While execution is the key to any operational objective, the strategy and planning elements surrounding why execution should occur and the context in which execution should be performed are also important. In recent technological offerings, SAP has improved these features, along with a formal approach to risk management to address market opportunities that organizations pursue. In this way, strategy is aligned, performance is predictable, and executives can make better business decisions.

Executives live in a financially driven environment, where operational processes are traditionally a means of organizing resources inside the company and its value chain, and employees are the responsible actors to execute those processes. The strategy gap that some industry watchdogs have noted is real and growing. Innovative technologies provide one approach to collapsing this gap and allowing corporate strategic outcomes to be fully realized and risk management programs to be fully described.

SAP provides SAP BusinessObjects Strategy Management to fill this need. I’ll introduce you to this product, along with the ways it can help you align real-time data with your strategic initiatives.

Enterprise Performance Management Using SAP Business Objects

SAP BusinessObjects Strategy Management is part of the overall SAP BusinessObjects enterprise performance management (EPM) solutions suite. EPM is a field of management that combines the intent and direction of an organization with the business operations in a manner that can be predicted, monitored, and guided. Regardless of an organization’s industry or position inside an industry segment, the sound practice of EPM to drive the agenda of a company or association falls under the “blocking and tackling” of management activities for executives, operations directors, and members of an organization management team. The solution map for EPM is shown in Figure 1, which consists of several strategic groups of activities.

Figure 1

Solution map for SAP BusinessObjects EPM solutions

Broadly speaking, EPM approaches one or more of the following issues that organizations may face:

• Strategy formulation: How does the organization determine the direction of its agenda, and once that direction is established, how does it know what to track and what corrective actions to take to reach a particular target state?
• Business planning and consolidation: How does the organization develop business plans consistent with the organization’s strategy and align activities and reporting requirements across multiple operations, regions, and product or service lines?
• Financial information management: How does the organization leverage its history and projections of financial performance, including its various cost models, expenditure patterns, profitability expectations, and investment in future product or service portfolios?
• Supply chain effectiveness: How does the organization take advantage of the extended enterprise, understanding and diagnosing the financial, inventory, delivery, and defect performance of its suppliers to anticipate low-probability, high-impact “fat tail” risks supporting sourcing and research and development activities?

A more holistic approach to operations management using the disciplines of EPM provides several competitive advantages to the organization and its executive team. Visibility increases dramatically across key performance areas of the organization, allowing for a proactive approach to management. For example, an executive team may develop a strategic plan with initiatives spanning the next several years. This is the strategy formulation function. When the business plans of an organization’s operating units are developed and consolidated to begin work on a new initiative, this activity can be expressed using the business planning and consolidation function. You can also analyze, manage, and predict the development and information around financial performance and management, as well as the effectiveness of the organization’s supply chain, using SAP BusinessObjects EPM tools.

Aligning Strategy Using SAP BusinessObjects Strategy Management

SAP BusinessObjects Strategy Management provides a quick and intuitive view into the status of company or department initiatives driven by strategy. You can take advantage of four key features of SAP BusinessObjects Strategy Management for successful strategy formulation and implementation:

1. SAP BusinessObjects Strategy Management comes with a core set of pre-defined key performance indicators (KPIs). Along with KPIs, tolerances or “trigger” ranges may be established to alert management when KPI thresholds threaten to exceed or do exceed company risk levels.
2. Configuration of operational information from classic SAP functions (e.g., SAP ERP or SAP Supply Chain Management), as well as third-party ERP and point solutions to support real-time KPI monitoring.
3. Easy-to-use initiative charting and scorecard functions reduce the need for executive team members to describe strategic initiatives in spreadsheets using static, outdated, or incorrect information.
4. Executive and department level management experience the power of real-time decision making based on live corporate information without having to access the conventional back-office enterprise software, encouraging less use of license access of the system and thereby reducing costs while leveraging SAP system investment.

Generally, SAP BusinessObjects Strategy Management supports either a core functional process (e.g., order to cash or procure to pay) or a specific operational mandate (e.g., maintenance, repair, and operations tracking). As you can see in Figure 2, the home screen of SAP BusinessObjects Strategy Management is concise and easily illustrated. In one location, a decision maker can see KPI alerts, positions of initiatives in progress, and other key information and messages.

Figure 2

The SAP BusinessObjects Strategy Management 7.0 home screen provides a rich decision making framework

One common risk tool to monitor strategic initiatives is a heat map, so named for the colors that represent increasing temperature when risk levels and impacts grow. A heat map correlates strategic initiatives based on its relative size and importance to the organization versus likelihood of occurrence and impact level should a strategic initiative experience a risk event. Additionally, a successfully configured SAP BusinessObjects Strategy Management environment also reduces the need to argue among management about whose data is correct, allowing for more effective meeting executions and providing more focus on enablement and problem-solving activities.

For example, a coffee grower could have in its strategic portfolio an initiative to increase the amount of beans harvested and processed in a new market. Let’s say management has targeted new Sumatran coffee sources for this purpose. Management would define key financial and non-financial outcomes associated with the initiative, as well as key risks within the control of the organization (e.g., target markets to ship the refined coffee, price point, and supply chain) and risks that are outside the control of the organization (e.g., weather conditions, local labor laws, and currency fluctuation). They could then make provisions and tolerances for each of the possible risks based on level of impact and possibility of occurrence. The resultant heat map could offer different scenarios to reduce risk and increase the likelihood that a strategic initiative will produce the outcomes desired by the organization.

If the executive management target object is to oversee profitable growth, then the decision maker will notice that the objective tolerance has been exceeded, placing it in a negative status. (You can use a variety of color and icon coding schemes to indicate alerts once a KPI moves outside of defined tolerances.) By selecting the objective, you can see a view of the scorecard screen (Figure 3).

Figure 3

By selecting a particular objective, the SAP BusinessObjects Strategy Management scorecard for that objective can provide decision makers with more information regarding its status and any alerts

Similar to other Web-based SAP environments, the user has the ability to show greater detail by selecting particular elements of the scorecard (e.g., one or more particular KPIs that enable the objective). This can provide a set of follow-up actions for the user and the user’s staff to further investigate the reasons why the objective may be under stress and to take mitigating actions to create a higher probability of success.

Continuing the previous example, say the coffee maker has noticed that the amount of profit derived from its Sumatra coffee beans shipped to Europe may be unseasonably low. Upon deeper inspection, it can see a number of factors affecting the initiative: higher seasonal shipping costs due to weather patterns and re-routing, logistical routing that planners have increased to address ports en route, and higher crew expenses due to the longer shipping period. Management then can make the call: Does it accept the recommendation to increase the shipping period with additional stops, or does it change the routing to avoid disruptive weather patterns and eliminate additional port stops?

Another screen you can access from the home screen is the initiative screen. Click the Initiatives button at the top to see a logical diagram showing the various components of the initiative and its corresponding business outcome. In the example illustrated in Figure 4, the realization of the X100 program — in this case, a new vehicle platform for International Motors — is critical for a company to achieve its profitable growth goals. Contributing to that outcome are intermediary initiatives that involve suppliers, production scheduling, and material flow. You can configure the status of these intermediary initiatives to reflect real-time information originating in back-office enterprise systems, such as SAP Supplier Relationship Management (SAP SRM) and SAP ERP modules for production planning (PP) and materials management (MM).

Figure 4

The initiative set for a particular strategic outcome, in this case the launch of a new product to support profitable growth objectives, is easily monitored

Executives use a balanced scorecard to track and monitor progress against initiatives and their resultant goals and objectives. SAP BusinessObjects Strategy Management provides this capability in the Scorecard screen. In the example case, the scorecard is easily represented in Figure 5 across all relevant objectives defined by strategic goals. Each objective corresponds to a series of initiatives to enable those objectives, which are synchronized with the KPIs, triggers, initiatives, and activities configured in the SAP BusinessObjects Strategy Management environment.

Figure 5

The scorecard feature provides decision makers with a quick reference as to the status of all relevant objectives driving the strategy

For the coffee maker, increasing production of Sumatran coffee for the European market would have components across each of the strategic goals of the company. Financial goals are supported by increased profits based on addressing a market need at a compelling price point. Customer goals are addressed by providing a product to a customer base in a market that has untapped demand. Management could address Internal Processes, such as purchasing, through the establishment of a regional shared services model. And finally, goals aligning with Skills and Capabilities might suggest an increase in the social responsibility areas of the workers involved in harvesting and refining the Sumatran coffee, via new skills training, community involvement, or new equipment supporting the operations.

In addition to these features, SAP BusinessObjects Strategy Management also interacts with SAP BusinessObjects GRC solutions, Xcelsius, Crystal Reports, and SAP BusinessObjects Explorer dashboarding, reporting, and analytic tools.

William Newman

William Newman, MBA, CMC is managing principal of Newport Consulting Group, LLC, an SAP partner focused on EPM and GRC solutions. He has over 25 years of experience in the development and management of strategy, process, and technology solutions spanning Fortune 1000, public-sector, midsized and not-for-profit organizations. He is a Certified Management Consultant (CMC) since 1995, qualified trainer by the American Society of Quality (ASQ) since 2000, and a trained Social Fingerprint consultant in social accountability since 2012. William is a recognized ASUG BusinessObjects influencer and a member of SAP’s Influencer Relations program. He holds a BS degree in aerospace engineering from the Henry Samueli School of Engineering and Applied Science at UCLA and an MBA in management and international business from the Conrad L. Hilton School of Management at Loyola Marymount University. He is a member of the adjunct faculty at both Northwood University and the University of Oregon with a focus on management studies and sustainability, respectively.

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You may contact the author at wnewman@newportconsgroup.com.

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