business process management - from market consolidation to process innovation

Business Process ManagementFrom Market Consolidation to Process InnovationMichael zur Muehlen, Ph.D.Center of Excellence in Business Process InnovationHowe School of Technology ManagementStevens Institute of TechnologyHoboken NJMichael.zurMuehlen@stevens.edu

1

2

Private university, founded 1870‣ 1800 undergraduate, 2600 graduate students‣ Located in Hoboken, NJ (across the Hudson from Manhattan)

Four Schools‣ Technology Management‣ Engineering‣ Systems and Enterprises‣ Arts & Sciences

Rankings:‣ Top 5 technology management program, on par with Stanford,

MIT, CMU, Babson (Optimize Magazine)‣ #1 for best distance learning program (Princeton Review)‣ Top 25 for most connected Campus (Sloan Foundation)

http://www.stevens.edu

3

Offers MBA in Technology Management, Master of Science (IS, Telecom Mgmt, Mgmt, EMTM), Bachelor’s Degree (Business & Technology)Programs taught on campus and off-site in corporate locationsClients: ADP, Avaya, BASF, Bristol-Myers Squibb, Chubb, Citigroup, Deutsche Bank, J&J, Lockheed, Merrill Lynch, PaineWebber, Pearson, Prudential, PSE&G, UBS, UPS, Verizon and othersResearch centers with focus on‣ Process Management

‣ Project Management

‣ Product Innovation

http://howe.stevens.edu

What this Talk is AboutHow has the field of BPM evolved?

Rules + Processes: The Next Frontier

Standards: Who needs them and what do they offer?

4

User Conceptions about BPM

AbstractRestrictiveIt’s not Excel

5

Too Abstract

Process thinking requires a lateral view of the organization

Process thinking requires to generalize from the day-to-day business

Process thinking is expressed in (semi-) formal notation

6

http://farm1.static.flickr.com/177/429319452_08923116cd_b.jpg

Too Restrictive

Try modeling the following:Manufacturing can start anytime after the payment from the customer has been received

An inventory check, a credit check, and a regulatory check have to be performed - in any order

After quotes from 3/4 of the eligible suppliers have been received, or after three days (whichever is earlier) a selection is made

Users tend to think in “If-Then” scenarios

7

It’s not Excel

8

Types of BPM Projects“Let’s model everything” (aka I just learned BPMN)

“Let’s try this out first” (aka I don’t trust BPM)

“SOA first, let’s figure BPM out later” (aka I love acronym soup)

9

10

“Let’s model everything”Develop a Process Architecture for the enterprise

Maintain comprehensive process documentation

Motivation

Compliance Requirements

Developing Global Standards

Mergers and Acquisitions

“We like to model”

“Let’s model everything”Develop a Process Architecture for the enterprise

Maintain comprehensive process documentation

Motivation

Compliance Requirements

Developing Global Standards

Mergers and Acquisitions

“We like to model”

Top-Down Strategy

11

Process Groupings

Business Activities

Core Processes

Business Process Flows

Detailed Process Flows

Level A

Level B

Level C

Level D

Level E

Level F

ObjectivesBusiness Activities

Delivery Units Products

Processes Systems

Scorecard

Sub Processes Roles System Functions

Operational Process Flows

Detailed Processes TransactionsDetailed Roles

Delivery Teams

Ownership ServicesProcess Groupings

Core processes

Strategic Process

Description

Tactical Process

Description

Operational Process

Description

Source: British Telecommunications plc 2006

Strategy

BPM Application

Top-Down Project

“Let’s try this out first”Chooses a pilot process to gain experience with BPM

Good: Choose high-value, low-medium risk business case

Example: Onboarding, Claims Processing

Bad: Choose no-value, no-risk business case

Example: Complaints handling, Expense reimbursement

12

13

First Generation BPM CaseMidwestern Life and Health Insurance Company deployed a FileNet Image and Workflow system in underwriting in 1995 to

reduce elapsed time to issue policies

reduce costs

and empower the underwriting area to make changes in their workflow with minimal I/S involvement

The company achieved objectives 1 and 2 but the customer found it too hard to make changes and turned it over to IT.

IT relied on Visual Basic since this was the familiar tool to the IT staff and eventually the system became hard to change. (Hardening of the workflow arteries).

Paper

14

Now: BPM as Industrialization

Input Channels

OrderManagement

Process

Job Types

Production ManagementTransparencyAutomation, but only if not

too complex / rareother regulatory requirementsno economies of scale

Phone

Fax

E-mail

Trading

Acct. Mgmt.

Payments

Complaints

Search processes using‣technical and‣business criteria

Display shows ‣status‣start time‣end time‣instance data

Drill Down is possible

15

Example: Back Office

16

Example: Back Office

“SOA first, let’s figure it out later”Establish basic services, ESB

Try to identify processes that can leverage the services

Problem: Without processes there is no point of reference for services abstraction, granularity

17

What are you really good at?

18

From Core to Commodity

Treat the process as a serviceDefine a standard interfaceThink about creating value outside and at the front-end

19

Learn from Outside

Usage-based Insurance applies Telecom Billing Techniques

Progressive: Autograph Prototype ‘99-’01

Norwich Union:

Free GPS

Rate depends on mileage driven

Precondition: Flexible billing process

20

Underwriting On DemandText2Insure: Provide Travel and Car Insurance via SMS

Provides Quote within 60 seconds

Reply “BUY”

Call from agent within 10 min for payment details

Cover2go: Accidental Death Insurance

Fees taken from cell phone bill

21

BPM Evolution

Products

StandardsAcademia

M & AStaffware TIBCO

FYI Global360

Proforma Metastorm

Filenet IBM

Carnot Sungard

...

23

Tool FeaturesModeling

High-End

Implementation

Execution

Human-Centric

EAI-Centric

Simulation

Basic

Enhanced

Rules

BRE Call

Decision Tables

24

From Simulation to Optimization

25

Rules + Processes

Control Flow DecisionsAssignment DecisionsMonitoring of Policies and Exceptions

26

Managing Change

Claims processing at major US Insurance company

12 Process Steps

>5,000 Business Rules

What do you think changes faster?

27

How many rules exactly?>90 product types and their associated product rules

>700 data edit rules

>70 claim pending rules

>200 types of correspondence letters

>250 claim processing and payment approval authority rules

>70 claim quality review sampling rules

>1,000 special client claim handling rules

>2,000 federal/state regulatory rules

>850 accounting rules

>600 published claim processing guidelines

28

Control Flow DecisionsUsing Business Rules Engine to make data-based decisions about the sequence of processing steps

From Workflow: Workflow-relevant data

From BRMS: Branching decision

Useful if multi-criteria decisions are needed

29

Simpler Processes

30Loos (2007)

Multi-Step Decisions

31

Decision RulesExample Applications

Customer Contact Scripts

Validation of data before processing

Complex decision scenarios

Mining of rule criteria from runtime data

Model process with high fidelity

Run process and record audit trail

Apply statistical analysis techniques to uncover correlation between process data and process path

32

Assignment DecisionsUse BRMS to route work to the most qualified performer

From Workflow: Assignment-relevant Data

From BRMS: Identifier of qualified resource(s)

Useful if assignment decisions are made based on data of the workflow object

33

34

Original System

Network

FileNetImage System

Workflow

1. Application is scanned into

FileNet.

2. Data is enteredInto Admin Systems.

3. Application is assignedto Underwriter during

indexing process.

4. Underwriting Begins

AdministrativeSystems

5. Workflow and associated route work through the business process based on the kind of policy.source: Royce (2007)

35

Sample RuleIf channel equals agency,

and plan equals mortgage term or whole life, and region equals Midwest, and age is greater than 18 and less than or equal to 65,and face amount is more than $250,000 and less than $1,000,000,and policy is a conversion from existing policy

Then assign to Midwest Level 1 Underwriter Group.

No Channel Region Age Face Amount Conversion? Assignment

1 Agency Midwest 18<=65250,000

<=1,000,000 noMidwest Level 1 Underwriter Group

2 Brokerage East 18<=65 >=1,000,000 yesEast Level 2 Underwriter Group

3 Agency South 18<=65 <250,000 no Underwriter Assistant Group

source: Royce (2007)

36

Rule Engine Driven Assignment

Network

FileNetImage System

AdministrativeSystems

Workflow,Rule Engine and Robot

1. Application is scanned into

FileNet.

2. Data is entered into Admin Systems and used by Rule Engine.

3. Applications are distributed based on availability and skill level

and Admin Systems Are Updated.

4. Underwriting Begins

Assignment Engine

source: Royce (2007)

Cross-Process PoliciesUse BRMS to coordinate across process instances

Example: During labor action, hold all non-critical orders

Requires API for process control at the BPMS level

37

Actions & Alerts

ProcessMetrics

GoalsThresholds

Risk Mitigation

KPI Evaluation

Action Schedule

Web Service Callor

Execute Script

Actions

Rules Engine

Email and Cellphone notification

Process Event

Triggers

38Shapiro (2007)

39

Imaging System24/7 Issue System

Workflow and Rule Engine

App is Scanned and OCR’ed

Data EntryAnd Validation

Admin System

Rule Engine validatesApplication information

and Issues some policies

Underwriter reviews APS’s and some complex cases

Producer receives policy

for delivery.

Moving to Exception Based Underwriting

Auto Issue of Policies

Expanded Rules with Automatic Interface functionality may include:

Straight-through processingIntelligent requirement processingAutomated issueMinimized admin system entryWorkload Balancing

source: Royce (2007)

Standards?

40

41

BusinessProcessManagement

BusinessProcessAutomation

BusinessProcessInnovation

BusinessProcessMonitoring

NotationStandard

Integration Standards

InteractionStandards

StandardMetrics

AuditStandards

The Workflow Reference ModelProcess

Definition Tools

Administration & Monitoring Tools

Interface 1

Interface 4 Interoperability

Interface 5Workflow Enactment Service Other Workflow

Enactment Service(s)

WorklistHandler

Interface 3Interface 2

InvokedApplications

Tool Agent

Process Definition Import/Export

ClientApps

WorkflowEngine(s) Workflow

Engine(s)

see: www.wfmc.org/standards/docs/tc003v11.pdf

TypicallyWeb Services

BPMN

XPDL

Wf-XML

SOAP

BPEL

Example: BPMN 1.0

43

+ Pool, Lane, Grouping, Annotation, Transaction

Boundary...

BPMN 1.1

44

Mainly cosmetic changes

New symbol for Multiple Event and Gateway (used to be star)

New Signal Event

Separation of “catching” and “throwing” events

0

30

60

90

120

Nor

mal

Flo

wTa

skE

nd E

vent

Sta

rt E

vent

/ E

vent

Poo

lD

ata-

Bas

ed X

OR

Sta

rt M

essa

geM

essa

ge F

low

Text

Ann

otat

ion

Par

alle

l For

k/Jo

inG

atew

ayLa

nes

Sub

-Pro

cess

(Col

laps

ed)

Ass

ocia

tion

Dat

a O

bjec

tIn

term

edia

te T

imer

End

Ter

min

ate

Inte

rmed

iate

Mes

sage

Sub

-Pro

cess

(Exp

ande

d)E

nd L

ink

Def

ault

Flow

Incl

usiv

e D

ecis

ion/

Mer

geA

ctiv

ity L

oopi

ng'e

xcep

tion'

task

End

Mes

sage

Sta

rt L

ink

End

Exc

eptio

nC

ompl

ex D

ecis

ion/

Mer

geE

vent

-Bas

ed X

OR

Gro

upM

ultip

le In

stan

ceIn

term

edia

te E

vent

Tran

sact

ion

Com

pens

atio

nC

ondi

tiona

l Flo

wE

nd C

ance

lE

xcep

tion

Flow

Inte

rmed

iate

Com

pens

atio

nIn

term

edia

te L

ink

Sta

rt T

imer

End

Com

pens

atio

nIn

term

edia

te M

ultip

leIn

term

edia

te R

ule

Off-

page

con

nect

orS

tart

Rul

eC

ompe

nsat

ion

Ass

ocia

tion

End

Mul

tiple

Inte

rmed

iate

Can

cel

Inte

rmed

iate

Exc

eptio

nS

tart

Mul

tiple

Practical Use of BPMN Symbols

45

Source: Sample of 120 BPMN models

46

Design Interchange vs. Executable Format

XPDLDesign Tool A

ExecutionEngine A

BPEL,XPDL,

or someengine

specific format

Design Tool B

ExecutionEngine B

BPEL,XPDL,or someengine specific format

XThis path not

generallysupported

47

Process Design Ecosystem

Vend

or B

Vendor C

Design Tool

Design Tool

ModelingTools

OptimizationTools

SimulationTools

ExecutionEngine

ExecutionEngine

BPELor someengine

specific format

BPELor someengine specific format

Repository(XPDL)

Vendor A

Vendor D

ASAP

Wf-XML

Business Process Definition Metamodel (BPDM)

Designed to supplement BPMN with a formal metamodel of its modeling constructs

BPMN 1.0 did not contain a formal metamodel specification

OMG mindset of MDA is based on multiple levels of metamodels

BPDM replaces efforts to create a UML profile for BPMN

BPDM contains more constructs than BPMN 1.0/1.1

Mapping to MOF and XMI

Envisioned to become persistency format for BPMN

BPMN 2.0 = BPMN + BPDM + possibly other notations

There may be a UML profile for BPDM

48

Universal Behavioral Happening

49

FinishStart

End

Error

Universal Behavioral Happening

Behavioral ChangePart typed by the “Start” Change

Succession between Behavioral Change Part

Abort

The “Universal Behavioral Happening”

is in the M1 Library of BPDM

is the super type of all processes and choreographies

is the default type for all process steps and choreography steps

source: modeldriven.org

Processing Successions between steps can specify

The Behavioral Change that originated them

The Behavioral Change that they trigger

All combinations are then possible

End -> Start (the default)

Abort -> Start

Error -> Start

Start -> Start

Start -> Abort

…

50

Behavioral Step 1 Behavioral Step 2predecessor successor

source: modeldriven.org

Example

51

FinishStart

Abort

End

Error

Universal Behavioral Happening

Behavioral Step 1 Behavioral Step 2predecessor successor

behavioral happening type behavioral happening type

predecessor behavioral change part

successor behavioral change part

FinishStart

Abort

End

Error

Universal Behavioral Happening

source: modeldriven.org

SBVRSemantics of Business, Vocabulary and Rules

Formally defined taxonomy to describe elementary business operations and rules

Meta model expressed in UML

Business-level specification aims at enterprises to formally express their operations

52

Example: SBVR Rules

53

54

Users don’t care about standards per se, but about

their value proposition

Your Service Interfaces

55

Your Business-level Services

56

Your Process Interface

57

58

Thank You – Questions?

Michael zur Muehlen, Ph.D.Center of Excellence in Business Process InnovationHowe School of Technology ManagementStevens Institute of TechnologyCastle Point on the HudsonHoboken, NJ 07030Phone: +1 (201) 216-8293Fax: +1 (201) 216-5385E-mail: mzurmuehlen@stevens.eduWeb: http://www.cebpi.org

slides: www.slideshare.net/mzurmuehlen