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Test Your Analytics Aptitude

by SAP's Doug Merritt | SAPinsider

July 1, 2006

When it comes to analytics, SAP customers are asking questions about user adoption, bridging the disconnect between corporate strategy and execution, and what SAP recommends its customers do. SAP Executive Vice President Doug Merritt lends insight to these discussions and reveals how SAP’s rebuilt applications can deliver analytic insight to all the individuals who need to act on it.
 

When it comes to analytics — the use of business insights in the context of a business process to enable appropriate actions — we find the most interesting questions to be around user adoption, the disconnect between corporate strategy and execution, and what SAP recommends its customers do. Measurements about user adoption and failure to execute on corporate strategy are very telling — see for yourself with this short quiz.

1.
What percentage of information workers are using analytics?
a) 20% b) 37% c) 65%  
2.
What percentage of companies fail to execute on their corporate strategies?
a) 37% b) 65% c) 90%  
3.
How many prebuilt composite analytic applications does SAP offer?
a) 30-59 b) 60-99 c) 100+  

In this article, SAP's Doug Merritt, Executive Vice President, Suite Optimization, lends insight to these discussions.

Doug Merritt
Executive Vice President,
Suite Optimization,
SAP Labs, LLC

1. What percentage of information workers are using analytics?
Answer: b) 37%

According to Gartner, the percentage is 37%.1 You are going to see this number grow dramatically in the near future. For SAP customers, analytics will be embedded in the business functions they work with day in and day out. For example:

  • Working with mySAP ERP Financials, a contracts manager will be able to see blocked orders, review credit history, and, if appropriate, authorize credit increases or order releases.

  • A sales and marketing executive will use an analytic application to evaluate how well regions are performing against plans, and to allocate more funding to marketing campaigns, where appropriate.

  • Using vendor managed inventory (VMI) analytic applications, supply chain executives will be able to know where stock is running low and schedule additional replenishments as needed.

Embedding analytic tools and solutions within the very business processes they support is the catalyst most companies have been waiting for. Everyone recognizes that decision support is vastly enhanced by simulation modeling, analysis of past behavior, and fact-based reasoning, but the path to adoption was fragmented. You can't expect a call center agent, for example, to leave the confines of his call center application in the middle of a call in order to check on a customer's escalation or their financial profitability. But embed analytics and analytic processes inside this same application, and suddenly all relevant information from SAP and non-SAP applications is aggregated, integrated, and presented in a single, actionable view, allowing this call center agent to focus on serving the customer while at the same time leveraging all resources available within the enterprise.

Nor can you expect an executive to constantly check how well her division is performing against strategic goals. Leveraging SAP composite analytic applications and SAP infrastructure, however, this same executive can monitor the most up-to-date strategic metrics and accomplishments, easily understand root causes, and determine where to take corrective or supportive actions. It's not enough to provide great analytic tools and insights. The context in which they are delivered is also key, and so is the simplicity of the user experience.

I think I'm a typical executive, perhaps a bit more technical than most, and I refuse to spend time sorting through spreadsheets to make my decisions — I just don't have the time. On the flip side, I may not turn to analytics either if I perceive them to be too complicated. Another problem with analytics in the past was that the name "analytics" really was a euphemism for a crop of tools and technologies better suited for a PhD statistician than for a businessperson like me. As the latest wave of search engines proves, if you simplify the interface, you can create a tool that is incredibly powerful yet so easy, even my four-year-old can do searches and get meaningful results.

If you look at the analytic applications offered by SAP today, you will find that they hide technical complexity, are simple to use, and are delivered in the context of a specific business process, optimized for a specific role, and often tailored to the requirements of a specific industry. Management of internal controls (MIC) is one such example. We've created a set of analytic applications around MIC that do the analysis for you so you can optimize your internal controls processes.

Figure 1 lists just a sampling of the more than 100 analytic applications now available.2 I'm particularly excited because even prior to these applications entering Ramp-Up, we already have customers, including SAP itself, using these applications for their business-critical applications.

Application SAP xApp Analytics Application
Customer Relationship Management (CRM) • Competitive Win/Loss Analysis
• Manage Sales Pipeline
• Marketing Project Performance Analysis
• Service Organization Performance Analysis
Financials (FI) • Blocked Order List
• Corporate Governance
• Credit Monitor
• Early Warning List
Human Capital Management (HCM) • Headcount
• Overtime — Illness
• Recruiting
Manufacturing • Capacity Utilization — Plant Level
• Inventory Overview
• Overall Equipment Effectiveness
• Quality — Problem Analysis
Product Lifecycle Management (PLM) • Average Number of Incidents per 1000 Employees
• Work Area, Exposure Log
Supply Chain Management (SCM) • Demand/Supply Match
• Global Capacity Utilization
• Global Inventory View
• Order Analytics
Supplier Relationship Management (SRM) • Contract Management
• Supplier Order Management
Industry SAP xApp Analytics Application
Aerospace and Defense • Pilot Report
• Vendor Analytics
Banking • Regulatory Capital Requirements
• Overview of Collaterals and Guarantees
Consumer Products and Life Sciences • Brand Analytics
• Category Promotion Analysis
• Channel Performance YTD
• Trade Marketing Analytics
Public Sector • Funds Management
• Tax and Revenue Management
Figure 1
Some of the More than 100 Function- and Industry-Specific SAP xApp Analytics
Applications Now Available

2. What percentage of companies fail to execute on their corporate strategies?
Answer: c) 90%

The percentage of companies that have a strategy in place and fail to faithfully execute against it is staggering. I've seen some studies that place this figure as high as 90%.3 One key, complicating factor is that strategy is constantly changing. Another is the time it takes for a strategy to leave the executive's office and reach all the individuals who need to act on it. Communicating strategy to the masses and getting them to fully understand it and devise a viable plan is difficult enough, let alone getting the execution right.

When it comes to corporate strategy, however, the question should not simply be: Did we execute on our strategy or didn't we? The questions I would also encourage your readers to ask are: Do we have the right strategy, and how do we know it's right? How effective is our strategy? How do we improve upon it? Developing winning strategies isn't a linear process.

It requires constant re-evaluation and refinement, and continual processing of lots of new data points.

The traditional approach is to have an executive somewhere set the strategy, which is then broken into a series of discrete objectives that are cascaded down the organization. In most companies, analytics only come into play after the strategy and objectives are in place and are used solely for the purpose of monitoring metrics that are already several levels removed from the strategy.

The power of new SAP xApp Analytics is that it bolsters all three of the distinct phases of strategy lifecycle management (planning, execution, and refinement) and the connections between them (see Figure 2).

Figure 2
The Three Phases of Strategy Lifecycle Management

Most analytic applications focus on the third area, geared toward tracking corporate strategy, which most think of as a "dashboarding" capability. The focus is on data aggregation and cleansing with a feedback mechanism so you know if you're on track or not.

We recognized the need to provide analytic insight into all three phases of strategy lifecycle management and have delivered applications that do so leveraging our SAP NetWeaver platform as well as elements of our ERP, CRM, SCM, and SRM applications to provide a strategic, integrated, actionable view of the business.

3. How many prebuilt composite analytic applications does SAP offer?
Answer: c) 100+

More than 100 prebuilt analytic applications are now avail-able for download from the SAP Service Marketplace.4 These are lightweight composite applications that, upon delivery, a VP of sales, a VP of marketing, or any line-of-business manager can immediately start to use. You have the ability to customize these applications, and I expect customers will do just that. But make no mistake about it: Out of the box, these analytic applications provide 90% of what's needed. We plan to deliver the first analytic application that fits this profile in Q3 2006.

And while these ready-made analytic applications represent a tremendous amount of value for our customers, we recognize that this is only a very conservative beginning. Given the flattening of the world that we're experiencing, and the wholesale transfer of competitive differentiation to intellectual property-bound activities, the ability to conduct simulation models or deep analysis is going to grow in importance as a critical component to setting yourself apart in the market.

In the traditional industrial world, there are limited resources, and you consume them very rapidly. The companies with the most resources used to be the ones who would win. In the new model, it is the companies who have access to the most talent that win. What's most interesting to me, as someone who manages a design center for analytic applications, is that human capital is the capital that makes the competitive difference. By providing the right applications, such as analytics, you can expand your investment in human capital, both in getting more skills and training and in sparking more excitement in your people. This creates a compounding effect in the type and amount of delivery that an empowered and energized team will create.

We started out in the late 1990s helping our customers get simple reports from their R/3 business applications. Today, with the introduction of SAP xApp Analytics, our vision is to deliver actionable information that significantly improves the real-time decision-making process for every information worker in the extended enterprise — providing timely, relevant, comprehensive information in the context of their role and business process. Additionally, we're helping IT to become partners to business by giving them composite, model-driven applications and the platform necessary to customize and extend what we deliver. Finally, we're changing the landscape for our partners, both services and software partners, by moving business intelligence from a tools discussion to the new world of composite analytic applications, allowing our partners to add their own expertise to augment our solutions. In a dynamic business environment, SAP's analytic solutions will be another key reason why the best-run businesses run SAP.


1 Source: Gartner Research, Gartner Business Intelligence Multi Client Study (2005).

2 See www.sap.com/solutions/xapps/analytics/index.epx for more information.

3 Source: Balanced Scorecard Collaborative, Strategy Focused Organization (2001).

4 Visit the SAP Service Marketplace at http://service.sap.com/SWDC and navigate to the download area following this path: Download --> Installations and Upgrades --> Entry by Application Group --> SAP xApps --> SAP xApp Analytics --> SAP xApp Analytics 1.1.


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