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EPM 101 for SAP Customers – Part 1

Subsequent to my Wave 3 – What’s next after ERP & BI? featured earlier, I thought that it will be a good idea to address some of the concerns of SAP customers who are looking to put together an EPM framework and for those who have deployed some components of it by now. This blog series is intended to make SAP customers understand what they should do first, second, so and so forth. It is by no means a de facto approach but it is definitely a practitioner’s approach in demystifyiing SAP EPM area.

Step 1 – Understanding why your organization needs EPM

Before understanding why your oragnization needs EPM, let’s first understand what is EPM. Enterprise Performance Management is a set of management and analytical processes that enable the performance of an organization to be managed with a view to achieving one or more (more often many) pre-selected goals. Simply put, EPM has three (3) main activities:

a)      Defining business objective and goals (strategic in nature)

b)      Consolidate and measure information relevant to these goals and objectives

c)       Intervention by managers to take necessary actions to course correct, mitigate risk and ensure success in light of having this information

This is a closed loop mechanism through which the organization can set goals, measure performance and close the gap by taking appropriate action. So the first step in putting together a EPM framework is to define a set of business objectives and goals.

Setting up business objectives and goals

So what do we mean by setting up business goals? Any business, no matter big or small, will have to have a set of business objectives and goals. Here are some examples:

a) Improve customer acquisition by 30% (for next 3 years) for a revenue growth of 25% year on year

b) Increase new product introduction by 18% quarter on quarter for the next two (2) years till we have a market share of 16% in the upper middle class segment in South East Asia

These are strategic goals which are defined by management to drive the organization (functions) towards its business objectives. Typically such goals are part of organizational strategy map as shown below:

Strategy MapStrategy MapStrategy mapStrategy Map

For those SAP customers who have jumped into EPM bandwagon by using modules such as Business Consolidation (SEM-BCS or BOBJ BPC Consolidation) or Budgeting (SEM-IP or BOBJ BPC Budgeting), you should seriously consider leveraging the EPM framework to extract the most out of your SAP EPM asset.

We will cover how we can address strategy planning aspects using SAP SSM in the next post (part 2 of this series). Watch out for this space.  

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