Adopting a Business Process Approach to Management - 6 Critical Steps

1. Determine Who Are Your Customers and Stakeholders, and What Benefits Your Organisation Offers Them

In our previous article we emphasised the customer/stakeholder focus of the business process approach to management. The first step is therefore clearly determining who those customers and stakeholders are. Who buys or uses your product or service offering? Who makes the buying decision? What exactly are they buying in terms of benefits? Who else is affected by your activities and what are their expectations?

A small pharmaceutical manufacturer of multivitamins, antibiotics, syrups and OTC medicines for children, located in a large African city, was trying to answer these questions for their own organisation. They came up with the following.

Customer/Stakeholder and Benefits Sought

Wholesalers: Availability, reliable delivery, favourable payment terms, margins, marketing support

Retailers: Availability, quality, clear product information, price

Suppliers: Guaranteed business, prompt payment

Hospitals and HMOs: Quality, price

Doctors: Quality, efficacy, product information

Consumers: Price, efficacy, pleasant taste

Shareholders/bankers: ROI, growth

Regulatory authority: Safety, quality, efficacy

2.Determine the Value Chains that Deliver these Benefits

The information obtained from the above step should be formed into benefit clusters. Next, trace those benefits back from your products and services through to the inputs. The identified paths form your value chains or end to end core business processes. Our pharmaceutical company took this step and concluded they had one major value chain consisting of two major processes - the new pharmaceuticals development process and the sales and production process.

All the benefits to the customers and other stakeholders are derivable from their product range, their distribution and market support and their information dissemination.

3. Decompose into Processes and Determine the Process Boundaries

The previous step yields an end-to-end view of the organisational value chains. We now need to determine the core processes and sub-processes that make up these value chains, and the support processes that enable them. The determination of process boundaries should combine top-down and down-up approaches applied iteratively.

Listing out the major processes in the value chain as we did in the previous step, is top-down. We might then take each major process identified and using the following procedure suggested by Patrick and McDermott, break them down into sub processes.

Brainstorm the milestones or necessary results of the process

Link the milestones together, such that the output of one is the input of the next

Note steps within one-to-one, one-to-many and many-to-one relationships from the above. Assemble all one-to-one steps to form the individual sub-processes within the major process.

In the case of the pharmaceutical for example, we might find, after going through this sequence that the sales and production process decomposes into the customer acquisition (identify prospect, qualify prospect and establish contract) and order fulfilment (receive order, produce and assemble order, and ship order) sub-processes.

4. Select Appropriate Metrics Based on Critical Success Factors for the Identified Processes and Overall Strategy

It is well known that measurements and rewards drive behaviour. To ensure proper balance between focus on past/current performance, and the need to build capabilities that drive future success, we need metrics that track results, processes, organisational capability and the environment.

Result measures are generally lagging in that they track past performance. By the time the result is measured, it is too late to do anything about it. Process measures are generally leading and prescriptive, since they predict future performance. Acting on factors that affect these measures will impact on future results. Care must be taken that metrics which drive the desired behaviour and customer valued outcomes are selected.

Having determined the critical factors that drive delivery of customer and stakeholder metrics or indicators of performance must be chosen, with targets for each measure, and cascaded down to individual sub processes. A line of sight must exist between overall organisational measures and the detailed measures at process and activity level.

Our pharmaceutical company chose to measure four categories. At the top level, the chosen metrics were:

Financial - ROI, earnings from new products

Customer/ consumer: Market share growth, price vs competition, value perception, on time delivery

Internal: Process improvement index, employee satisfaction index, environmental compliance index

Learning/growth: Number of patents, applied learning index

5. Appoint Process Owners for Each Core Process

A major flaw of the functional orientation is that there is no one within the organisation that has a complete view of the process as experienced by the customers and stakeholders. The appointment of process owners overcomes this flaw.

The job of process owner is to manage the processes in the critical areas of improvement, boundary management, metrics, collaboration and advocacy. The process owner coordinates the functions and activities at all levels of the process, and has the authority and ability to makes changes to the process. He is responsible and accountable for its outcome.

6. Begin a Never Ending Cycle of Business Process Improvement

With your core processes defined and documented, appropriate metrics selected and process owner appointed, the next step is to begin an improvement cycle.

Using process diagrams, value stream maps and metrics, determine the current capabilities of your core processes. Identify and quantify areas of greatest opportunity using information from customer surveys, comparison of your process performance with a similar ideal process, etc.

Continuous business process improvement is the subject of our next article. Be sure to watch out for it.

Overview of Business Process Management

Business Process Management, or BPM, now more and more driven by software, has been a management discipline for a long time, and it would seem to be rather straightforward to implement an automated system. In reality it is not. For one thing, business process management involves people to a large extent, and it can be very difficult to standardize a rather complex process in which people are deeply embedded. In addition, the terminology used in BPM is not as standard as one might suppose. In fact, if one were to specify a BPM software application, and leave it at that, Business Performance Management software could be what turns up on the doorstep.

As companies have automated aspects of their business process models, each has tended to go their own way, and today's management systems are far different from the document driven systems of 20 years ago.

Getting back to basics, where there is an area of generally common agreement, business process management is generally defined as a discipline that governs the business process environment with the aim of improving business operation performance, while at the same time providing flexibility and agility when dealing with change. Most processes in place today, especially in larger corporations, tend to be highly structured, replete with software tools, metrics, and policies and procedures designed not only carry out business but to continuously optimize the process.

An Example Of Past And Present - Highly automated business management systems that are being put into place today usually need to address both person-to-person and system-to-system processes. One only needs to visit a doctor's office to see such a system, on a smaller scale perhaps, in action. In the course of the consultation, the doctor, through his laptop or notebook, can review a patient's past history, view past and present lab tests, document exam or diagnostic results, set up appointments with other physicians, and e-mail prescriptions to the pharmacy of the patients choice. Just a few short years ago, that portion of a doctor's business management process involved locating and pulling a sometimes very fat folder containing the patient's records from the files, sending an aide to pick up lab test results, writing prescriptions, and negotiating appointments over the phone.

A business process management system used in a large corporation has to interact with many different organizations as well as outside companies, clients, and vendors, making certain among other things that all communications received are routed to the appropriate party or parties, and tracked. Since contemporary automated BPM systems are often based on preceding, non-automated processes, it is little wonder that there is no such thing as a one-size-fits-all system application.

New Mantra of Business Process Modeling and IT

In the worlds of Business Process Modeling and Systems Development as new approaches emerge they quickly turn to fads that are seen as the panacea for all of the ills that plague these worlds. These "advanced", and often unproven, approaches are quickly adopted because nobody knows how the existing mess has occurred nor has the skills to fix it - well not using existing techniques.

So the rationale is quickly formulated that the mess would not have had happened if the new approach had been available at the time it was being created, so using the approach will mend it! If the new approach is automated then it's Eureka! Technology replaces thinking! One of the latest approaches that is quickly turning to a fad in many places is Business Process Execution Language (BPEL).

The emergence of "process centric" business modeling over recent years, where everybody models everything that happens in a business as a "process", has introduced complexities that have accelerated this fad syndrome. Get this clear - not everything that happens in a business is a process, so stop modeling it as such! The problem is still further compounded because most "process" modeling tools are only suitable for modeling procedure. This statement is seen as "splitting hairs" by analysts and business managers who do not know the difference, but it is a big problem!

Procedure can, and will, change significantly over time within a business, due to changes in technology, organization, etc. Because nobody realizes that they have actually modeled the wrong thing, they mistakenly think that processes significantly change over time, which they do not. This is where approaches such as BPEL are seen as life saving solutions. Because procedure has been modeled in place of process, changes are happening all the time and there is a need to update things all the time. If this change could be automated and done quickly then the problem would be solved - wouldn't it?

This approach takes the business to the brink of the Chaos Chasm! If you have chaos and you automate it you do not get elegance, you get automated chaos! So what is the solution? Agile development approaches? BPMN? ABCD? Some as yet undiscovered miracle?

Its simple - stop modeling the wrong thing! Stop modeling complexity and trying to control it. Model simplicity by modeling the core activities of the business - Business Functions - not business processes. This will bring simplicity, power and elegance - much easier to automate. The Integrated Modeling Method describes how all this can be achieved in organisations of all sizes with far less effort and greater speed.

Core Business Processes

Many times I am asked "how can I really make a difference in my business?" With a question this open-ended, I often tell clients to focus on their core business processes. Business processes are designed activities that assist you in accomplishing very specific goals. These are the drivers for your company and touch every area from vision and strategy to delivery of products and services.

At the foundation of each of these processes, is the need to focus on customer satisfaction, retention and acquisition. It is important to note that innovation and quick response time are key drivers in the successful rollout and maintenance of each of the 5 core business processes.

The processes are very action oriented, as evidenced by the key words that are found in them. To help you remember them, focus on a few keys words that include develop, deploy, deliver and design. Let's focus on five critical processes that should be in your organization:

1. Develop and Deploy Vision and Strategy

2. Business Development

3. Deliver and Produce Services & Products

4. Market and Sell Products and Services

5. Design and Deploy New Products and Services

Develop and Deploy Vision and Strategy - In the first process, the focus is on developing a company plan and alignment. The process ensures everyone involved in establishing and deploying vision and strategy is heard. A critical component of this process, and in many of those that follow, is that it under constant review and analysis. As conditions change within and outside the organization, a rapid response is critical.

Business Development - This process requires constant innovation and market understanding. The ability to deliver new products to existing customers, existing products and services to new customers, and new products and new services to new customers helps you realize marketplace opportunities. This process is critical in filling your pipeline, and driving continuous revenue streams and cash flow to sustain your operation.

Deliver and Produce Services & Products - The third business process encompasses everything from supply chain, to manufacturing, to quality assurance, to service. It's critical to understand your current manufacturing capabilities along with key suppliers' to ensure uninterrupted production runs. Don't focus on trying to produce all the components internally, as you won't be able to do it. Stick to what you know best and do well without exception.

Market and Sell Products and Services - At the core of this process, is understanding what drives purchasing decisions, and the special needs of market segments and individual customers. By using tools that include customer visits, distributor meetings, focus groups, and input from your sales team, you can gather information on markets and customers. Remember, put yourself in your customer's shoes. Look at things from their perspective. Your goal is to understand what your customer wants, not to push your preferences on them.

Design and Deploy New Products and Services - Focus on improving the cycle time of the development process. Simplified product designs, common manufacturing platforms, and reduced part counts are just a few of the elements required to minimize the time and costs associated with this process.

Once you get started, you will realize that your next step will be to address supporting sub-processes, that when combined with your core business processes, will position your organization to accomplish your specific goals. Organizations must continue to develop and modify sub-processes to meet changes in customer requirements and market opportunities.

It's not as daunting as it might sound. With time, your organization will become more agile and develop a culture oriented towards continuous improvement. Small, incremental improvements keep your organization fresh without causing gut wrenching change.