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
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).
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.”
