Sinzig is Vice President at SAP AG in GBU Financials, responsible
for analytic applications. SAP Strategic Enterprise Management (SAP
SEM) is part of his responsibilities. Before joining SAP AG, he
worked in the areas of Management Accounting and Databases at Frankfurt
University. Werner holds a Ph.D. in business administration. He
studied industrial engineering and management at the Technical University
of Darmstadt. He is co-editor of the German business magazine Wirtschaftsinformatik.
Q. What is SAP SEM?
SAP SEM stands for SAP Strategic Enterprise Management. It is a relatively
new offering from SAP that allows enterprises to conduct strategic enterprise
management and planning activities more accurately and effectively, with
the ultimate goal of maximizing shareholder value.
SAP SEM has contained the Balanced Scorecard since 1999, and was the
first software solution on the market to be certified by the Balanced
Scorecard Collaborative at the end of that year. The Balanced Scorecard
Collaborative is a company established by the creators of the Balanced
Scorecard Concept, Robert Kaplan and David Norton.1 Using value-based
management methodologies and Balanced Scorecard techniques, SAP SEM incorporates
the requirements of all stakeholders (e.g., shareholders, employees, business
partners, and other interested parties) into critical decision-making
processes. The solution enables executives to communicate more effectively
with stakeholders, assess their business strategies through scenario simulation,
perform effective business planning and budgeting, and link strategies
with operative target-setting and resource allocation. From there, they
can then consolidate financial data according to legal requirements and
value-based accounting rules, and monitor results through the Management
Cockpit solution and key performance indicators (KPIs).
SAP SEM brings unprecedented relevance and viability to an enterprise's
strategic management activities. It ushers in a new concept in strategic
business planning, where high-level strategic decision-making becomes
part of the day-to-day operation of the company, instead of remaining
an annual or quarterly meeting-based process.
Q. Why is there a need for this kind of tool?
A number of significant trends in the way enterprises are organized and
how they interact lead us to the conclusion that a tool like SAP SEM is
essential for effective strategic enterprise management in today's world:
- Organizationally, enterprises are becoming more global: markets are
rapidly expanding, and at the same time "eco-systems" - comprised of
joint ventures, partnering, reselling, cooperatives, associations, etc.
- are ballooning. Internal organizational structures are becoming both
more decentralized and multidimensional (e.g., by product, region, sector),
all of which places increasing demands on the planning and coordination
process of an enterprise.
- Planners are facing the task of digesting and determining the relevance
of an unprecedented flood of information, which is often both complex
and fragmented. It is becoming more and more difficult to make informed
- Finally, we have seen a huge shift in corporate focus toward customers
and investors as they strive for market share and capital investment.
Stakeholders have a right to know how their interests will be served
by a company's strategic direction, and to demand that the enterprise
make sense of the varying interests among those groups.
All of these factors make traditional strategic planning methods, especially
on an annual or periodic basis, dangerously obsolete. Today's enterprises
need a much more dynamic approach to strategic planning, and SAP SEM provides
Q. SAP is typically equated with number-crunching activities, not
enterprise management and planning solutions. With SAP SEM, is SAP stepping
out of the accounting office and into the boardroom?
Yes, SAP has traditionally been acclaimed for transactional applications:
financials, materials management, supply chain management, human resources,
and, more recently, customer relationship management. Now, with the SAP
Business Information Warehouse, there is a universal platform for all
kinds of analytic applications.
The unique innovation introduced by SAP SEM is the consolidated data
of all these transactional applications to enable CFOs and their teams
to manage strategic enterprise processes in a dynamic manner in a real-time,
In this way, SAP SEM addresses the unique needs of the CFO, who is responsible
for performance management. CFOs want a system in which they can describe
the enterprise's strategy, evaluate alternatives, integrate operational
business plans, measure actual performance with the data out of an ERP
system, and have useful feedback in terms such as key performance indicators
The power of SAP SEM is that it brings a corporate financial strategy
to life - it closes the gap between creating a "theoretical" high-level
strategy and making it operational. SAP SEM translates high-level strategy
into the everyday activities of a company by linking strategy to the compensation
system, and providing new ways of defining key performance indicators
so that they are real, transparent, and measurable.
Q. How does SAP SEM address planning?
SEM-BPS (Business Planning and Simulation), one of the five components
that comprise the SAP SEM solution, offers a complete suite of financial
planning applications for integrated budgeting, target-settings and simulations.
As compared to conventional transactional planning, it is based on flexible
data structures to meet the planners' needs in terms of "what-if"
analysis and "how-to-achieve" planning. It integrates different
planning methods, so you can combine, for example, strategic and operational
planning, or short-term budgeting with long-term planning, or combine
simulation with target settings.
SEM-BPS offers a number of planning applications for a wide range of
purposes. This includes Financial Statement Planning, Investment Planning,
Cost Center Planning, Headcount Planning, Profitability Planning, and
One key benefit of SEM-BPS is its high-level integration of different
plan sections, which helps to balance the need for budget information,
targets, and analytic insights. This way, both line and top-level management
can easily understand the overall business plan and align it with the
SEM-BPS is highly integrated with the other SAP SEM modules and with
mySAP.com components. Starting with Release 3.0A, SEM-BPS also includes
a number of pre-fabricated best practice planning applications to accelerate
SEM Components - Delivering Continuos Strategic Management Between
Shareholders, Enterprise Management, Middle Management, and Employees
Business Information Collection
SEM-BIC provides functionality for an automated and semi-automated
collection of structured and (especially) unstructured business
information from internal and external sources for the entire information
supply chain - for example, competitor or market information from
the Internet, including:
- Automatic search for relevant business information
- Editing, structuring, and linking with structured quantitative
- Information distribution
SEM-BPS supports integrated strategic and operational business
planning on multidimensional data structures. These functions include:
- Creation of dynamic and linear business models n Modeling and
simulation of scenarios n Scenario planning
- Evaluation of scenarios taking into account the business risk
- Resource allocation as part of business planning and budgeting
- Cross-functional enterprise planning and rolling forecasting,
triggered by strategic key performance indicator (KPI) targets
SEM-BCS provides functionality for financial consolidation
and value-based accounting. These include:
- Automated value-based adjustment postings
- Automated assignments and allocations - e.g., moving from assets
to reporting units
- Currency translation n Inter-unit eliminations
- Consolidation of investments n Consolidation according to different
internal procedures, and according to local and international
statutory accounting requirements - e.g., US GAAP, IAS
SEM-CPM supports the definition, analysis, visualization,
and interpretation of KPIs. It uses innovative visualization techniques
for more effective management.
SEM-CPM provides a comprehensive infrastructure for performance
management and related communication processes across the entire
organization and with business partners.
It also helps you create your own interpretation models, such as
Balanced Scorecards, Value Driver Trees, and Management Cockpit
SEM-SRM supports stakeholder communication: the stakeholders
are informed Management regularly and systematically about the business
strategy and its effect on enterprise value (their investment),
either through push services - e.g., automated e-mails - or through
pull services - e.g., a Web-based Enterprise Stakeholder Portal.
SEM-SRM also helps collect feedback from stakeholders in a structured
manner and passes this on to other applications (SEM-CPM and SEM-BPS).
Q. What is the relationship between SAP SEM and Business Information
SAP SEM runs on top of the Business Information Warehouse infrastructure
as an analytic application that addresses specific questions and issues
regarding strategic management. It provides unique views of the "modeled
world" - and thus is much simpler to implement than an operational or
Q. How does SAP SEM address stakeholder demands for profitability?
SAP SEM assists not just in how a company manages, but in how it communicates
its strategy - which is after all a critical part of managing. It is no
longer enough to present good financial results in your balance sheet
and annual report. You need to report on strategic issues - the "intangibles"
of a company. You have to explain the gap between the market valuation
and the balance sheet's real value by identifying those intangible values
that exist in your company, e.g., the know-how and motivation of your
But SAP SEM Stakeholder Relationship Management goes beyond this. Instead
of the traditional one-way communication to inform investors about results,
we offer an interactive tool that also allows you to collect structured
feedback via questionnaires, and invites investors to perform dynamic
simulations of corporate strategy and goals to see the effects on this
investment in the company.
Q. What differentiates SAP's offering from competitors' products?
SAP SEM is significantly different in two ways:
- For one thing, the product is here! Right now! We have customers,
we have installations - and we have lots of them. So we can show you
systems and customers who use it successfully today.
- Moreover, SAP SEM is the only offering that covers all facets of
strategic enterprise management. Other offerings merely provide reporting,
but lack consolidation, budgeting, or planning functions. They only
offer partial solutions, while we cover the whole spectrum.
Q. What is the ultimate value of SAP SEM?
SAP customers are already investing a lot in customer relationship management
and supply chain management solutions to improve their operational processes.
The bottom-line value of both is integrated and measured in SAP SEM. In
the past, enterprises focused predominantly on optimizing the operational
system. But we feel the future focus will be on strategy - not just on
doing things right, but on doing the right things!
SAP SEM allows an enterprise to turn strategy into action! SAP SEM covers
the whole strategic process: definition of strategy, simulation, and evaluation
of alternatives; to operational planning on the BU level and definition
of implementation procedures and initiatives; to measurement; to action
items. SAP SEM provides a true value-based management system.
Using SAP SEM, executives can determine precisely which projects are
worked on, what initiatives the budget is spent on, where resources are
allocated, how they are linked to each other, and how they are linked
to compensation plans, budgets, and targets. Executives can define new
initiatives and new strategy maps - and can link all existing initiatives
to them. They can confidently implement new, more detailed projects. They
can see how day-to-day operational activities merge. They can take data
and make them into new, more revealing KPIs. They can benefit from new
products, faster time to market, and a whole new streamlined efficiency
to the organization.
It's not just knowledge, it's understanding - and it doesn't come
out of an ERP system, but rather by harnessing the power of SAP Strategic
Enterprise Management. In doing so, the inner life of the enterprise,
its history, and future prospects all become much clearer, and the connection
between "definition" and "execution" is complete.