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SAP Strategic Enterprise Management (SAP SEM) is the concept
to enable Value Based Management. SEM consists of a set of components with software
functions and processes that enables executives and senior managers to implement and
operate management processes across the organization. SAP SEM helps executives to
simulate, analyze, monitor, optimize and communicate the strategic aspects of the
enterprise. It endorses value-based management methodology to improve corporate value. SAP
SEM incorporates the perspective of stakeholders who share in the long-term success of the
company. These stakeholders include employees, investors, customers, and local and
regional governments. With SAP SEM corporations are able – e.g. based on the Balanced
Scorecard concept - to translate strategy into action faster and enable knowledge sharing
and learning throughout the entire organization to continuing improve strategy and
optimize its execution.
Key Messages:
- Supports and enables strategic management processes such as
strategic planning, resource allocation risk management, performance management and value
communication.
- Links strategic enterprise management systems with the
business execution system (Supply Chain management / Extended Financials/ HR Mgt.) by
closing the loop. It enables enterprises to constantly improve strategy through ongoing
learning.
Value Based Management  Why Manage for Value?
The concept of shareholder value is a recurrent theme in today’s business press.
Pressure from investors to deliver sustained superior returns has made shareholder value
enhancement a principal issue facing the CEOs and CFOs of most publicly listed companies.
Many large institutional investors now actively strive to redirect corporate strategies
that in their view do not enhance value. The days of passive shareholders and management
decisions made without accountability to investors are over.
Most questions that preoccupy executives today relate to shareholder value:
- how can we accelerate profitable growth over the next several
years?
- why does the market undervalue our company?
- how can we transition from cost cutting to revenue
generation?
- what really drives value in our business?
- how can we promote a culture of value creation throughout the
company?
The new measures can be divided into three types: economic
profit (for example EVATM), residual income (for example CFROI)
and free cash flow (for example TSR).
Operationalizing Value Based Management
To be effective, value based management must add transparency to the
decision-making process: it must let you see the likely impact of specific decisions on
the value of the business - not just major strategic decisions like mergers and
acquisitions, but operational decisions too.
To operationalize value based management, take four
essential steps:
- understand what drives value
- find where value is created or destroyed
- establish value as the criterion for decision-making
- embed value into your culture.
At each step, information systems are critical to success.
Understand What drives value
Calculating shareholder value using the
free cash flow method
(Source: White Paper SAP Strategic Enterprise
ManagementTM (SAP SEMTM)) |
Find Where Value Is Created or Destroyed
You must make decisions about how to allocate resources - financial, human and
intellectual - to maximize returns overall, not simply because individual projects are
expected to deliver higher returns. Resources therefore need to be allocated to
strategies, not individual projects: this makes resource allocation an integral part of
strategy appraisal. |
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A value map pinpoints the sources of value
creation
(Source: White Paper SAP Strategic Enterprise
ManagementTM (SAP SEMTM)) |
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The SEM
Process
The features of a value based management system may seem
similar to those of other decision support systems. But, in terms of functionality, there
are important differences.
Critically, the system connects top-down communi-cation of strategic targets with
bottom-up reporting of performance, and combines both historic and predictive views to
support the entire value management cycle. In such an integrated system, data from
internal and external sources is consolidated and compared with targets as part of the
performance measurement process - creating management information. This information is
transformed by simulation and scenario modeling into knowledge to form the basis of
strategic planning. Plans are translated into targets to drive the management of
operational performance, and so the cycle is complete (see diagram).
(Source: White Paper SAP Strategic Enterprise ManagementTM (SAP SEMTM))
The functionality required can be broken down into the
following SEM Process:
All the functionality needed for this process can be
provided by the different SEM Modules.
The SEM Components:
(Source: White Paper SAP Strategic Enterprise ManagementTM (SAP SEMTM)) |
Business Consolidation
SEM BCS provides functionality for financial consolidation and value-based accounting.
This includes automated value-based adjustment postings; automated assignment, for example
of assets to reporting units; currency translation; interunit eliminations; and the
consolidation of investments according to different internal procedures and also local and
international statutory accounting requirements (US-GAAP, IAS).
Business Planning and Simulation
SEM BPS supports integrated strategic and operational business planning. These functions
include the creation of dynamic and linear business models; simulation of various
scenarios, evaluation of these scenarios taking account of the business risks; carrying
out the resource allocation as part of business planning; and rolling forecasting. |
Corporate Performance Monitor
SAP CPM uses industry-specific and customer-developed Key Performance Indicators (KPI`s)
linked to Balanced Scorecard or Management Cockpit scenarios to continuously monitor
actual performance at all levels in the business relative to strategic targets. These
procedures make use of innovative visualization techniques that increase the effectiveness
of management work. This component also helps you to create your own interpretation models
such as Balanced Scorecards, Value Driver Trees and Management Cockpit scenarios.
Business Information Collection
SEM BIC supports automated and semi-automated collection of structured and especially
unstructured business information from internal and external sources. This includes an
automatic search for relevant business information in the Internet, and the structuring of
any information found.
Stakeholder Relationship Management
SEM SRM improves the stakeholder communication process: the stakeholders are informed
regularly and systematically about the business strategy and its effects on their
stakeholder value. In addition, the component helps to collect feedback from stakeholders
in a structured manner, and then to pass this on to the other components (CPM, BPS).
The SEM Framework
(Source: White Paper SAP Strategic Enterprise ManagementTM (SAP SEMTM))
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