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© Richard Welke 2002
Mike Gallivan Lars Mathiassen
Richard WelkeDuane Truex
MBA 8225:What is a process? --
Adopting a Process Perspective
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Agenda
The contextThe approachThe tool box
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Topic one
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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
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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
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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
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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 ……
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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,
w3c, Oasis, OMG, ..)w3c, Oasis, OMG, ..)
BP StandardsBP Standards(Rosetta, ebXML, (Rosetta, ebXML,
w3c, Oasis, OMG, ..)w3c, Oasis, OMG, ..)
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.
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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
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-
logy
Business
Business
partnerspartners
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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
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Defining BP
• 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’sSome high-level business processes:Some high-level 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 lower-level processes:Made up of a myriad of lower-level 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
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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
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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
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
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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
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The BP triangle
InfrastructureInfrastructure
CustomersCustomers
Products & ServicesProducts & Services Strategies
StrategiesEnvir
onmen
t
Envir
onmen
t
Work Practices
InformationParticipants Technology
Steven Alter (2002). Substitute:
- Work system Business process
- Business process Work practices1. Create a snapshot of the business
process
2. Find problems and opportunitiesfor improvement
3. Explore effects of proposedprocess changes
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Alter’s Collaborative Triangle ElementsSubstitute:
- Work system Business process
- Business process Work practices
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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
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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
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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
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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