STRATEGY AND BUSINESS PROCESS MANAGEMENT
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1 STRATEGY AND BUSINESS PROCESS MANAGEMENT Techniques for Improving Execution, Adaptability, and Consistency CARL F. LEHMANN Principal Analyst BPMethods, LLC Desk: Cell:
2 About BPMethods A professional services firm focused on execution, performance & outcomes Specializes in Business Process Management & Continuous Improvement Helps management team & practitioners develop & refine BPM skills, techniques & practices Manages processes as a portfolio of strategic assets Core processes necessary to the creation and delivery of customer & shareholder value are managed to maximize customer value & financial returns Non-core processes that perform supportive or management functions are managed to minimize risks & control costs Improves results through modeling, analysis & simulation of new design or redesign alternatives Begins engagements by first understanding Business strategy Organizational structure The capabilities & limitations of in-place IT systems & resources 2
3 What BPMethods Offers Professional Services Managed BPM Services The Portfolio Management Service Develops and manages a Business Process Portfolio The Project Management Service Initiates and runs a Business Process Improvement Project The Program Management Service Drives and executes a Continuous Process Improvement Program BPM Guidance Services On-Demand Coaching an on call resource Business-Focused Training tailored BPM curriculum for management teams & workforce Products (used for BPM preparation or self-service) BPM Guides The Strategy Guide: How To Ensure That Your Resources Can Execute Your Strategy The Portfolio Guide: How to Document & Manage Business Processes as Strategic Assets The Readiness Guide: How to Assess the Ability of In-Place IT Systems to Support Process Change The Evaluation Guide: How to Evaluate Business Process Analysis Software BPM Software & Templates The BP Inventory Worksheet (Microsoft Excel) The BP Portfolio Template (Word) & The BP Portfolio Manager (Access 2007 Database) The IT Readiness Assessment Template (Microsoft Word) 3
4 BPMethods Value Solves business problems (improves end-to-end processes) Customer satisfaction Financial Operational Cost Quality Schedule Deploys strategic initiatives (designs & structures a set of processes) Open new markets Launch new products or services Mergers & acquisitions Regulatory compliance Enables continuous transformation (manages a Business Process Portfolio) Structures implementations or upgrades to assure strategic results ERP (finance, accounting, HR, others) Supply chain management Customer relationship management Product lifecycle management Software-as-a-Service, Cloud Business Process Management Suites (BPMS) Initiates & manages Continuous Process Improvement Programs To run, grow & transform organizations 4
5 What BPMethods Does Inventory & manage processes as assets Classification Portfolio management techniques Evaluate process quality Using evaluation criteria Core vs. Non-core processes Document details Processes, polices/rules, performance measures (KPIs) Develops a Business Process Portfolio Improves processes Through modeling, analysis & simulation Following process-centric design & redesign principles Enabling a process-centric IT architecture Rigorous change management techniques Sustains results Develops a Continuous Process Improvement Program 5
6 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 6
7 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 7
8 BPM is not new! 8
9 What Is New? Traditional definitions Basic definition A logical series of related activities that converts input to results or output Value-added extension Designed to create or deliver customer value and/or; shareholder value through efficiency New thinking Processes are assets and must be managed as such If they are not they will become liabilities Process defined as an asset An asset that affects the quality of a product, service or brand to uniquely satisfy customer needs and differentiates its executor from competitors 9
10 What is New? Core processes Are necessary to the creation and delivery of customer & shareholder value They must be managed to maximize customer value & financial returns Non-core processes Perform supportive or management functions They must be managed to minimize risks & control costs Asset Types Operating processes Create or deliver value for which customers are willing to pay Support processes Facilitate or assist the execution of operating or management processes Management processes Measure, control quality & assure performance outcomes Help make decisions, control variance & resolve problems Control processes (a subclass of management processes) Adjust or correct a business process or its outcome, when performance measures vary, exceed acceptable thresholds or when a new opportunity is presented Exception control processes affect known and/or anticipated events Resolution control processes affect unknown and/or anticipated events 10
11 What is BPM & Why Is It Important? Popular beliefs perceive BPM as An enterprise-wide methodology A systematic approach to managing and improving specific processes A cost cutting or productivity initiative A set of new technologies BPM is a managerial discipline focused on execution, performance & outcomes Provides structure, methods & tools to align the workforce & IT with business strategy, helping organizations to execute & adapt while consistently achieving performance measures & business objectives It is the art & science of how an organization does things (end-to-end) and how it can continuously do them better Why is it important? Because HOW business gets done is just as important as WHAT gets done how you do things creates Competitive Advantage Business processes define your value chain, they should be treated as assets and assembled in the best possible way! 11
12 Competitive Advantage A systematic way of examining all the activities a firm performs and how they interact is necessary for analyzing the source of competitive advantage. The value chain disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the existing and potential sources of differentiation. Source: Michael Porter, Competitive Advantage,
13 Competitive Advantage Competitive advantage is created when a firm integrates the activities of its value chain in the best possible way. Source: Michael Porter, Competitive Advantage,
14 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 14
15 Market & Technology Trends Notable acquisitions in the last 5 years (partial list) IBMMetastorm Open Text Oracle Pega Progress Software SAP Lombardi (BPM Suite) IBM.. ilog (Rules Engine) IBM.. Aptsoft (Event Management) IBM... IBM IBM.. Cognos (Business Intelligence).. TeleLogic (BP & App, Dev. Software).. Filenet (Workflow)... Proforma (BPA Software)... Metastorm (BPA & BPMS)... BEA (App. Dev. & BPMS)... Chordiant (CRM / BPM)... Savvion (BPMS)... Business Objects (Business Intelligence)... IDS Scheer (BPA) Software Software AG AG... Software AG... webmethods (App. Dev & BPM) Tibco... Tibco Spotfire (Business Intelligence)... Tibco... Nimbus (Process Documentation) Platforms acquiring building blocks & migrating to process-centric services-oriented architecture 15
16 BPM Vendor Landscape Gartner Magic Quadrant BPA Tools, 2008 Gartner Magic Quadrant BPM Suites, 2010 Source: Gartner Magic Quadrant for BPA Tools 2008 Source: Gartner Magic Quadrant for BPM Suites
17 BPM Vendor Landscape Forrester Wave BPM Suites, Q IDC MarketScape 2011 Business Process Platforms Source: Forrester Wave TM Business Process Managment Suites Q3, 2011 Source: IDC MarketScape: Worldwide Business Process Platforms 2011 Vendor Analysis 17
18 BPM Market Observations Market Size & Growth Prognostications Recent International Data Corporation (IDC) research shows that the worldwide business process management (BPM) and middleware market recovered strongly from its 2009 growth slump and for 2010 revenue totaled nearly $16.1 billion, representing growth of 9.2% - up sharply from a growth rate of 2.2% in IBM reports that inefficient business processes cost Fortune 500 companies more than $480 billion dollars a year and public sector organizations as much as $1.3 trillion. Gartner, a leading IT research and advisory firm, reports that over 78% of business improvement projects yield internal rates of return of 15% or more. AIIM, the Association for Imaging and Information Management, reports that half of organizations practicing business process management realize investment payback within 18 months and over 70% realize payback within 2 years. 18
19 Benefits Sought Source: Forrester Software Survey, Q
20 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 20
21 How Industry Leaders View BPM BPM is NOT An isolated initiative, an IT project Just about processes BPM is A managerial discipline that treats processes as strategic assets integral to creating & delivering customer & shareholder value, & sustaining competitive advantage A means to structure resources (people, business processes & IT) to make each more effective, adaptable & valuable to consistently achieve results while adapting to change Practice Business Process Portfolio Management Core & non-core processes managed as a portfolio of strategic assets Maximize customer value & financial returns Minimize risks & costs Industry leaders are highly effective at creating value & linking strategy with execution 21
22 To Create Value Leaders Ask How do we compete? (Competitive Strategy & Competitive Advantage) Define value Determine a defendable strategy through analysis (customer, market, industry, competitor) How do we focus operations? (The Discipline of Market Leaders) Pick an operating model (core processes, IT, organization, culture, mgmt. systems) Operational Excellence Product Leadership Customer Intimacy How do we manage performance? (Balanced Scorecard) Develop a performance measurement system (outcome measures & performance drivers) Financial perspective Customer perspective Internal business process perspective Learning & growth perspective How do we adapt? (The Adaptive Enterprise) Sense-and-respond techniques Adaptive Loop (sense, interpret, decide, act) Modular Organization (assemble cross-functional as needed) Commitment Management (record & track) The result: a strategic plan A process not an event 22
23 To Achieve Results Leaders Ask How do we instill the correct organizational behavior? Empower & motivate Emphasize workforce collaboration (focused on end-to-end execution) Establish collaborative objectives (focused on transformational & end results) Managing responsibility & accountability (reinforcing strategy) How do we structure processes for strategic execution? Practice Process-centric design Document, model, simulate & analyze core processes (not just map) Measure performance through KPI Sets Design Control Processes (to manage anticipated & unanticipated events) Event management (techniques to sense change & execute control processes) How do we structure technology for strategic execution? Assess IT readiness for process change (First!, or at least early) Evolve toward a Process-Centric design & IT architecture How do we align strategy & resources for execution? Reveal cause-and-effect relationships across resources (Derivative Analysis) The result: an operating plan A process not an event 23
24 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 24
25 Motivations & Approaches for BPM A Problem BPM Strategy & KPI Set Process Team Process Selection Methodology Modeling & Simulation Implementation & Control Business Process Portfolio Management A Strategic Initiative Strategy & KPI Set(s) Program & BPM Team(s) Process Set Methodology(ies?), PMO? Redesigns & New Designs Modeling & Simulations Execute, Manage & Control Continuous Transformation Strategy & KPI Sets Center of Excellence (BPM Teams) Process Portfolio & Audit Multiple Methodologies, PMO Multiple Tools Governance Continuous Improvement Source: BPMethods 25
26 How To Audit Process Maturity To achieve high-performance organizations must develop their enterprise capabilities & establish process enablers Enterprise capabilities 1. Leadership: Senior executives who support the creation of processes. 2. Culture: The values of customer focus, teamwork, personal accountability, and a willingness to change. 3. Expertise: Skills in, and methodology for, process redesign. 4. Governance: Mechanisms for managing complex projects and change initiatives. Process enablers 1. Design: The comprehensiveness of the specification of how the process is to be executed. 2. Performers: The people who execute the process, particularly in terms of their skills and knowledge. 3. Owner: A senior executive who has responsibility for the process and its results. 4. Infrastructure: Information and management systems that support the process. 5. Metrics: The measures the company uses to track the process s performance. Source: Michael Hammer, Harvard Business School Publishing 26
27 How To Inventory Processes Select a process classification model APQC-PCF, SCC-SCOR, VCG-VRM, etom, ACORD, Strategy Map, custom, others APQC s PCF VCG VRM SCC SCOR Other or Custom 27
28 How To Inventory Processes Conduct a Business Process Inventory Use the chosen classification model, take stock of processes Source: APQC & BPMethods 28
29 How To Evaluate Process Quality Create evaluation criteria Used by management teams for qualitative evaluation, example criteria CRITERIA DESCRIPTION (Qualitative Assessment) 1. Value Core, Secondary, Low, Outsourced, Not Applicable 2. Asset type Operating, Support, Management, Exception Control, Resolution Control 3. Use Routine, Periodic, Occasional, Not Used, Unknown, New 4. Complexity Simple, Low, Moderate, Complex, Highly Complex 5. Discipline Formal, Informal, Rely on 3rd Party 6. Automation Manual, Semi-automated, Fully-automated, Rely on 3rd Party 7. Documentation Detailed, Satisfactory, Unsatisfactory, Undocumented, Rely on 3rd Party 8. Training Sufficient, Insufficient, Not Available, Not Necessary, Rely on 3rd Party 9. Effectiveness Very Effective, Effective, Adequate, Not Very Effective, Not At All Effective 10. Efficiency Very Efficient, Efficient, Adequate, Not Very Efficient, Not At All Efficient Action Timing Improve, Consolidate, Eliminate, Benchmark, Re-evaluate, Design, Outsource, Insource, None Immediately, Near-Term, Long-Term, Unspecified Source: BPMethods 29
30 How To Manage Processes as Assets Use Business Process Portfolio Management Focuses on how to improve the returns from diverse business processes that comprise an organization's value chain Create A Business Process Portfolio A classification system & common data repository used to inventory, document & manage detailed information & process lifecycles Database Document 30
31 How To Select Projects Problematic, strategic, transformational What needs to be done? Profit Revenue Market Share Margins Growth Response Acquisition Accuracy Satisfaction Innovation Retention Speed Quality Costs Efficiencies Churn 31
32 How To Select Projects Consider type & complexity Transactional Transformational Decision Making Source: BPMethods 32
33 How To Select Projects Use a Complexity Assessment Matrix Modify as required Source: BPMethods 33
34 How To Document Processes Identify process components What governs execution & value creation What is needed to begin Process Design How What value is created What is needed to execute & create value 34
35 How To Document Details Name, classification, descriptive information, contacts Evaluation criteria, comments, action status Execution (high-level step-by-step activities/tasks) Best practices Associated policies & rules, controls, processes, systems Resources Performance measures (KPIs) Collaborative objectives Risks Related information & documents Process lifecycle management Communications plan Messages/changes to be communicated History 35
36 How To Measure Performance Select KPI Set(s) (Balanced Scorecard meets Six Sigma) Source: BPMethods 36
37 How To Assess In-Place Systems IT Readiness Assessment Helps business professionals ask the right questions of IT professionals Reveals capabilities & limitations of inplace IT systems Calculates the time, cost, effort & resources required to adapt IT systems to support process change Acquires data for ROI analysis of improvement projects Tests feasibility & accurately determines financial returns Helps justify IT investment if needed 37
38 How To Improve Processes Select a methodology ISO, Six Sigma, Lean, ITIL, others The PRACTICE Method TM for Business Process Analysis & Improvement Phase 1: Plan (What do you want to do?) Business strategy review determines what strategic initiatives are to be pursued and/or what problems need to be solved Calls out how results will be measured, and who will be held accountable and responsible for outcomes Phase 2: Research (What are you doing now?) A Process Improvement Team researches current environment and what is needed to achieve the Phase 1 objectives A Project is created, in-place IT systems are evaluated for adaptability; a process analysis tool is selected (if needed) As-Is (or clean slate) process mapping and measuring begins Phase 3: Analyze, Correct & Test (How do you do what you want to do?) As-Is (or clean slate) process is modeled to measure actual (or assumed) performance & to find waste & inefficiency Specialized elicitation techniques are used to generate ideas for improvement (innovation) Process alternatives are tested and refined resulting in a final To-Be design Upon completion of return on investment (ROI) analysis & Acceptance Agreement a Next Step decision is made Phase 4: Implement & Control (Do it!) Implementation Plan, training, IT systems are adapted/augmented, new process is deployed A Quality Control Plan assure results are realized, consistent & repeatable Phase 5: Extend (Keep doing it better!) Processes monitored within a Strategic Planning & Review timetable to form a Continuous Process Improvement Program 38
39 How To Improve Processes Understand the organization Organization charts, RACI Matrix, Stakeholder Classification Matrix High Low Potential for cooperation Low High Potential to Impact 39
40 How To Improve Processes Skills Project management Methodology Scoping Team building Work breakdown structure Communications Risk management Execution Implementation Change management Quality control Business analysis Requirements gathering Artifact selection (diagrams, models, functional requirements, reports) Elicitation techniques (observation, interviews, workshops, use cases) Measurement & analysis Design and/or redesign Test 40
41 How To Improve Processes Select artifact set, elicitation techniques & requirements management tools Source: Corporate Education Group 41
42 How To Improve Processes Select BPM tools If needed or desired Business Process Analyses (BPA) software Business Process Management Suites (BPMS) 42
43 How To Improve Processes Process-centric design/redesign must include event management & control processes that can 1. Capture/manage roles 2. Capture KPI Set(s), policies, business rules 3. Capture performance threshold(s) 4. Sense variation (events and/or opportunities) Includes trends prior to exceeding threshold 5. Alert relevant systems & stakeholders (role based) 6. Assemble/aggregate information From distributed disparate sources, internal & external 7. Interpret information (exception & resolution [case] management) Based on strategic objectives, performance measures & rules of engagement 8. Negotiate & record commitments Based on roles, empowerment, motivation, accountability, responsibility 9. Disseminate information To all relevant systems & stakeholders 10. Track & report commitments & results against KPI Set(s) & strategic objectives Core processes must have corresponding control processes Exception & resolution controls 43
44 Process-Centric IT Building Blocks Must be capable of integrating sufficiently to support process-centric design Source: BPMethods 44
45 How To Manage Change Recognize barriers Turf battles by functional managers Workforce resistance to change No one in charge or in authority to push redesign Lack of incentives from department or oversight authority Inability to perform out of the box thinking Resource constraints Uncommitted top management Skepticism about yet another effort How to prevail People support what they create Start slowly, create involvement People have the right to their opinions Honor this, listen, let them know the team is aware & prepared to act When people hear the process is broken they may think they re broken Make it perfectly clear, the process is the problem, not them! Continuous communication Judge managerial involvement (Is your time invested or wasted?) 45
46 How To Manage Change Technique: ADKAR Change Management Model Focuses on the individual, requires instilling & managing five key goals: Awareness of the need to change Desire to participate and support the change Knowledge of how to change (and what the change looks like) Ability to implement the change on a day-to-day basis Reinforcement to keep the change in place Extend Methodology Implement & Control Analyze, Correct, Test Research Successful Change Plan Awareness Desire Knowledge Ability Reinforcement Facilitates workforce collaboration through collaborative objectives Sources: Jeff Hiatt, Prosci Change Management, Change Management Learning Center, BPMethods 46
47 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 47
48 A BPM Practitioner: Sloan Valve Source: ABPMP Chicago Speaker Series - The Process Enterprise: How Process Transformation Changes the Business. Tom Coleman Chief Information and Process Officer for Sloan Valve Company, 10/
49 A BPM Practitioner: Sloan Valve Source: ABPMP Chicago Speaker Series - The Process Enterprise: How Process Transformation Changes the Business. Tom Coleman Chief Information and Process Officer for Sloan Valve Company, 10/
50 Agenda What is BPM & why is it important? Market & technology trends How industry leaders view BPM Translating business strategy into action Questions they ask & the best practices they use How to manage, analyze and change business processes Techniques, tools, methods, technologies & practices A BPM Practitioner Summary Conclusion 50
51 Summary Conclusion BPM is an emerging managerial discipline focused on execution, performance & results Processes need to be managed as a portfolio of assets If not, they will become liabilities Technology is trending away from transaction-oriented applications to process-centric systems Process enablement is becoming de facto design by IT vendors Industry leaders view BPM as a way to achieve competitive advantage By uniquely creating & delivering customer & shareholder value By aligning people, process & technology By consistently achieving performance measures while adapting to change 51
52 Summary Conclusion Follow BPM How To techniques Audit process maturity Understand the organization Select a process classification model Conduct a business process inventory Evaluate process against qualitative criteria Use portfolio management techniques Create a business process portfolio Document processes, polices & rules Select KPI Sets Select improvement projects based on need, priority & complexity Select a methodology Assemble BPM skills, artifacts, elicitation techniques & tools Follow process-centric design/redesign principles & IT architectural constructs Recognize barriers and resistance, manage change Sustain results Recognize & overcome barriers Develop a Continuous Process Improvement Program 52
53 How to Use The PORTFOLIO Approach TM A Business Process Portfolio Management System Prepare for BPM using 1 The Strategy Guide Learn How To Manage Processes 2 using The Portfolio Guide Classify, Inventory & Evaluate Processes 3 using The BP Inventory Worksheet Create a Business Process Portfolio using 4 The BP Portfolio Manager or The BP Portfolio Template 5 Document Processes using Process Detail Sheets Document Policies, Rules & KPIs 6 using Rules & KPI Detail Sheets 7 Manage Lifecycles & a Continuous Process Improvement Program using The BP Portfolio Manager Assess IT Readiness for process change using 8 The Readiness Guide & IT Analysis Sheets 9 Select Business Process Analysis Software using The Evaluation Guide (if needed) Italicized red text indicates a deliverable. Source: BPMethods 53
54 How to Use The PRACTICE Method TM A Process Improvement Project Management System Prepare for BPM using 1 The Strategy Guide Learn How To Improve Processes 2 Using The Process Guide* 3 Learn How To Manage Projects using The Project Guide, The BP Project Manager & Project Management Document Templates* 4 Document Processes, Policies & Rules using Detail Sheets Assess IT Readiness for process change using 5 The Readiness Guide & IT Analysis Sheets 6 Select Business Process Analysis Software using The Evaluation Guide (if needed) Model, Simulate & Analyze Processes 7 using BPA Software Measure Return on Investment 8 using The BP ROI Calculator* 9 Implement & Manage Process Change using The IT Guide & Project Management Document Templates* Italicized red text indicates a deliverable. * Indicates in development. Source: BPMethods 54
55 Coming March,
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