Over 3,000 SAP financial, HR, and GRC customers gathered this morning to hear Sanjay Poonen, President, Go-to-Market for SAP, and Tom Davenport, critically-acclaimed knowledge management guru and distinguished professor at Babson college, deliver the Financials 2011, HR 2011, and GRC 2011 conference keynote address.
The theme of the day was competitive advantage through business analytics. Poonen and Davenport both emphasized the rapid rate at which business is changing around the world and the imperative for access to meaningful information that will drive smart business decisions.
Poonen shared his insights into four key areas in which organizations need to excel to achieve competitive advantage: Operational excellence, analytics and performance, risk and compliance culture, and people and talent agenda. In each area, Poonen provided examples of companies that are succeeding and how they are strategically leveraging SAP solutions to:
Better manage liquidity, streamline key business processes and reduce the cost of compliance
Analyze online customer behavior which is then used to improve performance
Formulate a balanced approach to risk management that leads to a risk-aware corporate culture
Successfully compete for skilled workers by linking job requisitions to hiring agencies
At this week’s conference, Poonen advised attendees to learn more about new solution rel
eases, such as SAP BusinessObjects Business Intelligence 4.0, and SAP BusinessObjects GRC 10.0. According to Poonen, dramatic changes and improvements have been made to both portfolios in response to customer requests for new functionality. He also hinted at a new release of SAP BusinessObjects EPM 10.0, which will be unveiled as SAPPHIRE.
Tom Davenport took the stage and suggested that historians will call this period the “age of analytics—“ the age in which companies use information to manage themselves better. To bolster his claim, he quoted Peter Drucker, who, before his death, opined that the only industries that hadn’t significantly improved productivity in the past 100 years were health care and education. Davenport pointed out that since Drucker made that statement, innovations like electronic medical records have revolutionized health care. In education, data from programs such as “No Child Left Behind” is being analyzed by school districts to make better decisions about the best approaches to education. Both, Davenport believes, are indicators that the age of analytics is here.
Davenport offered an interesting comparison of traditional BI environments and analytical applications. In the multi-purpose BI environment, BI applications provided a large toolbox that was not always user-friendly, and was built on a large, complex data warehouse. While this may have worked well for professional analysts, it was not helpful to the average manager or business user.
In contrast, Davenport argued, single-purpose analytical environments embed analytic capabilities into business applications. Analytics are “baked” into the processes that business users execute every day. A
ccording to his most recent research, Davenport has found that companies using embedded analytics are able to make the right decisions more readily than companies that depend solely on multi-purpose BI.
Davenport believes that the shift to mobile devices is leading to a trend in which the device becomes the desktop. Business users of mobile devices do not want large black and white reports with overwhelming amounts of data. Instead, they are looking for graphical, easy-to-interpret analyses that show movement and trends in key areas. The trend toward mobility is inciting demand for user-friendly analytical applications. These may be provided by SAP, third-party companies, or may even be built by companies themselves. Davenport provided dozens of examples of companies he’s worked with who are already using analytical applications to analyze spend in the life sciences industry, perform financial planning and modeling in the public sector, monitor supplier risk in global manufacturing companies, and analyze the reasons for employee attrition in the telecom industry, just to name a few.
Poonen discussed the impact that in-memory computing is having on analytics. Now that memory is easily available at very low cost, the capability to analyze very large amounts of data has never been greater. Analyzing terabytes will soon be the norm. This, in turn, means that companies will be able to quickly analyze large amounts of data and make business decisions very quickly.
Davenport cautioned the audience that analytical applications, while important, are not a magic bullet. It’s not enough to install new technology and think that your business will automatically become smarter and faster. He revealed that companies that successfully improve a decision intervene in the process o
n multiple fronts—not just technological—and that it takes an average of 5.3 interventions to successfully improve a business decision.
Davenport shared an example in which Stanley Works made eight interventions over a period of six years to improve gross margins from 34% to 40%. These interventions involved the use of technology, but they also involved changes in process, culture, and leadership. Was it worth it? Davenport thinks so—a 6% improvement in gross margins enabled Stanley Works to acquire Black & Decker. Had that improvement not been realized, the acquisition may have happened the other way around.
Both Davenport and Poonen heavily stressed the importance of balancing the left brain versus right brain approach to risk management—a concept that Davenport calls the Tao, or yin and yang, of risk. Many of the financial and insurance firms that failed just a few years ago had very sophisticated risk analytics in place, and risk management was approached very scientifically, or in left-brain fashion. Both speakers cautioned the audience about the dangers of building up left brain capabilities to the detriment of a right brain approach, which emphasizes the organizational and cultural aspects of managing risk. Poonen advised his listeners to carefully balance the science and art of risk management.
In the end, new technologies for analyzing risk and performance can be tremendously powerful—as long as they are closely aligned with the right organizational culture and leadership. And as Tom Davenport pointed out, leadership just doesn’t come from the head office—analytical leaders at every level of finance, HR, and compliance have an opportunity to make an impact and help to transform their businesses. For the next 4 days in Las Vegas, there will be ample opportunity for SAP customers to learn how they can make this transformation a reality.
If you are attending the conference, I’d love to hear your thought on how you hope what you learn this week can help your company mitigate risk and improve performance. Please post your comments here.