mba 8225: what is a process? -- adopting a process perspective

© 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 22

Agenda

The contextThe approachThe tool box


Topic one


A Process Defined

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

2002)

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

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


Process re-orientation example

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

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

New: replaced specialists by generalists each performing 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 cycle time and a hundred fold improvement in productivity


Ford MotorOld: accounts payable department -

500 people vs Mazda’s 5

Rethought and designed “Procurement” as a processIncluded 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 orders then a check is sent to the vendor. If the goods do not correspond to an order in the database, they are simply refused and returned to the vendor.

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

Process re-orientation example


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


The process principle here is that…

We reengineer processes not organizations evolved to accomplish themAccounts payable, a department, was an organizational artifact of a particular 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 The quality movementmovement

Scientific Scientific managementmanagement

Work designWork design

Diffusion of Diffusion of innovationinnovation

Increasing change Increasing change pacepace

1. Inspections1. Inspections

2. Continuous 2. Continuous improvementimprovement

3. Process innovation3. Process innovation

The roots of BPI

BusinessBusinessProcessProcess

InnovatioInnovationn

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


The decade of BPI

Definition: Definition: Business process fusionBusiness process fusion is the is the transformation of business activities that is achieved by transformation of business activities that is achieved by integrating previously autonomous business processes to integrating previously autonomous business processes to create a new scope of management capabilities.create a new scope of management capabilities.

Gartner October 2003Gartner October 2003

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


The drivers behind BPI

Cost Cost pressures, pressures, efficiencyefficiency

Need for Need for agility, agility,

flexibilityflexibility

Regulatory Regulatory pressurespressures

Maintaining Maintaining technologicatechnologica

l currencyl currency

Adopting Adopting industry industry

““best best 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 reduction


……))


……))

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


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 The BusinessBusiness

BPI covers end-to-end

VALUE THREAD:An End-to-End

Business Process

Outsourcing Partners

1st – Nth Tier

OperationsSuppliers

1st – Nth Tier

Customers

Operating ResourceSuppliers

Follow the Follow the then-what-then-what-chainchain


BPI is multi-disciplinary

-

Uni-Channel

Cross

Enterprise

Department

Single

Business

Unit

Inter -

Enterprise

Bi-Channel

Multi –Channel

Manual 0% Automated

100% Automated

Semi-Automated

Channel InteractionsChannel Interactions

Process DigitizationProcess Digitization

Process Integration

Process Integration

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

Market

Tech

no-

log

y

Busines

Busines

ss

partner

partner

s s


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


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 and transactional activities that deliver value to customers.”

(Work Flow Management Coalition): “A collection of interrelated works tasks, initiated in response 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


Identifying BP’s

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

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

Made up of a myriad of Made up of a myriad of lower-levellower-level processes: processes:Account managementAccount management

Advance planning & Advance planning & scheduleschedule

AdvertisingAdvertising

AssemblyAssembly

Asset managementAsset management

Benefits administrationBenefits administration

Branch operationsBranch operations

Budget controlBudget control

Build to orderBuild to order

Call center serviceCall center service

Capacity reservationCapacity reservation

Capital expendituresCapital expenditures

Check request processingCheck request processing

Collateral fulfillmentCollateral fulfillment

CollectionsCollections

Commissions processingCommissions processing

CompensationCompensation

Component fabricationComponent fabrication

Corporate communicationsCorporate communications

Credit Credit request/authorizationrequest/authorization

Customer acquisitionCustomer acquisition

Customer inquiryCustomer inquiry

Customer requirementsCustomer requirements

Customer self-serviceCustomer self-service

Customer/product Customer/product profitabilityprofitability

Demand planningDemand planning

Distribution/VAR Distribution/VAR managementmanagement

Facilities managementFacilities management

Financial planningFinancial planning

Financial close/consolidationFinancial close/consolidation

Hiring/orientationHiring/orientation

Installation managementInstallation management

Integrated logisticsIntegrated logistics

Internal auditInternal audit

Inventory managementInventory management

Investor relationsInvestor relations

InvoicingInvoicing

IT service managementIT service management

Knowledge managementKnowledge management

ManufacturingManufacturing

Manuf. Capability Manuf. Capability developmentdevelopment

Market research & analysisMarket research & analysis

Market testMarket test

Materials procurementMaterials procurement

Materials storageMaterials storage

Order dispatch & fulfillmentOrder dispatch & fulfillment

Order managementOrder management

Organizational learningOrganizational learning

Payroll processingPayroll processing

Performance managementPerformance management

Physical inventoryPhysical inventory

Planning & resource Planning & resource allocationallocation

Post-sales servicePost-sales service

Problem resolution Problem resolution managementmanagement

Process designProcess design

ProcurementProcurement

Product data managementProduct data management

Product design & Product design & developmentdevelopment

Product/brand managementProduct/brand management

Product schedulingProduct scheduling

Program managementProgram management

PromotionsPromotions

Property Property tracking/accountingtracking/accounting

Proposal preparationProposal preparation

Publicity managementPublicity management

Real estate managementReal estate management

RecruitmentRecruitment

Returns & depot repairReturns & depot repair

Returns managementReturns management

Quality controlQuality control

Sales channel Sales channel managementmanagement

Sales commission planningSales commission planning

Sales cycle managementSales cycle management

Sales planningSales planning

Service agreement Service agreement managementmanagement

Service fulfillmentService fulfillment

Service provisioningService provisioning

ShippingShipping

……

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

Th

e v

isib

ilit

y c

hallen

ge

Th

e v

isib

ilit

y c

hallen

ge

PerspectivePerspective

ManagementManagement

MarketingMarketing

TechnologyTechnology


Designing BPI approach

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

performance indicators performance indicators (KPI(KPI’’s)?s)?

• WhoWho’’s are the sponsors?s are the sponsors?• WhatWhat’’s to be the outcome s to be the outcome

(s)?(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 How to capture and

represent?represent?• How do the models inter-How do the models inter-

relate?relate?

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

• E.g. customers, owners, E.g. customers, owners, analysts, designers, analysts, designers, users.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 to design)?

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?


Some method options (lifecycle)

Determine Determine sponsors, sponsors, purpose, purpose, scope, scope,

deliverables deliverables

Decide Decide methods, methods,

tools, teams, tools, teams, metrics, metrics,

schedulesschedules

Discover Discover existing (as-is) existing (as-is)

processprocess

Confirm results Confirm results with users, with users, SMESME’’s and s and

ownersowners

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

process process alternativealternative

Assess impact Assess impact on users, on users,

owners and owners and other other

processesprocesses

Elaborate Elaborate changed roles, changed roles,

structures, structures, applicationsapplications

Work with HR, Work with HR, managers, managers,

clients, users to clients, users to transition to new transition to new

processprocess

InitializationInitialization

Discover/Discover/AnalyzeAnalyze

Design/DevelopDesign/Develop

Implement/Implement/DeployDeploy

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)


Topic three


The BP triangle

InfrastructureInfrastructure

CustomersCustomers

Products & ServicesProducts & Services Strategies

Strategies

Envi

ronm

ent

Envi

ronm

ent

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 business process

2. Find problems and opportunities for improvement

3. Explore effects of proposed process changes

2) ‘Business process’ Work practices


BP models

PlatformPlatformIndependenIndependen

t t ComponenComponen

ttModel Model (PICM)(PICM)

ComputatiComputationon

IndependeIndependent nt

BusinessBusinessModel Model (CIBM)(CIBM)

PlatformPlatformSpecificSpecificModel Model (PSM)(PSM)

CodeCode

Business Business Problem Problem

SpecificatioSpecification Model n Model (BPSM)(BPSM)

Created Created by by business business owners to owners to describe describe business business problemproblem

Created Created by by designer-designer-architects architects to to describe describe solution solution architectuarchitecturere

Created Created by by developerdeveloper-tester to -tester to implemenimplement solutiont solution

Created Created by by business business analysts analysts to to describe describe business business problem - problem - solutionsolution

UsersUsers

AbstractionAbstractionGapsGaps

RepresentatioRepresentations & mappingsns & mappings

BPBPRepositoryRepository


Example swimlane model

Source: Proforma Corporation

Organization structureOrganization structure


BP normative models

What are they?A process model constructed from a predefined set of alternativesPrescribed view of how the process should be seen and behave

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

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


DeliverDeliverMakeMakeSourceSource

PlanPlan

Supply chain normative model

P1: Plan Supply ChainP1: Plan Supply Chain

P2: Plan SourceP2: Plan Source P3: Plan MakeP3: Plan Make P4: Plan DeliverP4: Plan DeliverP5: 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


Example Supply Chain Reference Model (SCOR)

Simple 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

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