Coming to Terms with BPM1 June 2005
Acronyms can be confusing, none more so than those relating to business performance / process management / modelling. Janelle Hill, vice president of application development and architecture at Gartner, cuts through the jargon.
Business Process Management (BPM) is suddenly one of the hottest trends in the IT industry.
With almost every software vendor promoting itself as some kind of BPM provider, no wonder users are confused and sceptical. BPM can stand for Business Process Management, Business Process Modelling, Business Performance Management or Business Performance Measurement.
In fact, all of these concepts are related. The common theme is enabling enterprises to become more adaptive; allowing them to adjust operational business processes in near real-time to capitalise on opportunities, avoid threats and maximise corporate performance.
Understandably, in emerging markets, many users wonder just how much of this industry dialogue is simply hype.
WHAT IS BPM?
The acronym BPM is currently used to refer to both a business concept and an emerging technology.
BPM is the umbrella term used today to describe the deliberate and systematic approach to managing and optimising an organisation's business processes.
Many readers will recognise this concept from other process improvement theories and methods (such as Six Sigma, Lean and business process re-engineering).
These theories propose that an ongoing focus on operational excellence will positively impact corporate performance results.
Although such theories, methodologies and academic research on process orientation in business abound, the application of that thinking to business practices is still a long way off. BPM technology (commonly referred to as Business Process Management Suites, or BPMSs) is bringing these theories back into the foreground.
BPM is about establishing goals, defining strategies and setting objectives for improving the particular operational processes that have significant impact on corporate performance.
Unlike Business Process Re-engineering (BPR), BPM does not imply the re-engineering of all business processes. Rather, the focus is on identifying those business processes that directly affect some metric of corporate success.
Business Performance Management and Measurement (two other BPMs) emphasise using metrics beyond financial ones to guide business process management strategies. Today, many initiatives target metrics related to customer value or loyalty.
Applying process improvement thinking and developing strategies for improving particular aspects of corporate performance are characteristic of the 'on-demand enterprise' and the 'real-time enterprise'.
Organisations that want to become more adaptive in how they conduct business will apply BPM thinking and BPMS technology to help them realise and implement their business process improvement strategies and initiatives.
A DEGREE OF FLEXIBILITY
A BPMS is a tool set that allows companies to model, orchestrate, execute and measure business processes, including the manual steps, the automated steps and a variety of information (both structured and unstructured content).
The graphical development environment provides multiple design surfaces to support a collaborative approach between business users, process modellers and IT professionals.
Using these different surfaces, business and IT professionals can easily share and explore alternative process designs, modelling work tasks as the business defines them, as well as work sequences, information flows, system dependencies and any other area where business managers would like greater flexibility.
In this way, BPMS tools can help to close the communications gap between the business vision for adaptivity and IT implementation.
A NEW APPROACH
Unlike earlier generations of CASE tools, the design environments of BPMS tools do not generate code; they generate XML metadata. By not generating code, the design is separated from any implementation limitations.
Changing a business process requires a modification of the graphical model and the associated business rules, regenerating the metadata and redeploying process instances. This metadata-driven approach means that changes to the process can be made by non-programmers independently of the current deployment.
This characteristic of model and metadata-driven solution assembly is what makes continuous improvement to the process so much easier than coded approaches, thus enabling more adaptive processes.
The new products also promise business managers a visual dashboard to manage and adjust, in real time, all the resources (both human and machine) being consumed as work progresses.
The ability to dynamically change operational activities (such as in response to changing legislation or bringing new products to market faster) is one characteristic of an adaptive organisation.
WHERE TO START?
The concepts of continuous process improvement and the adaptive organisation are clearly related.
An adaptive organisation can adjust its operational business processes in near real-time to capitalise on opportunities, avoid threats and maximise corporate performance.
Getting started requires senior executives to assess the importance of adaptivity to their company's goals. This helps to identify which operational areas and processes directly, and indirectly, contribute to the attainment of goals. In this way, management can begin to prioritise business processes for improvement.
WORKING ACROSS BOUNDARIES
A process perspective is a horizontal view of how work progresses across boundaries and what causes it to advance, yet there is much confusion over the relationship between business processes and IT applications.
A business process is a set of activities performed by people and machines necessary to bring about a desired result. An application represents a logical grouping of tasks (often the most repetitive tasks) to be automated, with the objective of reducing or augmenting human interaction. Thus, an application represents a subset of business process tasks.
The remaining (and largely uncontrolled) steps of any business process continue to be human-centric activities and interactions. Candidate business processes are those that cut across boundaries between applications, departments, functional units and even companies.
Typically, the biggest benefits are created by addressing these boundary conditions.
DEFINING THE PROCESS
BPM strategies focus on reducing the latency of operational business processes (time is money), standardising a process (skills are expensive), simplifying the process (learning curves are steep), and reducing errors in a process as work progresses and crosses boundaries (work gets lost) among applications, functions, departments, buildings, and even companies.
Consider vendor-managed inventory efforts as an example.
Coordinating the information flow across companies in VIM scenarios takes time. In terms of inventory management, time is money. Thus, using technology and a straight-through processing approach to the information flow contributes to eliminating information latency, increasing inventory information accuracy and cost savings.
Another approach is to focus on the unautomated processes, since human-based activities are more error-prone than automated ones.
These are often the customer-facing processes (such as customer service and ordering), or those that are highly collaborative (such as product ideation and marketing content creation).
Even when earlier forms of workflow automation software are in use, incremental benefits are derived from a greater degree of coordination between the human activities and the underlying systems on which workers rely.
With a BPMS, human workflow automation becomes an infrastructural capability rather than an application-embedded capability.
For organisations that have invested heavily in ERP and CRM, so many of the back- and front-office processes have been automated that users often wonder what more might be accomplished with a BPM initiative. The answer goes back to the earlier distinction between a business process and an application.
In addition to looking for the gaps in a process, users should also consider which industry forces cause them to change how they do things. Regulations, competitive pressures, mergers, acquisitions, divestitures, changes in leadership and strategies, new product introductions, pressure from trading partners, costs of existing IT infrastructure and market expansion all contribute to changes.
When change and disruption to operations is frequent, then the business will need some way to manage and minimise the impact.
Business process adaptability means that business managers can directly interact with operational processes and make changes to in-flight transactions to maximise corporate performance.
Industries where business transactions are highly commoditised (such as insurance, banking / lending, airlines and utilities) are particularly looking at BPM as a way to innovate their business processes.
A higher level of coordination of human tasks within their systems information is seen as a potential area for innovation and a source of differentiation based on how companies deliver their services to their customers.
Becoming an adaptive organisation requires leadership and change management. To make the difficult decisions about how to optimise or compromise business processes, especially those that cross organisational boundaries, c-level executives must provide leadership and clear accountability to drive transformations.
They must act as (or designate) process owners with the appropriate cross-boundary authority over policies, governance, compensation, and process change.
People will need training and performance incentives to drive new behaviours. This cross-boundary characteristic of BPM initiatives creates a unique challenge for managing large-scale initiatives.
For this reason, initiatives should be led by someone who does not have a vested interest in any part of the process. This could be a staff executive, a change management consultant, an internal process improvement methodology expert (such as the Six Sigma black belt), or an external management consultant reporting to the CEO or the board.
Increasingly, the CIO is seen as a potential agent of change in the process. CIOs see issues from an enterprise perspective, yet they are not responsible for the business performance of any core operational functions.
Their lack of a vested interest in the success of any one area makes them good candidates to lead business process improvement strategies.
These improvements necessarily cut across organisational silos and depend on an adaptive IT infrastructure. CIOs' experience with other technology-driven changes (ERP and CRM, for example) further qualifies them for the role.
BPM is undoubtedly one of the hottest trends in the IT industry.
CEOs must understand the foundational concepts behind the hype, and determine their relevance for their organisation, as well as if and when to invest. Successful BPM is about business strategy, change management and organisational effectiveness. BPMS technology can be an enabler.
When combined with leadership, vision and transformation disciplines, a BPMS can be a powerful tool to enable the improvement of business process performance and a faster cycle time in an adaptive organisation.