High Performance Enterprise

1

Theory and Systems of Management

The High Performance EnterprisePresented by:Walter Kruz

Module 2: Business Process Improvement

Momari

Momari 2

We will learn...

Forces driving process improvement Industry report: BPI projects from

around the worldBasic business process conceptsProcess mapping and analysis

3

Business Process Improvement Overview

Segment 1

Momari

Momari 4

Forces driving business change

BusinessChange

Economy

Social/Political

Customers

TechnologyIndustry/Competition

Work Force

Environment

Momari 5

Business Process Improvement (BPI)

Business process improvement is the optimization of business processes and the associated systems and organizational structures to achieve significant improvement in business performance

Changes in business processes leading to the creation of value for the enterprise

Momari 6

Two approaches

Fundamental and radical change Fundamental rethinking and radical

redesign of business processes to bring about dramatic improvements in performance (M. Hammer)

Continuous Process Improvement Small and measurable refinements to

an organization's current processes and systems

Momari 7

Elements of Business Processes

Organization Functional teams that produce product or

service Processes

Activities to deliver product or service Technology

Technical input to create product or service People

All stakeholders Culture

“Personality” of an organization

Momari 8

Incremental Improvement versus

Extreme Business Reengineering

Cultural/StructuralCulturalType of Change

Information TechnologyStatistical ControlPrimary Enabler

HighModerateRisk

Broad, Cross-FunctionalNarrow, FunctionalTypical Scope

Top-DownBottom-UpParticipation

ShortLongTime Required

One-timeOne-time /ContinuousFrequency

Clean SlateExisting ProcessStarting Point

RadicalIncrementalLevel of Change

ExtremeContinuous

Source: Davenport

Momari 9

Few Companies Adjust Processes Before Implementation

27%

29%

44%

Implement and change process simultaneously

Implement first, adjust process if necessary

Assess & adjust process before

implementation

Momari 10

BPI Methodology

Ensure PerformanceContinuous ImprovementControl

Validate BenefitsProcess ImplementationImprove

Evaluate OptionsProcess AnalysisAnalyze

Quantification of IssueProcess DocumentationMeasure

Prioritize Critical IssuesProcess IdentificationDefine

GoalBPISix Sigma

Momari 11

BPI drivers

Cost reduction Higher efficiencies lead to cost reductions

Improved customer satisfaction Improved understanding of customer

interfaceTime to market

Faster product development cycle Risk reduction

Faster prototyping improves product quality

Momari 12

BPI - Key Success factors

Top Management Sponsorship strong and consistent management

involvement is required. Without it chances of success are reduced

Strategic Alignment with company strategic direction; that is, in

agreement with financial performance, customer service, and the organization’s vision

Compelling Business Case for Change Communicate clearly the benefits and

importance of change

Momari 13

BPI - Key Success factors (cont)

Proven Methodology that includes a vision process, meets the needs of

the project and one that the team understands and supports

Effective Change Management deals with cultural transformation and is the

discipline of managing change as a process

Line Ownership match ownership with accountability. Front line

workers do the day-to-day process execution BPI Team Composition

must contain breadth and knowledge

Momari 14

Discussion-The Pepsi Case Study

State the problems associated with the Pepsi distribution model

What technology and approach was used to overcome these problems

How did these changes affect revenue and effectiveness of the distribution model?

15

A report from industry

The Prosci 2002 BPR Report

Segment 2

Momari

Momari 16

Prosci’s 2002 BPR Report

Third study in a series conducted over a five- year period

327 organizations from 53 countries participated in the study

Results provide a comprehensive view of business process reengineering projects from around the world

Source: http://www.prosci.com/bprbestpractices.htm

Momari 17

Exercise

Analyze the pros and cons of the Prosci report

How could you use this knowledge to improve your organization?

18

Basic Business Process concepts

Segment 3

Momari

Momari 19

Defining Processes

A set of logically related tasks performed to achieve a defined business outcome

Davenport and Short

The logical organization of people, materials, energy, equipment, and procedures into work activities designed to produce a specified end result

Whilst Pall

Momari 20

Typical processes in manufacturing

OPERATIONAL Product

development Customer

acquisition Logistics Order management Post-sales service

MANAGEMENT Performance

monitoring Information

management Asset management Human resources

management Planning and

resource allocation

Momari 21

4 types of business processes

Core processes Central to business functions; relate directly to

external customers. Primary activities of value chain

Support processes Have internal customers; back up core processes

Business network processes Exist beyond boundaries of enterprise, Include

suppliers, customers, partners Management processes

Used to plan, organize, control resources

Momari 22

The role of IT in BPR

IT is an essential enabler Hammer and Champy say that IT can

be used to break the old rules (Disruptive technology)

Momari 23

3 IT opportunities in BPR

1. Computing Reduce cost of production

Automating data dependent tasksDisintermediating information processesEliminating activities

Momari 24


2. Communications Reduce costs of coordination

Collapsing time and spaceIntegrating tasks and processesDistributing and collecting data/information

Momari 25


3. Databases and systems Reduce cost of information

Monitoring processes and tasksAnalyzing information and supporting

decisionsArchiving and making sense of experience

Momari 26

Relationship between IT capabilities and BPR

BPR ITcapabilities

How can business processes be transformed by IT?

How can IT support business processes?

Momari 27

Value-adding capabilities of IT

SUPPLIER VALUECHAIN

COMPANY VALUE CHAIN

END-USERVALUE CHAINS

CHANNELVALUE CHAINS

UPSTREAM COMPANY DOWNSTREAM

COMPETITIVE ADVANTAGE ARISES BY OPTIMIZINGVALUE CHAIN LINKAGES; INFORMATION TECHNOLOGY ACTS AS ADDED VALUE

Momari 28

People factors in BPR

Human resources are a strategic resource; people play a vital role in the enterprise Empowerment

Increased participation, less hierarchical organization, fewer layers of management

Increased use of cross-functional teamsFacilitate communications and complex

activitiesMotivational effect

Momari 29

Two approaches for reengineering

Davenport Identify process Identify change

levers Develop process

vision Understand existing

process Design and

implement new processes

Hammer and Champy Choose process Understand process Undertake re-

design session Implement new

process

Momari 30

Identifying process for redesign

Enumerate major processes Identify major processes of interest

Determine process boundaries Scope processes; determine boundaries

Assess strategic relevance Target processes to innovate

Render high level judgement on process health Identify problematic processes

Qualify the culture and politics of processes Measure selected processes cultural, political

climate

Momari 31

The visioning process

Initial visionstatement

Key processcharacteristics

Performancemeasures and

objectives

Critical successfactors

Potentialimplementation

barrier

How can we do things different?

How will it work?

How well will it work?

What things have to go right?

Why might not go right?

Momari 32

Understanding existing processes

Models and documentation facilitates communication among participants

Documentation provides the means to migrate to a new process

Recognizing problems in existing process helps in preventing them in new process

Understanding current process provides measure of value of proposed redesign

Momari 33

Redesigning new process

Brainstorm design alternative Use workshops to surface creative

designsAssess feasibility, risk, and benefits

Evaluate relative benefits, costs, risks of alternative

Prototype new process design Develop prototype to simulate and test

the operation of the new process

Momari 34

Skills needed for BPI

Business analysisStrategy analysisData modelingComputer simulation Industrial engineeringFinancial analysis………..

Momari 35

Exercise

Discuss the value add of a specific information technology on an industry or business. For example, wireless communications and the supply chain; or online learning and education.

36

Process Mapping

Segment 4

Momari

Momari 37

Process Concepts

Processes All activities that create and deliver the

product or service An activity that

Takes an inputAdd value to itProduce an output for a customer

Momari 38

The process environment

Input/supplier

Output/customer

Feedback system

Process characteristics (Measurements)

Requirements Requirements

Momari 39

Characteristics of the process(Attributes we want to improve)

External Customer

complaints Defective rates Warranty claims Response time

Internal Customer

complaints Cost Number of steps Number of sign-offs Travel time Inventory levels

Momari 40

Preparing a monthly financial report

Info Systems:VolumesInventory costLabor costFinancial Planning:Overhead ratesPracticesManagement:Review scheduleSpecial requirements

Process

Characteristics/MeasurementsAccuracy (# redo’s)

Customer satisfaction (# complaints)Timeliness (Complete on time)Efficiency (Hrs paid overtime)

Supplier input

Financial mgmt:ReportsExplanationsConcernsSite mgmt:ReportsReviewsTax accounting:Cost infoDeductions

Customer output

Momari 41

Exercise

Prepare an income tax return for a customer

Use the model described earlier and show: Title Supplier/input Customer/output Characteristics/measurements

Momari 42

Process mapping definition

A graphical description of an existing or proposed process which uses symbols, connecting lines, and descriptive words to display the activities, sequence, and relationships within the process

Momari 43

Insurance claim process

Client Claims processing

Insurance agent

Car repair shop

1. Notify agent

2. Instructions

3. Request quote

4. Provide quote

9. Fix and pay

5. File claim

6. File claim

7. Request additional info

8. Pay

Momari 44

Process Owner Initiates study Gets buy-in Provides resources

Manager with stake in theprocess

Team Leader Responsible for output Plans activities Interfaces with other

managers

Working level or managerwithin the process

Facilitator Responsible for“teaming process”

Tools expertise Team dynamics

Process/team specialist

Team member Ideas and expertise Work on assignments Interface to their

organizations

Working level within theprocess

Support personnel Technical expertise Administrative/logistics

supportLine managers Provide members and

time Support work of team

Role Responsibilities Source

Team Roles

Momari 45

Process mapping methodology

Bounding the process & setting objectives

Developing the data gathering plan

Interviewing the process participants

Generating the process map

Analyzing and using the map

Momari 46

Bounding and target setting

Bounding Put wall around area to be studied

Setting objectives Understanding the customer

perceptions Setting improvement targets based on

these perceptions

Momari 47

Bounding the process

Objectives Identifies what is

included and what is not

Clearly describes what will be mapped

Identifies Inputs/suppliers Outputs/customers

Purpose Eliminates overlaps

and gaps Provides basis for

agreement on scope owner, team, mgmt

Helps teams focus on problems

Helps teams focus on customer needs

Momari 48

Setting improvement objectives

Determine Which customer perceptions do you want

to change? Which process outputs will change those

perceptions? Which process characteristics must be

changed? How much must they be changed?

Process changes are based on the expected impacts to the customer

Momari 49

Who are the customers?

Who are they? Anyone affected by a change to the

outputs of the process, including:external customers, business strategies,

internal customers, other processes

How do you know what they want? Complaints and compliments,

surveys, interviews, focus groups, market research studies

Momari 50

Exercise

Fill out Process bounding worksheet for the insurance claim process There is 60% variation in cost of similar

claims Customer complaints: It takes a month to

get check Set objective: timely and fair payment Input: Policy #, car model, damage Output: instructions, claim quotes, check

Momari 51

Process Bounding Worksheet

Title: Owner:

Mission:

The Process Begins with: The Process Ends with:

Input:

Item Source / Vendor Comments

Output

Item Customer Perceptions

Characteristics / Measurements

Characteristic Data Available? Current Value Target value

Momari 52

Developing the data gathering plan

Bounding the process & objectivesDeveloping the data gathering plan

Interviewing the participantsGenerating process map


What data is needed to create a process map?Who do we need to talk to?

What should we ask?

Momari 53

Plan generation process

Outputs

•Concept flowchart

•Final process boundary

•Information plan•What needed•from whom•by when

Inputs

•Bounding worksheets

•Owner’s expectations

•Restrictions

•Available data

Team Planningmeeting

Momari 54

Concept flowchart

Objectives Provide enough detail to identify all

activities and departments involved Leads to agreement among team

members on the major components and boundaries

Allows process mapping work to be split up logically

Momari 55

Concept flowchart-Insurance Co.

client agentclaims center shop

1. Notify agent 2. instructions

3. Quote request

4. Provide quote

…and so on

Momari 56

Interviewing the process participants Bounding the process & objectives

Developing the data gathering planInterviewing the participants

Generating process mapAnalyzing and using the map

Setting up and conducting info gathering interviewsCreating sub-process maps during the interview

Momari 57

Interviews

Purpose: Gather enough information to create

accurate process map that can used for improvement

Gather suggestions for improvement from employees directly involved in its execution

Gain buy-in by involving process participants in the process analysis

Mechanics: 2 team members per interview One interviewee at a time

Momari 58

Interview Process Flow

Is this the last

step

Facts

1. What is the first(next) next step you perform

3. What supportdo you need?Who supplies

2. What are the outputs?Customers?

3. What are the inputs?Suppliers?

4. What are the characteristics

values?Task time, cost?

No

YES Review input with participant

1. Is customer satisfied

with inputs

2. How do you measure your

progress?

3.What are roadblocks to quality,

productivity?

4. How would you change the

process?

Opinions

Momari 59

Generating the process map




The conventions and symbols used in process mapping

The details of process mappingVariations and when they are used

Momari 60

Process mapping symbolsBasic

Ops: Process, activity

Decision:Triage, classification

Terminal: Start and end process

Ops: Process, activity

Inspection: Approval

Delay: Waiting

Manufacturing

Storage:controlled

Assemble

Accept/reject?

Start batch

Finished goods to warehouse

Quality control

In process inventory

Raw materials, Finished goods

Services

Sales call. Med exam

Audit? Make or buy?

Cust orders lunch

Fax order to vendor

Sign-off P.O.

Computer install waiting for S/W

Records Vault

Momari 61

A simple process map

Start Step 1

Step 2 Step 3

Step 4

?

End

No

Yes

Organization x Org y Org z

Time scale

Momari 62

Exercise

Construct simplified processes for: Semiconductor device Financial audit Real Estate construction project

Momari 63





Analysis:Concepts of value added activity

Basic tools of process analysisProcess analysis check list

Momari 64

Value added assessment

Process step

Necessary to produce

output?

Customer value added

Businessvalue added

Novalue added

Contribute tocustomer

requirement?

Contribute to business function?

Yes

No

No

NoYes

Yes

Record orderType policyResearch dataRecord claim

Record date receivedOrder formsUpdate personnel recordsPrepare financial reportPay taxes

Review & approveReworkMovementStorage

Momari 65

Analyzing and using the map (cont)




Using the map:Process improvement programsTarget setting

Momari 66

The basis for improvement

Ree

ng

ine e

rin

g

Ben

chm

arki

ng

C

ycle

tim

e re

du

ctio

n

Co

nti

nu

ou

s im

pro

vem

ent

S

ix S

igm

a

A

ctiv

ity

bas

ed m

gm

tImprovement

Process mapping

Process Analysis tools

Momari 67

Target setting

Targets drive methodology

Characteristic: Fast mail delivery

Time

Baseline (current level) 1 business day

Capability 1.5 hrs

Industry benchmark 35 min

Momari 68

Process improvement enablers

E-mail Voice systems Imaging systems Workflow tools Document

management

E-commerce Wireless

communication Broadband Simulation tools Multimedia

Momari 69

We learned

Forces driving process improvement Industry report: BPI projects from

around the worldBasic business process conceptsProcess mapping and analysis

High Performance Enterprise

Business

Transcript of High Performance Enterprise