The Evolution of Business Process Management

The Evolution of BPM Paul Harmon

Paul Harmon

Executive Editor Business Process Trends

Process Integration in Nineties

Executive Management Strategy Committee

Sales Department

Horizonally Integrated Business Process

That Delivers A Specfic Product to a Targeted Group of Customers

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Today: Horizontal & Vertical Alignment

Executive Management Strategy Committee

Sales Department

Vertically Integrated Horizonally Integrated Measures, Processes Managers, and From Suppliers to Customers Resources

Employees & IT Applications and Infrastructure

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

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Business Process Change Initiatives

Process Management Activity Based Senior Executive Cost Accounting System

Financial System Management Dashboard Near Real-Time Monitoring and

Management Control System Business Dashboard Process Value Chain Architecture Manager

BAM & Data Value Warehouse

Business Rules Chain Process Manager Process Manager Process Manager Mang. System Processes Modeled and Optimized

Suppliers Customers Resources Markets

Aligned HR System Employees Employees Employees Employees Employees Employees

Aligned IT Architecture Process Components Application &Application & Application & Application & Application & Application & Databases Databases Databases Databases Databases Databases ERP System

All Processes Managed by Enterprise BPM Systems

We Have Lots of Technologies to Use

1980s 1990's 2000s

Porter's Value Balanced Management BPO Chains Scorecard

Business Business Process Process SCOR VCOR Reengineering Redesign

Performance Activity Based Rummler-Brache Improvement Costing Performance Improvement

Six Sigma Quality Control Total Quality Lean Management

SEI's CMM for IT Workflow BPM Business Rule EAI Information Management Systems Technology Packaged Software (ERP, CRM) Software Modeling Tools and Methodologies (CASE, UML, MDA)

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The BPTrends Pyramid

Strategy Plans Level & Goals

Value Chain Process Business Process Management and Level Measurement Specific Process

Process Performed Process Automated Implementation by Employees by IT Systems Level

Physical Plant and Hardware Used.

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

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An Aside on the Meaning of Process

Value Chain Architecture SCOR Framework

Business Process Business Process Business Process

Process Redesign Projects Process Process Process Business Rule Projects

Sub-Process Sub-Process Sub-Process

Six Sigma Projects Sub-Sub-Process Sub-Sub-Process IT Automation Projects SAP Process Models

Activity Activity

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)

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Coordinating the Management of Processes

CEO

Process Architecture Executive Committee Committee

Widget Sales Manufacturing Delivery Process Department Department Department

SVP Widget VP VP VP Process Sales Manufacturing Delivery

Process Manf. Management Sales Supervisor Delivery Team Supervisor Supervisor

Sales Manufacturing Delivery Customer Process Process Process

Widget Value Chain

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

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Too Many Independent Hierarchies

An Aligned Hierarchy An Aligned Hierarchy of Organization Goals of Process Measures

An Aligned Hierarchy An Aligned Hierarchy of of Business Policies/ Job Responsibilities Rules

We Need to Integrate Our Hierarchies

An Aligned Hierarchy of An Aligned Hierarchy of Organization Goals Job Responsibilities An Aligned Hierarchy of An Aligned Hierarchy of Process Measures Business Policies/Rules

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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

Supply Chain

Plan

Source Make Deliver

Return

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The Level 1 SCOR Notation

P1 P1 P1

P3 P3 P2 P4 P2 P4 P2 P4

European S2 M2 D2 RM Supplier

M1 D1 S1 D1 S1 DR1 SR1

DR1 SR1 DR1 SR1

Key Other S1 M1 D1 S1 RM Suppliers DR3 SR3

Alpha RM ALPHA Regional Customer Suppliers Warehouse

SCOR’s Level 1 Scorecard

Performance Performance Attribute Definition Level 1 Metric Attribute

The performance of the supply chain in delivering: the correct product, to the correct Delivery Performance Supply Chain Delivery place, at the correct time, in the correct Fill Rates Reliability condition and packaging, in the correct quantity, with the correct documentation, to Perfect Order Fulfillment the correct customer. Supply Chain The velocity at which a supply chain provides Order Fulfillment Lead Times Responsiveness products to the customer.

Supply Chain Response Time Supply Chain The agility of a supply chain in responding to marketplace changes to gain or maintain

CustomerAttributes Facing Flexibility competitive advantage. Production Flexibility

Cost of Goods Sold Total Supply Chain Management The costs associated with operating the Costs Supply Chain Costs supply chain. Value-Added Productivity Warranty / Returns Processing Costs Cash-to-Cash Cycle Time The effectiveness of an organization in Supply Chain Asset managing assets to support demand Management Inventory Days of Supply satisfaction. This includes the management InternalAttributes Facing Efficiency of all assets: fixed and working capital. Asset Turns

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SCOR Benchmarks Provide Instant ROI

Supply Chain SCORcard Industry Benchmarks

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

Delivery Performance 50% 85% 90% 95% to Commit Date Supply Chain Fill Rates63% 94% 96% 98% Reliability Perfect Order 0% 80% 85% 90% $30M Revenue Fulfillment Order Fulfillment Responsiveness 35 days 7 days 5 days 3 days $30M Revenue Lead Times EXTERNAL Supply Chain Key enabler to cost and 97 days 82 days 55 days 13 days Response Time asset improvements Flexibility Production Flexibility45 days 30 days 25 days 20 days

Total SCM 19% 13% 8% 3% $30M Indirect Cost Management Cost

Cost Warranty Cost NA NA NA NA NA

Value Added Employee NA $156K $306K $460K NA Productivity Inventory Days of 119 days 55 days 38 days 22 days NA

INTERNAL Supply Cash-to-Cash Cycle Assets 196 days 80 days 46 days 28 days $7 M Capital Charge Time Net Asset Turns 2.2 turns 8 turns 12 turns 19 turns NA (Working Capital)

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

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The Types of BP Methodologies

Strategy Mangement and Level Measurement Issues Organization Involved Establishing Strategy Performance Strategy and Goals and Goals Broad Based BP Change Mangement and Measurement Issues Methodologies Business Process Involved in BP Architecture Executing Actual Level Business Processes Business Process and Activities

BP Analysis & Redesign Narrow Specific Focused BP Activity Change HumanMethodologies Resource Architecture IT Architecture Implementation Management and Level Measurement Issues Involved in the Activity Activity Job Human-IT Application Data Network Logical Measurement Interface Implementation of BPM Management Design Architecture Architecture Architecture Level Plan Plan Model solutions. Plans, Budgets, Job Aids, Activity/ Screens Application Database Technology Physical Hiring, Resource Performance Training IT Focused BP and Designs Designs and Architecture Level Allocation, Monitoring Programs, Reports and Code ChangeData Feedback, System Knowledge Management Consequences Management MethodologiesSystems Hardware Architecture System Physical Plant and Hardware Used.

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

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Six Sigma and BPM

1. Define 2. Measure 3. Analyze 4. Improve 5. Control

Plan Identify Implement Document and Analyze Data Project Measures Measurement Maintain

1. Define project 1. Identify Measures 1. Analyze date 1. Select a soluton 1. Document and 2. Identify customer 2. Define measures 2. Explore possible 2. Pilot test solution keep score of results requirements 3. Develop & test causes and test 3. Implement full scale 3. Document data collection hypothesises solution process methods 3. Identify causes 4. Set goal 4. Define baseline measures

1-2 wks. ongoing

1-2 wks. 4-8 wks

2 wks. 34.13%

2.14% 0.13% 13.06%

-3 -2 -1 mean +1 +2 +3 0.13% 68.26% 95.46% 99.73%

An Aside: BPM Software Product Space

Graphics Statistics Tools Tools

Organization Modeling Tools BP Process Simulation Business Process Modeling Architecture Tools Tools Tools BP Modeling Capability + Repository Languages Business Rule XML DSLs and Management Tools BPEL, BPML Tool for creating, storing and using business rules. Universal EAI Tools BPM Suites BP Repository BPM Database capable of Modeling Capability Applications storing information Workflow + BPM Engine from all the BP tools. Modeling Capability Tools + BPM Engine + Application Components

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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BP Architecture, Modeling & Simulation Tools

Graphics Statistics Tools Tools

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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

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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

Graphics Statistics Tools Tools

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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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

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What Is a BPM Suite?

Software Tool That Displays a Graphical View of a Process Logical Description of the Process A B C D E

Software Tool (Engine) BPMS That Manages Links Between Diagram and Engine Impelementation

Software Software Enterprise Enterprise Physical Component Component Application Application Implementation B C Module D Module E of the Process

The Key is Controlling the Business Process

Business Analyst Logical Description of the Process Interface Software Tool That Displays a Graphical View of a Process

C BPMS Engine

A B E Software Tool (Engine) That D Manages Links User Between Diagram Interface and Impelementation

Software Enterprise Software Enterprise Component Application Component Application C Module D B Module E

Physical Implementation of the Process

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BPM Suites

Graphics Statistics Tools Tools

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

A BPM Continuum

Languages provide the maximum Applications provide the minimum flexibility and require the most work flexibility and require the lest work to get to a complete BPM system. to get to a complete BPM system. These products are invariably used These products can be used by by IT developers business users.

BPM BPM BPM Suites Complete BPM Languages Tools/Utilities Servers Suites +Frameworks Applications

Vendors who Vendors who Vendors who sell Vendors who Vendors who Vendors who sell languages, sell BPM server stand alone tools sell BPM sell BPM sell complete like BPEL or platforms or utilities. Suites Suites with BPM systems Java frameworks or or applications. BP Modeling Vendors templates Business Rule Mang. System Vendors

BAM Monitoring Vendors

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A Layer Diagram of the BPM Space

BPM System or Applications

An application that implements a BPMS Application process that can be examined and changed dynamically.

BP Knowledge Frameworks

User Interfaces Process Rules for Models for Software to Support Measures for Specific Specific Components or Specific Specific Processes Processes Modules Processes Processes

BPM Suite BPM SUITE

BPM Tools/Utilities

Process Software User Interface Process Monitoring Requirements Tools Modeling Tool Tools (BAM) Tool

BPM Server (Engines) Business Rule BPM Engine BPM Engine Engine (Software) (employees)

Language/Platform J2EE BPEL XML 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

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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

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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

Computation- Independent Model (CIM) CIM >> PIM Mapping Created by Business Analysts to Describe Business Platform- Independent Model (PIM) PIM >> PSM Mapping Created by Architect/ Designer to Describe Archtiecture Platform-Specific Model (PSM) PSM >> Code Mapping

Created by Developer or Tester Code to Implement Solution

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The OMG’s BP Metamodels

MOF Meta Object Facility

XMI

Various UML 2.0 BPMN BP Tools

Ontology Business Rules Business Process Definition Metamodel Metamodel Metamodel

Various J2EE BPEL BP Tools

A BP Repository and MDA

Graphics Statistics Tools Tools Can Create Diagrams. No Repository. Used to Support 6 Sigma Projects Organization • Adaptive Modeling Tools Process BP Simulation Business Process Modeling Tools Architecture Tools Tools •IBM Modeling Capability + Repository BP Business Rule Languages Management Tools XML DSLs and • BEA BPEL, BPML Tool for creating, storing and using business rules. Universal • Oracle EAI Tools BPM Suites BP BPM Repository Modeling Capability Applications Database capable of + BPM Engine Software Development storing information Modeling Capability from all the BP tools. Suites + BPM Engine + Application Components

Application Servers BP Packaged/ Monitoring Enterprise Tools Application Workflow Suites Tools Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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7. BP-Based Enterprise Monitoring Systems

Graphics Statistics Tools Tools

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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

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Process Monitoring vs. Value Chain Monitoring

Strategy Level CEO

4 Staff Manager

4 VP Line Mang Value Chain Level

3 Manager 2 Process Level

3 Process 2 Supervisor Plan & Staff Monitor & Control Filtered & Summarized Business Process or Activity - Execution Information Activity and Implementation 1 Levels

BI Application Application that 4GL System automates part of Creates Inventory activity Report

Data Database Warehouse for Appl. Other Data Databases

BPM Applications

Graphics Statistics Tools Tools

Application Servers BP Packaged/ Monitoring Enterprise Application Software Development Tools Suites Suites Modeling Capability + Ability to Monitor Runtime Process+ Dashboard Capability

BI and Data Warehouse Products

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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

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The ISPI Human Performance Model

Process Defined

Activity Specifications Activity Support activity measures

Activity: Expense Updated Expense Enter Expense Consequences Reports Report Ledger Reports * Feedback Skill, Knowledge & Capability 4. Consequences

Feedback

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

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Some of the Most Important Trends

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

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