© 2005, Business Process Trends 1 The Evolution of Business Process Management Paul Harmon...

© 2005, Business Process Trends www.bptrends.com 1

The Evolution of Business Process Management

Paul Harmon

Executive EditorBusiness Process Trends


Process Integration in Nineties

SalesDepartment

ExecutiveManagement

Horizonally Integrated Business Process

That Delivers A Specfic Product to a Targeted Group ofCustomers

StrategyCommittee


Today: Horizontal & Vertical Alignment

SalesDepartment

ExecutiveManagement

StrategyCommittee

VerticallyIntegrated

Measures,Managers, and

Resources

Employees & IT Applications andInfrastructure

Horizonally IntegratedProcesses

From Suppliers to Customers


Why the Interest in Business Process?

• Make the company more efficient and productive by improving existing processes

• Allow the company to shift goals or get into new businesses by providing the company with the ability to quickly and efficiently create new business processes

• Keep focused on customers

• Automate where reasonable


Business Process Change Initiatives

ValueChain

CustomersMarkets

SuppliersResources

Application &Databases

Employees

Value ChainManager

Senior Executive

Employees Employees Employees Employees Employees






Process Manager Process Manager Process Manager

AlignedHR System

AlignedIT Architecture

Process ComponentsERP System

Activity BasedCost Accounting

BAM & DataWarehouse

Business RulesMang. System

Financial System

BusinessProcess

Architecture

Near Real-TimeMonitoring andControl System

All Processes Managed by Enterprise BPM Systems

ManagementDashboard

ManagementDashboard

Processes Modeled and Optimized

ProcessManagement

System


We Have Lots of Technologies to Use

Business RuleManagement Systems

SEI's CMM for IT

1980s 1990's 2000s

Management

BusinessProcess

Redesign

InformationTechnology

Workflow

Software Modeling Tools and Methodologies (CASE, UML, MDA)

QualityControl Total Quality

Management

Porter's ValueChains

Business ProcessReengineering

Rummler-BrachePerformance Improvement

PerformanceImprovement

Activity BasedCosting

Six Sigma

Lean

BPM

EAI

Packaged Software(ERP, CRM)

BalancedScorecard

SCOR VCOR

BPO


The BPTrends Pyramid

StrategyLevel

Business ProcessLevel

Specific Process

Value Chain

Plans & Goals

ImplementationLevel

Process Automatedby IT Systems

Process Performedby Employees

Physical Plant and Hardware Used.

ProcessManagement and

Measurement


Some of the Most Important Trends

• 1. BP Management System• 2. BP Architecture• 3. BP Process Analysis & Redesign Approach• 4. Business Rules Management System• 5. BP Automation (BPMS)• 6. IT Components Aligned with BP• 7. BP-based Enterprise Monitoring System• 8. HR Support Aligned with BP• 9. Significant BP Outsourcing


An Aside on the Meaning of Process

Value Chain

Business Process Business Process Business Process

ProcessProcess Process

Sub-Process Sub-ProcessSub-Process

Sub-Sub-Process

Activity Activity

Sub-Sub-Process

ArchitectureSCOR Framework

Process Redesign ProjectsBusiness Rule Projects

Six Sigma ProjectsIT Automation Projects

SAP Process Models


1. BP Management System

• Senior Management’s Vision: The Process-Centric Company

• Senior Management’s Goal: Coordinate and Prioritize all the diverse process initiatives

• Train Managers to Manage Processes• Align Manager’s Incentives with Processes• A BP Redesign Group• Teams Trained to Undertake Constant Process

Improvement (6 Sigma)


Coordinating the Management of Processes

CEO

Executive Committee

ProcessManagementTeam

DeliveryDepartment

ManufacturingDepartment

SalesDepartment

Customer

Process ArchitectureCommittee

Sales SupervisorManf.

SupervisorDelivery

Supervisor

Widget Value Chain

SalesProcess

DeliveryProcess

ManufacturingProcess

VPDelivery

VPManufacturing

VPSales

SVP WidgetProcess

WidgetProcess


2. BP Architecture

• The key tool for process management• A high-level overview of the value chains and

key processes that make up the organization• An alignment of strategic goals, value chains

and key processes• A clear-cut way to monitor the performance of

the value chains and processes (KPIs)

• A BP Architecture is NOT an IT EA Architecture


Too Many Independent Hierarchies

An Aligned Hierarchyof Business Policies/

Rules

An Aligned Hierarchyof Process Measures

An Aligned Hierarchy ofJob Responsibilities

An Aligned Hierarchyof Organization Goals


We Need to Integrate Our Hierarchies

An Aligned Hierarchy ofBusiness Policies/Rules

An Aligned Hierarchy ofProcess Measures

An Aligned Hierarchy ofJob Responsibilities

An Aligned Hierarchy ofOrganization Goals


BP Operation Reference Frameworks

• A OR Framework is a template for a BP Architecture

• The Supply Chain Council’s SCOR Framework

• The TeleManagement Forum’s eTOM/NGOSS Framework

• Hewlett Packard’s Framework Suite• The VCOR Initiative


SCOR MODEL: Level 1

SupplyChain

DeliverMakeSource

Plan

Return


The Level 1 SCOR Notation

S1 M1 D1 S1

S1 D1 S1M1 D1

Key OtherRM Suppliers

EuropeanRM Supplier

RMSuppliers

ALPHAAlpha

RegionalWarehouse

Customer

DR1 SR1 DR1 SR1

SR3DR3

P1

P2

P3

P4

P1

P2

P3

P4

P1

P2 P4

S2 M2

DR1

D2

SR1

S2


SCOR’s Level 1 ScorecardPerformance

AttributePerformance Attribute Definition Level 1 Metric

Supply Chain DeliveryReliability

The performance of the supply chain indelivering: the correct product, to the correctplace, at the correct time, in the correctcondition and packaging, in the correctquantity, with the correct documentation, tothe correct customer.

Delivery Performance

Fill Rates

Perfect Order Fulfillment

Supply ChainResponsiveness

The velocity at which a supply chain providesproducts to the customer.

Order Fulfillment Lead Times

Supply ChainFlexibility

The agility of a supply chain in responding tomarketplace changes to gain or maintaincompetitive advantage.

Supply Chain Response Time

Production Flexibility

Supply Chain CostsThe costs associated with operating thesupply chain.

Cost of Goods Sold

Total Supply Chain ManagementCosts

Value-Added Productivity

Warranty / Returns ProcessingCosts

Supply Chain AssetManagementEfficiency

The effectiveness of an organization inmanaging assets to support demandsatisfaction. This includes the managementof all assets: fixed and working capital.

Cash-to-Cash Cycle Time

Inventory Days of Supply

Asset Turns

Cu

sto

mer

Fac

ing

Att

rib

ute

sIn

tern

al F

acin

g A

ttri

bu

tes


SCOR Benchmarks Provide Instant ROI

50%

$30M Revenue

$30M Indirect Cost

35 days

97 days

0%

63%

Supply Chain SCORcard Industry Benchmarks

Overview Metrics SCOR Level 1 Metrics Actual Parity Advantage Superior Value from Improvements

Delivery Performanceto Commit Date

85% 90% 95%

Fill Rates 94% 96% 98%

EX

TE

RN

AL

Supply ChainReliability

Perfect OrderFulfillment

80% 85% 90%

Order FulfillmentLead Times

7 days 5 days 3 days

Flexibility

Responsiveness

Production Flexibility 30 days 25 days 20 days

Total SCMManagement Cost

19% 13% 8% 3%

INT

ER

NA

L

Cost Warranty Cost NA NA NA NA NA

Value Added EmployeeProductivity

NA $156K $306K $460K NA

Inventory Days ofSupply

119 days 55 days 38 days 22 days NA

AssetsCash-to-Cash Cycle

Time196 days 80 days 46 days 28 days

Net Asset Turns(Working Capital)

2.2 turns 8 turns 12 turns 19 turns NA

Supply ChainResponse Time

82 days 55 days 13 days

45 days

$7 M Capital Charge

Key enabler to cost andasset improvements

$30M Revenue


3. BP Process Analysis & Redesign

• New processes need to be designed

• Inefficient or ineffective processes need to be redesigned

• Processes that work need to be improved

• The entire effort needs to be coordinated with methodologies, software tools, and a repository


The Types of BP Methodologies

Strategyand Goals

SpecificActivity

StrategyLevel

BusinessProcess

Level

Business Process

ImplementationLevel

Physical Plant and Hardware Used.

BP Architecture

BP Analysis& Redesign

OrganizationPerformance

Management andMeasurement Issues

Involved in theImplementation of BPM

solutions.

Mangement andMeasurement IssuesInvolved Establishing

Strategy and Goals

Mangement andMeasurement Issues

Involved inExecuting Actual

Business Processesand Activities

Human Resource Architecture IT Architecture

DataArchitecture

ApplicationArchitecture

NetworkArchitecture

ApplicationDesigns

and Code

DatabaseDesigns and

DataManagement

Systems

TechnologyArchitecture

Hardware Architecture

JobDesign

ActivityMeasurement

Plan

ActivityManagement

Plan

Job Aids,Training

Programs,Knowledge

ManagementSystem

Activity/PerformanceMonitoring

System

Plans, Budgets,Hiring, Resource

Allocation,Feedback,

Consequences

Human-ITInterface

Model

Screensand

Reports

LogicalLevel

PhysicalLevel

IT Focused BPChange

Methodologies

NarrowFocused BP

ChangeMethodologies

Broad BasedBP Change

Methodologies


BP Methodologies

• Broad BP Change Methodologies– Process Renewal Methodology (PRG)– Rummler Methodology (PDL)– xBML Methodology (Business Genetics)

• More Focused Process Change Methodologies– Balanced Scorecard– Six Sigma DMAIC– Proteus Business Rules Methodology (BR Solutions)– ARIS Methodology (IDS Scheer)

• IT Automation Methodologies– UREP Methodology (Rational/IBM)– IDEF Methodology– Martin Ould’s RIVA Methodology


Six Sigma and BPM 3. Analyze 4. Improve 5. Control2. Measure

ImplementMeasurement

Document andMaintain

PlanProject

IdentifyMeasures

Analyze Data

1. Define

1. Define project2. Identify customerrequirements3. Documentprocess4. Set goal

1. Identify Measures2. Define measures3. Develop & testdata collectionmethods4. Define baselinemeasures

1. Analyze date2. Explore possiblecauses and testhypothesises3. Identify causes

1. Select a soluton2. Pilot test solution3. Implement full scalesolution

1. Document andkeep score of results

1-2 wks.

1-2 wks.

2 wks.

4-8 wks

ongoing

-1-2-3 +1 +2 +3

68.26%

95.46%

99.73%

0.13%

0.13%

mean

34.13%

13.06%2.14%


An Aside: BPM Software Product Space

BPM Suites

Modeling Capability+ BPM Engine

BPMApplications


+ Application Components

BPLanguages

EAI Tools

ProcessSimulation

Tools

BI and Data WarehouseProducts

UniversalBP Repository

Database capable ofstoring information

from all the BP tools.

OrganizationModeling Tools

Business ProcessArchitecture Tools

Packaged/EnterpriseApplication

Suites

StatisticsTools

GraphicsTools

Tool for creating, storingand using business rules.

Business RuleManagement Tools

BPModeling

ToolsModeling Capability

+ Repository

Modeling Capability +Ability to Monitor Runtime Process+

Dashboard Capability

BPMonitoring

Tools

XML DSLs andBPEL, BPML

Software DevelopmentSuites

Application Servers

WorkflowTools


BP Architecture, Modeling & Simulation Tools

BPM Suites


BPMApplications



BPLanguages

EAI Tools

ProcessSimulation

Tools








Suites

StatisticsTools

GraphicsTools



BPModeling


+ Repository



BPMonitoring

Tools



Application Servers

WorkflowTools


Business Process Modeling Tools

• Include architecture, process modeling and simulation capabilities

• Are holding their own against BPM Suites that also include modeling capabilities

• Are popular with managers and redesign teams


Some BP Architecture, Modeling & Simulation Tools

• CACI’s SIMPROCESS• Holocentric’s Holocentric• IDS Scheer’s ARIS• iGrafx’s iGrafx Process• MEGA International’s MEGA• Mi Services’ Mi SCOR• Popkin Software’s System Architect• Proforma’s ProVision• ProModel’s Process Simulator• xBPM Innovations’ xBPL 2005 Modeling Suite


4. Business Rule Management Tools

BPM Suites


BPMApplications



BPLanguages

EAI Tools

ProcessSimulation

Tools








Suites

StatisticsTools

GraphicsTools



BPModeling


+ Repository



BPMonitoring

Tools



Application Servers

WorkflowTools


Business Rules Management

• Goal: Abstracting business rules from policy manuals, software, and from training programs and saving them in a repository so they can be systematically managed

• The effort needs to be aligned with business process efforts

• OMG Business Rule Standards• Business Rules Community

– www.brcommunity.com

• Business Rule Management Vendors


5. BP Automation: BPM Systems

• The idea of using software to manage processes in something close to real time

• New and confusing

• Most companies are just exploring the idea and it will evolve rapidly over the course of the next 2-3 years

• There are no clear winners yet: Most companies are yet sure how they’ll use this technology


What Is a BPM Suite?

A B EDC

Software Tool That Displays a Graphical View of a ProcessLogical

Description ofthe Process

PhysicalImplementationof the Process

SoftwareComponent

B

SoftwareComponent

C

EnterpriseApplicationModule D

EnterpriseApplicationModule E

Software Tool (Engine)That Manages Links

Between Diagram andImpelementation

BPMSEngine


The Key is Controlling the Business Process

A B E

D

C

Software Tool That Displays a Graphical View of a Process

Logical Description of the Process

PhysicalImplementationof the Process

SoftwareComponent

C

SoftwareComponent

B

EnterpriseApplicationModule E

Software Tool(Engine) That

Manages LinksBetween Diagram

and Impelementation

BPMS Engine

EnterpriseApplicationModule D

UserInterface

Business AnalystInterface


BPM Suites

BPM Suites


BPMApplications



BPLanguages

EAI Tools

ProcessSimulation

Tools








Suites

StatisticsTools

GraphicsTools



BPModeling


+ Repository



BPMonitoring

Tools



Application Servers

WorkflowTools


A BPM Continuum

LanguagesBPM

ServersTools/Utilities

BPMSuites

BPM Suites+Frameworks

Complete BPMApplications

Vendors whosell languages,

like BPEL orJava

Vendors whosell BPM server

platforms

Vendors who sellstand alone tools

or utilities.

Vendors whosell BPM

Suites

Vendors whosell BPM

Suites withframeworks or

templates

Vendors whosell completeBPM systems

or applications.

Languages provide the maximumflexibility and require the most workto get to a complete BPM system.These products are invariably usedby IT developers

Applications provide the minimumflexibility and require the lest workto get to a complete BPM system.

These products can be used bybusiness users.

BP Modeling Vendors

BAM MonitoringVendors

Business Rule Mang.System Vendors


A Layer Diagram of the BPM Space

Language/PlatformJ2EE

BPM Server(Engines)

BPM Suite

BPM System or Applications

BP KnowledgeFrameworks

BPMS Application

Rules forSpecific

Processes

Models forSpecific

Processes

SoftwareComponents or

Modules

User Interfacesto Support

SpecificProcesses

An application that implements aprocess that can be examinedand changed dynamically.

ProcessModeling Tool

BPM Engine(Software)

XMLBPEL

BPM Engine(employees)

Business RuleEngine

ProcessMonitoring

Tools (BAM)

SoftwareRequirements

Tool

User InterfaceTools

BPM SUITE

BPM Tools/Utilities

ProcessMeasures for

SpecificProcesses

Eclipse


Some BPM Suite Vendors

• Appian’s Appian Process Engine• Ascentn’s AgilePoint BPMS• B2B Internet’s XicoBPM • Chordiant’s Straight Through Service Processing• CommerceQuest’s TRAXION Enterprise BPM Suite• Eg Solutions’ eg Work Manager• Filenet’s Filenet Business Process Manager• PegaSystems’ PegaRULES Process Commander• TIBCO’s TIBCO Staffware Process Suite • Ultimus’ Ultimus BPM Suite• IBM’s WebSphere Business Integration suite


BPEL and BPMN

• Being embraced rather than understood

• BPEL is currently only a variation on EAI

• Maybe a BPEL+ can support both employee and IT activities, but that is in the future

• BPMN is a nice notation that hasn’t got much traction yet; ultimately it’s an extension of UML’s Activity Diagrams


Petri Nets and Pi Calculus

• There are groups meeting to sort out the underlying basis for process automation

• There will be meetings on this in 2005

• They will probably get passed up by the vendors and user companies who will select more pragmatic solutions


6. IT Components Aligned with BP

• Ultimately BPM relies on software components

• They will need to be developed or changed as processes change

• Thus, BPM needs a clean link to Software Development technologies

• UML, MDA, and components


The OMG’s Model Driven Architecture

Code

Computation-Independent Model

(CIM)

Platform-SpecificModel(PSM)

Platform-Independent Model

(PIM)

Created by BusinessAnalysts to Describe

Business

Created by Architect/Designer to Describe

Archtiecture

Created by Developer or Testerto Implement Solution

CIM >> PIMMapping

PIM >> PSMMapping

PSM >> CodeMapping


The OMG’s BP Metamodels

UML 2.0Various

BP ToolsBPMN

J2EEVarious

BP ToolsBPEL

Business Process Definition MetamodelOntology

MetamodelBusiness Rules

Metamodel

XMI

MOFMeta Object

Facility


A BP Repository and MDA

BPM Suites


BPMApplications

Modeling Capability+ BPM Engine+ ApplicationComponents

BPLanguages

EAI Tools

WorkflowTools

ProcessSimulation

Tools

Application Servers


UniversalBP

RepositoryDatabase capable ofstoring information





Suites

StatisticsTools

GraphicsTools

Can Create Diagrams.No Repository.



BPModeling

Tools

Modeling Capability+ Repository



BPMonitoring

Tools

Used to Support 6 SigmaProjects



• Adaptive• IBM• BEA• Oracle


7. BP-Based Enterprise Monitoring Systems

BPM Suites


BPMApplications



BPLanguages

EAI Tools

ProcessSimulation

Tools








Suites

StatisticsTools

GraphicsTools



BPModeling


+ Repository



BPMonitoring

Tools



Application Servers

WorkflowTools


BP-Based Enterprise Monitoring Systems

• Everyone seems to think its part of BPM Systems

• It’s important to discriminate between monitoring a specific process and providing information for senior managers

• Business Performance Management, BAM, BI and Data Warehouses– The BPM Forum– IBM/OASIS Events Standard


Process Monitoring vs. Value Chain Monitoring

CEO

VP Line Mang

Manager

Staff Manager

ProcessSupervisor

Databasefor Appl.

DataOtherDatabases

DataWarehouse

BI

Application

Business Process orActivity - Execution

Monitor & ControlPlan & Staff

1

Application thatautomates part of

activity

4GL SystemCreates Inventory

Report

2

2

Strategy Level

Process Level

Activity andImplementation

Levels

Filtered &SummarizedInformation

Value ChainLevel

4

4

3

3


BPM Applications

BPM Suites


BPMApplications



BPLanguages

EAI Tools

ProcessSimulation

Tools








Suites

StatisticsTools

GraphicsTools



BPModeling


+ Repository



BPMonitoring

Tools



Application Servers

WorkflowTools


Packaged Applications vs. BPM Apps

• Traditional Packaged Applications are difficult to understand or to change

• BPM applications will incorporate Process Models and BPM Enginbe based to make them easier to manage and change

• Packaged application vendors will attempt to transition to BPM (SAP’s NetWeaver)

• BPM Suite vendors will evolve into BPM application vendors

• This is a very important part of BPM that has hardly begun


8. HR Support Aligned with BP

• BPM Suites will place more importance on analyzing employee activities and aligning them with business processes

• Aligning Knowledge Management with processes

• Aligning employee incentives and feedback with processes

• Aligning training with processes• www.ispi.org


The ISPI Human Performance Model

ExpenseReports

Updated ExpenseReport Ledger

Consequences

Feedback

Activity Support

4. Consequences

Feedback

Activity:Enter Expense

Reports

Process Defined

activitymeasures

Activity Specifications

Skill, Knowledge & Capability

*


9. Business Process Outsourcing

• We are going to create more decentralized organizations, using outsourcing

• The key is managing BPO is to have a good BP architecture and to manage with process-oriented techniques

• BPO vendors will become major advocates and consumers of BPM


Some of the Most Important Trends

• 1. BP Management System• 2. BP Architecture• 3. BP Process Analysis & Redesign Approach• 4. Business Rules Management System• 5. BP Automation (BPMS)• 6. IT Components Aligned with BP• 7. BP-based Enterprise Monitoring System• 8. HR Support Aligned with BP• 9. Significant BP Outsourcing


SUMMARY

• The challenge is the management of business process change

• We have too many technologies and not enough focus on why we should do BPM in the first place

• We manage processes to improve corporate performance

• Companies need to set goals, develop a strategy, and then create a BP organization that can organize and coordinate their BPM resources


For More Information

www.bptrends.com The most comprehensive source of

information and analysis on trends, directions and best practices in Business Process Management

[email protected]

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© 2005, Business Process Trends 1 The Evolution of Business Process Management Paul Harmon...

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