Economic aspects of BPM PV207 Business Process Management Michal Krčál Department of Corporate Economics 10. 5. 2018 Today's content Michal Krcäl (KPH ESF MU) Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 3/1 Introduction • Assistant lecturer at the Department of Corporate Economics, Faculty of Economics and Administration • Master degrees ► Applied Informatics (specialization: Information Systems) ► Business Administration • Main teacher of Management Information System (Business Informatics) master programme • Research: business value of information systems, reverse logistics, knowledge management Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 My 11 years relationship with BPM • Met BPM at Fl • Participated in few seminars (and webinars) and workshops abroad • Consulted and graded modeling projects for 9 years and lectured (business) BPM for 7 years • Did some non-commercial small business analysis projects • Did one large commercial process analysis optimization project at Honeywell Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 5/1 Your backaround • Do you know what business strategy is? • Is dealing with business people easy? • How would you define BPM? • Who is usually right? Customer, consultant, coder... God? Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 7/1 Three waves of BPM First wave of BPM - F. Taylor's theory of management, 1920s Second wave of BPM - ERP systems, workflow, 1990s BPR - Don't automate, obliterate! ► Micheal Hammer: Reengineering Work: Don't Automate, Obliterate, Harvard Business Review, vol. 68, is. 4, 1990. Third wave of BPM - today's BPM - article Question - what is difference between supporting processes by ERP and by BPMS? ► code vs. model ► programmer vs. administrator Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 8/1 Three BPM traditions P. Harmon K Worte Simplification 1»D Business Management Quality Control, Six Sigma, Lean Fond - C mi tie ni i o lb Production LinE WW I- First Taylor -Scientific Management Production Oompmere BPM Information Technology \bphs PC Gl-nbaJizdtiDn Interne! aooo Outsourcing a»H Fig. L An overview of approaches to business procesu change Michal Krčál (KPH ESF MU) Economic aspects of BPM 10.5.2018 9/1 Management Tradition - business thing 1960S 2000S Porter's Value Chains > Fiimmler-Brache Performance Improvement > Rummler. Porter, Kaplan & Norton. Burllon ...HBR, ISPI, SCC Business Process Ftearigineering > > Business Process Managern^ Proc ass F ramewo rk; SC OR, CI BITX _ATOM)_/ Business Process Architectures Fi ft. 6 The management tradition Michal Krcäl (KPH ESF MU) 10.5.2018 10/1 Quality Tradition - business thing The Scope and Evolution of Business Process Management 1980s 1090's 2000s Total Quality Management (TQM) ^> Six Sigma > Lean Six Sigma _ea" > _J Shewhart. Demings, Juran. Ohno, Womack...ASQ, ISSSP Capaci ity Maturity V ocel s \ (CMMI, BPMM) / Fi*;. 2 The quality eonlrol tradition Michal Krčál (KPH ESF MU) Economic aspects of BPM IT Tradition - IT and business thing 50 P. Harmon 1930S 1990 S 3usiness Process Fteenginegring 2ÜÜQS > IT Architectures (Zachman) Enterprise Architectures (FEAF;^ -j: 'Lie: l red £; ft ware M Jl I": - olog ie:y> C A S E To; It > Business Process Modeling Tools OO Software MelhocologiBS ^> UML ^> B=MN Martin, Davenport. Hammer. Cnampy, Smitti & Fingar...BPMI. WfMC. OMG, NBA, Gartner tionN^ ln:egration (EAI) Workflow > BFM3 Packagad Software [EHP. CHM) Expert Systems > Business Rules Business Intelligence Fif;. 7 The inform alum technology Inidilion Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 12/1 Main point How much was it about business and how much about IT? Business rulez! Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 13/1 Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 14/1 What's important about today's economy? • Try brainstorming in groups of 4. Write as many features, characteristics and capabilities that are typical and important in nowadays economy. ► Globalization (on production and customer side) ► Entirely new business models (social networks, loT, Industry 4.0) ► Customer (super)centric ► Knowledge management ► Design - one purpose, short time ► Quality vs. fast innovation ► Frequency of innovations (competition - China, restless customers) • How to manage this? • How to gain a competitive advantage in/from this? Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 15/1 Typical (old) view of the company Functional Organizational Structure V f \ f Michal Krcäl (KPH ESF MU) Economic aspects of BPM Does this structure make a sense? Yes, but... No interconnections between departments No customer focus, no added value focus, Typical approach: overemphasis on cutting expenses and local increase of productivity Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 17/1 Process view on the company • Is this a solution? Division Product X Division Product Y Division Product Z R&D R&D R&D Marketing Marketing Marketing Finance Finance Finance • double activities • fighting between process (product) departments Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 18/1 Solution is in balance • Matrix structure Fii :-. .'.i. m,iii...|.:il • No extreme is usually good. • Any problems with this? • BPM shows the way how to make the matrix work! Michal Krcäl (KPH ESF MU) Economic aspects of BPM Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 20/1 BPM and IT ■■(definitions Km Ins- "bttp: //www. omg. org/spec/BPNN/2@l@@524/M0DE ^process id- "processl" name- "processl "> ■Mictiviti : f ormProperty id- "name" name="Waroe" type- "sir name= name= name= Fnrf">^/endEvent> to usertask" sourceRef-"sta ending" sourceRef-"usertask Michal Krcäl (KPH ESF MU) Economic aspects of BPM 5. 2018 21 /1 BPM and business DILBERT __. .____ mm w j pbctiy is oufc new t| WOO TO I 22 ANYTHING-J f5«€ only kiows ^0 la TO 00 THINGS better j 1 fTOR EXAMPLE, THIS j MEETING 15 fGQaJLV fAANAGE-D btCAnj&E. I voo *A^£. NO PROCESS (^AHD tw1s inte&n HAD no process for deciding uwetker to attem&VJ (OKA1*, PATT*i 13^ /"ALL IK FAVOR Gr GELTTtNk RIO Of -iOV LASTED LONGEfcl TUAKl TI^^V THE J "FACILITATOR." ■ '-M--- Michal Krcal (KPH ESF MU) BPM and business processes • order-to-cash; quote-to-order; procure-to-pay; issue-to-resolution; application-to-approval < o Cl CL 3 if) < b- Administrative. Legal, accounting, financial management Finance infrastructure Human resources management Personnel, lay recruitment, training, staff planning, etc. Product and technology development Produci and process design, production engineering, market testing. R&D Procurement Supplier management funding, subcontracting, specification INBOUND LOGISTICS Examples: Quairly control. receiving; raw materials control: supply schedules OPERATION Examples: Manufacturing; packaging; production control: quality control; maintenance OUTBOUND LOGISTICS Examples: Finishing goods: order handling; dispatch: delivery: invoicing SALES & MARKETING Examples; Customer management; order taking; promotion; sales analysis: market research SERVICING Examples: Warranty; maintenance education and training upgrades Source Michal Krčál (KPH ESF MU) Economic aspects of BPM 10.5.2018 23/1 • Business people usually don't care about technology • IT people usually don't care about business value of technology • They should know about the other one's world • You need a facilitator -> process analyst = bridge between IT and business Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 24/1 Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 25/1 Q&A and discussion 15 minutes for coffee or discussion, your choice © Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 26/1 Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 27/1 Where is your place? What is Business Process Management',1 r Understand Source of Performance Gap: Design vs. Execution Set Performance Target 1 Develop Intervention Plan _i_ Find and Fix Execution Problem Improve Design Measure Process Performance Understand Customer Needs and Benchmark Competitors Modify Design 1 Replace Design L Measure Results Ensure Process Compliance t J Design. Document, and Implement Process Zdroj: (Brocke and Rosemanr* 2014), Weske's Business Process Lifecycle 1 Introduction Evaluation: Process Mining Business Activity Monrtof ing Enactment: Operation Monitoring Maintenance Enactment Evaluation Administration and Stakeholders Design & Analysis ] Configuration ^ Design: Rutins** Prr:r.F=.^ Identification and Modeling Analysis: Validation Simulation Verification Configuration: Sy3tem Selection Implementation Test and Deployed-1 Fi£- 1.5. Business process lifecycle Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 29/1 30/1 Design/Model First step - to identify processes or to design them. ► learn about the reality (company) ► establish the scope of the project ► establish common understanding In order to gather data about processes you have to ► Interview people ► Observe ► Study documents etc. Business people (from customer side) heavily involved. ► You need to persuade (show) them that process analysis is for their benefit. ► Or at least to "give a damn" Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 31 /1 Implement/Execute Your thing! Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 32/1 Monitor/Control/Analyse • You need data about processes - in BPM the source is BPMS • Usually Key Performance Indicators (KPIs) and various metrics are defined and monitored. ► If you cannot measure it, you cannot manage it... • Examples of KPIs or metrics? • Making reports about process performance. • Analyze and management exceptions and process efficiency. Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 Optimize/Improve When you have data, you know, if something is wrong and needs fixing. Monitor/Control phase generates the input for optimizing. What is the most valuable sources (what kind of processes) for process optimization? Different scenarios are simulated and business rules are changed. Economical and operational impacts of different scenarios are assessed. Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 34/1 i ne six Core Elements of Business Process Management O Strategic Alignment O Governance O Methods O Information Technology Q People O Culture • The framework to be identified has to comprehensively structure those elements of BPM that need to be addressed when following a holistic understanding of BPM, i.e., BPM as an organizational capability and not just as the execution of the tasks along a process lifecycle (identify, model, analyze, improve, implement, execute, monitor, and change). Capability Areas 0 Strategic Alignment Information Technology I People .1____\\ Culture a o -I Process Improvement Planning Strategy & Process Capability Linkage Enterprise Process Architecture Process Measures Process Customers & Stakeholders Process Management Decision Making Process Roles and Responsibilities Process Metrics & Performance Linkage Process Related Standards Process Management Compliance hi ess Design & Modelling I Process Monitoring & Control Process Design & Modelling Process Implementation Execution Process Implementation & Execution Process Improvement & Innovation Pr !_! rocess Program & Project Management Process Skills & Expertise Process Management Knowledge Process Monitoring & Control Process Improvements Innovation I Process Education Ion I Process Program & Project Management Process Collaboration Process Management Leaders Responsiveness to Process Change Process Values & Beliefs Process Attitudes & Behaviors Leadership Attenti on to Process Process Management Social Networks J o a : ■o : - ■ CT it) V) Michal Krcäl (KPH ESF MU) Economic aspects of BPM 5. 2018 36/1 The Six Core Elements of Business Process Management - in detail O Strategic Alignment ► When something does not fit the strategy, it is wrong. ► Which processes to improve should be derived from strategy. ► Enterprise Process Architecture and Strategy Maps. ► Stakeholders of BPM (processes) are very important. O Governance ► 'Day-to-day' work on BPM = operative decision-making perspective. ► Collecting metrics. O Methods ► Tools and techniques to make things work. ► 'Compatible with lifecycle' O Information Technology O People ► People are the core element of BPM. O Culture ► The 'softest' part of BPM (management in general). Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 37/1 Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 38/1 What Business Activity Monitoring is for? HI.......... Mb |Ht4 : "J 11" • Any ideas? • Management is about control and making decisions • BAM can be used for ► Corporate Performance Management - BSC, ABC ► Process Optimization - (Lean) Six Sigma, TOC Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 39/1 Activity-based costing Costs are divided into activities We know what does business process cost Useful for optimization BPMS or another part of IS should enable this Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 40/1 Balance Scorecard Strategic framework for KPI Customer To achieve our vision, how should we appear to our customers?" > O 4» o Measures o 1- Initiatives Financial To succeed financially, how should we appear to our shareholders?" Objectives Measures 4» Q Initiatives 1 Vision and Strategy T Learning and Growth 1 To achieve our vision, how will we sustain our ability to change and improve?" Objectives Measures 4» a Initiatives Internal Business Processes To satisfy our shareholders and customers, what business processes must we excel at?" Objectives Measures 4» 1- Initiatives Michal Krcäl (KPH ESF MU) Economic aspects of BPM 5. 2018 41 /1 Lean Six Sigma DMAIC = define, measure, analyze, improve, control Areas Under the Normal Curve 99.99% Mean ± Six Sigma Figure 5: UCL LCL Control Chart Upper Control Urn it (UCL) Lower Control Limit (LCL| I I M I I I I I I I I I I I I M M I I I M I I I I Michal Krčál (KPH ESF MU) Economic aspects of BPM 10.5.2018 42/1 Lean - 7 wastes MUDA is *he Japanese word fop WASTE. An 8th waste |tli is the wasted J| potential of people Seek it out and get rid Over Processing \ /] Processing beyond the standard required by the customer. OVGrDr0ClUCti0n produce sooner, faster or in greater quantities than customer demand Inventory Rework Raw material work in progress or finished goods which is not having value added to it. Non right first time. Repetition or correction of a process. Waiting Transportation L Unnecessary movement of people , or parts between processes. Copyright TE 2010 People or parts that wait for a work cycle to be completed. Unnecessary movement of people, parts or machines within a process. SourCG: Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 43/1 Theory of Constraints • TOC in nutshell • The system is as strong as the weakest link in chain • The flow of the system is based on the bottom neck Michal Krcäl (KPH ESF MU) Economic aspects of BPM Table of contents Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10.5.2018 45/1 Summary • What to take from today ► BPM is not only IT, although it exists because of IT ► At some point, you will probably have to face business people ► It could be studied as regular study programme (University of Lichtenstein) • More about business process analysis MPHBUPM Business Process Management (autumn semester). Michal Krcäl (KPH ESF MU) Economic aspects of BPM 10. 5. 2018 Q&A Michal Krcäl (KPH ESF MU) Economic aspects of BPM