Stay with me here, this is for the SCOM management group installation
Follow expert published documentation
Kevin Holman’s blog
2016 https://blogs.technet.microsoft.com/kevinholman/2016/10/22/opsmgr-2016-quickstart-deployment-guide/
2012 R2 https://blogs.technet.microsoft.com/kevinholman/2016/10/22/opsmgr-2016-quickstart-deployment-guide/
2012 (not supported) https://blogs.technet.microsoft.com/kevinholman/2012/04/26/opsmgr-2012-a-quickstart-deployment-guide/
TechNet
2012 https://technet.microsoft.com/en-us/library/hh298609(v=sc.12).aspx
2007R2 QuickStart https://technet.microsoft.com/en-us/library/bb418758.aspx
Using Local System for your core environment, SQL environment, etc. leaves you at high risk
Local Security Policy
Group Policy
No domain
No central password management
Definitely not recommended for an enterprise installation, who would want to support that?