Change Management - Free Essay Example

The SAP organization was used as the case-study company in this research. The literature review addresses the topics of change management, the McKinsey 7S model, and Kotter’s eight-step model. The literature and theories of various scholars are cited in making arguments about change management strategies in SAP. The seven elements of McKinsey’s model and the eight steps of Kotter’s model are broadly discussed.
The results and discussion of change management in SAP are guided by the responses to the interview questions. Additionally, the results inform a discussion of McKinsey’s 7S model, Kotter’s eight-step model, and the impact of ongoing change on people of SAP.

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Key Words: Change management, impacts of ongoing change, SAP organization, Kotter’s eight-step model, McKinsey’s 7S model, and change management strategies

IntroductionThe corporate environment today is fast-moving and constantly changing (Cascio and Montealegre, 2016). Change is vital for organisations; organisations unable to change reduce their competitive edge and fail to meet the needs of their clients. To succeed in the face of change and competition, an organisation must know how to direct and manage change.

The focal point for the establishment of most organisations, both for-profit and non-profit, is primarily the accrual and realisation of excellent operational and functional aptitude as well as the maximisation of productivity (Victor and Franckeiss, 2002). However, attaining such desirable capabilities demands the initiation of appropriate strategies, such as pertinent change management approaches (Stouten, Rousseau and De Cremer, 2018). Change management denotes the use of processes and tools to guide people from a current state to a future state with the prime aim of achieving the anticipated change outcomes (Sujova and Rajnoha, 2012).

The goal of this thesis is to critically evaluate how the software company SAP combines the McKinsey 7S framework and the Kotter eight-step model change management strategies and how SAP staff perceive organisational changes. The scope of this review examines both internal and external organisational elements affecting the organisation.

Statement of the ProblemChange management has long been regarded as a critical factor that can influence the success or failure of an organisation. However, despite the high level attention paid to change management, organisations – including SAP – still face challenges managing organisational change. Several types of research have been carried out focused on change management practices, but few studies have paid attention to the problems faced by organisations implementing strategic changes. Given such inadequacies, the focus of this study is to fill existing gaps by researching the problems experienced during the process of strategic change within organisations, with a particular focus on SAP’s global Business One (B1) and Business by Design (ByD) business units.

The aim, Motivation, and Research Questions

The primary purpose of this research is to study change management and analyse the way people at SAP are affected by ongoing change. An additional goal is to evaluate the McKinsey 7S framework and the Kotter eight-step model change management strategies and investigate how these models and methods are applied in a real organisational transformation.

The writer has taken part in various change processes within SAP, which is the company used for the case study, and the writer's senior management position within SAP is particularly suited to driving this study and analysing the problems arising during the organisation's transformation. The writer's subjectivity or bias will be addressed by including senior management staff from other business units in the interview process to get different views of organisational changes. The author should write his report inclusively and objectively in order to gain respect and trust from readers and also get rid of alienating the readers (Lazarus, A.A., 1993).

Finally, the research aims to formulate, through an intensive analysis of existing change management models, and specifically the McKinsey 7S and Kotter eight-step models, recommendations from a people perspective on how to manage future change initiatives for IT industry companies of SAP’s size.

The following three research questions are formulated to guide this research:

• Why are change management models used in an organization?
• How should the McKinsey 7S and Kotter's eight-step change models be used?
• How did the staff perceive organizational changes?

The Case Company

The case company, SAP, is a global leader in application software for enterprise and had a revenue of USD 31 billion in 2019 (SAP, 2020). The company has 102,000 employees in 132 countries serving more than 475,000 customers. SAP focuses on the development, sales, and implementation of enterprise software needed to run end-to-end business operations. Notably, approximately 76% of global transaction revenues are processed through SAP systems. SAP/R3 is the enterprise resource planning (ERP) system that powered SAP to its leadership position during the nineties.

SAP is undeniably a frontrunner across the enterprise application software market since the multinational is well equipped to assist a range of companies, both large and small, across a vast industrial scope (Houghton and Kerr, 2006).

SAP's Internet of Things (IoT), machine learning, and cutting-edge analytics technologies help redirect clients' businesses toward becoming intelligent enterprises. The company's end-to-end collection of services and applications enables customers to realize positive change, adapt quickly, and operate successfully. SAP has a global base of clients, employees, thought leaders, and partners, and its promise has always been to pursue innovation to help its wide array of customers run at their best. The company describes itself as engineering solutions to fuel innovation, spread opportunities beyond territorial borders and cultures, and promote equality (SAP, 2020).

SAP is a global leader in an application for enterprises, as per recent analyst reports, and its software is employed by more than 200 million cloud users. Despite the company's positive business trajectory, however, if SAP is to become more competitive, the management of strategic change in the organization is not an option but a fundamental prerequisite. SAP has applied Kotter's eight-step model and the McKinsey 7S model within its Business One and Business by Design business units to improve the company's competitive position.

In 2012, SAP started its journey to cloud enterprise software, making several multibillion-dollar acquisitions of organizations that sell cloud-based software. These moves were seen by experts as an endeavor by SAP to challenge its main rival, Oracle.

Concur Technologies, a supplier of cloud-based expense-management software, was acquired by SAP in 2014 for $8.3 billion, the costliest acquisition to date for SAP. Credit Suisse considered the acquisition of Concur a "forceful" move by SAP to gain market share in the enterprise cloud software market. The same year, SAP further developed its cloud strategy by partnering with IBM to offer cloud-based services to enterprises. The following year, the company signed a strategic partnership with Hewlett Packard Enterprise to provide its enterprise cloud software and SAP high-performance analytic appliance (HANA; Gellaw, 2016) through the Hewlett Packard Enterprise secured data center.

SAP exceeded its revenue and income projections because of the development of its cloud business and the rollout of SAP HANA. The organisation declared plans in 2016 to invest vigorously in innovation, identifying IoT automation capabilities as a critical component and a growth engine (Mahmud, 2017).

In 2018, SAP launched SAP Leonardo, which is a new way to define intelligent enterprise by combining the IoT with artificial intelligence, blockchain, machine learning, and SAP's continuous database. The primary aspiration of SAP Leonardo is to facilitate the digitalisation of the economy.

What Is SAP Business One (B1)?SAP B1 is an ERP product dedicated to the small and medium-sized business. It brought in revenue of €210 million in 2019 and is deployed to 75,000 customers. SAP B1 provides an on-premises integrated ERP suite solution (Polancos, 2018) targeted to small and medium enterprises (SMEs) with a turnover of less than €200 million.

What Is SAP Business by Design (ByD)?SAP ByD is an on-demand ERP product dedicated to the SME. It brought in revenue of €50 million in 2019 and is deployed to 15,000 customers. This on-demand ERP solution is hosted by the SAP cloud centre and is targeted at SMEs with a turnover of up to €200 million or fewer than 500 users (Mathur et al., 2013).

What Are the Challenges Faced by SAP B1 and ByD Business Units?SAP sells mainly to large enterprises, with more than 76% of the global GDP's transactions passing through its systems. This leadership position offers limited long-term growth because demand is low due to the saturation of this market segment.

SAP must develop markets in new sectors to generate new revenue streams, and according to Ndiaye et al. (2018), the SME market offers a significant opportunity, because it represents more than 40% of the GDP in developing and emerging economies.

SAP already addresses the SME, but success with this sector is limited because SAP’s large-enterprise-focused culture prevents determination of a successful strategy for this sector. An example of SAP’s organisational culture misalignment is its SME definition. According to OECD (2019), international criteria define SMEs as enterprises employing fewer than 250 persons or with revenue below €50 million. SAP defines the same segment as enterprises with revenue below €2 billion.

The implementation of the McKinsey 7S framework and the Kotter eight-step model change management strategies improves SAP's capacity to meet customers' needs in the small and medium-sized business segment. The organisational changes give more autonomy to the SAP B1 and ByD business units to establish a new strategy for becoming a leader in the SME segment by leveraging the company’s financial power and quality reputation and the wide awareness of the SAP brand. The key challenge being addressed is the impact of new changes to people of SAP, how can management of SAP be made effective through change implementation. McKinsey’s 7S model and Kotter’s eight-step framework has been used in the change process since they are the most effective management strategies and the majority of the advanced organisation have adopted.

Dissertation StructureFollowing this introduction, chapter two presents a literature review on the topics of change management, the McKinsey 7S model, and the Kotter eight-step model. It examines the academic literature on change models, addressing recent theories as well as giving an overview of the most recent critiques and benefits of these two models. Chapter three introduces the methodology for the case study conducted for this thesis, including details on the interviews and staff observations used to collect evidence. Chapters four, five, and six present and discuss the findings and results and provide recommendations and the conclusions of this research paper.