When we talk about digital transformation, we all have different ideas of how to achieve what can be considered the impossible. And whilst nowadays better, faster and accurate data is helped by the new technology architectures, what sets apart those who achieve transformation success, comes down to good strategy, leadership and execution.

According to McKinsey 70% of digital transformation initiatives don’t deliver! ARLANXEO did not want to contribute to that statistic, they wanted to be the exception.

On April 30^th we hosted a webcast with Dr Hermann Schuster Chief Digital Officer at ARLANXEO. A global company comprising of 4300 employees and over 3.2bn Euros in sales. The company set themselves a mammoth challenge to re-architect their global processes, systems and operating practices, across the board, at speed.

After considering the options, Arlanxeo decided for a ‘greenfield approach’ to redefine their process and system landscape, including the elimination of a patchwork of 150 applications. They focussed on unity and simplicity and opted for S/4 HANA as their new ‘digital core’ ERP and a ‘Cloud-First’ philosophy for the necessary “hub and spoke” process applications including Coupa, Hybris, Concur, SuccessFactors, C4C and GTS (among others) that would feed it.

Starting with a pilot roll out for all processes (no mean feat!) in the Netherlands and China, ARLANXEO have now achieved (as of 1^st January 2020) major business unit roll-outs in Belgium, Germany, Switzerland, Singapore and Canada. Their final roll-out to France, Brazil and USA has been postponed until 1^st October 2020 due to the COVID-19 impact, but Hermann and the team have now reached the peak and are now approaching the calmer waters of their transformation journey.

Paraphrasing Peter Drucker, the legendary business management guru, Hermann was determined that ‘operational culture would not eat ARLANXEO’s IT strategy for breakfast.’

There were many challenges and lessons learned, but a determination and execution focus to “complete the mission” is very clear as he described their experiences. ARLANXEO took an approach that didn’t stop with implementation – it kept going to sustain knowledge, expertise and ongoing global process innovation. It has been quite a journey and a great example of how to develop key subject matter experts to lead global process innovation and continuous improvement.

The compelling event behind the transformation was to get the new business operational as fast as possible, whilst building in agility and flexibility. Hermann describes the business benefits as;

• Creating a standard platform for end to end business processes which is more business focused and agile
• Integration of processes – no old style interfaces but true integration, for example Accounting, Treasury and Consolidation all integrated for real-time consolidation.
• Consistent user experience for the external customer, all experience from website to ecommerce to product details delivered via Hybris
• Reduced IT costs (25-30% less than previously) through a smaller application landscape, simplification, and reduction in customisation

What ARLANXEO has achieved in 3 short years is impressive – many organizations spend more time than this exploring the case for action and it can take up to a decade to achieve such results. This isn’t just an example of great leadership during turbulent times but also a reminder that planning, detailed work, commitment and hard-work pay off when it comes to driving successful transformation. Hopefully ARLANXEO’s story will help us all realise that McKinsey’s 70% statistic does not need to apply to us if we take the right steps!

You can hear Hermann and the Arlanxeo story at https://youtu.be/Mz0aMfpc0oA

Q&A Session with Hermann

We were delighted to be sent numerous engaging questions from those who attended the session. A number of them we thought might be of interest to the wider audience, so we have collated the ones with common themes with greatest relevance below:

1. I expect you had business resources as a part of your implementation team.  If so, can you please comment on the typical time commitment throughout the various project phases?
   • We appointed one central, global lead process expert for the duration of the program (2 years) and one per country during the relevant rollout stage. We had about three days per week of these people committed to the program. These were appointed as genuine end-to-end process foal points, not just system module focussed.  So, for example, the P2P process expert, led on the process that is supported by Coupa, S/4 and Opentext VIM. These global experts have become even more valuable to us and will become our Global Process Owners, developing new ideas and driving process improvement and innovation.
2.  Can you please share some of your experiences around payments, bank statements (topics where one needs to work with banks)Are there any lessons you would share from your experiences on such work?
   • The bank interface work took a long time, and we used TIS as the bank/payments interface/management system. Testing with the banks was time consuming and complex, with multiple banks in use per country.
3. What are the major business benefits you achieved with the transformation?
   • The compelling event behind the transformation was to get the new business operatioal as fast as possible, whilst building in agility and flexibility. The benefits have been;
     • Creating a standard platform for end to end business processes which is more business focused and agile
     • Integration of processes – no old style interfaces but true integration, for example Accounting, Treasury and Consolidation all integrated for real-time consolidation.
     • Consistent user experience for the external customer, all experience from website to ecommerce to product details delivered vi Hybris
     • Reduced IT costs (25-30% less than previously) through a smaller application landscape, simplification, reduction in customisation
4. Have you been hit by any cost reduction rounds, and were you able to continue with the experienced / aligned staff? If so, you have been the lucky one!
   • There were no cost reduction rounds during the initial 2 years, but COVID has required us to cut costs, which we are doing collaboratively with suppliers.
5. You have rolled out full capability by country. You decided not to roll out by process globally, what drove that decision?
   • We never considered rolling out by process. The integrated rollout by country proves the integrated process early, eliminates costly temporary interfaces, helps change management and was the easiest option, given the changes in the General Ledger structure in S/4
6. Did you need any customisations on S/4HANA to support all the requirements and history of the various countries?
   • Yes we did, but much less than before. Most customisations were around tax and financial regulations (such as in Brazil) and also the specific needs of the rubber market, such as process specific, batch level specifications by customer.
7. There must have been cultural differences between the various countries; did this impact in any way your project, and if yes, how did you handle this?
   • Yes, in such a global business there are always cultural differences. Language has been a problem, particularly in Brazil and Chine, but we hired a business Coach to advise on cultural sensitivities before we entered the testing phases. For instance, ins some cultures, the absence of disagreement does NOT mean agreement! So we have to be very careful with the make-up of teams, using blends of long term expatriate colleagues in country to help manage the feedback. In workshops we worked hard to have the more fluent English speakers sitting with those less able colleagues, so that everyone could develop a common understanding. Obviously, this became much more difficult during the crisis with everyone working remotely form home by web meeting!