SAP AG In 2006 Driving Corporate Transformation

By Robert Burgelman, Tom Federico
2006 | Case No. SM153
In April 2006, SAP AG CEO Henning Kagermann faces several critical decisions. Over the past two years, Kagermann has put in place a bold growth strategy for the company – one that aims to transform the business software applications giant into a pioneer in the emerging Service Oriented Architecture (SOA) technology field, a leader in the small-to-midsize enterprise market segment, and a relevant solution provider for a broader population of business software users. Concurrent with the formulation of this strategy, Kagermann has instituted many internal changes and initiatives designed to make SAP into a more agile, efficient, and globally aligned organization. In several cases, these changes to organizational design, leadership, management processes, culture, and values directly challenge what many consider to be the foundational principles of this highly traditional, 30+ year old German company. Kagermann’s plan and changes are not met with universal enthusiasm by employees or customers. Approximately one year after his public announcement of SAP’s new growth strategy, Kagermann must now assess the situation and decide how to proceed. He has made repeated statements to the market that by 2010 SAP would be a company transformed, and even publicized specific quantitative goals that would substantiate such a transformation. However, in the meantime, a new development has occurred. Resurgent demand for SAP’s legacy software applications is driving record revenues and profits and pushing SAP’s stock price to new heights. As a result, Kagermann must answer several key questions. How can he determine whether the current pace of execution regarding the new growth strategy is right? How should he sequence the rollout of internal changes still required to support the corporate transformation? And given the industry environment and the resurgent growth of SAP’s legacy business, how should he balance resource allocation between short and long-term opportunities?
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