the firm to manage – time, project costs, and have sustainable margins on the projects.
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.
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.
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.
Effective Research and Development (R&D)
– Sap Software has innovation driven culture where significant part of the revenues are spent on the research and development activities. This has resulted in, as mentioned in case study SAP's Platform Strategy in 2006 - staying ahead in the industry in terms of – new product launches, superior customer experience, highly competitive pricing strategies, and great returns to the shareholders.
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.
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.
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 -
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.
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.
Ability to respond to the competition
– As the decision making is very deliberative, highlighted in the case study SAP's Platform Strategy in 2006, in the dynamic environment Sap Software has struggled to respond to the nimble upstart competition. Sap Software has reasonably good record with similar level competitors but it has struggled with new entrants taking away niches of its business.
High dependence on existing supply chain
– The disruption in the global supply chains because of the Covid-19 pandemic and blockage of the Suez Canal illustrated the fragile nature of Sap Software supply chain. Even after few cautionary changes mentioned in the HBR case study - SAP's Platform Strategy in 2006, it is still heavily dependent upon the existing supply chain. The existing supply chain though brings in cost efficiencies but it has left Sap Software vulnerable to further global disruptions in South East Asia.
No frontier risks strategy
– After analyzing the HBR case study SAP's Platform Strategy in 2006, it seems that company is thinking about the frontier risks that can impact Strategy & Execution strategy. But it has very little resources allocation to manage the risks emerging from events such as natural disasters, climate change, melting of permafrost, tacking the rise of artificial intelligence, opportunities and threats emerging from commercialization of space etc.
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.
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.
Compensation and incentives
– The revenue per employee as mentioned in the HBR case study SAP's Platform Strategy in 2006, is just above the industry average. Sap Software needs to redesign the compensation structure and incentives to increase the revenue per employees. Some of the steps that it can take are – hiring more specialists on project basis, etc.
Skills based hiring
– The stress on hiring functional specialists at Sap Software has created an environment where the organization is dominated by functional specialists rather than management generalist. This has resulted into product oriented approach rather than marketing oriented approach or consumers oriented approach.
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.
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 -
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.
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.
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.
Identify volunteer opportunities
– Covid-19 has impacted working population in two ways – it has led to people soul searching about their professional choices, resulting in mass resignation. Secondly it has encouraged people to do things that they are passionate about. This has opened opportunities for businesses to build volunteer oriented socially driven projects. Sap Software can explore opportunities that can attract volunteers and are consistent with its mission and vision.
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.
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.
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.
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.
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.
Creating value in data economy
– The success of analytics program of Sap Software has opened avenues for new revenue streams for the organization in the industry. This can help Sap Software to build a more holistic ecosystem as suggested in the SAP's Platform Strategy in 2006 case study. Sap Software can build new products and services such as - data insight services, data privacy related products, data based consulting services, etc.
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.
Using analytics as competitive advantage
– Sap Software has spent a significant amount of money and effort to integrate analytics and machine learning into its operations in the sector. This continuous investment in analytics has enabled, as illustrated in the Harvard case study SAP's Platform Strategy in 2006 - to build a competitive advantage using analytics. The analytics driven competitive advantage can help Sap Software to build faster Go To Market strategies, better consumer insights, developing relevant product features, and building a highly efficient supply chain.
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 -
Barriers of entry lowering
– As technology is more democratized, the barriers to entry in the industry are lowering. It can presents Sap Software with greater competitive threats in the near to medium future. Secondly it will also put downward pressure on pricing throughout the sector.
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.
Environmental challenges
– Sap Software needs to have a robust strategy against the disruptions arising from climate change and energy requirements. EU has identified it as key priority area and spending 30% of its 880 billion Euros European post Covid-19 recovery funds on green technology. Sap Software can take advantage of this fund but it will also bring new competitors in the Strategy & Execution industry.
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.
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.
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.
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.
Trade war between China and United States
– The trade war between two of the biggest economies can hugely impact the opportunities for Sap Software in the Strategy & Execution industry. The Strategy & Execution industry is already at various protected from local competition in China, with the rise of trade war the protection levels may go up. This presents a clear threat of current business model in Chinese market.
Increasing wage structure of Sap Software
– Post Covid-19 there is a sharp increase in the wages especially in the jobs that require interaction with people. The increasing wages can put downward pressure on the margins of Sap Software.
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.
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.
Easy access to finance
– Easy access to finance in Strategy & Execution field will also reduce the barriers to entry in the industry, thus putting downward pressure on the prices because of increasing competition. Sap Software can utilize it by borrowing at lower rates and invest it into research and development, capital expenditure to fortify its core competitive advantage.
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.