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"Find out why industry leaders rely on innovative
business models – and not new
products and services – as the competitive assets that help them expand their industry influence and improve
their market position."
Source : SAP
Energy Innovator Implements a New Business Model with mySAP
Business Model is also known as :
Business Model Analysis,
Business Model Change,
Business Model Chart,
Business Model Defined,
Business Model Description,
Business Model Design,
Business Model Development,
Business Model Diagram,
Business Model Examples,
Business Model Innovation,
Business Model Patent,
Business Model Project,
Business Model Review,
Business Model Sample,
Business Model Strategy,
Business Model Structure,
Business Model Template,
Business Model Tool,
Business Model Tutorial,
Business Model Types,
Business Modeling,
Advertising Business Model,
Alternative Business Model,
Bad Business Model,
Best Business Model,
Better Place Business Model,
Blog Business Model,
Broken Business Model,
Business Strategy Models,
Changing Business Model,
Community Business Model,
Company Business Model,
Computer Business Model,
Cost Business Model,
Current Business Model,
Define Business Model,
Definition Business Model.
“SAP has helped us make a cultural mind shift
from being focused on features and patents to
being quality and customer focused.”
Luke Pfaffinger, Director of Information Technology, Capstone Turbine
By 2003, Capstone Turbine Corporation, a major innovator in
energy-efficient power sources (microturbines), wanted to change
its engineering-driven strategy. New management took charge
that year and changed the company’s focus and culture. Rather
than continue to strive for constant technological innovation,
they moved to stabilize Capstone’s products and focus squarely on
the customer and selected niche markets.
The new strategy demanded a shift from sales through distributors
to a mix of direct sales and distributors specializing in the
target markets. Research and development’s primary charter
became customer requirements and the development of modular
configurations for specific markets.
The new leaders inherited two solid foundations on which to
build. The first was Capstone’s technology, which IT director Luke
Pfaffinger says is “second to none.” The company lays claim to
being “the first to offer a commercially available power source
using microturbine technology.” Capstone’s technology can use a
variety of fuels and combines patented air bearing technology,
advanced combustion technology, and sophisticated power
electronics to form efficient, high-availability electricity and heat
production systems.
This is critical, says Pfaffinger, because “the old grid infrastructure
is aging. Our product, based on a decentralized model of power
supply, is a means of moving away from our reliance on the grid
and its enormous cost.”
SAP® SOLUTIONS ARE PART OF THE FOUNDATION
The second foundation was the IT infrastructure. To help them
stay operationally lean as it tested the marketplace and evolved its
products, the Chatsworth, California–based company decided to
deploy integrated processes and
systems from the outset. In 1998, it
rolled out not only its first microturbine,
but also SAP® R/3® software
(which is available today in the
mySAP™ ERP solution).
“I’d say we are cutting 30% to 40%
off both the project time and cost by
leveraging SAP Best Practices.”
Luke Pfaffinger, Director of Information Technology,
Capstone Turbine
What followed was a stream of
application implementations and
enhancements. In 2003, there was enormous pressure to move
quickly to support the new business model and management
requirements. Pfaffinger notes that the new team emphasizes “a
strict management approach, including strategic planning and
driving to that plan. This requires setting goals and measuring
success, which in turn demands a lot of analytics.” As a result, he
says, “We made the decision to upgrade our licenses to mySAP
Business Suite and the SAP NetWeaver platform and start laying
out a very aggressive timeline to implement functionality.”
The SAP NetWeaver™ components SAP Business Intelligence
(SAP BI) and SAP Enterprise Portal (SAP EP) have already begun
to provide many of Capstone’s employees with access to all
applications, including the data warehousing capability of SAP BI.
Ultimately, Capstone will use SAP Exchange Infrastructure
(SAP XI) for the development and maintenance of interfaces
with third-party logistics providers.
To support direct sales and improve service, Capstone has chosen
key new solutions including mySAP Customer Relationship
Management (mySAP CRM) , and the upcoming installation of
mySAP Supply Chain Management (mySAP SCM), including its
SAP Advanced Planning & Optimization (SAP APO) component.
CHALLENGE: GETTING CLOSER TO CUSTOMERS
When Capstone entered the market, it faced major direct competitors
as well as suppliers of such alternative technologies as
reciprocating engines and the
nascent fuel cells. Looking to make
its mark quickly with its innovations,
Capstone and its distributors
struck out aggressively, ultimately
selling almost 3,000 30- and 60-
kilowatt Capstone microturbines.
Under a build-to-order model,
the number of configurations for
the markets and applications grew, and over time became more
challenging to manage.
A step away from their customers, Capstone found that this
business model created issues in sales, service, and the supply
chain. Says Pfaffinger, “The sales process was outside the system
until you got to the final purchase order phase. At that point you
might find that internal folks or distributors were working on
selling products or new functionality not yet commercially
available, or they were working with a part number that is no
longer valid.”
Pfaffinger adds, “In order to ensure the ability to meet customer
demands, we needed to move in the direction of a more integrated
process and create happy customers who bring us repeat
business.”
APPLYING A NEW BUSINESS MODEL
Capstone’s new management moved on all fronts. The niche
focus now simplifies production and assembly, and, by moving
toward fewer and more modular configurations, Capstone is
reducing service complexity. To speed service, the company is
working to establish third-party regional distribution centers
correlated to the customer base.
The information systems support for Capstone’s new model and
business processes is being provided by SAP solutions. To connect
the end-to-end sales and service processes, Capstone implemented
mySAP CRM. “With direct sales,” says Pfaffinger, “we have to track
our effectiveness in developing sales throughout the life cycle.
We have to know how effective we are in planning and developing
prospects.”
mySAP SCM is also important for direct sales and is “part of the
push to reduce the internal cost of products and increase profit
margins. We need to remove any waste or overhead within the
whole supply chain process, and we want to be able to respond
more quickly to fluctuating demand,” adds Pfaffinger.
To provide management with a total picture of service performance
and the related costs of warranties and resolving claims,
Capstone is using SAP EP and SAP BI tools to bring together information
from data repositories in mySAP CRM and mySAP ERP.
The SAP NetWeaver components will also be vital to the planning
and execution functions in mySAP SCM.
“As we bring up new applications, we are providing access to them
within the portal environment,” says Pfaffinger. “Within a year,
SAP Enterprise Portal will be the common user interface for every
SAP user,” adds Pfaffinger. “What’s critical is that the portal hides
the complexity of the environment. Users don’t need to know if
they are connected to mySAP ERP or mySAP CRM.”
IMPLEMENTING WITH SAP BEST PRACTICES
So far in 2004, according to Pfaffinger, Capstone has implemented
SAP BI including its data warehousing capabilities, SAP EP, and
mySAP CRM. “We only have six IT people, but we do as much of
the implementation as we can ourselves – with the help of SAP
Best Practices guides,” says Pfaffinger. “We need functional-area
SAP experts to a degree, but ever since 1998, starting with the best
practices predecessor, the preconfigured client, we have been
leveraging the SAP Best Practices guides to keep our costs low and
speed the cycle time for our projects. That has contributed to our
getting them approved. I’d say we are cutting 30% to 40% off both
the project time and cost by leveraging SAP Best Practices.”
The SAP BI data warehousing and SAP EP projects were completed
within three months, requiring 40 and 21 staff days, respectively.
Pfaffinger adds, “In addition to those projects, we plan to use
the mySAP SCM and SAP APO guides. The configuration guides
enable us to set up processes and functionality. Even if you are just
exploring functionality, it’s a way to get something working and
show your end users, which cuts the time and investment
in a full-blown project.”
BENEFITS, EXPECTATIONS, AND NEXT STEPS
While it is too early to measure performance improvements,
Pfaffinger notes that “SAP has helped us make a cultural mind
shift from being focused on features and patents to being quality
and customer focused.” SAP EP and SAP BI enable this in many
ways. There is the general employee accessibility to reporting and
analytic tools and data from all applications. This results in the
breakdown of barriers to departmental data and the removal of
the “key holder” dynamic.
Analytics are now available for functions of mySAP ERP and
mySAP CRM and will soon be available for mySAP ERP Human
Capital Management, mySAP SCM, and mySAP Product Lifecycle
Management. Executive cockpits for sales, financials, inventory,
and product are in operation, with SAP Employee Self-Service and
SAP Manager Self-Service implementations to come. Capstone
is also planning direct portals for key partners, to provide, for
example, a product configuration tool for sales and customers.
All these capabilities will enable timely measurement of and
action on all key activities, from business growth to customer
retention to manufacturing strategy. Says Pfaffinger, “Through
leads analysis, we are already getting better visibility into customer
inquiries and whether we have appropriate resources to deal with
them. On the opportunity side, having tied mySAP CRM back into
mySAP ERP, we are making sure that we are tracking sales against
viable products.”
Capstone’s integrated SAP solutions environment is already
enabling the company to maintain regulatory compliance with
the Sarbanes-Oxley Act and Securities and Exchange Commission
(SEC) requirements for financial reporting. This is enhanced by
giving executives timely visibility through the portal into financial
data and critical operational events. “We are now beginning to see
the native controls inherent in mySAP Business Suite,” he says.
SAP EP and SAP BI are indeed having a personal impact on executives
and managers. “They can, through the cockpit, get a quick
sense of what’s going on. And if they see something that pops out
at them, they can drill down to understand what’s happening and
take action,” says Pfaffinger.
“For example, during a training session where we ran an accountsreceivable
report, people from different functions were drilling
down. For example, a sales manager was quoting an order and
found the account had a large balance. It’s all about giving
people access to information they need but typically don’t see.”
SAP EP is being leveraged for training as well. “In a small, growing
business, people are constantly changing roles and we have to
keep them up-to-date and effective, so we are gradually making
learning aids accessible through the portal.”
SAP XI, which will be used to interface Capstone’s systems with
non-SAP external systems, will play a critical role in supply chain
management. SAP XI will link the company’s global distribution
center with a logistics provider and – under a new suppliermanaged
inventory project – link mySAP SCM with supplier
systems.
Capstone is using SAP – its products and its services – to help
shorten the distance between its employees and its customers,
suppliers, distributors, and other stakeholders. In the midst of
dramatic change, they are, as Pfaffinger says, “keeping the costs
low and the cycle times fast.”
AT A GLANCE
Company Name
Capstone Turbine Corp.B
United States
www.capstoneturbine.com
Industry
Industrial machinery and
components
Key Challenges
- Implement management,business-model, and strategy changes
- Improve product reliability and modularize configurations
- Provide visibility and analytics for all functions
Implementation Partners
- SAP Labs (small and midsize businesses)
- Bramasol, Inc.
Solution and Services
- SAP NetWeaver™, including
SAP® Enterprise Portal (SAP EP),
SAP Business Intelligence
(SAP BI), and SAP Exchange
Infrastructure (SAP XI) components
- mySAP™ Business Suite, including
mySAP Customer Relationship
Management (mySAP CRM)
and mySAP Supply Chain
Management (mySAP SCM)
- SAP Best Practices
- SAP Consulting
Existing Environment
SAP R/3® (now available in
mySAP ERP)
Implementation Highlights
- With SAP Best Practices,
project time and cost reduced
30% to 40%
- SAP BI and SAP EP each
implemented within three months
- SAP EP and SAP BI quickly
enabled analytics in mySAP CRM
Key Benefits
- Performance measures for key
business activities
- Sales improvement through leads
and opportunity analysis
- Facilitated regulatory compliance
- Supplier-managed inventory,
logistics providers
Hardware
Compaq Proliant
Operating System
Microsoft