1. G00294357
How British American Tobacco Achieved
Global Business Transformation Success
Enabled by SAP
Published: 3 March 2016
Analyst(s): Carol Hardcastle
This research highlights how British American Tobacco has successfully
concluded one of the largest ever SAP-enabled global transformation
projects. CIOs can leverage the lessons from this case study in their own
organizations' ERP-enabled transformation projects to ensure business
success.
Key Challenges
■ Too many ERP projects have a high risk of failure because they are viewed and executed as IT
projects and not as business projects.
■ Global ERP projects are inevitably complex and substantial undertakings that require a large
investment of time, effort and funding. Despite this outlay, there is often significant business
frustration and disappointment with the eventual business outcomes.
■ Although project scope and scale act as effort multipliers, this does not translate into a linear
relationship with project duration, yet numerous global ERP rollouts have extended durations
(even more than 10 years).
Recommendations
For CIOs undertaking ERP-enabled transformation projects:
■ Secure the right business sponsorship — from planning the journey (know where you are going
and why) through to arrival at your destination and beyond — throughout the ERP life cycle
(implementation and ongoing benefits realization).
■ Manage change within the organization and always treat ERP-enabled transformation projects
as business projects, where success is measured in business outcomes that are driven and
owned by business leaders.
■ Ensure delivery excellence and recognize that speed is your friend, not your enemy.
2. Table of Contents
Strategic Planning Assumption...............................................................................................................2
Introduction............................................................................................................................................2
Analysis..................................................................................................................................................3
Secure the Right Sponsorship — From Planning the Journey to the Arrival at Your Destination and
Beyond.............................................................................................................................................3
Manage Change Within the Organization and Always Treat ERP-Enabled Transformation Projects as
Business Projects.............................................................................................................................4
Ensure Delivery Excellence and Recognize That Speed Is Your Friend, Not Your Enemy................... 6
Gartner Recommended Reading............................................................................................................8
Strategic Planning Assumption
Through 2019, all companies that have business-driven ERP initiatives will see greater return on
investment than those driven by IT.
Introduction
Founded in 1902, British American Tobacco (BAT) is a global tobacco company that operates in
over 200 markets, selling more than 200 brands. Its annual turnover in 2014 was £42.5 billion.
BAT identifies that its most significant business challenge is to operate as one global organization.
Additionally, the company needs to be able to respond rapidly to constant changes in regulatory
requirements, increased competition from existing/new industry players, and ongoing changes in
consumer behavior.
BAT has a strong recent history of transformation, dating from 1999. At that point, it operated as a
multidomestic federated tobacco group, while also merging with Rothmans. In 2005, BAT
established a new global brands portfolio strategy. Then 2008 brought significant transformation in
many areas, including regional integration, "above market" centers of excellence, global
procurement, a regional supply chain organization, transactional shared services and global
standards. In 2011, "Programme TaO" was approved. The "T" in TaO represents a new target
operating model for BAT, driving 16 significant business changes (for example, a global supply
chain network and global process standardization). The "O" represents the move to One SAP — a
single global SAP solution for BAT. This Target Operating Model and One Sap (TaO) program would
build on the successful transformation that BAT had implemented since 1999 and would provide a
foundation for future transformation.
Programme TaO was an ambitious project from the outset. The plan was to develop a global
business operating model underpinned by a single global SAP instance (see Note 1), implement a
pilot in 2012 and then move into a rapid five-phase deployment, completing in the first quarter of
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3. 2016. Despite the magnitude of the scope (in SAP application terms: ECC, PLM, SRM, SCM, PI,
GRC and BPC, as well as other SAP and third-party tools) and the scale (over 180 markets in four
regions, plus the corporate center, 43 factories and about 25,000 users), this program has delivered
on time and on budget. Yet what is even more important is that BAT is already realizing the
committed and expected business outcomes — i.e., business benefits.
Although BAT's Programme TaO is based on a global SAP solution, the best practices adopted and
the lessons learned are applicable to any global transformation initiative, regardless of technology
solution.
Analysis
Secure the Right Sponsorship — From Planning the Journey to the Arrival at Your
Destination and Beyond
The implementation of a global operating model was "countercultural" for BAT since, historically, it
had operated in a federated manner, with significant independence at market level. So the only way
that the program could hope to succeed was with very strong sponsorship from the most senior
levels in the organization (at the corporate center, regional and end-market level). As Shon Kumar,
TaO Programme Director, told us: "It has to be active sponsorship where the sponsors are not just
part of governance but are regularly involved, drive the prioritization, free up resources and
understand the methodology and terminology. This level of sponsorship must be visible and felt
across the organization."
At inception, the sponsor was the chief operating officer, who took a very active role in getting the
program up and running and into the first stages of execution. After his retirement sponsorship was
not dropped but passed in the interim to the CFO, before being handed on to BAT's business
development director.
This type of transformation, enabled by SAP (or any similar technology/application), is often an
unfamiliar one to most business (and some IT) leaders. BAT's leaders were no different in this
respect. However, the company was undertaking this program after more than 10 years of
transformation activity, and hence was able to leverage its wider transformation experience as a
foundation for success. Education of business leaders was critical to ensure their active
participation, and to support the rigorous governance required. It also meant that TaO program
leadership, supported by the business sponsor, needed to be able to reassure key stakeholders
without ever hiding bad news.
The "destination" for BAT isn't the end of the program in 2016, but a continued drive for excellence.
As Programme TaO wraps up and the team disperses, TaO transitions to be an enabler of further
transformation. Functions will run their own transformation programs, and the TaO board morphs
into a portfolio board with responsibilities for overall coordination and governance above the
functional transformation. Due to the implementation organization approach — including global,
regional and local BAT resources — the knowledge transfer has taken place alongside the
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4. deployment, and TaO program resources transition into ongoing roles in the organization (business
and IT).
Critical success factors:
■ A strategic story explains the journey upfront. This type of transformation will be unlike anything
you have done before and education must be from board level downwards. At BAT, this
strategic story was conveyed throughout the organization using various approaches such as
executive "talk track," regular management cascade, and specific TaO communications.
■ Ensure CEO support and that this translates into senior leadership engagement. The program
board works for the project — it drives, supports and enables success by removing obstacles,
and ruthlessly focusing on outcomes.
■ Manage expectations of what a successful project "go live" looks like. Beware overconfidence,
and be realistic as problems are inevitable — what's critical is how (and how fast) you overcome
them.
Related Gartner research:
"Create a Winning Postmodern ERP Vision Through a Narrative Like Columbus' Journey"
"ERP Steering Committees Do Matter — Make Yours a Success Factor"
"How to Plan Your ERP Project's 'Go Live', 'Hypercare' and Stabilization"
"How to Successfully Navigate Politics in ERP Initiatives"
Manage Change Within the Organization and Always Treat ERP-Enabled
Transformation Projects as Business Projects
From its initiation this has been and continues to be a transformation program, rooted in the need
for BAT to truly operate as a global enterprise. TaO had to be seen as a business program with
business objectives and outcomes — communicating this early and constantly was key to landing
the message.
Organizational change was "front and center," demonstrated by the commitment of resource, time
and focus to preparing for, implementing and supporting the business change. BAT appointed a
business leader, Toby Granwal, as full-time Global Head of Business Readiness to ensure this
change focus throughout the TaO program. Granwal led a team that coordinated all business
readiness activities. This commitment to business readiness (i.e., organizational change) physically
translated into approximately 1,000 business leaders aligned to organizational change, over 150
organizational change resources in the end markets, and the Malaysia pilot alone had 300 "business
readiness" resources assigned.
BAT recognized that it would only achieve its outcome — to operate effectively as a global
enterprise — by taking this approach. Shon Kumar told us: "The way to get general managers and
their reports to buy in is for them to understand the business impact of the program, both the
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5. positives and negatives. Once they understand this they will dedicate time and become involved,
which gives the organization the license to put the time and effort in to making it a success."
Sixteen fundamental business changes were the aim of the target operating model, categorized in
four areas:
1. Foundation: IT infrastructure connecting the business end to end, reliable integrated data and
information, global process standardization, and simplified end-market organization.
2. Enabling: More efficient and value-adding shared services, a single global treasury, and more
focused/higher value centers of expertise.
3. Integration: Streamlined/faster product life cycle management, integrated business planning/
performance management, and a smarter, more responsive route to the consumer.
4. Direction: Extended brand portfolio, standardized product platforms, prioritized market insight
and investment, higher impact innovation, and a global supply chain network.
In terms of specific measurable outcomes, the business benefits were identified in four major areas:
direct materials, logistics costs, organizational efficiencies and finance costs. They arose from both
profit and loss and balance sheet improvements, and addressed the three types of benefits that
Gartner identifies: strategic, tangible and intangible.
Examples of the benefits already achieved include:
■ Reduced inventory through global spares management, reduced days sales outstanding (DSO),
and improved compliance with payables
■ Improved cash forecasting, extension of shared services resulting in organizational efficiencies,
centralized planning reducing logistics costs, and global recipe management improving direct
material spend
■ Increased speed to market, better insights and cost avoidance
Unlike the majority of organizations undertaking an ERP project, BAT didn't build a business case
and then "put it on the shelf" to be revisited postimplementation. It built a holistic benefits
realization approach that ensured strong leadership, specifically identified accountability for
business outcomes, and adopted a regular rhythm of measurement, reporting and oversight — all
bound together with excellent governance. However, Kumar acknowledged that, ultimately, faith
was required, recognizing that benefits would be realized through the TaO program approach.
BAT is now on track to achieve its business case and to exceed it, with an expectation of continued
improvement in its operating margin. As an example of global treasury, BAT has already realized
30% higher benefits than in the approved business case.
1
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6. Critical success factors:
■ Transformation must be owned by the business — it is not an IT/SAP project. Technology isn't
the issue — people and the approach to program management are. Managing the
transformation, program risk and resistance to change is what matters.
■ You need the best people from the organization, dedicated full time to the program, and these
people need to connect into the superusers. Watch out for signs of stress and overload; the real
heroes are those who are prepared to ask for help and to leverage the expertise of others.
■ Benefits realization must be explicitly linked to business outcomes and KPIs that matter to the
organization. Benefits management starts before the program is off the ground, when
benchmarks can provide ambition and focus.
Related Gartner research:
"Organizational Change Management Is Critical for ERP-Enabled Transformation"
"ERP Benefits Realization — Chasing the 'Pot of Gold'"
"CIOs Must Mitigate Enterprise Maturity Risk Factors for Postmodern ERP Success"
"Toolkit: ERP Project Postimplementation Review"
"How to Develop an Effective ERP Business Case"
"Toolkit: Business Case Model for ERP"
Ensure Delivery Excellence and Recognize That Speed Is Your Friend, Not Your
Enemy
Always looking forward, moving at speed and hitting the big milestones built momentum and
confidence in Programme TaO. To maintain this forward momentum the program had a small
stabilization team and quality IT support to deal with any outstanding issues from each deployment.
The program's main responsibility has been to land the organizational change and the new systems,
and then move on. However, this speed and focus could not have been achieved without stopping
and replanning other projects across the organization, realigning marketing activity and other
restructuring. Without doing so, conflict for resources and time would have made locking down
design and change difficult, leading to scope changes and overburdened resources in markets and
in IT. Programme TaO's governance mechanism regulated control for other (non-TaO) activity.
Overall, the key to speed and excellence was an industrialized deployment approach based on six
unified characteristics:
1. A robust and extensive global template, largely designed upfront (of rollout). The template
consisted of many types of artefacts, not just design and configuration — anything that could/
should be "created once and used many times."
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7. 2. Knowledge transfer via a three-tier model (global, regional, market) that was based on a critical
mass of capability at global and regional level, supported by a superuser network and
structured knowledge transfer. Superusers (acting as change agents) have been instrumental in
driving adoption and continue to play a role in ensuring business ownership and sustaining the
integrity of the solution.
3. A resourcing approach that would only take the best people from BAT and from its system
integrator (SI). BAT also leveraged its high-quality and capable IT people both with SAP
expertise and extensive project management experience. BAT worked with a single SI —
tenders were issued for separate phases but ultimately BAT remained with the same
implementation partner throughout. This was scaled effectively by ensuring the enforcement
and embedding of a global implementation methodology, processes and ways of working,
augmented by local knowledge.
4. Accelerators for design, including colocation, design hit squads, prototyping, demonstrations
and a focus on "hot spots." BAT recognized that, when it came to face-to-face and colocation,
there could never be too much.
5. Accelerators for build and test, including ruthless prioritization and control of scope, pull
forward of blueprint activities to allow build to start before full blueprint completion, and a
scalable offshore build "factory."
6. A strong governance framework that operated top to bottom structurally (global, regional,
market) and organizationally (the global program board comprised BAT management board
members, general managers and regional leadership teams). This framework also included the
SI.
A significant point to note in the TaO program was the sheer number of markets being deployed in
an individual "wave" within a deployment group. Each new deployment was implemented into an
existing live SAP environment supporting other markets, since BAT adopted a single global instance
approach. A strong focus on regression testing was essential and backed up by a swift but highly
disciplined stabilization period.
Critical success factors:
■ Speed is your friend — get it done fast since the longer the project duration, the more risky it is.
BAT attributes its on-time delivery to stripping out all contingency and to "delay the decision to
delay" until the last possible moment, thereby ensuring focus on hitting the timeline.
■ Exercise strong management of external partners/vendors in the program, both commercially
and on a delivery execution basis. There must be a healthy balance between what's in the
contract and getting it done. Never outsource management control.
■ Manage the scope closely but acknowledge that late change requests are a fact of life. The
quality of the design authority is key to achieving scope control.
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8. ■ Data is always on the critical path and if it's wrong the consequences are very significant. Data
problems percolate and proliferate so the data must be right. It's never too early to start data
readiness activities.
Related Gartner research:
"ERP Projects: Twenty Ways to Reduce Cost, Time and Effort"
"How to Scope a Postmodern ERP Project"
"How to Partner With ERP Implementation Service Providers for Program Success"
"Best Practices Mitigate Data Migration Risks and Challenges"
"How to Plan Your ERP Project's 'Go Live', 'Hypercare' and Stabilization"
"Best Practices for Accelerating ERP Adoption"
Gartner Recommended Reading
Some documents may not be available as part of your current Gartner subscription.
"Organizational Change Management Is Critical for ERP-Enabled Transformation"
"ERP Benefits Realization — Chasing the 'Pot of Gold'"
"ERP Projects: Twenty Ways to Reduce Cost, Time and Effort"
"How to Implement Effective ERP Project Governance"
"How to Plan Your ERP Project's 'Go Live', 'Hypercare' and Stabilization"
"ERP Steering Committees Do Matter — Make Yours a Success Factor"
Evidence
1 T. Marroco, "Investor Day 2015: Operating Model, SAP and Shared Services," British American
Tobacco, September 2015.
British American Tobacco (BAT)
BAT has received SAP's 2015 Business Transformation Award of Distinction, which recognizes
companies and their transformation leaders that have successfully launched transformation
programs and achieved measurable results.
Gartner conducted numerous interactions with the Programme TaO team and BAT executive
leadership during the five years from program inception to completion.
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9. BAT gave a presentation to Gartner for Enterprise IT Leaders EMEA Peer Forum, held 12 through 14
October 2015 in Copenhagen, Denmark.
Gartner would like to acknowledge the TaO Programme Director, Shon Kumar, and the TaO Global
Head of Business Readiness, Toby Granwal, for contributing their time to share information that has
enabled the development of this case study.
Note 1 Single Global Instance Approach
BAT decided on a "single global instance" strategy to support its objective of "build once, deploy
many" after considerable evaluation and assessment of cost and operational drivers, as well as
risks and impact. See "Critical SAP Operations Issues Within Any Single Global Instance Strategy."
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