five ways bpm can help ppm boost business...

Five Ways BPM Can Help PPM Boost Business Results

Enterprise Integration Summit

April 13-14, 2010 WTC HotelSao Paulo, Brazil

Bill Rosser

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The primary tasks and procedural flow of project portfolio management (PPM) illustrated in this slide areThe primary tasks and procedural flow of project portfolio management (PPM), illustrated in this slide, are well known. The key message is that each of the five PPM activity stages can be supported and supplemented by the adoption of business process management (BPM). The result is that PPM can be executed better with the support of BPM.BPM's first contribution is added insight into opportunities for improving business performance, based on close examination of business processes using business process modeling. BPM treats business processes as assets that can be managed and improved. BPM-driven modeling enables a look inside those processes, often revealing opportunities to improve them and so get better business performance Further opportunities arerevealing opportunities to improve them and so get better business performance. Further opportunities are often found based on BPM's emphasis on an end-to-end process view that looks at the outcomes of a series of connected processes. The net result is that BPM delivers a richer array of promising potential projects to enhance a business.Support for PPM continues with BPM's focus on sound process evaluation metrics. BPM can also make a major contribution to securing end-user support for required process changes by encouraging fuller user engagement in those changes. This helps link projects to business strategies. So does h ili h BPM i b i b ki i i h i d d d i d

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the agility that BPM gives a business by making it more responsive to changing demands and revised strategies.


The three Key Issues address the major benefits to the execution of PPM that come from the use of BPM EachThe three Key Issues address the major benefits to the execution of PPM that come from the use of BPM. Each Key Issue is meant to stimulate broader thinking about the question — consideration of other options, of what might work best, and of what obstacles may need to be addressed.The first Key Issue deals with how BPM can strengthen a business case for a proposed project. The second Key Issue addresses the measurements used to evaluate business process performance and how BPM can deliver better metrics. The aim is to know just what to monitor for the best determination of meaningful improvement and to be able to compare metrics over timemeaningful improvement, and to be able to compare metrics over time.The third Key Issue concerns the vital contribution of a greater likelihood of project success resulting from clear alignment with a business unit's business strategy. This increase comes about because BPM can stimulate more and richer end-user involvement and support by clearly linking a project to the right goals and strategies, often through comprehensive modeling.




Key Issue: How does BPM strengthen a business case for project justification?

To understand the BPM movement some historical context may be helpful Successive waves of attentionTo understand the BPM movement, some historical context may be helpful. Successive waves of attention have been given to the idea of processes in business, and great progress has been made in making business processes more effective and more efficient. Within the last 50 years one of the greatest advances has been the attention paid to improving quality, especially in Japan where companies pursued ideas about quality from a U.S. expert, W. Edwards Deming. This eventually led to the development of the Six Sigma methodology with its goal of delivering no more than three defects per 1 million events. GE has used this approach to great effect across its broad operations. The parallel Lean concept pays particular attention to the elimination of waste or idle time. In many firms, the two concepts have merged into a Lean-Six Sigma program to take advantage of y , p g g p g gboth perspectives.Attention to processes received another boost from Michael Hammer and James Champy in 1993, with the concept of business process re-engineering (BPR): the idea that existing processes should be scrapped and replaced by those of the "right" design. However, this approach lost popularity as it came to be perceived largely as a means of eliminating workers. The BPR thrust was displaced by BPM, a discipline that takes a broader view of how business process performance can be improved. BPM focuses primarily on improving business performance by taking existing processes, treating them as assets and applying technology to make



p y g g p , g pp y g gythem work better.


Key Issue: How does BPM strengthen a business case for project justification?Key Issue: How does BPM strengthen a business case for project justification?BPM widens the scope of process attention to include measures that improve any dimension of business process performance. One area that commonly attracts attention for BPM-based improvement is customer satisfaction and the customer experience. But BPM is also used widely to spur consolidation of redundant and overlapping processes for greater efficiency. One aspect that distinguishes BPM within the world of IT is that the immediate result of a BPM project is better business performance That is the improvement is delivered as soon as the new process is operationalbetter business performance. That is, the improvement is delivered as soon as the new process is operational. Analysis, design and implementation are aimed directly at improving performance. As a result, the payoff is immediately evident, and the return on investment (ROI) can be demonstrated and believed. This is not always the case with other IT efforts, such as CRM, where the systems, once installed, still have to be used in order to make decisions that produce better business results — a sometimes gradual process.For PPM, the direct, immediate and visible business performance improvements that come from BPM-based projects mean greater visibility and credibility to a business audience. In short, BPM is a way to demonstrate



projects mean greater visibility and credibility to a business audience. In short, BPM is a way to demonstrate more fully that PPM is handling the right projects and delivering value.


Key Issue: How does BPM strengthen a business case for project justification?

The general structure of a business case for an IT project will be familiar to most audiences But gettingThe general structure of a business case for an IT project will be familiar to most audiences. But getting understanding and agreement on all of a project's contents in order to prioritize it against other projects is not always easy. Added insight and credibility have clear value as means of strengthening a business case. The disciplines of BPM can make a direct contribution here.This slide shows a typical outline of a business case, outlining many of the elements that must be considered. BPM can make a direct contribution to understanding for 10 of the 11 topics shown. BPM starts with the depiction of the "as is" business process for the proposed project. It then shows the changes planned to attaindepiction of the as is business process for the proposed project. It then shows the changes planned to attain the desired process, including assumptions, and the improved performance that would result from implementing the to-be model. Visualization at this level enhances many dimensions of comprehension. While the specific changes proposed are illustrated, it is straightforward to review adjacent processes and any associated dependencies, and to judge the scope of the changes, the degree of difficulty, the metrics and the risks. Business process visualization also increases a project's credibility by making it more tangible. It can be the



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source of answers to many relevant questions.


Key Issue: How does BPM strengthen a business case for project justification?Key Issue: How does BPM strengthen a business case for project justification?The initial task of PPM is to define project opportunities and select the best ones for investment. To do this, it must pull together relevant information about individual proposed project costs, benefits and risks, at the least. BPM can play a strong role in supplying this information because of its use of business process modeling wherever the project includes a business process (that is, BPM is not typically used for evaluating, say, the merits of PC upgrades or server virtualization). The purpose of modeling is to provide a representation of the real world which has good fidelity to reality. BPM provides these details through modeling via a process ofreal world which has good fidelity to reality. BPM provides these details through modeling via a process of discovery in relation to activities, sequencing, decisions, timing, and so on, including the use metadata which can all be represented in a comprehensive visualization. The resulting insight can be used to get an sense of what is right and wrong about the current process, to stimulate ideas for improvement, and to form a basis for evaluation of what would happen if proposed changes were made. Furthermore, this view can clarify the amount of effort or the degree of change involved, compared with the present practice. Each step can add to the quality of the proposed project.



This approach is clearly better than setting a simple goal of, say, "speed this process up by 10%" or the use of brute force. As such, PPM projects benefit from this insight.


Key Issue: How does BPM strengthen a business case for project justification?Key Issue: How does BPM strengthen a business case for project justification?Good business process modeling requires both a tool and a methodology — either alone will falter. Depending on the context of the business process, the high-level overview of the processes under analysis, and the chosen discovery methodology, different models will be created. These models can be related to the strategy (goal models and risk models), organization (role models), process (workflow models and event models), information (object models), communication (system models) and technology (implementation models). There is a history of different process modeling methodologies. Current sound modeling methods will capture of all this by using different views in an accessible fashionthis by using different views in an accessible fashion.For today's business process modeling products, there are two broad camps. One camp is oriented to technology for implementation, execution, and orchestration — and has largely shut out business users due to its complex nature. Products in this camp may come from the business process analysis tools arena; they include Aris from IDS Scheer. Standards are emerging in this arena that include a common graphical notation, Business Process Modeling Notation (BPMN), and Business Process Execution Language (BPEL).The other camp is intended for business users. Products in this group may have a background in architecture-

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modeling languages. Products from each camp should be used to supplement the other.


Key Issue: How does BPM strengthen a business case for project justification?Key Issue: How does BPM strengthen a business case for project justification?This example of a business process diagram shows what can be gained from BPM business process modeling in the scan and review stage of PPM projects. The highlighted blocks show problems or opportunities. The advantages of using business process modeling at this stage are that it:1) Provides insight and ideas for what to fix or improve.2) Allows a focus on activities that affect cost, speed or quality — whatever the target goal.3) Enables testing of ideas in the model in order to evaluate a change and see what leverage is possible4) Makes clear the options and identifies locations for process performance measurements.5) Creates the opportunity to examine the requirements and skills needed in context.6) Adds the ability to overlay, examine and determine data elements and standards.7) Permits evaluation of the use of complex algorithms, such as for scheduling.



8) Gives a clear view of the impact of change on what is in place.


Key Issue: How does BPM strengthen a business case for project justification?Key Issue: How does BPM strengthen a business case for project justification?As a foundation of the business process view, BPM places extra attention on the overall enterprise process and value chains, as well as on individual functional processes. Furthermore, particular attention is paid to the outcomes and results of processes, in order to clearly establish the overall end-goal. By paying attention to the end-to-end process that links several functions, the handoffs and exchanges between functions are examined. These may be capable of substantial improvement, because too often interchanges are ignored in favor of primary functional performance metrics. Important corrections may lead to new joint measures and newprimary functional performance metrics. Important corrections may lead to new joint measures and new motivations.Lack of an end-to-end process view tends to encourage each function to pursue its own best performance, an approach whose overall results, when combined, may not amount to the best possible end-to-end performance. A local optimum may need to be modified in order to produce the best end-to-end process result. Local functional performance evaluation can grow to include end-to-end results as well. This brings its own challenges of dependence on other functions, but these can be resolved with the help of modeling.



Action Item: View every PPM project in its larger BPM end-to-end context, where relevant.


Key Issue: What are the risks and rewards of becoming a process-driven organization?Key Issue: What are the risks and rewards of becoming a process-driven organization?Assessment of a PPM project at the level of an activity within a larger end-to-end process benefits from BPM's higher-level process model view. All five of the separate activities shown in this slide are part of the classic order-to-cash process. Each activity has goals but the overall goal of meeting the customer's order accurately, efficiently and quickly should be dominant. Conflicting goals at the activity level may be natural, such as getting the order (what promises?), minimizing customization, keeping inventory low, and requiring payment promptly. Each of these may detract from good performance toward the end-to-end goal. But BPM's model visualization y g p gand the use of key metrics across the whole end-to-end process can be used to decide the best compromise. The best approach to take may be a form of matrix management to resolve the tradeoffs. This means that each activity has to add the overall performance metric to its local performance metric. This may cause concern in that one person's appraisal may be dependent on someone else over whom he or she has no control. This conflict can stimulate the shift to matrix management and the use of shared governance based on the "authority of knowledge," not direct reporting authority, that BPM can make happen.



Action Item: For each proposed PPM project, be aware of its impact on the higher-level process goal.


Key Issue: What are the BPM keys to choosing the right process performance metrics?

Each business process examined from a BPM perspective essentially starts with a focus on the processEach business process examined from a BPM perspective essentially starts with a focus on the process outcome or desired result. Putting the desired objective into explicit terms is the very basis of improvement, which is the intended goal. But for many business processes it is surprising that a clear consensus on the process objective is not available. It is not uncommon for as much work to be done on agreeing the objective of a process as on developing the process model itself. Individuals may view the same process in different ways in terms of what constitutes success and how it should be measured. Defining a primary objective is vital, and it must be agreed by the appropriate stakeholders in order to achieve the desired performance gain. Any PPM project needs the same clarity of desired outcome, and BPM can help. Part of BPM's contribution is its p j y , pview of how the outcome of one process contributes to the performance of another — insight gained from BPM models. Furthermore, business process models can be used to examine the sensitivity and volatility of the outcome measurements. In addition, the models can help identify metrics which can be used to predict changes in outcomes — a valuable insight.Naturally, in addition to a primary measure for improvement, there also needs to be a set of metrics to act as the appropriate balances. Guided by a model, these should cover aspects such as maintaining safety and avoiding undue risk.



gAction Item: Use BPM to confirm that PPM objectives have sound, agreed outcome measures.


Tactical Guideline: Start the metrics development process with a clear understanding of the three categories of business metrics.

Key Issue: What are the BPM keys to choosing the right process performance metrics?Key Issue: What are the BPM keys to choosing the right process performance metrics?

Each of the three levels of business metrics has a valuable role. At the top is the accounting level, which is carefully controlled by financial regulators. It provides gross measures of financial performance in terms of revenue, profit and balance sheet (or the equivalent for public-sector organizations). The aim is to provide fair means of comparing organizations, especially for investors.

In the middle is the performance level. It is unregulated, but often organized and standardized within industries to provide sound measures of many standard industry processes for purposes of comparison, including performance benchmarking.sound measures of many standard industry processes for purposes of comparison, including performance benchmarking. These metrics are organized primarily by business function and are very relevant to the goals of business performance improvement and BPM. They are used by business managers both for managing operations and for deciding about new investments, such as within PPM.

At the bottom is the analytical level. These measures are custom-made to perform diagnostics, undertake research, solve problems and find new opportunities. These measures are attracting growing attention as enterprises move toward greater scientific management.



The middle and bottom layers each contribute to the performance of the layer above.

Action Item: Apply standardized performance measurements for sound project comparisons.


Key Issue: What are the BPM keys to choosing the right process performance metrics?Key Issue: What are the BPM keys to choosing the right process performance metrics?This diagram illustrates part of "The Gartner Business Value Model: A Framework for Measuring Business Performance" (G00139413). It is a rich source of standard performance measures that are widely used by BPM programs to evaluate various business functions and processes and to track performance, both over time and between organizations. It can be just as useful and productive for evaluating and monitoring PPM projects. The top-level activities ("business aspects") measured are demand management, supply management and

i T h h f h di id d i i " " ( h f d dsupport services. Together, these are further divided into nine "aggregate measures" (those for demand management, for example, being market responsiveness, sales effectiveness and product development effectiveness.) Each aggregate measure is in turn split into "prime measures," which are composed of primarily leading indicators of financial results (only some of the prime measures are shown above). The metrics are mutually exclusive and collectively exhaustive (MECE) at the mid- to upper-management level. There are no more than seven (plus or minus two) metrics at any level. The specific metrics and their definitions and relationships with other measures are given in the framework



p p gdocument. Action Item: Take advantage of the standard metrics definitions in PPM project work.


Key Issue: When can a BPM process view demonstrate strong alignment with business strategy?

The prioritization of candidate investment proposals in PPM can be influenced most heavily by the degree toThe prioritization of candidate investment proposals in PPM can be influenced most heavily by the degree to which the project aligns with current business strategy. Understanding the project alignment's with strategy is easier using BPM and a process perspective.For each process or subprocess with a measured outcome, results contribute to the performance of the next-higher-level process. The cause-and-effect relationship needs to be seen and compared with other contributing factors. It is the BPM modeling view that illustrates all the contributing elements and allows evaluation of the relative importance of each input factor, particularly when the right metrics are in place. An even more detailedrelative importance of each input factor, particularly when the right metrics are in place. An even more detailed view of the process impact toward the higher goal is available using simulation of the process as part of the BPM view and capability.What is needed, but too often absent, is clear traceability from an individual project up to the top-line goal or strategy, using a hierarchical view. Traceability, and knowledge of the relative impact contributed, provides strong support for project justification through evidence that is easy to see and accept. It also helps to illustrate the key business value of a project.



Action Item: Understand a project's alignment with business strategy by viewing cause-and effect links.


Key Issue: When can a BPM process view demonstrate strong alignment with businessKey Issue: When can a BPM process view demonstrate strong alignment with business strategy?This diagram shows the vertical hierarchical structure used to illuminate the contribution relationships among business processes at Salt River Project, a power utility in Arizona. Overall, there are three levels beneath the Level 0, the overall goal of a line of business. At Level 1 is the division into relevant value chains — three in this case. Within each value chain are a series of key processes performed for Level 2, and below these are subprocesses that may offer candidates for project approval. The visibility up and down the hierarchy and thesubprocesses that may offer candidates for project approval. The visibility up and down the hierarchy and the related metrics is important, and consistent terminology must be used. This enables direct visibility up to the top-level business strategy, with which to determine alignment. Relevant inquiry and evaluation may be initiated at any level in the hierarchy, which then enables exploration of adjacent impacts. Reason to examine the process view may derive from a trigger represented by the vision models at the top of the chart — the primary stimulus for action may be an opportunity, a goal or a problem. This perspective is useful throughout the PPM scanning, prioritization and evaluation cycle.



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Action Item: Make clear use of a process hierarchy to illustrate alignment with business strategy.


Tactical Guideline: It must be possible to link any BPM program or project to a series of logical cause-and-effect connections up to the enterprise-level goals in order to gain full buy-in and support.

Key Issue: When can a BPM process view demonstrate strong alignment with businessKey Issue: When can a BPM process view demonstrate strong alignment with business strategy?This slide is a useful illustration of cause-and-effect relationships used to tie to a business strategy. It shows how the top enterprise goal spawns a series of strategies in a process hierarchy and how these links can be used for project traceability and alignment.We start at the top with a dominant goal: growth. This drives the selection of a strategy (the "how to"). The top level growth strategy to gain market share becomes the goal of the next organizational level downtop-level growth strategy — to gain market share — becomes the goal of the next organizational level down the hierarchy. At the second level (marketing), the market share goal leads to a strategy of "faster time-to-market" as the means to increase market share. This then successively moves down the organizational hierarchy and their processes to individual projects that do not reveal their alignment directly. But these projects remain traceable back to the top-level goal, as shown above. The hierarchical process model from BPM can be used to illustrate PPM project alignment. This illustration is not presented as a way to create a strategy, but rather to show how one is supported.



Action Item: Develop the hierarchical relationships to show how projects link to particular strategies.


Key Issue: When can a BPM process view demonstrate strong alignment with businessKey Issue: When can a BPM process view demonstrate strong alignment with business strategy?When alignment of new IT projects with business strategy is identified as a primary goal, it must remain so even when business conditions are changing rapidly, causing corresponding revisions of business strategy. BPM enables agile business processes that can be revised dynamically to keep up with business strategy. PPM needs to be equally responsive to changing strategy, and BPM can help.The inherent BPM discipline of performance and business activity monitoring often in real time providesThe inherent BPM discipline of performance and business activity monitoring — often in real time — provides a window onto changes that may require a reevaluation and potential shift of strategy. BPM instrumentation can also support the creation of specified alerts, and even predictive analysis, to draw attention to a need for change. In anticipation of changing business conditions, BPM also supports the use of rules management systems to automatically make the right decisions under different conditions. Even the rules are designed to be easily changed. Finally, BPM can enable process variations to be implemented to pursue defined business goals — automatically when conditions change.



Action Item: Use BPM's monitoring, rules and goal-driven features to drive PPM choices.

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