sharp - exec briefing umd bizschool 2015

UMD Process Briefing Clariteq Systems Consulting Ltd.1

BusinessProcessChange

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Business Process Change Five Things You Need To Know About Business Processes

The University of MarylandSmith School of Business

Alec SharpConsultantClariteq Systems Consulting Ltd.West Vancouver, BC, [email protected]



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Speaker background

Alec Sharp, Clariteq Systems Consulting [email protected] 30 years consulting and facilitation experience:

Business Process Redesign / Improvement(discover, map, analyze, improve processes)

Application Requirements definition Data Modeling and Management

Consulting and instruction worldwide, primarily to large, global firms

Developed methods and techniques used worldwide for business process improvement

Principal author Workflow Modeling published by Artech House, - best-selling book on process modeling & improvement- widely used as MBA text and consulting guide - first edition 2001, second edition 2009

Alec's bio:

Alec Sharp, a senior consultant with Clariteq Systems Consulting, has deep expertise in a rare combination of fields business process analysis and redesign, application requirements specification, and data modelling. With almost 35 years of hands-on consulting experience, his practical approaches and global reputation in model-driven methods have made him a sought-after resource in locations as diverse as Ireland, Illinois, and India.

He is also a popular conference speaker, mixing content and insight with irreverence and humour. Among his many top-rated presentations are The Lost Art of Conceptual Modeling, The Human Side of Data Modelling, Crossing the Chasm - From Process Model to IT Requirements, and Getting Traction for Process What the Experts Forget.

Alec literally wrote the book on business process modelling he is the author of Workflow Modeling: Tools for Process Improvement and Application Development, Second Edition The first edition was published in 2001, and the second edition was published in 2009. It has consistently been the top-selling title on business process modelling, and is widely used as a consulting guide and as an MBA textbook. He was also the recipient of DAMAs 2010 Professional Achievement Award, a global award for contributions to the Data Management field.

Alec's popular workshops on Working With Business Processes, Data Modelling (introductory and advanced,) and Use Cases and Services are conducted at many of the world's best-known organisations. His classes are practical, energetic, and fun, with the most common participant comments being best course Ive ever had.



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Five key points

1. It's essential to have clarity on what a business process really is

2. Existing performance measures are often functionally aligned and work against business processes

3. Enterprise system implementations must include a business process perspective

4. Success with business processes depends on taking a holistic view in which six enablers are considered

5. Business processes can't be great at everything a single strategic differentiator must be chosen

Always want to begin by de-threatenising the topic process

Easy to think of it in terms of details, rigor, control, bureaucracy, and so on. There are many negative connotations.

What it's really about:

WHAT do we really do (or intend to do)

Then

HOW do we do it, and WHO is involved

Ultimately, then, it's a lens for managing work. Not the only one (org/function, project/programme, geography, business unit, product line, customer verticals, etc.) but ultimately the only one that looks at WHAT we do and HOW we get it done.

That makes it a very powerful tool indeed for discovering, holistically, why things work or don'twork, and what to do about it.



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Two themes

Simple (not simplistic!) techniques,rigorously (not rigidly!) applied,

help us accomplish a lot in a small amount of time

Process work is social work, and you must engage all stakeholders

theres no point in designing a process that wont be adopted or cant be sustained



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1 What is a business process?

An end-to-end, cross-functional, business process is larger than most people expect when they think of a process.

Key point:Even within the process community there are very different ideas of what a process is: Business Process Management Six Sigma Lean ISO 9001


Let's be sure we start with a clear understanding of what a business process really is, because just about any body of work can be described as a process. This matters because the most common failing in process improvement is incorrect identification of business processes

The usual statements made to define business processes in papers, texts, and courses don'thelp very much

Q What exactly is a business process?

A A business process is a linked set of activities that collectively deliver value to the customer of the process.

Q Fine, but how big is a business process?

A Don't worry about it, because a business process can be decomposed into a hierarchy of processes.

Now Im really confused


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Logistics process

Sales process

A/Rprocess

A real life (and expensive!) example

Manufacturingprocess

Fabricationprocess

Assemblyprocess

Packaging&

Labelingprocesslithography

process

There were huge differences in the granularity of the identified business processes

Most groups took a very functional (organisational) perspective in identifying their business processes

As part of a massive system implementation, a global manufacturer identified the business processes that were expected to improve:


Process is a useful term because it can be used for so many different things, but that is also a problem as illustrated, there are a wide range of interpretations of process within the general business community, and even within the process community. That's why it's so important to offer a clear demonstration of the concept at the outset of a project.

Note that none of the examples of processes on the previous page is actually wrong -process is a term that can be used for many different things, but we need to have a specific definition to support modelling, analysis, and improvement. Otherwise, confusion and frustration will be the result.

Saying that Fulfill Order is a true business process seems arbitrary let's justify that statement by providing guidelines for a well-formed process, and then develop a more specific definition of a business process. (Actually, an end-to-end, cross-functional, business process.)

This is crucial, because modelling, analysis, and improvement begin with identification (discovery) and scoping!


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The real business processes were missed

Business Process = end-to-end, cross-functional, business process

larger than people think from initial trigger to final results

Logistics function

Sales function

A/Rfunction

Manufacturing function

Business process: Fulfill Customer Order

Everyone confused process and function.None of the actual end-to-end processes were correctly identified.



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Looking at some higher ed processes

The processes that were initially identified

the Recruiting

process

the Admissions

process

the Financial

Aid process

the Assessment

process

the Registration

processthe

Orientation process

the Student

Employmentprocess the

Housing process

As part of a Strategic Enrolment initiative, the U looked at how they attracted the best students



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Reframing it as a single X-functional process

Admit and Onboard a Student

RecruitProspect

CompleteApplication

AdmitStudent

CompletePre-

EnrollmentRequirements

RegisterStudent

inClasses

Award Financial

Aid

AssessApplicant

GrantHousing

Triggering Events: Dept. targets prospect Suspect is identified or purchased Prospect self-identifies ACT scores come in Prospect applies

Final Results:Up and running,

ready to attend classes: Student is:

admitted oriented registered

Tuition is collected Student accommodation

is arranged Financial aid is granted Employment is

arranged

Cases: In-state undergrad Out-of-state undergrad



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Factor in a highly granular org structure

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Whenever we first draw a process vs. function diagram with a client, the reaction is always We sort of knew that, but weve never seen it put that clearly before.

The actors may include external people or organizations, such as Customers, Suppliers, or Regulators

Supporting mechanisms includes information systems, tools and equipment, facilities, physical holding areas, forms, documents, etc. that contribute to making the process work


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Re

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and we have an incredibly cross-functional process

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Admit and Onboard a Student

RecruitProspect

CompleteApplication

AdmitStudent

CompletePre-

EnrollmentRequirements

RegisterStudent

inClasses

Award Financial

Aid

AssessApplicant

GrantHousing

Without explicitly addressing the end-to-end process: very frustrating for the people doing the work almost zero chance the student experience is positive the university isnt going to meet its goals(Note functions are doing their best to optimise activities)



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2 Cross-functional issues

The performance goals of the functions (divisions, departments, ) that participate in a business process often conflict with the goals of the business process (if process goals are stated at all)

Key points: Beware of perverse incentives and

unintended consequences A business process needs an owner to

rationalize the competing objectives


Other significant issues:

1 Failure to properly identify true processes and make them visible

2 Not having a process owner to set overall direction and resolve conflict

3 Problems delay, error, & expense - occur in the white space between the functions

4 Each functions world view and terminology are embedded in systems. For instance, consider how many different interpretations there are for the word Customer. TO different people in the same organization, it could mean a Corporation, an Operating Location, a Contact Person, an Account, or something else.

You cant solve these on your own, but you can make them visible and blame-free.

This is a simple, painfully obvious diagram, but it is vastly under-utilized as a mechanism for showing gaps, conflicts, and disconnects between functions. Under each function, list:

Performance goals for each function

Applications used by each function for that process

Data required by each function for that process

Technology platforms used by each function for that process

Core responsibilities by function for that process


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Misalignment the most common obstacle to high performance

lowershipping

costs

late-quartersales

no unprocessedreceivables at the weekend

maximize machine

utilization

Sales Manufacturing Accounts Receivable

Logistics

Process: Fulfill Order Process goal:Responsiveness by providing the shortest order-to-cash cycle time

ReceiveOrder

PlanOrder

FabricateOrder

DeliverOrder

CollectPayment

AssembleOrder

StageMaterial

MoveWIP

Poor process performance because everyone was working hard and meeting their targets!

Package& Label

Order

MoveWIP


It might be a good idea to stop referring to functional silos it makes it sound like there'ssomething inherently wrong with functions, which there isn't.

Remember you may be aware of the Process vs. Function distinction, BUT MANY OTHERS IN YOUR ORGANISATION ARENT!!!


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This doesn't mean functions are bad!

Sales Production Accounts Receivable

Logistics

triggering event

finalresultsProcess: Fulfill order

A centre of expertise an efficient way to provide resources across multiple processes

Specialised skills, knowledge, tools Work is ongoing Organisational design is usually

based on functional areas We prefer not to use the somewhat

negative term functional silos

FunctionProcess End-to-end business processes

deliver essential results by aligning the work of multiple functions

Results are discrete countable Must be explicitly identified and

managed as a whole

Ultimately, business processes are all about alignment


Budget authority, control, allegiance, measures, etc. align up and down but value flows horizontally


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Processes and functions three key points

Customer Front Office

Finance Back Office

Operations

agency

Issue Operating Permit

The first step in managing processes is to figure out what they are they don't identify themselves

Performance goals for the functions must align with the performance goals of the process

Processes need an owner / steward to set direction, ensure alignment, and resolve conflict

It takes concerted effort nothing happens by accident

Has an owner!

Needs an owner!



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3 Processes and information systems

When major information systems are implemented without regard to end-to-end business processes, overall results range from okay to awful. (How awful? Stay tuned)

Key point:Major companies often re-implement systems they already have in order to make them more process-oriented



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Success with ERP implementation

Study by the late Michael Hammer,

godfather of BPR

Observed that success of SAP implementations

varied wildly

Worked with ~200 companies to assess their

degree of success with SAP implementation

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Michael Hammer did a famous study which showed that in implementing ERP apps from SAP, there were winners and losers, and very little middle ground. The difference winners treated it as process-driven initiative, losers treated ERP implementation as an IT initiative

Point out that (as we'll see) process inherently involves measures and people they can't be separated because theyre an ecosystem.

----------------------------------------------

Michael Hammer is the man who (more than anyone else) popularised the focus on business processes. He coined the term "business process reengineering" and "cross-functional, end-to-end, business processes." In fact, we didn't really use the term "business processes" until he wrote his landmark HBR article "Reengineering Work" and later the book "Reengineering the Corporation."

By the mid- to late-1990s though, reengineering was somewhat discredited, and it was SAP consultants that were in demand, so Mr. Hammer started working on SAP implementations.

Didn't take long to notice that they didn't all work out very well.

He's a statistician by training, so his firm undertook a study of ~200 companies that had implemented SAP. (Broad sample - all sizes of companies, differing number of modules.)



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Success with SAP implementation

Gues

s the

line o

r cur

ve

18

Success (ROI, etc.) ranked from 0 - 100 5 10

Num

ber

of e

nter

pris

esHammer plotted the number of companies for each success ranking

Michael Hammer worked with each company to assess success of implementation on a 0 - 10 scale. (Not sure exactly how they assessed success - some combination of cost-benefit and achieving objectives.)

10 was wildly successful.

5 was middle of the pack

0 was... ( I usually ask what the group thinks, and then let them know 0 = bankrupt)

And this was on a marketing video by SAP and PWC, the largest SAP consultancy. Strange messaging! But they did have an important point.

So, carrying on - then they counted the number of companies at 0, the number at 1, and so on, and then plotted them on this chart. As expected, it formed a curve or a line.

What do you think. (If people know the story, tell them to hold on a moment.)

People will offer various suggestions, but virtually never get it right



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Hammer not sure what the outcome would be


Num

ber

of e

nter

pris

esNormal

distributionSkewed

optimisticallySkewed

pessimistically

Reallypessimistic


The difference winners treated it as process-driven initiative, losers treated ERP implementation as an IT initiative


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The surprising result


Num

ber

of e

nter

pris

es

WinnersLosers

Process first,

IT secondary

IT focus,Functional orientation



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How process-oriented worked out

Logistics function

Sales function

Production function

A/Rfunction

end-to-end process: Fulfill Order

Logistics process

Sales process

Production process

A/Rprocess

Salesmodule

Manufgmodule

Logisticsmodule

A/Rmodule

Logisticsmodule

Salesmodule

Manufgmodule

Accounts Receivable

module

Conflicts: timing, coding, terminology, data formats, performance targets,

SAP re-implemented in a process-driven configuration:

Implementing SAP without clarity on process:

X

X

Same software, radically different results

Key point in the first example, the modules were in conflict. In the second example, the different modules are aligned to a common objective (filling an order,) but it's the same software in both cases!!!

Experienced people agree that it is not possible to adequately assess large, purchased applications (e.g., ERP systems) without some amount of process modeling, requirements specification at the event / use case level, and data modelling. The data model is actually the most important, so overview models (conceptual models) should be done for both your desired future state and for each application you are evaluating, and then they should be compared.



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4 The enablers of a business process

The performance of a business process is determined by multiple factors the enablers.

Key point:The factors that get the most attention (process workflow design and information technology) are seldom the crucial factors;the crucial factors are the ones that deal with human, socio-political, and organisationalfactors.


Enablers are the dials and levers manipulated by a skilled process designer.

The point processes are governed by their environment, and won't work optimally unless all six enablers are in alignment. Usually, people focus on workflow and IT alone that's tunnel vision

Strategy what we do, and how we're different

Which Customers or Markets do we - or should we - serve?

What Products or Services do we - or should we - serve them with?

What differentiates us? or, more clearly, why choose us?


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A holistic view for process analysis and design

Business Process

BusinessProcessDesign

(Workflow)

Information Systems

Motivation & Measurement

Human Resources

Policies and Rules

Facilities(or other,

e.g. Funding)

Roles Steps &

decisions Flow -

sequence and handoffs

Applications Data Information Integration Devices and

platforms

Assessment and incentives

Implicit and explicit

Process KPIsvs. Function KPIs

Constraints Business

rules the process enforces

External & internal

Workplace layout

Equipment Fixtures and

furnishings

Skills Matching

roles to activities

Recruitment, selection, & placement

Organisationdesign

Enabler A factor that can be adjusted to impact process performance.

enables enables enables enables enables enables

The usual suspects!

Business mission, strategy, goals, &

objectives

supports

Culture, core competencies,& management style

aligns with

Unfortunately, these are often ignored!



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Use workflow models to understand enablers

A great way to get people involved, and understand the whole!

left-to-right flow simple symbols shows all actors


Having an accurate workflow model that participants have bought into (because they or their peers built it) is vital if the process assessment is to be thought of as fact based.

This illustrates why the approach we're describing in this workshop is holistic.

For this to work, business involvement is a necessity, which is why we stress modellingtechniques that support it.


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As-is modelling reveals how processes really work by mapping who, does what, when.

This supports assessment of the as-is process, and design of the to-be process, enabler by enabler, e.g.:

Why we really model as-is workflow

WorkflowDesign:Is each step adding value, placed at the right point in the process, sequential / parallel as appropriate, etc.?

Information Systems:Is the process, the steps, and the actors supported by the right technology?

Motivation & Measurement:How is the performance of steps, actors, participating functions, and the process measured?

Human Resources & Organisation:Are the right roles & skills deployed effectively?

Policies & Rules:What rules constrain or are enforced by the process?

Facilities(or other):Are the layout & furnishings optimal or are they impeding the process?



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5 Choosing what to excel at

A business process, like a company, can't be all things to all people it's essential that a differentiator is chosen.

Key point:A lack of clarity around the differentiator, or conflicting statements about what it is, are a major source of stress and frustration



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Great processes don't try to be all things to all people strive to be great at one differentiator, and good at the other two

OperationalExcellence

ProductLeadership

CustomerIntimacy

Consistent, predictable, error-free, and efficient.

More efficient, but less flexible in changing direction or meeting needs of individual customers.

Tailors product or service delivery to the processes of individual customers.

More flexible for adapting to needs of individual customers, but less efficient.

Continuous and rapid introduction of new

products and services,or changes to the mix

More flexible for adapting to needs of

new offerings, but less efficient.

The original reference:The Discipline of Market LeadersMichael Treacy and Fred WiersmaAddison-Wesley 1995

Process goals: know your differentiator

Lack of focus on one differentiator lower performanceFocus on the wrong differentiator customer alienationInconsistent or conflicting differentiators stressed workforce

A common point of confusion is that Customer Intimacy is the same as being customer focused, but all three focus on knowing what your customer wants

There isn't really any harm in trying to be great at multiple differentiators, as long as you know what your primary one is. This is critical when you have to make a decision the differentiator will tip the balance.

A few points we expand on in our Advanced Business Process Techniques course:

The concept was originally applied to entire enterprises, but we find it very applicable to individual processes or process areas.

Differentiators change over time. (E.g., you're Product Leadership at startup, and then grow into Op Ex.)

Different processes (or process areas) within an enterprise can have different differentiators


Op Ex can be a good platform for moving into other areas, but its usually the goal of a mature business

Op Ex: make money on bottom line by cost containment; other two: make money on top line by higher margins from charging more


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Notes on differentiators Concept was originally developed at the level of the entire

corporation, but highly applicable to individual processes a signpost for decisions on process changes

Why we care its key to understanding what is good?

Every process in an enterprise does not have to strive for the same differentiator, e.g. Product leadership within Develop Product processes Customer intimacy within Human Resource processes

Different versions of the same process can have alternative differentiators, e.g., in Retail Banking Customer intimacy for high net worth customers Operational excellence for the rest of us

Differentiators can change over time


See also The Myth of Excellence: Why Great Companies Never Try to Be the Best at Everythingby Fred Crawford and Ryan Mathew


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Common differentiator problems

No clear differentiator, no direction

A business process trying to excel at two differentiators: Operational excellence We must be the low-cost provider! Customer focused We must do what it takes for each client!

Conflicting differentiators within functions of a process:

Engineering:Product Leadership

Functional area 1

Functional area 2

Functional area 3

End-to-end business process

Finance:Operational Excellence

Sales:Customer Intimacy

Stuck in the Bermuda Triangle



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Understanding through differentiators


ProductLeadership

CustomerIntimacy

The first time I used this framework on a consulting engagement.

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Leading U.S. HMO (the original one) Reengineering of core Provide Clinical Care

process is stalled; Im brought in to get it moving

Key finding when determining program objectives: 50% thought Op Ex 50% thought C. I.

The immediate outcome program cancellation The ultimate outcome

return to their roots in Product Leadership

50%

50%

their history



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Five key points


ProductLeadership

CustomerIntimacy

Differentiator

XSystem successHolistic method

Business Process

WorkflowDesign

Information Systems

Motivation & Measurement

Human Resources

Policies and Rules

Facilities(or other)

Business mission,

strategy, goals, & objectives

Culture, core competencies,

and management style

F1 F2 F4F3

Cross-functional process

Processes: largeand X-functional

F1 F2 F4F3

Cross-functional process

Misaligned measures



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Contact information Me: [email protected] My company: www.clariteq.com My book: Workflow Modeling, Second Edition

(A complete rewrite of the first edition, not just a minor refresh)

Data Modeling blog: www.erwin.com/expert_blogs/authors/22/ Business Process articles:

search for "Alec Sharp" at www.bptrends.com for my columns

sharp - exec briefing umd bizschool 2015

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