Jim Hunt: So essentially by making those incremental decisions about software implementations and incremental process changes, you may not realize it, but you’re building up a certain amount of debt in your digital structure that you’re going to have to deal with and so forth.
John Froelich: Exactly. If you think of it as akin to personal debt or corporate debt, when you have a lot of debt, it makes you inflexible. It forces you into an inability to move forward and change your business. Right?
Jim Hunt: Yeah. Very good overview. So let’s talk about a little bit about Franken-processes. Are these things that are like the living dead, they’re going on and you’d like to be able to address them, but you don’t know how,
John Froelich: Yeah. You know, Jim, I like that living dead analogy. I think these are a lot like zombies. You continue to move forward with the living dead, but you know, you’re not living a real life. You’re not living to the best you can be. You’re not taking your business to the next level. Right. And so, you know, at some point in time you need to get away from the zombies and and move on. And the way a lot of this evolves is you find different ways that you’re doing business and you create manual workarounds and those manual workarounds force you to do something different. And you think it’s expedient thinking, you think that you’re going to do something positive, but you’d begin to stitch together these various processes, whether it’s a unique AR, accounts receivable process, or unique way that you account for different aspects of your accounts receivable or you do something different in provisioning because it’s so happens that you buy a product and because of the way you buy it and sell it, you, you might have to do something different, right?
John Froelich: So maybe you buy a specific widget from a company and that company only allows you to buy in certain quantities and you only get credits a certain way. So you create a unique process just for that customer or that product that you purchase. And all of a sudden you have another one and another one and another one. And your processes become so convoluted that there’s just no way for you to move easily forward with anything. And so I call these things Franken-processes because there’s no simple way, there’s no unique way, it doesn’t look like anything normal. It’s all stitched together oddly. And these, these old functional areas, these old complex processes that don’t really work then go together and create your technical digital debt, right? So you have functional digital debt and that’s all tied to your business processes. You also have this concept of technical or data-based digital debt.
John Froelich: And that becomes your old dirty, useless, outdated, incomplete analytics that end up not giving you the kinds of pictures that you want if your business in order to understand. So who are my most profitable customers? What are my most profitable products? And so you end up in this paralytic place and the digital debt doesn’t allow you to move forward. And this results, of course, in really bad business models that make you, you know, that can cause your business on ultimately almost to fail.
Jim Hunt: Interesting. I would assume that if you were starting from scratch, if you and I are going to start a company together, we get to choose the most advanced ERP finance system infrastructure out there. We’d probably a SAP S/4HANA for many, many reasons we could talk about in another podcast, but most companies, they don’t have that clean slate to choose whatever they want. They have an existing ERP infrastructure, so how is it holding them back and what can they do about it?
John Froelich: Well, a lot of companies have existing ERP solutions or they have cobbled together ERP solutions and what they can do about it is a couple of different things, right? Um, number one is they can do what we call Greenfield. Just start all over. It’s akin to, you know, Jim, let’s say you want to redo your kitchen, right? You can start by gutting your entire kitchen and you can start over and put a clean slate and put all new appliances in and all new plumbing. And that’s probably in the long term the best thing for you to do. But it’s not always the most feasible thing and sometimes not the most cost effective thing. Other customers will come in and say, look, you know, I want to do my re redo my kitchen, but I can’t afford to put all new cabinets in, so let’s go with new appliances.
John Froelich: So you can go with that. So you know, that kind of a model might be something as akin to what we call Central Finance. Central Finance is a great option for many customers that want to bring together their reporting, their recording their finance aspects of their business, but they’ve built and still have disparate underlying ERP systems. And it’s a way for them to get it begin to get the advantages of an S/4HANA integrated solution while allowing them to make the transitions out of their old, existing ERP. So that, that’s kind of what your options are.
Jim Hunt: Talk a little bit about the notion of customization and fit-to-standard versus fit-to-purpose and how that plays into the digital debt process.
John Froelich: So that’s a, that’s a great point. And if you think of those two areas, let’s, let’s talk about fit-to-purpose and the old models. So in the old model of the world, what we did was we came in and talked with a customer about, show me all of your processes, show me all of your Franken-processes and let’s recreate all of those processes onto a new technology platform. And at the end of the day, Jim, all that ever did for us or did for customers was to make bad processes faster. Certainly we encourage them to change those processes. But very often what we ran into was a customer who said, “Oh yes, we want to improve our processes”. But as you walked through the discover process or the blueprinting phase, there was always, “Oh, but we don’t do it that way. Here’s our process”.
John Froelich: They say “we need to replicate that process in the new systems”. And what you ended up with, of course, is a faster Frankenstein that runs as, as fast as as Hussein Bolt, right? And that’s not what you really needed. What you needed was a redone, revamped world. And so for a lot of different reasons, we suggest a fit-to-standard approach and that fit-to-standard approach asks the questions about why not take the Best Practices. Whether it’s through SAP, with 43 years plus of experience in helping companies really transform their businesses or others. It’s really understanding what are the best practices or standard practices and those standard practices, whether it’s: a customer orders something, you ship it, they receive it, you invoice them and they pay their invoice. That order-to-cash process is fairly standard and yes, there might be some nuances depending on what channels you use, but at the end of the day it’s a fairly standard process.
John Froelich: The same thing for Payables, right? Your procure-to-pay process. You initiate a procurement process, you order something, you receive it, you then are invoiced for it, you match that invoice to the goods that you received and then you pay your bill. And those are pretty straightforward standard processes. And so what we suggest is you look at those and try to ask the question of why not fit the standard. The next one is really ask yourself the questions about what are my differentiated processes? What makes me unique? You know? So for example, if you’re Amazon, your ability to provision and get products to people in a matter of hours, sometimes days, sometimes hours is a unique value proposition that they bring to the table. But how they do their accounts receivable may not be something unique to them or their accounts payable. And so why not focus on those areas that make a difference to you?
John Froelich: And so that’s why we say take a fit-to-standard approach.
Jim Hunt: And that especially makes sense with modern advanced ERP finance systems where they address all of those pieces. And if you conform to the standards, you’ll fit the pieces together better. Whereas in the past, sometimes there was legitimately a gap. So you had to build something custom. That’s really not the case in today’s world.
John Froelich: Absolutely, absolutely. And the other thing is if you think of some of the drivers of digital, you know, what I’ll call digital transformation or what’s going on in the marketplace today, there are four key aspects on this whole idea of not being able to move forward because of the digital debt is a result of some of that. Right? So let me be a little more specific and we talked about that and I’ve talked about in the past and there’s four key drivers of this innovation.
John Froelich: One of them is all around data, right? And that data is all tied to key aspects of your business and it’s driving increases in data, increases in data. The second piece is the evolution of mobility where people want to consume information, consume it in whatever way they want, when they want and where they want. Another aspect of it is the experience, you know, customers are looking for and businesses are looking for a consistent experience across the different channels that you deal with. And then finally, you know, it’s, it’s all about being able to leverage the systems to provide a flexible business model. As the world moves to more of a, a subscription based economy. And if you’re stuck in the world of digital debt and you have systems that can’t accommodate this, how do you move forward? And that becomes extremely difficult, particularly in a a cloud based environment, for example.
Jim Hunt: Great overview. You know, I bet a lot of our listeners right now are thinking, “I wish I had a FICO score so I could understand my digital debt and then pay down or take whatever steps”. So, which steps should they be taking to both understand their level of digital debt and assess their risk of digital bankruptcy, while creating a plan to restructure or get rid of that debt so that they’re operating more debt free in the future?
John Froelich: I think one of the first things we ask you to do, or we suggest people do, is really try to understand and look at and do an assessment. And that assessment is really beginning to look at and do an analysis of where you are. So, in the case of treasury, we take a look at asking a number of different questions around your treasury systems. Really understanding, what is your focus and position from the perspective of understanding your cash. Do you have the right banking relationships and the banking information you need. So sitting down and assessing where you are and then talking about where you’d like to be. We’ll do some design thinking exercises with companies to help them understand what’s your vision for the future, where would you like to be, how do you see your models evolving? And as a result of that, where do you see your processes evolving?
John Froelich: And then we’ll do a fit to standard workshop after we’ve kind of designed that. And that fit to standard workshop involves three basic processes. The first one would be to sit down and really get a sense of, you know, what are the standard processes and understanding the systems and the solutions that are available to you. Do a fit gap analysis in step two to understand where are you different today from where that is and what can you change from a process perspective and what needs to be changed digitally. Then do a complete evaluation of what your systems are in the work you would have to do to get there. And that’s kind of a Bramasol’s recommended approach to doing that
Jim Hunt: Excellent structure. So essentially find out where you are, understand where you want to be and then you have a chance to start mapping out the steps in order to get there. And Bramasol’s teams have been through all that with clients a number of times. So if somebody is worried about their digital debt, wants to understand it, quantify it and figure out a plan to do something about it. They know where to come.
John Froelich: Absolutely. We almost kind of, as you Jim said, we kind of almost give you your digital debt FICO score.
Jim Hunt: Excellent. And I know that people are going to be knocking down your door to find out their score. There’ll be resources on the website where if you are interested in learning more, you can connect with Bramasol and get started on a debt free future. Thanks very much.
John Froelich: Thank you Jim. I appreciate it. Have a great day and everybody enjoy.