mba 8225: what is a process? -- adopting a process perspective€¦ · included purchase orders,...

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© Richard Welke 2002

Mike Gallivan Lars Mathiassen

Richard WelkeDuane Truex

MBA 8225:What is a process? --

Adopting a Process Perspective

© CEPRIN (2007) MBA 8225 #1 Process Perspective 2

Agenda

The contextThe approachThe tool box

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Topic one


A Process Defined

A business process is a set of logically related businessactivities that combine to deliver something of value (e.g.,products, services, or information) to a customer. (Cousins andStewart RivCom, 2002)

A way of seeing organization and what it does beyond thetraditional functional or departmental view.

Business process can be viewed as discrete steps orcollectively as a set of activities creating value

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Process re-orientation example

IBM CreditOld: to make a deal required 7 steps, taking 6 days onaverage

performed by specialistsdeal logger, credit check, modifying standard loanagreement, pricing loan, quote generationBut the actual work only took 90 minutes

New: replaced specialists by generalists eachperforming several of the steps--delivery in 4 hours

How old assumed worst case scenario, the tough cases;new allows or exception proceduresImprovement of 100 times or a 90% reduction in cycletime and a hundred fold improvement in productivity


Ford MotorOld: accounts payable department -

500 people vs Mazda’s 5Rethought and designed “Procurement” as a process

Included purchase orders, payables, purchasing and receivingTook into account the 80-20 rule (the law of maldistribution)Assumed most of the time the orders and products received did match.

New: Eliminated the invoice entirelybuyer orders and enters order into database.

Goods arrive and are accepted iff they are in the database of ordersthen a check is sent to the vendor.If the goods do not correspond to an order in the database, they aresimply refused and returned to the vendor.

The change? Payment authorizationUsed to be performed by accounts payable and now is performed at theloading dock

Process re-orientation example

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purchasing vendor

receiving

Accounts payable

Purchase order

Items

Payment

Invoice

ReceivingDocument

Copy ofPurchase order

Spends most of their timeinvestigating mismatches “AS-IS” System

Diagram of Ford Accounts Payable Process


purchasing vendor

receiving

Accounts payable

Purchase order

Items

Issues Paymentwhen items received

Matches itemswith purchase order

Purchase order

database

Invoice-less payables system

“TO-BE” System

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The process principle here is that…

We reengineer processesnot organizations evolved to accomplish themAccounts payable, a department, was an organizational artifact of aparticular administrative design processA big change for Ford and its supplies

For now the principle was we pay for the parts when we USE them,until then they are your partsIn exchange supplier got all of Fords businessYou get paid when we get the parts, not weeks later

Forced a process rethinking downstream with suppliersThey became privy to Ford’s production scheduleIntegrated information systems required


The quality movementThe quality movement

Scientific managementScientific management

Work designWork design

Diffusion of innovationDiffusion of innovation

Increasing changeIncreasing changepacepace

1. Inspections1. Inspections

2. Continuous improvement2. Continuous improvement

3. Process innovation3. Process innovation

The roots of BPI

BusinessBusinessProcessProcess

InnovationInnovation

Thomas H. Davenport: Origins of Process Innovation (Appendix B to: Process Innovation:Reengineering Work Through Information Technology, Harvard Business School Press, 1992).

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The decade of BPI

Definition: Definition: Business process fusionBusiness process fusion is the transformationis the transformationof business activities that is achieved by integrating previouslyof business activities that is achieved by integrating previouslyautonomous business processes to create a new scope ofautonomous business processes to create a new scope ofmanagement capabilities.management capabilities.

Gartner October 2003Gartner October 2003

Synonyms: agile business, self-service enterprise,Synonyms: agile business, self-service enterprise,virtual organization, process-focused virtual organization, process-focused ……


The drivers behind BPI

CostCostpressures,pressures,efficiencyefficiency

Need forNeed foragility,agility,

flexibilityflexibility

RegulatoryRegulatorypressurespressures

MaintainingMaintainingtechnologicaltechnological

currencycurrency

AdoptingAdoptingindustry industry ““bestbest

practicespractices””

BPI BPI

Academics Academics Academics Academics

ConsultanciesConsultancies(Accenture, CSC, (Accenture, CSC,

EDS, EDS, ……))

ConsultanciesConsultancies(Accenture, CSC, (Accenture, CSC,

EDS, EDS, ……))

BP StandardsBP Standards(Rosetta, ebXML, (Rosetta, ebXML,

w3c, Oasis, OMG, ..)w3c, Oasis, OMG, ..)

I/T developmentI/T developmentBP StandardsBP Standards(Rosetta, ebXML, (Rosetta, ebXML,


BP StandardsBP Standards(Rosetta, ebXML, (Rosetta, ebXML,


I/T developmentI/T development Trade/govTrade/gov’’t policyt policy(Sarbanes, BASEL II)(Sarbanes, BASEL II)

Finance/accountingFinance/accounting

Trade/govTrade/gov’’t policyt policy(Sarbanes, BASEL II)(Sarbanes, BASEL II)Trade/govTrade/gov’’t policyt policy(Sarbanes, BASEL II)(Sarbanes, BASEL II)

Finance/accountingFinance/accounting

Professional orgProfessional org’’ss(Quality, Lean, IEEE, (Quality, Lean, IEEE,

……))

Process improvementProcess improvementVariance reductionVariance reductionProfessional orgProfessional org’’ss(Quality, Lean, IEEE, (Quality, Lean, IEEE,

……))

Professional orgProfessional org’’ss(Quality, Lean, IEEE, (Quality, Lean, IEEE,

……))

Process improvementProcess improvementVariance reductionVariance reduction

Industry leadersIndustry leaders(GE, GM, Dell, Wal(GE, GM, Dell, Wal--Mart, Ashland, ..)Mart, Ashland, ..)

CxO CxO ““best practicebest practice””Industry leadersIndustry leaders(GE, GM, Dell, Wal(GE, GM, Dell, Wal--Mart, Ashland, ..)Mart, Ashland, ..)

Industry leadersIndustry leaders(GE, GM, Dell, Wal(GE, GM, Dell, Wal--Mart, Ashland, ..)Mart, Ashland, ..)

CxO CxO ““best practicebest practice””

Thought leadersThought leaders(Gartner, Meta, (Gartner, Meta,

HBRHBR……))

CxO CxO ““strategystrategy””Thought leadersThought leaders

(Gartner, Meta, (Gartner, Meta, HBRHBR……))

Thought leadersThought leaders(Gartner, Meta, (Gartner, Meta,

HBRHBR……))

CxO CxO ““strategystrategy””

Platform VendorsPlatform Vendors(SAP, Oracle, IBM, (SAP, Oracle, IBM,

MS, MS, ……))

Technology platformsTechnology platformsPlatform VendorsPlatform Vendors

(SAP, Oracle, IBM, (SAP, Oracle, IBM, MS, MS, ……))

Platform VendorsPlatform Vendors(SAP, Oracle, IBM, (SAP, Oracle, IBM,

MS, MS, ……))

Technology platformsTechnology platforms

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BPI starts with customer needsWants it now

Anytime, anyplace24 x 7 x 365

Expects you to know themPersonalized interaction, tailored information

Product/service tailored to changing needsMass customization (market of one)

End-to-end need fulfillment in one-stopUnderstand the full needOrganize to fulfill it, service it, replace it

With minimum total costs to consumerMinimize client-experienced transaction costs

Across multiple channelsBricks, clicks, mobile, face-to-face, etc.

________________________


The BusinessThe Business

BPI covers end-to-end

VALUE THREAD:An End-to-End

Business Process

OutsourcingPartners

1st – Nth TierOperationsSuppliers

1st – Nth TierCustomers

Operating ResourceSuppliers

Follow the then-Follow the then-what-chainwhat-chain

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BPI is multi-disciplinary

-

Uni-Channel

Cross

Enterpris

e

Departm

ent

Single

Busines

s

Unit

Inter -

Enterpris

e

Bi-Channel

Multi –Channel

Manual 0% Automated

100% Automated

Semi-Automated

Channel InteractionsChannel Interactions

Process DigitizationProcess Digitization

Proces

s Integr

ation

Proces

s Integr

ation

Source: Kalakota and Robinson, Services Blueprint:Roadmap for Execution, Addison-Wesley (2003)

MarketTe

chno

-lo

gy

Busines

s

Busines

s

partne

rspar

tners


BPI has complex solution space

Business Process InnovationBusiness Process Innovation

BP representationBP representation

BP implementation platformsBP implementation platforms

BP substitutionBP substitution

BP monitoring & verificationBP monitoring & verification

BP normative designBP normative designBP normative modeling BP normative modeling

BP modeling and assessment BP modeling and assessment

BP best practices and metrics BP best practices and metrics

Platform independent specs Platform independent specs

Competing platformsCompeting platforms

BP outsourcingBP outsourcing

BP monitoring (BAM)BP monitoring (BAM)

BP organization realignmentBP organization realignment Organizational restructuringOrganizational restructuring

BP verificationBP verification

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Topic two


Defining BP (revisited)

• Has well-defined products and customers• Achieves defined customer-related business goals• Involves several activities that collectively achieve the goals• Crosses functional and/or organizational boundaries

Definitions:

(Smith & Fingar 2003): “The complete, dynamically coordinated set of collaborative andtransactional activities that deliver value to customers.”

(Work Flow Management Coalition): “A collection of interrelated works tasks, initiated inresponse to an event, that achieves a specific result for the customer of the process.”

CharacteristicsCharacteristics

• Large/complex involving flow of materials, information, value & commitments• Very dynamic, responding to demands from customers to changing needs• Widely distributed and customized across boundaries within/between BU’s• Long running (e.g. cash to order may run for months or years)• Dependent on human intelligence & judgment; mix of structured & unstructured tasks• Difficult to make visible; often undocumented and implicit

Smith & Fingar 2003

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Identifying BP’s

SomeSome high-level high-level business processes:business processes:

Supply chain management, demand chain management, product/serviceSupply chain management, demand chain management, product/servicedesign, customer service, contract management, etc.design, customer service, contract management, etc.

Made up of a myriad of Made up of a myriad of lower-levellower-level processes: processes:

Account managementAccount managementAdvance planning & scheduleAdvance planning & scheduleAdvertisingAdvertisingAssemblyAssemblyAsset managementAsset managementBenefits administrationBenefits administrationBranch operationsBranch operationsBudget controlBudget controlBuild to orderBuild to orderCall center serviceCall center serviceCapacity reservationCapacity reservationCapital expendituresCapital expendituresCheck request processingCheck request processingCollateral fulfillmentCollateral fulfillmentCollectionsCollectionsCommissions processingCommissions processingCompensationCompensationComponent fabricationComponent fabricationCorporate communicationsCorporate communicationsCredit request/authorizationCredit request/authorizationCustomer acquisitionCustomer acquisition

Customer inquiryCustomer inquiryCustomer requirementsCustomer requirementsCustomer self-serviceCustomer self-serviceCustomer/product profitabilityCustomer/product profitabilityDemand planningDemand planningDistribution/VAR managementDistribution/VAR managementFacilities managementFacilities managementFinancial planningFinancial planningFinancial close/consolidationFinancial close/consolidationHiring/orientationHiring/orientationInstallation managementInstallation managementIntegrated logisticsIntegrated logisticsInternal auditInternal auditInventory managementInventory managementInvestor relationsInvestor relationsInvoicingInvoicingIT service managementIT service managementKnowledge managementKnowledge managementManufacturingManufacturingManufManuf. Capability development. Capability developmentMarket research & analysisMarket research & analysis

Market testMarket testMaterials procurementMaterials procurementMaterials storageMaterials storageOrder dispatch & fulfillmentOrder dispatch & fulfillmentOrder managementOrder managementOrganizational learningOrganizational learningPayroll processingPayroll processingPerformance managementPerformance managementPhysical inventoryPhysical inventoryPlanning & resource allocationPlanning & resource allocationPost-sales servicePost-sales serviceProblem resolutionProblem resolutionmanagementmanagementProcess designProcess designProcurementProcurementProduct data managementProduct data managementProduct design & developmentProduct design & developmentProduct/brand managementProduct/brand managementProduct schedulingProduct schedulingProgram managementProgram managementPromotionsPromotions

Property tracking/accountingProperty tracking/accountingProposal preparationProposal preparationPublicity managementPublicity managementReal estate managementReal estate managementRecruitmentRecruitmentReturns & depot repairReturns & depot repairReturns managementReturns managementQuality controlQuality controlSales channel managementSales channel managementSales commission planningSales commission planningSales cycle managementSales cycle managementSales planningSales planningService agreementService agreementmanagementmanagementService fulfillmentService fulfillmentService provisioningService provisioningShippingShipping

……Zero-based budgetingZero-based budgeting


Maneuvering BP levels

Underlying business processes

Composite Processes

Customer channel strategy

Technology Infrastructure

Focal Point Easy to Do Business With

Services Involved

AffectedEnterprise

Applications

- Target to Engage- Engage to Close - Transact to Fulfill- Retain to Sell- Request to Resolve

- Sales Order Management- Configuration- Payment and Billing - Problem Management- Returns Management- Role-Based Personalization, etc.

- Customer Relationship Management - Enterprise Resource Planning- Order Fulfillment- Financials – Payment and Billing- Returns Management

Business Process

Management

The

visi

bilit

y ch

alle

nge

The

visi

bilit

y ch

alle

nge

PerspectivePerspective

ManagementManagement

MarketingMarketing

TechnologyTechnology

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Designing BPI approach

Motivations (Why?)Motivations (Why?)•• What motivates the study?What motivates the study?•• What are the key performanceWhat are the key performance

indicators (indicators (KPIKPI’’ss)?)?•• WhoWho’’s are the sponsors?s are the sponsors?•• WhatWhat’’s to be the outcome (s)?s to be the outcome (s)?

Methods (How?)Methods (How?)•• What steps to follow?What steps to follow?•• In which sequence?In which sequence?•• Project discipline?Project discipline?

Models (What?)Models (What?)•• Which aspects to focus on?Which aspects to focus on?•• How to capture and represent?How to capture and represent?•• How do the models inter-relate?How do the models inter-relate?

People (Who?)People (Who?)•• Who are the stakeholders?Who are the stakeholders?

•• E.g. customers, owners,E.g. customers, owners,analysts, designers, users.analysts, designers, users.

•• What roles do they play?What roles do they play?•• How are they engaged?How are they engaged?

ApproachApproach


Some motivations

Why discover (go instead directly todesign)?

Model/analyze existing processesFind weaknesses; understand interactionsEstablish common understanding/vocabularyHave a baseline for comparison to “should be”Invent new service and process

What performance indicators?As-is; should-beNormative models

Who is the (assumed) sponsor?

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Some method options (lifecycle)

DetermineDeterminesponsors,sponsors,

purpose, scope,purpose, scope,deliverablesdeliverables

Decide methods,Decide methods,tools, teams,tools, teams,

metrics,metrics,schedulesschedules

Discover existingDiscover existing(as-is) process(as-is) process

Confirm resultsConfirm resultswith users, with users, SMESME’’ss

and ownersand owners

Develop newDevelop new(should-be)(should-be)

processprocessalternativealternative

Assess impact onAssess impact onusers, owners andusers, owners andother processesother processes

Elaborate changedElaborate changedroles, structures,roles, structures,

applicationsapplications

Work with HR,Work with HR,managers, clients,managers, clients,users to transitionusers to transition

to new processto new process

InitializationInitialization

Discover/AnalyzeDiscover/Analyze

Design/DevelopDesign/Develop

Implement/DeployImplement/Deploy

Models & their associated documentationModels & their associated documentation(elaborated and evolved as the project progresses)(elaborated and evolved as the project progresses)

Bottom-up, top-down, middle-outFree-form vs. structured elicitation

Centralized vs. decentralized


Some model typesModel types:

Process flow diagrams (PFD’s)Show the flow of control from one activity to another

Activities/tasks as blocks; control flow as connectionsInformation flow diagrams

Show the flow of information from one activity to anotherGenerally superimposed on PFD’s

Resource diagramsInter-relationship among resources used by an activity, e.g.

Organization (have) Units (staffed by) Employees(assigned) Roles (conduct) ActivitiesFixed assets (consumed by) Activities

Views on modelsHierarchical (e.g. organization chart)End-to-end (process diagram)Swimlane (activities placed in resource rows)Static (diagrams) vs. dynamic (simulations)

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Topic three


The BP triangle

InfrastructureInfrastructure

CustomersCustomers

Products & ServicesProducts & Services Strategies

StrategiesEnvir

onme

nt

Envir

onme

nt

Work Practices

InformationParticipants Technology

Steven Alter (2002). Two Substitutions of terms:

1) Work system Business process

Alter’s Steps:

1. Create a snapshot of the businessprocess

2. Find problems and opportunitiesfor improvement

3. Explore effects of proposedprocess changes

2) ‘Business process’ Work practices

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Alter’s Collaborative Triangle ElementsSubstitute:

- Work system Business process

- Business process Work practices

Work Practice---------------------------


Work Practice ---------------------------

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BP models

PlatformPlatformIndependentIndependentComponentComponent

Model (PICM)Model (PICM)

ComputationComputationIndependentIndependent

BusinessBusinessModelModel(CIBM)(CIBM)

PlatformPlatformSpecificSpecific

Model (PSM)Model (PSM)

CodeCode

BusinessBusinessProblemProblem

SpecificationSpecificationModel (BPSM)Model (BPSM)

Created byCreated bybusinessbusinessowners toowners todescribedescribebusinessbusinessproblemproblem

Created byCreated bydesigner-designer-architectsarchitectsto describeto describesolutionsolutionarchitecturearchitecture

Created byCreated bydeveloper-developer-tester totester toimplementimplementsolutionsolution

Created byCreated bybusinessbusinessanalysts toanalysts todescribedescribebusinessbusinessproblem -problem -solutionsolution

UsersUsers

AbstractionAbstractionGapsGaps

RepresentationsRepresentations& mappings& mappings

BPBPRepositoryRepository


Example swimlane model

Source: ProformaCorporation

Organization structureOrganization structure

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BP normative models

What are they?A process model constructed from a predefinedset of alternativesPrescribed view of how the process should beseen and behave

What is their value?Simplification of modeling (constrained choicevs. green field)Standardization enables

Exchange of models across units & organizationsDescription of common problems and metricsExchange of industry norms (benchmarking) andbest practices


DeliverDeliverMakeMakeSourceSource

PlanPlan

Supply chain normative modelP1: Plan Supply ChainP1: Plan Supply Chain

P2: Plan SourceP2: Plan Source P3: Plan MakeP3: Plan Make P4: Plan DeliverP4: Plan Deliver P5: Plan ReturnsP5: Plan Returns

SI: SourceSI: SourceStocked ProductsStocked Products

S2: SourceS2: SourceMTO ProductsMTO Products

S3: SourceS3: SourceETO ProductsETO Products

MI: Make-to-MI: Make-to-StockStock

M2: Make-to-M2: Make-to-OrderOrder

M3: Engineer-to-M3: Engineer-to-OrderOrder

DI: DeliverDI: DeliverStocked ProductsStocked Products

D2: DeliverD2: DeliverMTO ProductsMTO Products

D3: DeliverD3: DeliverETO ProductsETO Products

Return SourceReturn SourceRSI: ReturnRSI: Return

Defective ProductsDefective Products

RS2: ReturnRS2: ReturnMRO ProductMRO Product

RS3: ReturnRS3: ReturnExcess ProductExcess Product

Return DeliveryReturn DeliveryRDI: ReturnRDI: Return

Defective ProductDefective Product

RD2: ReturnRD2: ReturnMRO ProductMRO Product

RD3: ReturnRD3: ReturnExcess ProductExcess Product

SCORSCOR(Supply Chain Operations(Supply Chain Operations

Reference model)Reference model)

EnableEnable

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Example of SCOR modelSimple thread diagramSimple thread diagram


SCOR payoffs

S1. Source Stocked ProductS1. Source Stocked Product

ScheduleScheduleProductProduct

DeliveriesDeliveries

S1.1

ReceiveReceiveProductProduct

S1.2

VerifyVerifyProductProduct

S1.3

TransferTransferProductProduct

S1.4AuthorizeAuthorizeSupplierSupplierPaymentPayment

S1.5

3. Prescribed level 3 processes3. Prescribed level 3 processes

1. Metrics1. Metrics2. Industry benchmarking2. Industry benchmarking

mba 8225: what is a process? -- adopting a process perspective€¦ · included purchase orders,...

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