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“Embrace the opportunity that finance has to be a business partner, a thought leader, and drive change.  And it’s important that you don’t become the reason things can’t change.”

Myles Corson

That was Joel Bernstein CFO, Customer Success & Head of Global Finance at SAP. As architects of the “intelligent enterprise,” SAP has also had to embrace significant change in transforming to become a cloud company in the last few years.

Transformation can be an intimidating concept in the business world, so being able to articulate your corporate purpose and a clear strategy about not only where you’re heading, but why you’re heading there, is important to engage your people and organization to be inspired to make the necessary, sustained change.

The pandemic has been a major external disruption, which despite all the negatives, has seen leading finance functions take the opportunity to accelerate their investment in digital finance and collaboration, particularly as the need for flexibility and resilience have become even more important. SAP has played a fundamental role in supporting their clients through that transformation.

The increased focus on sustainability is another driver of change for finance organizations that we’ve talked about on the podcast previously. SAP’s CEO Christian Klein has made public commitments on making SAP’s vision of being a leader in sustainability software and making ESG, environmental, social and governance, reporting more transparent. This commitment will be critical as regulators, including the recent proposal from the US Securities and Exchange Commission, introduce global standards on climate-related disclosures, and especially in Europe, where transparency in ESG metrics are crucial to a company’s ability to secure capital. 

I’m Myles Corson from Ernst & Young, and I’m your host of The Better Finance Podcast, a series that explores the changing dynamics of the business world and what it means to the finance leaders of today and tomorrow.

To examine these topics, and more, I recently had the opportunity to speak to Joel and hear more about SAP’s business model transformation while maintaining focus on its customers, people and culture. Joel has a long and successful career with SAP around the world. During our conversation, Joel reflects on some of the formative moments in his career, sharing his perspectives on how he helped shape SAP’s strategy and their significant transition from an on-premise to cloud based business. I hope you enjoy Joel’s perspectives and insights.

Corson

Joel, hello and thanks for joining us.

Joel Bernstein

It’s great to be here. Thanks for the invite.

Corson

You’ve obviously had a very successful career, and it would be great to hear just a little bit about your career journey so far and the role you play at SAP.

Bernstein

I’ve been with SAP almost 26 years now, starting in our corporate financial reporting, and taking the company public on the New York Stock Exchange, which was a lot of fun.  And currently my role is the CFO of Customer Success, which is our customer facing organization, including sales, services, customer success teams.  And also the head of global finance, which includes teams like tax, treasury, procurement, facilities, shared services, things of that nature.  So it’s been a fun ride.

Corson

Reflect back on your career and some of the formative moments, and how you think about also developing your own team.  What are some of the things that you talk to your team about in terms of the experiences and how they can learn some of the lessons through the mentoring you provide?

Bernstein

I think it starts with a focus on the customer, whether it’s internal or external customer.  I think finance is a customer service, if you will.  It requires understanding of what’s going on around the world, what SAP strategy is to provide value to our customers, and then how does that relate to finance and how can finance, and each individual in finance, connect ultimately to what’s going on in the world.  That’s how we connect our purpose in finance to the purpose at SAP, making the world run better.  And so those are the types of things from the broad perspective. 

I think empathy is really important when you’re focused on customer success and customer service, to really understand, for example, it’s not easy to sell.  It’s not easy to implement, so have a little perspective that we’re in the business of trying to make everyone better and ultimately delivering high value solutions and services to our external customers. 

Corson

You mentioned SAP’s purpose. SAP as a business has been through a pretty significant transformation from on-premise to cloud based business. Perhaps you could talk about some of the journey you went on, and how as an organization you changed the culture of impacts and how you’ve taken a very large, complex organization, and been able to manage that transition in a relatively short space of time?

Bernstein

It certainly is a different business than it was when I started 26 years ago, with much more opportunity ahead of us.  As we transition from a legacy business model into now a cloud first, or cloud only business model, I think it’s important to realize that all aspects of our business are really changing.  And what’s been interesting, as you break these into different work streams, and organizations, the one thing that’s consistent is that finance touches all of those work streams and all of those organizations.  We have a role to play in all of it.  And so to really get it focused and structured, we broke it down into four areas.  Our transformation as we move to cloud only over the years.  And that’s the financial success, operational success, customer success, and then of course our people and our culture.  And I’m happy to dive into any one of those areas that you’d like to touch on.

Corson

Joel, perhaps you can start off by talking about the people aspects, and then build on that theme.

Bernstein

From a people perspective, and a cultural perspective, it’s not just finance.  It’s the entire organization of SAP, all 109,000 of us, and the ecosystem around us.  Our partners and so forth. When you think about what that change is, and what we’ve transitioned to, the business model has changed, right?  We’ve gone from selling a perpetual license to a customer, and making sure that we could help the customer after the fact adopt, consume the on-premise functionality that they’ve had, as a separate motion, if you will, separate and distinct from a selling motion. And that is no longer acceptable in a cloud model.  We really own the success of our customer all along the life cycle of SAP, starting with development, through sales, delivery it’s really about making sure that everybody is aligned at SAP on customer success.  I would say it starts with your objectives.  And in finance, you know, we like numbers, we like KPIs, and OKRs.  So we have really moved away from something that would be more, call it a booking specific, land specific, how are we doing on our net-new business, to things like total customer lifetime value, to adoption, how much ACV, or annual cloud value, that we’ve sold, has been deployed.  And those types of things that really focus on long term customer success.  Imbedding that in our governance processes, reviewing that with the management team, having it standard reporting, and you’ll always hear me say, if you know me, you know you’ve been successful when you make the business accountable for the business.

The business has the ability to pull that information as needed on what you’re focused on those KPIs, and OKRs, versus you as a finance organization having to push them.  So you make them accountable, you enable them, you provide them with that real time data and insight, and that really helps to change the culture and the alignment of everybody who works at SAP in our ecosystem, so that’s what we’ve really been focused on.

Corson

I love that; the business being accountable for the business.  Just picking up on that theme of culture, Joel, obviously you’ve been through this transition as you’ve changed the business. Can you talk a little more about that culture transformation because I know you’ve got some points of view on how best that operates and works effectively?

Bernstein

It’s important as a leader that you insure everybody understands where we’re heading, and why we’re heading there.  And again, I’ll connect it back to what’s going on in the world, that’s going on with our customers, so that the team members in finance get it, know what the big picture is. 

And when you describe that transformation I think that it’s important that we again set up programs, processes, governance, give them the opportunity to transform, but most importantly I think is give them the route to transform.  Transformation … the management team, if you’ve got the right organizational structure, it’s a pyramid.  And if you're at the top of the pyramid, you’re not going to change the rest of the pyramid with a couple of people.  You're going to give them the guidance and the room.  They’ve got to understand how they connect to that purpose.  And they’re going to have to make those changes collaboratively, in an agile fashion, with each other.  Because in a digital business that we are right now, where the world is moving to, every process is connected to each other.  So before, maybe you could tweak something here and it wouldn’t necessarily impact the end of a process.  In a digital end-to-end process, you tweak something here, it’s impacting all of those processes along an end-to-end  scale. 

It’s really important that you scale, that you're aligned, and you provide that guidance, that space and that opportunity, so that transformation is coming from the bottom up.  It’s much more passionate that way.  It’s much more effective that way.  And I always tell people that if your fingerprints are not on the transformation, it’s happening to you.  It’s not happening as a result of you.  So be on the right side of that equation.

Corson

That’s really good insight.  Let’s pivot and talk a little bit about customer pillar, and obviously in your role, as well as seeing the internal SAP transformation, you’re experiencing it from the customer side in terms of what they’re trying to achieve.  Can you share some perspectives on what you're seeing from the customer side and how you’re helping enable your customers and clients achieve their transformation goals. 

Bernstein

I think it starts with the bread and butter, who SAP is and how we become successful. Where we’ve always thrived and how we’ve gotten such an amazing customer base is by designing best processes and automating them in an end-to-end process with an automated solution, SAP’s systems.  That hasn’t gone away.  That is now moving to that next step which is, owning the infrastructure, the delivery if you will, owning the application management support, those things, and fine tuning, optimizing, SAP solutions with the delivery mechanism that SAP offers to customers.  And honestly, that’s the first step.

There are a lot of companies that can do that, hyper-scalers, hosting partners, so forth.  And that’s a TCO play.  It’s a total cost of ownership, lowering the costs, improving the efficiencies.  We’re past that now.  Now it’s a matter of owning the transformation, the business transformation, with your customers. 

I’ll give you an example.  One solution we have is Signavio.  Signavio actually goes into your system, looks at how your people are performing the processes, and identifies where there’s inconsistencies, where there is inefficiencies.  And of course with data privacy as it is, it needs to be aggregated or anonymized to a certain extent, but you can really see it real time.  Hey, this is a bottleneck.  It even quantifies the people savings that you would have from an inefficient process based on reality. 

There’s no better study than your own data, your own activity.  And then it allows you not to require an IT big fix.  It allows for people who own those processes or in the business to modify the business with a low touch, or no touch, change and see the results immediately.  That’s owning the customer’s business transformation. We’re right there alongside with our customers while they’re doing that.  And we’re also learning from that and continuously improving our solutions.  So that’s one example I hope provides some insight on what the opportunities really are for moving to a customer focused cloud business.

Corson

You touched a little bit on the no-code, low-code type of approach here.  We’ve had some of these conversations on the podcast previously, that role of finance in that environment where you can have a much more direct influence.  And it’s the business understanding and the finance acumen that really matters.  Are there any other examples you can share about, from your organization or from customers you’ve seen, finance really taking the lead or taking the tools that they’ve been provided and being able to drive the insight.

Bernstein

I’ll give you another example that I love so much, that started with our internal customers’ focus and ended up really helping the, call it the back-office functions of financial, who are extremely important I think as we all know.  It dealt with customer insight.  And it started with pipeline, and what are the real opportunities that SAP has.  And this is going awhile back, before we first started transforming and really leveraging technology, the people would not maintain master data very well.  It was not an area of focus.  People would put information half accurate if you will, into our customer relationship management solutions.  And then when it came time to rolling up a forecast, to see hey what do we look like for this quarter or for this year, they would take the information out of that system, they’d put it in an template, and manipulate it so their boss could see what they wanted them to see. 

And that was it.  You had no detailed level, no qualitative information about that pipeline.  You had quantitative information.  And that went away.  That started with the business leadership saying, one more spreadsheet at a forecast call and somebody’s losing their job and it’s not just finance.  And suddenly with that business drive, the data got pretty clean pretty fast.  The level of insight that you started to have on which industries, which market segments, which solutions, which people.  Who were the sales people who have a great pipeline, got amazing.  It’s in the system real time.  No more spreadsheets.  You can have management go in there and see it for themselves. In the beginning they knew more about what was going on in people’s business than they did, because they really wanted to leverage those tools. 

And the unintended consequence of that, was not just being able to use predictive measures with data in the system from a forecasting perspective, and not just helping management manage their business better and get in front of issues, or opportunities, but, on the back office process, all of that data is in there.  Now we can create quotes with a single entry by the sales team. Now that quote can move through an approval matrix, and a workflow.  Then it can be populated into a contract. 

Then you can issue a contract and issue an invoice, instead of several manual steps of entering the right data in at different steps in the process.  And that really allowed us, for a lot of automation, a lot of re-organizational design into shared services, a lot of different skillsets being redeployed from transactional business into centers of excellence and really more let’s say customer facing value-adding business transformation and services that we provide for our customers. 

Corson

I presume again one of the benefits of having this all in the central system is the benefits around machine learning and ultimately how it’s going to feed into AI by having the data in one place.  Are there any examples you can share of how you’re seeing that start to play out and some use cases? 

Bernstein

I’ll give you a great example on the finance side.  We’re not a manufacturer, so we have expenses that are very specific, and our largest expense is people.  And when you look at forecasting, for example, where we started, before automation, is we have a geographically dispersed finance team.  They would take a look at information separately on what’s our budgeted head count, how many offers are out, things of that nature.  They would apply some judgement.  They would put in what they wanted to put in, in case they wanted some wiggle room for their forecast.  And then that would roll up.  So we had 40, 50 people touching a forecast at any given time for our largest expense, people.  That’s gone.  Now we have a small handful of people that manage the data inflow, the recruiting information, just to make sure that the dataflow and the processor are working well.  And then the automation and reporting.  All of that information is pushed out, prepopulated, down to a very detailed level, at the country level, at the organization level.  You can do it down to the P&L level if you really wanted to. 

All that judgement is gone, and it’s based on facts and facts that are maintained in a system.  Because it gets so granular, it’s automated, you can even get to what is the average cost of that type of role in that country.  Turning head count information into financial information and you know, we tried it out side by side to make sure this worked.  Automation and AI is a lot more accurate than people, well from 40 different countries rolling up judgment calls in their forecasts.  That’s our biggest expense line item.  And there’s very few people that are involved there right now. 

Corson

One of the other disruptions that we’re seeing a lot in the market right now is obviously market expectation around the ability to communicate a long-term value story, and the need to balance long term value creation with short term performance delivery and execution.  And clearly ESG and sustainability are a very hot topic right now.  Can you talk a little bit about how SAP is looking at that and how you're showing that internally and also what you're communicating externally?

Bernstein

I’d first like to say it’s very heartening to see social interest converging with markets and capitalism.  And the importance and the acceleration of ESG and sustainability in the financial markets is very visible.  I mean interest rates, subscriptions to bond offerings, all of these things are really showing themselves very quickly in the markets.  And you talk to all of the different banks that we partner with, all the rating agencies, it’s at the forefront of the discussions that you have.  I think it’s really heartening that the business world has taken on social interests and global interests and made it part of a business and governance.  There are certainly a lot of organizations and agencies that have an interest in this right now.  I look forward to some convergence on what the reporting requirements will be. 

I also think and I’m honored that it is crystalizing in the office of the CFO.  Because I think when you put governance in with sustainability what better place for that to occur than in the CFO office, and also standardized disclosures for capital markets’ interest also.  We like to think we’re a frontrunner in this area.  We’ve announced our carbon neutrality by 2023.  Two years ahead of what we thought we’d be able to do.  We certainly include disclosures in our financials, non-financial disclosures, to show where we are in there.  If you looked at what SAP’s purpose is, make the world run better, we also have embedded this in our technology.

You think of the hundreds of thousands of companies that use SAP to make the world better, we’ve included at the data level, the transactional level, information around sustainability, and in addition to that we provide a dashboard that allows the management layer to manage.  To see what’s it look like when you roll up at that data level.  And it’s very much like a financial model and exercise when you think of it that way.  Transactions, dashboards, and KPIs.  And taking actions to influence the output of your company.  So very proud of how seriously we’ve taken this at SAP and how we’re going to continue to help our customers get better at this.

Corson

It sounds like alongside your traditional financial management reporting you're now starting to imbed some of those non-financial metrics into how you run the business.  Can you share some examples of that and how it’s being embraced either within your organization or even how you’re seeing customers embrace it in their day-to-day operations?

Bernstein

I think it starts with this realization that this is real. That it’s not going away, and that we’re going to have to take it seriously.  And then it starts with how are you going to help me or what are the opportunities that are ahead of me.  We have a chief sustainability officer who’s rock solid, who’s great.  I learn a lot from him.  He’s part of our finance leadership team and he reports into SAP CFO.  He is right there alongside of all of us.  And he’s talking about the things that we do. We’re looking at travel policies.  A very specific example is we provide cars to certain employees, depending upon the country they live in, and we’ve made a commitment that we’ll go all electric in the very near future.  That’s a pretty bold statement.  And not necessarily the easiest financial impacts in the short term, given the cost of electric cars.  But one that we think that it’s a bet worth taking in the long-term sustainability of SAP and the world. 

Corson

I wanted to pick up on this point about the CSO reporting into the CFO and that synergy between sustainability and finance, the two things having to go hand in hand.  You’ve given some great examples.  Are there any other examples in terms of how that relationship is working effectively between sustainability and finance?

Bernstein

We need to drive the future.  I think we have a lot of experience as finance professionals on reporting.  What is valuable reporting.  What is accessible reporting.  I think the history and legacy and experience that we have in the CFO’s office will be very valuable in helping the sustainability community movement and keeping it sustainable, and to really benefit from the experience that the CFO has had.  I think if you think across what CFO’s responsibilities are, at least in our organization, Facilities is also part of my team and part of the CFO office.  And look what’s going on. Not necessarily by choice this quickly, but as a result of COVID, there’s a lot of opportunity there.  And even linking operational systems and financial systems together to understand what is your office space utilization?  What do you really need?  What is your carbon footprint as a result of that, whether it’s utilities, electricity, heating, cooling and so forth.  I think that is a great opportunity for the CFO to take operational data, financial data, and link with sustainability and make a big difference. 

Corson

COVID has obviously been one of the big disruptions we’ve all been working with.  And you mentioned Facilities.  In terms of how your team has adjusted or is continuing to adjust to the working environment.  Talk about the journey you went on, where you’re at now, what you see the future of the operating model is for your finance organization?

Bernstein

I could start with facilities.  Because I think it’s data driven again.  I think the more data you can get, the less emotional decisions you make, the better off you are.  And it starts off with really getting close to your customers, your employees in this case.  Never have I felt as a leader that it’s the importance of being close to your employees in a time when you can’t be close to your employees.  All of these virtual meeting spaces, making sure that they have the access that they need, the hardware that they need, the IT support that they need.  But also the interaction that they need, more so than ever. 

When is the last time you’ve been on a phone call without your screen on?  And now, versus three years ago, when did you ever have your screen on when you were on a phone call? It’s a huge difference there.  we can get feedback from our employees on this topic and we’ve leveraged that, doing pulse checks, and again data, saying by age group, by organization, by geography.  What do you think of coming back into the office?  Will you come back five days a week?  Do you not want to come back in the office?  And you get that data.  Now that changes with time.  I think it’s important that you do that on a regular basis.

It was really interesting to see the differences of opinion between the developer and a salesperson.  Between an early talent and somebody who’s been here for 25 years.  You can use that to make decisions, provide feedback.  I think from a facilities perspective, there’s two things.  One is the office space itself.  And really changing it to an environment where you can mix virtual and on premise, let’s call it, on site, together.  So it’s collaborative.  If people are making decisions that are different from each other, that doesn’t preclude interaction.  And we’ve done some great pilots to make that work, and that is the footprint for our future success.  Then it’s just the space.  I think what we’ve seen is, I expect a lot of people to be in the office eventually, from Tuesday to Thursday.  I don’t think we’ll see many people on Mondays or Fridays in the office, based on some of the things that we’ve seen.  So at least from a facilities perspective, that’s the data driven insight that you get as a result of the technology that we have. 

Corson

I think that the Monday/Friday syndrome is definitely one that I think the data is there, is pointing in that direction.  It will be interesting to observe.  We’ve covered a lot of ground, Joel.  Is there anything else in terms of disruptions that you see that you think other finance leaders need to be thinking about and focused on?  Technology, regulatory implications?  Anything else you’d share?

Bernstein

I think there’s a couple of things. The first thing is the speed of change.  And I would say COVID is responsible for this.  It turned it from an evolution to a revolution.  Companies that had a three, five-year roadmap on digitizing their business processes were caught behind, and were scared out of requirements to get a move on it.  And the days of spending a significant amount of time figuring out how do I process the norm, if you haven’t figured that out by now, you’ve got a problem.   Because the business models, the creativity, the closeness that you need with not just your own organization, but with your employees, with your customers, and now even supply chains are more so than ever, with what’s going on.  That’s what you need to focus on.  That’s real value add.  And you've got to bring them all together at the same time.  If you don’t have that agility, if you don’t have the ability to offer the future instead of protecting against the future because you can’t handle it, you're in a bad position as a finance organization. 

That’s the biggest change that I’ve seen.  Some of the regulatory changes that are out there that are looming, there’s a new world tax order that’s out there.  Talking about falling behind, I would say some of the tax rules and regulations are a little bit behind the digital world and where people are buying, where people are selling, and how you’re taxed on that.  There is an accelerated movement in that direction.  It’s being worked out.  And there’s a lot of uncertainty around that on what are the rules, let alone how do you capture the information that you need as well as what’s the impact, what’s the impact on my cash flow, on my expenses, tax rate, and so forth.  That’s one of the largest things I think is top of mind in my finance organization from a regulatory perspective.

Corson

Going back to the point you made around agility, because I think it’s a really interesting point.  You talked about it in the context of the pandemic and managing the function. One of the things that comes through in our research is also CFO relationship with other C-suite functional leads.  One of the things I think we’re going to see as we look back on the impacts of the pandemic is the way that collaboration was forced, and that agility was forced cross functions.  Share again some of your perspectives on how, you had to work together as a leadership team to kind of address some of those problems, and some of the things that worked for you to drive that agility.

Bernstein

The lines are blurry now.  Finance on everything that we looked at, across all the work streams whether it was part of transformation, whether it was a COVID crisis management team, finance is always involved, which is great.  I mean that’s the life we chose, and that’s why we chose it hopefully.  I’ll take some examples in COVID.  We work very closely with our chief revenue officer, the head of customer success and sales, to really understand and have some empathy for our customers.  Everybody got hit hard and got hit fast.  We have contractual obligations, things like for travel and expense software and solutions that we sell.  How do we help our customers but still protect within the guardrails of SAP.  It’s probably the first time in my career I figured out how to responsibly, fiscally responsibly, reduce the money that’s coming into our company.  It’s not something you often focus on.  But that’s what we needed to do.  So we worked, we had real time treasury insight, some great solutions there.  We saw what we could do. 

We looked at industries, which industries are hardest hit, who are the customers we have in those industries, and we strategically reached out to work with those customers and help alleviate that.  That’s not going to happen without finance and sales, for example, executive management working together.  As we changed business models, just think about it.  When you're selling software, everything’s a fixed cost.  You're giving up an opportunity cost, you’ve got the research and development cost behind you, everything’s just an opportunity cost, did I give it way for too little?  And that you manage transactions based on discount and things like that. 

When you’re selling cloud, that’s not the way it works.  There’s a lot of things that come along with that.  Getting really close to the delivery organization, the research and development organization, to make sure that functionality can be delivered in the most economical way, to make sure it could be implemented in the quickest way so the customers can get to value, that’s a huge change in your relationship.  We have literally looked at each of our solutions and our offerings to come up with home standard cost models that we now at a transactional level want to make the business accountable for the business. 

When somebody is creating a quote, and they’re pulling in line items to that quote, they don’t just see what the list price is, they understand what the expectation is from a margin perspective to sell at a certain price point and what their flexibility is.  And of course compensation plans, quota plans, we know how sales people operate.  We have the ability to actually compensate for higher margins at the deal level, at the quote level, before something is presented, approved to the customer.  It’s getting much closer to areas of the business that you didn’t necessarily work with at that same level.  And it really drives that connectivity across the life cycle of solutions, from development through adoption and consumption.            

Corson

That role, the finance across the organization, the connectivity and collaboration is such an important thing.  Joel, you’ve shared great insight across a number of different areas.  As we wrap up, any final recommendations for our audience in terms of where they should everybody focused?

Bernstein

I think you should be focused on the customer.  I think you really need to, whether it’s internal or external, it’s really important if you want your role to be exciting and gratifying, being like this, “Oh my gosh, it’s all coming at me and I don’t get it,” is a horrible place to be.  The days of creating spreadsheets, pushing information out, they’re gone.  Or if they’re not gone, they should be, and they’re going very quickly.  Get interested.  Understand what’s going on around the world, understand how you can get your fingerprints on that purpose.  And contribute in the role that you currently play.  And I think what you’ll see is as that role expands, because of your interest, so will your content, so will your leadership, and most importantly your development.  And you’ll find yourself someday leading a large finance organization and that you didn’t even realize that it was happening over the years that you were doing it.

Really embrace the opportunity that finance has to be a business partner, a thought leader, and drive change.  And it’s important that you don’t become the reason things can’t change.  That would be my advice to the finance community that’s out there.

Corson

 That’s a really positive and uplifting message to end on.  Joel, really appreciate you’re taking the time to join us today, and look forward to talking to you again soon.

Bernstein

The pleasure’s mine.  Thanks for having me Myles.

Corson

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