Strategy & Business Process Management

STRATEGY AND BUSINESS
PROCESS MANAGEMENT
Techniques for Improving Execution,
Adaptability, and Consistency

CARL F. LEHMANN
Principal Analyst
BPMethods, LLC
www.bpmethods.com
Desk: +1.781.319.0599
Cell: +1.781.405.0027
carl.lehmann@bpmethods.com

BPMethods, LLC | Business Process Management & Continuous Improvement | A Professional Services Firm
© BPMethods, LLC | www.bpmethods.com | info@bpmethods.com | +1.781.319.0599

1

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

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

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

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

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

Agenda




7

BPM is not new!


8

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

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

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

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, 1985

12

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, 1985

13

Agenda




14

Market & Technology Trends

 Notable acquisitions in the last 5 years (partial list)…
Lombardi (BPM Suite)
…………….. ........ .....

IBM …………….. iLog (Rules Engine)
IBM …………….. Aptsoft (Event Management)
IBM …………...…
IBM …………….. Cognos (Business Intelligence)
IBM …………….. TeleLogic (BP & App, Dev. Software)
…………….. Filenet (Workflow)
IBMMetastorm ……………….….. Proforma (BPA Software)
Open Text ……………….….. Metastorm (BPA & BPMS)
Oracle …………….…….. BEA (App. Dev. & BPMS)
Pega …………………... Chordiant (CRM / BPM)
Progress Software …………………... Savvion (BPMS)
SAP ……………….….. Business Objects (Business Intelligence)
Software AG ……………...
Software AG ……………….….. IDS Scheer (BPA)
Software AG ……………….….. webMethods (App. Dev & BPM)
Tibco ……………….….. Spotfire (Business Intelligence)
Tibco ……………...
Tibco …………………... Nimbus (Process Documentation)

 Platforms acquiring building blocks & migrating to
“process-centric” services-oriented architecture

15

BPM Vendor Landscape

Gartner Magic Quadrant Gartner Magic Quadrant
BPA Tools, 2008 BPM Suites, 2010

Source: Gartner Magic Quadrant for BPA Tools 2008 Source: Gartner Magic Quadrant for BPM Suites 2010

16

BPM Vendor Landscape

Forrester Wave IDC MarketScape 2011
BPM Suites, Q3 2010 Business Process Platforms

Source: Forrester WaveTM Business Process Managment Suites Source: IDC MarketScape: Worldwide Business Process Platforms
Q3, 2011 2011 Vendor Analysis

17

BPM Market Observations

 Market Size & Growth
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 2009.

 Prognostications
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

Benefits Sought

Source: Forrester Software Survey, Q4 2009

19

Agenda




20

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

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

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

Agenda




24

Motivations & Approaches for BPM

A Problem
• Strategy & KPI Set
• Process Team
• Process Selection
• Methodology
• Modeling & Simulation
• Implementation & Control

BPM

Business Process
Portfolio Management

A Strategic Initiative Continuous Transformation
• Strategy & KPI Set(s) • Strategy & KPI Sets
• Program & BPM Team(s) • Center of Excellence (BPM Teams)
• Process Set • Process Portfolio & Audit
• Methodology(ies?), PMO? • Multiple Methodologies, PMO
• Redesigns & New Designs • Multiple Tools
• Modeling & Simulations • Governance
• Execute, Manage & Control • Continuous Improvement

Source: BPMethods

25

How To Audit Process Maturity

To achieve high-performance organizations must develop
their enterprise capabilities & establish process enablers
 Enterprise capabilities  Process enablers
1. Leadership: Senior executives who support the creation 1. Design: The comprehensiveness of the specification of
of processes. how the process is to be executed.
2. Culture: The values of customer focus, teamwork, 2. Performers: The people who execute the process,
personal accountability, and a willingness to change. particularly in terms of their skills and knowledge.
3. Expertise: Skills in, and methodology for, process 3. Owner: A senior executive who has responsibility for the
redesign. process and its results.
4. Governance: Mechanisms for managing complex 4. Infrastructure: Information and management systems
projects and change initiatives. 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

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

Other or
SCC SCOR
Custom

27

How To Inventory Processes

 Conduct a Business Process Inventory
 Use the chosen classification model, take “stock” of processes

Source: APQC & BPMethods

28

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 Improve, Consolidate, Eliminate, Benchmark, Re-evaluate, Design, Outsource, Insource, None
Timing Immediately, Near-Term, Long-Term, Unspecified

Source: BPMethods

29

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

How To Select Projects

 Problematic, strategic, transformational
 What needs to be done?

Revenue
Profit Market Share

Margins Growth

Response Acquisition

Accuracy Satisfaction

Innovation Retention

Speed Churn
Quality Efficiencies
Costs

31


 Consider type & complexity
 Transactional
 Transformational
 Decision Making

Source: BPMethods

32


 Use a Complexity Assessment Matrix
 Modify as required

Source: BPMethods

33

How To Document Processes

 Identify process components

What governs execution & value creation

What is needed Process Design What value
to begin “How” is created

What is needed to execute & create value

34

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

How To Measure Performance

 Select KPI Set(s) (Balanced Scorecard meets Six Sigma)

Source: BPMethods

36

How To Assess In-Place Systems

 IT Readiness Assessment
 Helps business professionals ask the
right questions of IT professionals
 Reveals capabilities & limitations of in-
place 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

How To Improve Processes

 Select a methodology
 ISO, Six Sigma, Lean, ITIL, others…

The PRACTICE MethodTM 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


 Understand the organization
 Organization charts, RACI Matrix, Stakeholder Classification Matrix

High Low
Potential for cooperation
Low High

Potential to Impact

39


 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


 Select artifact set, elicitation techniques & requirements
management tools

Source: Corporate Education Group

41


 Select BPM tools
 If needed or desired

Business Process Analyses
(BPA) software

Business Process
Management Suites
(BPMS)

42


 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

Process-Centric IT Building Blocks

 Must be capable of integrating sufficiently to support
process-centric design

Source: BPMethods

44

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

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

Implement & Control
Methodology

Successful
Analyze, Correct, Test Change

Research

Plan

Awareness Desire Knowledge Ability Reinforcement

 Facilitates workforce collaboration through collaborative objectives
Sources: Jeff Hiatt, Prosci Change Management, Change Management Learning Center, BPMethods

46

Agenda




47

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, 10/2009

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, 10/2009

49

Agenda




50

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

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

How to Use The PORTFOLIO ApproachTM
A Business Process Portfolio Management System

Prepare for BPM using Learn How To Manage Processes Classify, Inventory & Evaluate Processes
1 The Strategy Guide 2 using The Portfolio Guide 3 using The BP Inventory Worksheet

Create a Business Process Portfolio using Document Processes using Document Policies, Rules & KPIs
4 The BP Portfolio Manager or The BP Portfolio Template 5 Process Detail Sheets 6 using Rules & KPI Detail Sheets

Assess IT Readiness for process change using
7 Manage Lifecycles & a
Continuous Process Improvement 8 The Readiness Guide & IT Analysis Sheets 9 Select Business Process Analysis
Software using The Evaluation Guide
(if needed)
Program
using The BP Portfolio Manager

Italicized red text indicates a deliverable. Source: BPMethods

53

How to Use The PRACTICE MethodTM
A Process Improvement Project Management System

Learn How To Improve Processes Learn How To Manage Projects
1 Prepare for BPM using
The Strategy Guide 2 Using The Process Guide* 3 using The Project Guide, The BP Project Manager
& Project Management Document Templates*

Document Processes, Policies & Assess IT Readiness for process change using Select Business Process Analysis
4 Rules using Detail Sheets 5 The Readiness Guide & IT Analysis Sheets 6 Software using The Evaluation Guide
(if needed)

Measure Return on Investment
7 Model, Simulate & Analyze Processes
using BPA Software 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

Coming March, 2012

55

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