Enterprise Performance Management: Unlocking Hidden Business Value
Business process upgrades. Innovative software investments. New analytic tools. How can you ensure maximum value from your business analytic investments? All too often, conflicting priorities derail even the most committed organization. While one department identifies better business intelligence (BI) as a top priority, another targets improved planning processes, and a third data management issues.
The problem with “improvement by initiative” is that companies evaluate one project or upgrade at a time without considering the whole picture. Instead of working in isolated silos, companies need to take a broader perspective and consider how technology, business processes, data needs, and metrics can work together to accomplish the end goal and support sustained improvements. To derive maximum value from technology or business process initiatives, you must take a holistic view, creating a roadmap the addresses upstream and downstream data, processes, and reporting.
A Holistic View
Figure1. A Complete Business Analytics Framework
The pyramid illustrates how multiple initiatives must work together to drive maximum value throughout an organization. At the foundation of the pyramid is enterprise information management (EIM), encompassing a company’s data strategy and how it prepares data to be utilized in decision making. EIM ensures that clean, accurate transactional data is ready for upstream reporting and analytics. The data flows into the next layer – business intelligence. In BI, the company outlines a strategy for how it organizes, uses, visualizes, and reports on information.
At the top of the pyramid is enterprise performance management (EPM), which including strategic decision making, planning, and financial reporting. This is where data and analytics come together to drive decisions that help the company better manage suppliers, customers, profitability, and plans. Wrapped around the entire process is governance, risk, and compliance (GRC), which evaluates risks related to data, reporting, and decision making.
Never before has the economic environment required successful companies to increase margins while the market tries to shrink them. Those that remain competitive are proactively using their data and information to make rapid and fact-based decisions. At SAP, we have an entire portfolio of products for customers wanting to squeeze business value out of their solutions at all levels of the pyramid. SAP consultants can help unlock hidden value by optimizing the entire end-to-end, risk-adjusted decision making process. Business Analytic Services specialists from SAP can help companies better plan, analyze, compile, and report on data by finding ways, for example, to more efficiently source data or make decisions. With SAP’s help, organizations can reduce the time needed to focus on key drivers, and to identify and act on performance improvement opportunities.
A Closer Look: Profitability Analysis
Let’s look at how the end-to-end, holistic approach to improving business value might play out for a company wanting to improve profitability analysis. First, the company must identify optimizing profitability and cost management as a key priority. The usual place to start is with a profitability and cost management (PCM) solution. But while PCM undoubtedly provides value, it alone doesn’t offer full impact. For that, the company must dive deeper into transactions. How is each product made, and what activities, people, hours, and costs are associated with it? But as the number of products multiplies, things become complicated. The company is faced with analyzing millions of transactions for each product, with limited drill-down ability.
But there is hidden potential in considering the EIM and BI reporting components alongside the profitability analysis. Using transaction-level details, the company can take profitability metrics and go deeper into each transaction, driving greater insights. Strategic reporting then makes it possible to narrow down and report on the precise set of 10-15 metrics required to drive profitability, or to identify the most important performance exceptions to include in weekly reports for each product manager. Finally, access and process controls – part of GRC – must overlay the entire profitability analysis, ensuring the security of sensitive product and customer information.
Getting from Here to There
Moving from an individual project mindset to an end-to-end process discussion can be a challenge. But it doesn’t have to be overwhelming. To get started, a company should first create an overall business analytics roadmap. The roadmap starts with an understanding and prioritization of the most pressing areas that need transformation. These areas are then translated into a sequence of events required to change the business processes, roles, and organization over time.
We have seen customers focused on only their most painful, pressing business issue and solving problems in isolation. Taking a comprehensive and holistic view, our most successful customers start at the top with EPM and determine the most appropriate process for improving decision making, creating a roadmap built on past events and the future direction for the company. SAP uses proven methodologies and best practices to define proactive, holistic business analytic roadmaps that include a clear picture for both short term (6 to 12 months) and longer term (3 to 5 years) next steps. In our example, the company starts with profitability analysis and implements a solution like SAP Profitability and Cost Management; next addresses EIM issues, and finally works to improve reporting.
To find out more about how Business Analytics Services from SAP can help your company develop a targeted roadmap that unlocks the business value of analytic investments, please visit us online. Learn more about how to assess the value of your EPM project by reading the next article in our series.