Starting from Scratch: Build a New Business Case

Starting from Scratch: Build a New Business Case
www.celonis.com CELOSPHERE 2019 BUILDING A NEW BUSINESS CASE FROM SCRATCH Sam Attias Solution Engineer, Celonis Bertram Lutz Head of Solution Engineering UKI 03/04/2019
Agenda 1. Motivation • Order-to-cash examples • Why build a business case? 2. Key Value Drivers • Efficiency • Speed • Direct Cash Effects • Cost of Diagnosis 3. How to present a business case 4. Summary
$237 bn Because of the failure to find and eliminate inefficiencies in their processes, Fortune 200 companies are losing $237 bn a year. the price of inefficiency
Value Proof from existing customers: Summary Target Area Transformation Metric Business Impact Order-to-Cash On-time-delivery € 1,234,120 p.a. Reduced cycle times € 820,000 p.a. Perfect orders € 1,124,271 p.a. Late production orders € 72,347 p.a. Reduced delivery times € 1,030,000 p.a. Internal cycle time benchmarking Strategic targeting of sales organizations with above- average cycle times. 3,7 Mio € p.a. Process Harmonization Consolidation of process variants covering 1,300,000 cases 1,3 Mio € p.a. OnTime Delivery 62 % 87 % Days from Sales Order toGoods Issue 25 22.5 Perfect Orders 21 % 40 % Late production orders 23 % 18 % Delivery time days 6.5 5
Business Case Value Give robustness to an investment proposal Prioritize improvement initiatives Give a sense of magnitude/urgency Highlight time-to-value Why build a Business Case?
Business case areas Putting a number to business transformation Efficiency SpeedDirect Cash Effect Cost of diagnosis
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we measure efficiency? • Eliminate Rework • Targeted Automation • Reduce Manual Changes • Process Specific • Efficient Order Bundling • Reduce Delivery Blocks
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we measure efficiency? No. rework activities × Avg. effort (min) × FTE Cost (€/min) × realization potential. Calculation Operational metrics Process Experts Define and identify unwanted rework activities within the process. Highlight high-volume activities to target.
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we measure speed? • Increase Throughput time • Cut-down Late payments • Increase No-touch orders • Increase First-time-right orders
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we measure speed? Calculation Affected Vol. (€) × ROIC (%) × Reduction of Cycle Times (d) Operational metrics Process Experts & Use Celonis to calculate cash volume subject to delay due to process bottlenecks and inefficiencies.
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we determine cost of diagnosis? Reduced Reporting effortCut-down Consulting spend Reduce the number of narrow- focused reports that need to be produced to diagnose process problems. Reduce reliance on both external and internal consulting services. Focus on delivery rather than diagnosis. Tool Synergy Reporting & Dashboards Benchmarking Effort Data Provisioning
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we calculate direct cash effects? • Reduce Order Cancellations • Eliminate Material Loss • Identify Missed Invoices • Evaluate Mis-matched deliveries
Business Case Value Drivers Efficiency Cost of diagnosis Direct Cash EffectSpeed How do we calculate direct cash effects? Calculation Lost revenue × Gross profit margin × realization potential Operational metrics Process Experts Use Celonis to identify direct lost revenue due to factors including order cancellations, lost inventory, and missed invoicing.
Business case areas Putting a number to business transformation Efficiency SpeedDirect Cash Effect Cost of diagnosis
Business Case Value Drivers How to present a business case? • Structure impact areas • Give a ranged estimate • Identify priorities • Highlight effect on P&L • Specify ramp-up (present long-term business case)
ORDER-TO-CASH POTENTIAL QUANTITATIVE BUSINESS IMPACT Type Topic Conservative Estimate Description Speed Throughput Time ##,### € Fasten internal throughput time to free up cashflow and avoid unnecessary interest loss Late Payments ##,### € Reduce working capital expenditure by reducing late payments No touch orders ##,### € Increase processing speed through orders without a single human interaction Quality & Fulfillment ##,### € Rejected Items a) ##,### € Find your major rejection reasons and realize additional revenue Efficiency Manual Changes ##,### €Reduce manual change activities associated to impact process costs Delivery blocks ##,### €Reduce manual effort associated with delivery blocks Automation rates ##,### €Identify and realize automation potentials in the process Electronic ordering ##,### €Realize untapped EDI potentials Annual Financial Impact ###,### € Empiric Values* 20 % (ROI Realized) 10 % (Reduction potential) 30 % (Opti. potential) 30 % (Reduction potential) 15 % (Reduction potential) 10 % (Reduction potential) 20 % (Improvement potential) +25 % (Target ratio) Rejected Items b) Reduce manual effort that resulted in rejected orders First Time Right Orders Increased speed through first time right orders Order Bundling Bundle frequent orders of the same customer to save internal resources 20 % (Reduction potential) ##,### € ##,### € 5 % (Reduction potential) 30 % (Reduction potential) Rework Streamline your process by eliminating rework activities that add no value 30 % (Reduction potential) ##,### € *Empiric values based on actual realization potential of Celonis customers within one year ###,### € ###,### € ###,### € ###,### € ###,### € ###,### € ###,### € ###,### € ###,### € #,###,### € ###,### € ###,### € ###,### € Optimistic Estimate
Business Case Value Drivers Highlight potential Lo w Lo w High High ValuePotential Feasibility Quick wins Avoid Nice to have Long-term goals Value Potential • Cost Savings • Efficiencies • Strategic Benefits • Key Differentiators • Compliance Feasibility • Low Technology / Business Risk • Organizational Readiness • Low Transition Cost
3-year Impact Cumulated impact, 3 years 50% 75% 100% Degree of ramp-up in % Business Impact for Order to Cash (p. a.) €X.XXM Assumptions Always state assumptions. Top three priorities 1. Priority 1 2. Priority 2 3. Priority 3 BUSINESS CASE – ORDER-TO-CASH Year 1 Impact Year 2 Impact Year 3 Impact 2019 2020 2021
SUMMARY Efficiency Cost of diagnosis Direct Cash Effect Speed Operational Metrics + + Process Experts € #,###,### Cumulated impact, 3 years 50% 75% 100% Degree of ramp-up in % Calculate Methodology Present

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