I cannot tell you how many times I am asked to recruit a new CIO who can “save our failing SAP program.”
In each case, the CEO I am meeting with is beyond frustrated because the company has spent 18 months and tens, or even hundreds of millions of dollars on the program, and has yet to reap a dime of benefit.
Mike Molinini, President and CEO of Airgas, is not one of those CEOs.
As he stated in an earnings release in January 2014, “We are pleased to have achieved our long-standing target of reaching a run-rate of more than $75 million in SAP-enabled operating income benefits by the end of calendar year 2013. Delivering on that commitment made to shareholders more than three years ago is a remarkable achievement for which all Airgas associates are to be commended."
Real ROI from the SAP Implementation
Clearly, Bob Dougherty, who has been CIO of Airgas since 2001, and the Airgas team did something right. “Airgas had acquired more than 400 companies since we were founded in 1982, and we were running on a variety of legacy systems,” says Dougherty. “With our new SAP system, we’ve eliminated sales channel and distribution silos, and standardized our business processes for reliability and efficiency.”
I caught up with Dougherty, and he let me in on his approach.
Keys to the SAP Success at Airgas
Focus on the top line: Most CIOs, when making a case for a new ERP system, focus on operational savings. While there is nothing wrong with saving money, the top line matters, too. “If you can drive a one percent improvement to a $5B revenue line, that’s material,” says Dougherty. “You may be focused on operating cost improvements, but don’t forget about the opportunity to enhance revenues and gross margins.”
Before SAP, Airgas had a field-based sales force and a telesales operation that were selling different but complementary product lines. “There was potential for crossover, but the telesales system could not interface and map to the systems that carried customer and inventory information for our other products,” Dougherty says. “Once we were on SAP, our sales force had a single view of products and customers, so that every sales associate could sell our full product line. While standardizing our business processes was an important achievement, unlocking the full potential of our sales channels has been a big difference maker.”
Let the business drive: Dougherty and his team had spent years surveying associates about their view of IT systems. “In the reviews, our systems received low ratings, so we knew that the business wanted us to do something to improve. The case for change was being driven by the business, by the people who were concerned about limitations of our legacy systems,” he says.
Engage the business from the beginning: When it comes to business engagement, the “what” is a no-brainer. If you don’t engage the business throughout the implementation’s life cycle, your SAP program will fail. The “how” is a little more complicated.
“During the vendor evaluation process, we wanted to build momentum for the program, so we asked more than 50 people across the business to participate in scripted demos,” says Dougherty. “Once we selected SAP, we invited an even larger audience to participate in the demos.”
Once they moved into the design phase, Dougherty and his team involved more than 300 subject matter experts and conducted approximately 100 workshops over seven months. “In those workshops, we broke down our business processes and ran a fit-gap analysis to see how SAP could address our pain points and make our processes better,” says Dougherty. “The subject matter experts came from all levels and reaches of the company. They approved different elements of the blueprint; that was very important for buy-in.”
In addition to the 300 SMEs, Airgas had a core team of 75 people full-time on the project, 50 of whom were from the field, who each made a three-year commitment to the project.
How do you know when you have the right level of business engagement? “When you can get the business to commit 300 SMEs to participate in seven months of design workshops; that’s good skin in the game,” Dougherty says.
Let IT provide the structure: “Our IT organization is very good at project management,” says Dougherty. “So, our job was to create a very structured process for how we evaluated vendors and ran the implementation.” Airgas is a decentralized organization, so people travelled from across the country to participate in the blueprinting process. “Our business associates led the program with a motivation to get it right,” says Dougherty. “They provided the content, but they counted on us for the discipline and structure.”
Commit to training: Dougherty knows that a major reason the SAP program was a success was how they trained people on the system. “We took 55 volunteers from across the business and put them through Airgas SAP boot camp,” he says. “They each did more than 120 classroom hours of training and became our dedicated trainers. We took them out of their day jobs, and they went from business unit to business unit six weeks prior to each rollout to train those associates. They were also on the ground for two to four weeks during post-go-live to ensure the associates were using the system properly.”
Communicate from the right source: The CEO was public about his support for the SAP implementation, but his voice was not the only critical success factor, says Dougherty. “Sponsorship from the C-level executives is important,” Dougherty says, “In our organization, it was critical to engage and align our business-unit leadership teams, as well. We conducted in-person kick-off meetings and utilized ‘count-down’ web casts in advance of each go-live.”
About Bob Dougherty
Bob Dougherty is Senior Vice President and Chief Information Officer with Airgas, and joined the company in January 2001 as Chief Information Officer. Before coming to Airgas, he was Vice President and CIO for six years with Subaru of America, where he was for more than 17 years altogether. Prior to that, he was a senior accountant with Deloitte. Bob graduated from Villanova University with both a Bachelor’s degree in Accounting and an MBA. Additionally, Bob is a Certified Public Accountant.
About Airgas, Inc.
Airgas, Inc. is one of the nation’s leading suppliers of industrial, medical and specialty gases, and hardgoods, as well as welding equipment and related products. Airgas is a leading U.S. producer of atmospheric gases with 16 air separation plants, a leading producer of carbon dioxide, dry ice, and nitrous oxide, one of the largest U.S. suppliers of safety products, and a leading U.S. supplier of refrigerants, ammonia products, and process chemicals. The company – founded by Executive Chairman Peter McCausland in 1982 – employs more than 16,000 associates spread across approximately 1,100 locations. Airgas is headquartered in Radnor, PA.