The Value of Strategic Enterprise Management

Creating value for customers and shareholders is something all insurance companies strive to achieve. But how does a company continuously deliver value amid global and knowledge-based competition? To deliver that value, good business strategies are required to become very good business operations. Management needs to execute these strategies not only within a company, but also throughout a company’s entire business network. Many companies are developing these strategies by using Strategic Enterprise Management (SEM), a solution that facilitates comprehensive value-based decision-making.

DEFINING SEM

What is SEM? Consider SEM as the next step in the evolution of computer-based support systems for business. Back in the 1960s and 1970s, businesses automated the basic transaction processing. For insurance companies this typically meant custom-developed Cobol programs that automated policy administration, claims, sales commissions and reinsurance processes. Maintained by an IT ‘priesthood’ and largely used by administrative staff, these operational systems were usually batch-interfaced to a general ledger system for financial and statutory reporting. The 1980s saw the advent of the microcomputer, along with desktop analytical applications, particularly spreadsheets, providing tools for analysts and middle management. The 1990s brought integrated Enterprise Resource Planning (ERP) applications, which coordinated back-office business processes for procurement, human resources and financial management. In the last few years we have seen the advent of Customer Relationship Management (CRM) software, which supports call center and field operations personnel with a consolidated view of customer information and transactions.

SEM solutions are focused on a more exclusive audience — senior and executive management of an enterprise. What exactly constitutes an SEM? Step back for a minute and think about what senior management in a large organization does. Typically this involves monitoring actual and planned results, comparing the results of your own enterprise against that of your peers, and brainstorming on scenarios for evolving, restructuring and generally improving the business. Looking at it objectively, senior management is not a black art, it’s just a set of business processes — processes that take skill and experience to execute. SEM provides a set of software tools that delivers structure and methodology for executive management business processes.

COMPONENTS OF SEM

SEM will usually have software components designed specifically for senior management. For example, some of the components from SAP’s SEM solution include:

Balanced Scorecard. Nolan and Norton’s Balanced Scorecard methodology compares conditions and key performance indicator, both internal and external.

Business Planning and Simulation. This supports not only financial budgeting scenarios, but also ‘what-if’ analysis on possible corporate restructurings.

Stakeholder Relationship Management. This provides a toolkit for delivering corporate information tailored to the needs of internal and external constituencies.

Business Consolidations. This provides the rigor of a legal consolidation methodology to multiple types of master data, including companies, profit centers and lines of business.

ENABLING TECHNOLOGY

New advances in business software are made possible by the maturation of an underlying and usually arcane technological advance. SEM solutions are no exception to this. SEM solutions are made possible by the advances over the last few years in data warehouses, which can be understood best in terms of transaction processing systems. Modern Online Transaction Processing (OLTP) systems use a relational data model, which is optimized for fast, secure transaction processing. Reporting and analysis is the second priority for OLTP systems, as anyone who has tried building complex reports with ‘what-if’ scenarios in an OLTP system can attest. Data warehouses were developed to address this shortcoming. A data warehouse extracts information from the OLTP system, and restructures it into a format that is easier for reporting and analysis. The data warehouse provides the infrastructure to an SEM system.

There are a number of challenges associated with staging a data warehouse to support SEM. Deploying an SEM system involves importing and combining data from internal systems and external sources. Checks and balances must be in place to ensure that you are comparing ‘apples to apples’ once the data from discrete sources is grouped together in the data warehouse.

Most insurance companies face added complications due to complex sales commission systems, and multiple policy administration and claims systems. In some cases, these systems support products and customers who have been on the books for decades. The challenges of deploying an SEM system are similar to those of implementing a CRM solution — installing the desktop application is the easy part. The hard work comes in combining data from multiple non-integrated operational systems.

There are certainly challenges in deploying an SEM solution — having your back-office systems in order, building and deploying the data warehouse, incorporating data from external sources. The potential win from an SEM solution will be in providing structure, methodology and consistency to the black art of executive management, and creating that value customers and shareholders seek.

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