Business Process Management (BPM)

Introduction
Introduction
1. Overview of the Process Management Lifecycle
2. Introduction to Process Modelling
3. Business Process Change
4. What is Business Process Management (BPM)?
5. The Evolution of Business Process Management (BPM)
The Role of Operation Function

“A company’s operations function is

either a competitive weapon
or
a corporate millstone.
It is seldom neutral.” [Skinner ‘69]

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corporate millstone
• Company A entered the combination washer-dryer field after several
competitors had failed to achieve successful entries into the field.
Company A’s executives believed their model would overcome the
technical drawbacks which had hurt their competitors and held back
the development of any substantial market. The manufacturing
managers tooled the new unit on the usual conveyorized assembly
line and giant stamping presses used for all company products.
• When the washer-dryer failed in the market, the losses amounted to
millions. The plant had been “efficient” in the sense that costs were
low. But the tooling and production processes did not meet the
demands of the marketplace.
corporate millstone
• Company B produced five kinds of electronic gear for five different groups of customers;
the gear ranged from satellite controls to industrial controls and electronic components.
In each market a different task was required of the production function. For instance, in
the first market, extremely high reliability was demanded; in the second market, rapid
introduction of a stream of new products was demanded; in the third market, low costs
were of critical importance for competitive survival.
• In spite of these highly diverse and contrasting tasks, production management elected to
centralize manufacturing facilities in one plant in order to achieve “economies of scale.”
The result was a failure to achieve high reliability, economies of scale, or an ability to
introduce new products quickly. What happened, in short, was that the demands placed
on manufacturing by a competitive strategy were ignored by the production group in
order to achieve economies of scale. This production group was obsessed with
developing “a total system, fully computerized.” The manufacturing program satisfied no
single division, and the serious marketing problems which resulted choked company
progress.
corporate millstone
• ompany C produced plastic molding resins. A new plant under construction was to come on-
stream in eight months, doubling production. In the meantime, the company had a much higher
volume of orders than it could meet.
• In a strategic sense, manufacturing’s task was to maximize output to satisfy large, key customers.
Yet the plant’s production control system was set up—as it had been for years—to minimize costs.
As a result, long runs were emphasized. While costs were low, many customers had to wait, and
many key buyers were lost. Consequently, when the new plant came on-stream, it was forced to
operate at a low volume.

• The mistake of considering low costs and high efficiencies as the key manufacturing objective in
each of these examples is typical of the oversimplified concept of “a good manufacturing
operation.” Such criteria frequently get companies into trouble, or at least do not aid in the
development of manufacturing into a competitive weapon. Manufacturing affects corporate
strategy, and corporate strategy affects manufacturing. Even in an apparently routine operating
area such as a production scheduling system, strategic considerations should outweigh technical
and conventional industrial engineering factors invoked in the name of “productivity.”
Introduction
• A company can reach its business goals in an efficient and effective
manner only if people and other enterprise resources, such as
information systems, play together well.
• Business processes are an important concept to facilitating this
effective collaboration.
• While at an organizational level, business processes are essential to
understanding how companies operate, business processes also play
an important role in the design and realization of flexible information
systems.
 Business Growth
Innovation
 81% believe innovation is key to getting closer to
their customers

New Channels
 70% are focusing on new channels to deliver
services to their customers

Collaboration
 69% are collaborating with customers
to deliver better products and services

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Source: IBM CEO Study, 2010
2. Process Modelling
Process Modelling
Process
• describe the properties, behaviour, purpose and other elements of the
process
• are captured in a tool in order to organise, analyse and manage an
organisation’s portfolio of processes
• examples:
• Inputs/Outputs, Events/Results, Value Add, Roles/Organisations, Data/Information,
Probabilities, Queuing, Transmission Time, Wait Time, Arrival Patterns/Distributions,
Costs (indirect and direct), Entry Rules, Exit Rules, Branching Rules, Join Rules,
Work/Handling Time, Batching, Servers (number of people available to perform
tasks)
 Models

• Represents the performance of what is being modelled

• Needs greater precision, data about the process and about
the factors that affect its performance.
• Often done using tools that provide simulation and reporting
capability to analyse and understand the process
Purpose of Process Modelling (1)
• A model is rarely a complete and full representation of the
actual process
• Objective is to create a representation of the process that
describes it accurately and sufficiently for the task at hand
• Models are simplified representations that facilitate
understanding of that which is being studied and making
decisions about it.
Purpose of Process Modelling (2)
• Process models are the primary means for
• Measuring performance against standards
• Determining opportunities for change
• Expressing the desired end state preceding a change effort

• Benefits of Modelling:
• Models are relatively fast, easy and inexpensive to complete
• Models are easy to understand (when compared to other forms of
documentation)
• Models provide a baseline for measurement
• Models facilitate process simulation and impact analysis
Business Process Change
Dynamic Market
• Today’s dynamic markets, companies are constantly forced to provide
better and more specific products to their customers.
• Products that are successful today might not be successful tomorrow.
• Competitor will always find ways to produce a cheaper, better
designed, or more conveniently usable product.
• Internet-based communication has change the traditional product
cycles are not suitable for coping with today’s dynamic markets.
Process Change, Uncertainty and Complexity
Transformation Today Means:

 Simpler Business Led Change

 Full Process Visibility and Governance
 Optimized Processes and Decisions

Agile Processes and Decisions with

Business Process Management
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What is a Business Process?
A Business Process describes how something is done in
• In general terms… an organization

• Business - Organizational entity that deploys resources to provide

customers with desired products and services

• Process (Merriam-Webster’s Dictionary)

• (i) A natural phenomenon marked by gradual changes that
• lead to a particular result
• (ii) A natural continuing activity or function
• (iii) A series of actions and operations conducing to an end
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What is a Business Process?
A business process is a collection of linked tasks which find their end in the delivery of a service or product to a
client. A business process has also been defined as a set of activities and tasks that, once completed, will
accomplish an organizational goal. The process must involve clearly defined inputs and a single output. These
inputs are made up of all of the factors which contribute (either directly or indirectly) to the added value of a
service or product. These factors can be categorized into management processes, operational processes and
supporting business processes.

Management processes govern the operation of a particular organization’s system of operation. Operational
processes constitute the core business. Supporting processes such as human resources and accounting are put in
place to support the core business processes.

The definition of the term business process and the development of this definition since its conception by Adam
Smith in 1776 has led to such areas of study as Operations Development, Operations Management and to the
development of various Business Management Systems. These systems, in turn, have created an industry for
BPM Software which seeks to automate process management by connecting various process actors via
technology.

A process requires a series of actions to achieve a certain objective. BPM processes are continuous but also
allow for ad-hoc action. Processes can be simple or complex based on number of steps, number of systems
involved etc. They can be short or long running. Longer processes tend to have multiple dependencies and a
greater documentation requirement.
What is a Business Process?
• Any organization entity or business can be characterized as a process
or a network of processes
• Based on the simple transformation model of a process
• Has its origin in the areas of manufacturing and quality

Inputs Process Outputs

The transformation model of a process

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Business Processes
• A process perspective encourages managers to:
• See every aspect of the business as customer driven.
• Make employees responsible for the whole process, rather than for just one
task in it.
• Focus on how work is done, rather than just on what is done.
“How to do things in an efficient and effective way”

• An efficient process which does not deliver customer

value is useless

A well designed process does the right things,

right!
 Bridging The Gap

Organization Technology
The abilities to create a new product and adapt an existing product at low
cost have become competitive advantages of successful companies.
Example: Request to IT Department
What defines a “good process”?
Delivered value
Delivered value of process =
benefit to process customers – total process cost

Benefit driven by
customer value
Variety V
Price p (flexibility)
(Cost)

Quality Q: Time T:
•of product or outcome •Rapid, reliable delivery
•of service •New product development

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Business Process Modelling Notation (BPMN)

• Widely used and supported standard for business process modelling

• Provides a graphical notation for specifying business processes in a
Business Process Diagram (BPD)
• Uses a flowcharting technique similar to activity diagrams from Unified
Modelling Language (UML)
• Can output BPMN to Business Process Execution Language (BPEL)
• Standard executable language for specifying interactions with Web Services
• Emerging standard
BPM lifecycle
Business process management activities can be grouped into five
categories:
• Design
• Modeling
• Execution
• Monitoring
• Optimization
Definition
• Process Design encompasses both the identification of existing
processes and the design of "to-be" processes. The aim is to ensure
that a correct and efficient theoretical design is prepared.
• Modeling takes the theoretical design and introduces combinations
of variables (e.g., changes in rent or materials costs, which determine
how the process might operate under different circumstances).
• Execution: Process Automation is to develop/purchase an application
that executes the required steps of the process.
Definition
• Monitoring / Tracking of individual processes, so, that information on
their state can be easily seen, and statistics on the performance of
one or more processes can be provided.
• Process optimization includes retrieving process performance
information from modeling or monitoring phase; identifying the
potential or actual bottlenecks and the potential opportunities for
cost savings or other improvements; and then, applying those
enhancements in the design of the process.
Assignment:
• Next week discussion : find more articles from books/articles on BPM
lifecycle.
Modelling Standards and Notations
• Range of number of modelling and notational standards and Techniques
• Models provide a language for describing and communicating as-is and to-be process information
• Like all new languages must be learned
• Examples:
• Business Process Modelling Notation (BPMN)
• Flow Charting
• Event Process Chain (EPC)
• Value Chain
• Unified Modelling Language (UML)
• IDEF-0 (Integration Definition for Function Modelling)
• LOVEM-E (Line of Visibility Engineering Method - Enhanced)
• SIPOC (Supplier, Input, Process, Output and Customer)
• Systems Dynamics
• Value Stream Mapping
What is BPM?
Definitions
• Business = person/ corporation engaged in commerce, manufacturing, or a
service; profit-seeking enterprise (people/teams are involved for a specific
outcome; refers to individuals, interacting together, to perform a set of activities
to deliver value to customers and a return on investment to the stakeholders)

• Process= a systematic series of actions directed to some end; a continuous set of

actions, operations or series of changes taking place in a definite manner

• Management = the act or manner of managing; handling, direction or control;

executive ability; the person or persons controlling and directing the affairs of a
business or institution (it requires handling exceptions, providing directions,
controlling variables to achieve desirable outcomes; it requires skills and involves
people and executives)
Definition
• Business process management is when the organization attempts to
improve efficiency and effectiveness of their operation by focusing on
their business processes.
• Companies normally hire when the economy is booming
(flourishing/prosperous/successful).
• Companies look for ways to cut costs during down economic times.
• Downsizing is one option where companies reduce the number of jobs while attempting
to increase productivity.
Other related terms
• Business Process Automation (BPA) involves automating some aspect
of the business process through the application of information
technology.
• Business Process Improvement (BPI) involves employees looking for
ways to improve the process incrementally.
• Business Process Transformation (BPT) examines how the business
operates and then looks for ways to fundamentally and radically
change those operations.
Definitions
Business Process Management
• Disciplined approach to identify, design, execute, document,measure,
monitor and control both automated and nonautomated business processes
to achieve consistent, targeted results aligned with an organisation’s strategic
goals
• Involves the deliberate, collaborative and increasingly technology aided
definition, improvement, innovation and management of end-to-end business
processes that drive business results, create value and enable an organisation
to meet its business objectives with more agility
• Enables an enterprise to align its business processes to its business strategy,
leading to effective overall company performance through improvements of
specific work activities either within a specific department, across the
enterprise or between organisations

(Association of Business Process Management Professionals-ABPMP)

Business processes: conceptual model
BPM Lifecycle (1)

• The BPM activities are affected by several factors: leadership, values,

culture and beliefs factors
BPM Lifecycle (2)
• Iterative, phased set of activities
Analysis of Business Processes
• Takes information from strategic plans, process models, performance
measurements, changes in the environment and other factors in
order to fully understand the business processes in the context of the
overall organisation
Design and Modelling of Business Processes
• Document the sequence of activities, including the design of what work is
performed, at what time, in what location, by what process actors using
what methodology
• Defines what the organisation wants the process to be and answers the
what, when, where, who and how questions of how end-to-end work is
executed
• Ensures that the proper management controls and metrics are in place for
compliance and performance measurement
Process Monitoring and Controlling
• Continuous measuring and monitoring of business processes provides the
information necessary to adjust resources in order to meet process
objectives
• Measuring and monitoring also provides critical process performance
information through key measurements related to goals and value to the
organisation
• Analysis of process performance information can result in improvement,
redesign or reengineering activates
The Evolution of Business Process
Management (BPM)
The BPM Hype Cycle
The BPM Hype
• BPM has been around for 2 decades
• In 1986 Six Sigma was introduced. (Chapter 5)
• In 1990 Hammer and Champy “Don’t automate obliterate”
• In 1990s the BPM started “BPM: The Third Wave”
• Up till now it is the most important management topic.
BPM Technology
• BPM is a technology enabled and supported management discipline
• Wide range of technologies available to support the planning, design,
analysis, operation and monitoring of business processes
• Application suites available which help enable organisations to better
manage their business processes
• BPM systems must be able to integrate with legacy systems in order
to control work and get information or measure performance
• Common framework for how these technologies are deployed is most
often referred to as a Service Oriented Architecture (SOA)
References
• Association of Business Process Management Professionals (ABPMP) Business Process
Management Common Body of Knowledge (CBOK)

• Alan McSweeney, “Introduction to Business Process Management”, 2010

• M. Staron, W. Meding, “Ensuring Reliability of Information Provided by Measurement

Systems”, Ericsson

• M. Staron, “Software Leadership and Quality Assurance”, Gothenburg University, 2010