value based management presentation at sapphire 2010

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SHERRYANNE MEYER[ASUG INSTALLATION MEMBER MEMBER SINCE: 1999

STEVE RUGGIERO[ASUG INSTALLATION MEMBER MEMBER SINCE: 2000

ED HUDAK[ASUG INSTALLATION MEMBER MEMBER SINCE: 1998

Value-Based Management A SAP Framework for Creating, Realizing

and Measuring Value

by Prof. Dr. Mark von RosingHenrik von Scheel

Real Experience. Real Advantage.

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Author Prof Mark von Rosing and Henrik von Scheel

To Be

Design

Process Owner CIO Project Manager Business Unit Owner

The new ASAP Methodology support the 4 lifecycleASAP Methodology including BPM Technology – BPM, SOA and Value perspective

Process Management

Performance Management

Value Management

Process/Perfor Gov. IT Gov. Project/Prog Gov. Business Governance


[


Real-World BPM in an SAP Environment

www.sappress.com© SAP 2009 /

Applying Real-World BPM in an SAP Environment

Learn what BPM is and how to get started within and SAP context

Benefit from a comprehensive compilation of use-cases

from early adopters Discover SAP technology, methodology, performance

metrics and governance

Managing your business processes wisely is key to stay ahead of your competitors! This book is your guide to implementing Business Process Management in all its aspects in your SAPcentric business and IT: It explains how BPM and standard software work together, how to prepare your company for the project, and how to put technology, governance, and the philosophy behind it in action. Extensive use cases from well known SAP customers including technical and process details make this book a true real-world experience!

Available end of September 2010


[

Author Prof Mark von Rosing and Henrik von Scheel 4

Learning Points

Learn how to apply a business value management road map from SAP

Discover how a company can create, realize, and measure business value

Explore a value-based management approach that can create the needed value companies are looking for today


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Value planning – Value identification


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Value planning, value identification and value creation


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Value planning, value identification, value creation, and value realization - Competing on standards


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Value planning, value identification, value creation, and value realization - Competing on differentiation


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Competences and Value Creation?


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Value Planning, Creation and Realization -competencies


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The ASAP 7.0 - Competency Based Subject approach

Subjects approach with more business focus • Business Model competencies• Value Management competencies• Performance competencies• Business Governance competencies• Service Orientation competencies

Subjects approach with more IT focus • IT – End-user Focus competencies• IT - Software competencies• Master Data competencies• IT - System competencies• Enterprise Architecture competencies

Business Process competencies


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The Competency Based Subject approachExample: Business Processes

The Competency Based Subject approach steps Step 1. Competency scan Asses As-Is competency stage (level 1 to 5)Step 2. Business Process ScanAsses Business parametersStep 3. Identify Core Competitive and Core Differentiated competenciesStep 4. All Competencies are both rated with their Revenue and Cost: High, Medium or LowStep 5. Value spots/drivers are identifiedStep 6. Define “To-Be” competency stageStep 7. Apply SAP BPM methodStep 8. Apply SAP BPM GovernanceProcess Management Life-Cycle (PML)


[ Business Process Scanning ASAP Add-on

DescriptionBusiness Process Scanning ASAP Add-on enables organizations to derive & prioritize process improvement projects in their companies with a clear link to their corporate strategies. The Business Process Scanning include 2 phases:Calibration: The objective of the Calibration phase is to reach agreement on a list of processes that are to be analyzed and optimized in the next phases. The first task is to understand the business and IT strategy of the company. This is a basic requirement for optimizing the processes and ensuring that optimization projects adhere to the overall strategy. The second step is to focus on the processes that are considered to have significant optimization and innovation potential. Based on the understanding of the process landscape and the related business success factors, processes can be evaluated and prioritized.

AS-IS Analysis:After agreement is reached on the processes that are to be optimized, the objective of this phase is to understand the as-is situation of the selected processes and the IT landscape, andto identify weaknesses, pain points and as-is process performance measurements (PPI´s) in respect to cost, cycle time and cost . Having selected the relevant parameters (roles, costs, time, data and so on) for the process analysis, it is necessary to classify the processes based on their optimization potential to eliminate identified weaknesses. The as-is situation of the processes is documented in detail and all weaknesses identified are clustered in order to identify those with the greatest impact on the business.


[

© SAP 2009 /

Process Owner

Who is responsible for the process?

Managers with end-to-end responsibility for individual processes

Organizational Units

Which organizational units own the process execution?

Processes are performed by one or more organizational units.Examples: Business department, HR, Controlling

Objects

Which objects are used, modified, and produced?

Processes result in the manipulation of physical or informational objects. The two most important objects are input and output.Examples: Purchase order, invoice

KPIs (Key Performance Indicators)

How is the process performance measured?

Definition of measurable indicators to verify whether the process goals have been achievedExamples: No. of created purchase orders, process cycle time

Roles

Which roles need to contribute to the process execution?

Definition of all resources involved in performing the processExamples: Hiring manager, recruiter, HR Business Partner

Business Rules

Which rules govern the business?

Description of the operational characteristics of the businessExample: Prioritization guidelines, disturbances, decision processes

Technology

What kind of technology enables the process execution?

Systems, tools, and hardware usedExample: SAP SRM

Media

By which media do processes interact?

Means of communication usedExamples: Paper, fax, e-mail

Process Flow

Which processes precede and follow?

Definition of process sequence and process interfaces, input and outputExample: Check availability, confirm delivery date

Process

Purpose & Goal

Why is the process performed?

Ultimate reason for the existence of the processExample: Getting the right products to the right person at the right time based on existing sales orders

Business Process Scanning ASAP Add-onProcess Parameters

9

5

1,2,3,& 10

321

4

7

6 8

5 8 6

2

4

1310

9

7

1 1= As-IsWhere, who, what, why & how

= To-BeWhy, what, how & where


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Business Performance Management


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SBO = Strategic Business Objective

BPI = Business Performance Indicator

CSF = Critical Sucess Factor

KPI = Key Performance Indicator

PPI = Process Performance Indicator

Accelerate profitable growth

Growth +17% marketshareprofit +9%

Increase new customer aquisition rate

50 new customers per month

Business transition rate = 60%

Performance Measurements example

VI = Volume Indicator

EI = Efficiency Indicator

QI = Quality Indicator

TI = Time Indicator

CI = Cost Indicator

The additional 5 Indicators

CostTime

Quality

Input

Output

Process


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Alignment of Business and IT


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The Value Tree is a practical tool to help understand values


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Business Value Tree


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The different Business Value areas – Increase Shareholder Value


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The different Business Value areas – Improve Competitiveness


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The different Business Value areas – Lower Risk


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The different Business Value areas – Efficient Operations


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Business Value Tree


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How to understand and use the Value Tree


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Business Value Tree


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Business Value Tree – support Business Model imperatives


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How the Business Model Imperatives are mapped to the different Values


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Business Model Imperatives – Focused


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How the Business Model Levels are mapped to the different Values


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How the Business Model Competencies are mapped to the different Values


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Case study “Arla Foods “IT history” and the direction outlined in the strategic IT plan for 2007-2012.”

BUSINES

S Mod

el

ARCHIT

ECTU

RE

Business Modularity

Source: Case study ”Arla Foods IT history” (Adapted from the book: Business Process Management – The SAP Roadmap, 2009)

© SAP 2009 /

BUSINESS

ARCHITECTURE


[



BUSINES

S Mod

el

ARCHIT

ECTU

RE

Proce

ss M

odel

Business Modularity


© SAP 2009 /

BUSINESS

ARCHITECTURE

APPLICATION

ARCHITECTURE


[



BUSINES

S Mod

el

ARCHIT

ECTU

RE

Proce

ss M

odel

TECH

NICA

L

ARCH

ITEC

TURE

Business Modularity


© SAP 2009 /

BUSINESS

ARCHITECTURE

APPLICATION

ARCHITECTURE

TECHNICAL

ARCHITECTURE


[



BUSINES

S Mod

el

ARCHIT

ECTU

RE

Proce

ss M

odel

TECH

NICA

L

ARCH

ITEC

TURE

Service OrientedArchitecture

Service Orientation

Business Modularity


© SAP 2009 /

BUSINESS

ARCHITECTURE

APPLICATION

ARCHITECTURE

TECHNICAL

ARCHITECTURE


[



BUSINES

S Mod

el

ARCHIT

ECTU

RE

Proce

ss M

odel

TECH

NICA

L

ARCH

ITEC

TURE

Service OrientedArchitecture

BPM

SOA

Service Orientation

Business Modularity


© SAP 2009 /

BUSINESS

ARCHITECTURE

APPLICATION

ARCHITECTURE

TECHNICAL

ARCHITECTURE

BMM


[


Case study “Arla Foods IT history” and the direction outlined in the strategic IT plan for 2007-2012.”


© SAP 2009 /

Business Model

Processes

IT


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© SAP 2009 /

(Standardized Technology and Optimized Core)

Business Model

Processes

IT


[



(Business Modularity)


© SAP 2009 /

(Standardized Technology and Optimized Core)

Business Model

Processes

IT


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SAP SRMNetweawerSAP ERP SAP SCM SAP PLMSAP CRM

The Business Model linked to SAP Solutions


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Support Activities Value PointsCritical Success Factors

Strategic Objectives

General Administration

Product and Project Portfo. Management

Corporate Service

Corporate Service

Corporate Service

Business A

dministration Financials

Support Activities

Financials

Analytics / Information Integration

Increase focus on creditworthy customer segments

Improve Capital Management

Increase Operational Efficiency

Differentiate credit treatment of customers/segments

Improve and standardize credit assessment processes

Improve collections processes

Better alignment of business planning, management & reporting functions

Reduce Sales and Administration Costs

Increase Shareholder Value

Better alignment of financial accounting & analysis functions

Drive greater financial predictability Optimize Intelligence Lower Risk

Improve monitoring and management of risk and compliance

Optimize Regulation Compliance

Improve/implement internal control frameworks and policies

Improve Risk Planning

Improve company-wide monitoring and management of risks

Improve Risk Management

Improve identification and assessment of risk

Increase emphasis on risk identification and management

Analytics

SAP Solutions linked to Value Drivers


[






Corporate Service

Corporate Service

Corporate Service

Business A

dministration

Analytics

Financials

Support Activities

Financials


Increase focus on creditworthy customer segments

Improve Capital Management


Differentiate credit treatment of customers/segments

Improve and standardize credit assessment processes

Improve collections processes

Better alignment of business planning, management & reporting functions

Reduce Sales and Administration Costs


Better alignment of financial accounting & analysis functions

Drive greater financial predictability Optimize Intelligence Lower Risk

Improve monitoring and management of risk and compliance

Optimize Regulation Compliance

Improve/implement internal control frameworks and policies

Improve Risk Planning

Improve company-wide monitoring and management of risks


Improve identification and assessment of risk

Increase emphasis on risk identification and management



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Value PointsCritical Success Factors


Improve production performance management methods and tools

Improve Development & Production


Improve materials performance management methods and tools

Improve logistics performance management methods and tools

Improve Logistics, Material & Services

Improve material performance management methods and tools

Improve service performance management methods and tools

Improve procurement performance management methods and tools

Improve Corporate Services

Improve establishment of and adherence to service-level targets

Improve HR performance management methods and tools

Improve/consolidate IT performance management methods and tools

Support ActivitiesGeneral Administration


Corporate Service

Corporate Service

Corporate Service

Business A

dministration

Analytics

Financials

Support Activities

Financials




[




Improve sales performance management methods and tools

Improve Responsiveness Improve Competitiveness

Improve service and support performance management methods and tools

Improve marketing and advertising performance management methods and tools

Improve Brand Awareness

Increase focus on business insight and forward-looking information

Reduce Sales and Administration Cost


Reduce business risk by aligning with changing market needs

Optimize Intelligence Lower Risk

Reliable customer intelligence

Improve identification and prediction of industry and market trends

Secure use of information that is accurate and real-time

Provide greater predictability in performance

Improve access to information and analytical tools

Improve analytical processes and tools

Improve identification of opportunities and threats

Better cost transparency

Improve access to and distribution of performance information

Improve analysis of managerial information

Improve assessment and benchmarking of business process performance

Support ActivitiesGeneral Administration


Corporate Service

Corporate Service

Corporate Service

Business A

dministration

Analytics

Financials

Support Activities

Financials




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Corporate Service

Corporate Service

Corporate Service


Business A

dministration

Financials

Financials

Support Activities

Financials

Improve program management processesImprove Corporate Services


Better settings for innovation to flourish Strengthen Innovation Improve CompetitivenessImprove project management

Improve utilization of product development channels

Continuously track and manage the realization of project benefits


Lower Risk

Improve alignment of projects with program and business objectives

Improve assignment of resources to projects

Improve coordination and communication across programs & projects

Improve identification and management of program/project risks

Structure programs/projects to deliver benefits progressively




[





Marketing, Sales & Service

Business O

perations

Sales

Sales

Sale & Service

Sale & Service

Primary Activities

Marketing

Marketing

Marketing

Marketing

Improve campaign design and management processes and tools

Improve Customer Interaction

Improve Competitiveness

Improve sales forecasting and campaign execution processes and toolsImprove marketing strategy Improve Brand AwarenessTailor marketing approaches to customer segments

Develop and cultivate good willDevelop and leverage strong brandImprove effectiveness of marketing and advertising processes

Improve brand awareness/Elevate brand image

Rationalize and/or refocus channel/media usage

Improve brand strength and good willOptimize marketing channelsApply brand to new and unbranded products

Increase emphasis on differentiated products and services

Increase Revenue Through Price Optimization



[




Marketing, Sales & Service

Business O

perations

Sale & Service

Sale & Service

Primary Activities

Marketing

Marketing

Marketing

Marketing

Sales

Sales

Gain market share while others recover from external shocks

Increase Revenue Through Volume Optimazation


Penetrate new markets better and faster Enter new segments and markets Improve account management strategies

Refocus and/or refine retention priorities and strategies

Improve cross-sell and up-sell campaigns

Tailor sales approaches to customer segments

Target new segments within current geographiesStrengthen customer baseIncrease sales by guaranteeing 24/365/100% availability

Tailor account management approaches to customer segments

Increase sales to existing customers Target new geographiesExpand sales and advertising channels



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Business Value Tree


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How the key focus areas of Business Processes are mapped to the different Values


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Business Value Tree – Responsible C-level Executives


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How the responsible C-level Executives are mapped to the entire information


[Top Down Approach

Bottom Up Approach

From Business Model to process breakdown and the connecting to the SAP system

SAPSolution

Composer

SAPSolution

Composer


[


Performance Measurements CFO – Example: Buttom up approach


[


Performance Measurements CIO – Example: Buttom up approach


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Top Down approach: example 1: "Focused"


[




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SAP's ASAP 7 approach summery (BPM/SOA/EA)Business Model Level 1Main Business Model with main Business competencies which produce internal and external value.- Business Architecture strategy

Business Model Level 2Business Model with business competency groups- Business Architecture alignment

Business Model Level 3The company’s Business Model competencies desribed in more detail - Business Architecture roll out

Process Level 1Main (management or support) processes with focus on whole company. – EA strategy

Process Level 2Core processes with focus for example on department level.– EA ownership

Process Level 3Business processes will be described as a set of level 3 processes (sub process) and are the starting point of SAP process cycles (EA roll out)

Process Level 4Sub process needed to map To-Be processes to SAP Solutions(EA roll out)

Process Level 5• Process steps needed to map To-Be processes to SAP Solutions

Overal Strategic Anchoring• Corporate Strategic Business Objectives (SBOs)• Company’s management models• Core competencies• Responsible

Strategic Anchoring• Department Strategic Business Objectives (SBOs)• Critical Sucess Factors (CSFs)• Core competencies (Differentiated and Competitive)• Cost & Revenue

Tactical Anchoring• Critical Sucess Factors (CSFs) • Key Performance Indicators (KPIs)• Core competencies (Differentiated and Competitive)• Value opportunities• Identify and define service enablement needs •Define Performance and Monitoring needs

Main Groups of Processes• Identify main process• Document main process flow• Document main process relations• Document main process input and output (match to KPIs)

Core Processes• Identify different end-to-end business processes• identify Process ownership (eventually)• Document core process input and output

(define PPIs)

Business Process• Document process cycles “end-to-end” with

input and output simulations (define PPIs)• Apply the 10 process parameters• Apply Netweaver BPMN process meta model parameters

Sub-Process• Document process activities with static and dynamic

simulation and optimization (define PPIs)• Apply SAP Composite application process

characteristics (including service definition)• Define monitoring and measurements

Sub-activity Process• Document sub activities with static and dynamic

simulation and optimization (define PPIs)• Apply SAP Composite application process

characteristics (including service definition )• Define monitoring and measurements


[ Defense - Value Drivers

Business Governance

Core BusinessBusiness

ProcessManagement

Technologydelivery

Business opportunities

AutomationTechnologyManagement

LineManagement

ValueManagement

Balan-cing


[ Level 3 - Defense Business Model

Personnel strategy & Planning

Mission Analysis & Planning

Program Management

Supplier Relationship Management

Logistics

DeploymentManagement

Force Operations

Program, execution

Inventory Tactical& Traceability (RFID)

Business ProcessManagement

Distribution ProcessPlanning

Corporate Planning

Alliance Mgt.

Line of DefensePlanning

Business PerformanceManagement

External MarketAssessment

Organization &Process Design

Legal and Regulatory

InStrategicProcurement

Real Estate, Facilities & Equip

HR Administration

InformationTechnology Mgt.

FinancialManagement andPlanning

RiskManagement

Corporate FinanceAnd Tacticals

Treasury

Force production Sub Assembly

Accountingand GL

Force & material Planning

OperationalStrategy & Planning

Weapon & Air worthiness (weapon Certification)

ProgramConfiguration Management

StrategicProcurement

TaskManagement

Task Planning

Research & Advanced Development

ProgramAnalysis & Validation

Process Design, Analysis & Validation

Tool Design& Build

External ProductionDistributionInternal ProductionFinancialManagement

DefenseAdministration

Contract Management

Agency Audit (DCAA)

Government Relations

Communications

Systems Engineering & RequirementsManagement

Force deployment

Supplier Management

Program Security

Knowledge Management

Force production Final Assembly & Test

Strategic Sourcing

TaxManagement

Advanced portfolio execution

Logistics Scheduling

Materials Research

Portfolio FinanceAnd operations

Portfolio Strategy & Planning

Opportunity Management

Demand Planning & Analysis

Business ProcessManagement

Technical Support

MROManagement

Field Services

Material and infrastruc-ture planning

Distribution Planning

Portfolio Strategy

PartsInventory Mgt

WarehousingOperations

Maintenance & Repair Operations

Technical Data & Information

e-diagnostics& Prognostics

Repair & Overhaul

WeaponsManagement

= Core Competitive Core Differentiated= Value opportunity=

Projectexecution

Process execution

Copyright: Prof. Dr. Mark von Rosing

Internal Operations external Operations

Analyzing defensecapacity +10/20/30 years


[ Level 1 - Processes


[

© SAP 2009 /

Level 2 - Processes

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

ConfidentialConfidential

Confidential

Confidential

Confidential

Confidential

Confidential

ConfidentialConfidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential

Confidential


[ Lessons Learned


[


Link between Business Model and the overall Enterprise Architecture


[


Link between Business Model and the overall Enterprise ArchitecturePerformance Management and Business Governance


[


To Be

Design

Process Owner CIO Project Manager Business Unit Owner

The new ASAP Methodology support the 4 lifecycleASAP Methodology including BPM Technology – BPM, SOA and Value perspective

Process Management

Performance Management

Value Management

Process/Perfor Gov. IT Gov. Project/Prog Gov. Business Governance


[


Key Learnings

1. Learned how to apply a business value management road map from SAP

2. Discovered how a company can create, realize, and measure business value

3. Explored a value-based management approach that can create the needed value companies are looking for today

4. Had fun……

Questions: Mark von Rosing ([email protected]) Henrik von Scheel ([email protected])


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[

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value based management presentation at sapphire 2010

Technology

real advantage

value realization

rosing henrik

value creationreal experience

author prof mark

measure business value

realizingand measuring

needed value companies