Enabling high performance in the digital age
ISE Magazine November 2018 Volume: 50 Number: 11
By Mathias Kirchmer
From Europe to Australia, Industry 4.0 requires the discipline of business process management 4.0.
A global study shows that more than 75 percent of organizations have started their digital journey. They plan to use digital technologies to achieve the necessary agility, innovation and compliance that today’s volatile business environment requires. However, the study by BPM-D, a consulting company, also shows that most organizations are struggling to meet the high expectations of their digital initiatives. And according to another industry study, “Start Up your Business Process Competency Center” from a Gartner business process management summit, only 1 percent of organizations have their business processes sufficiently under control to realize the full potential of their digital initiatives.
That’s where business process management (BPM) comes into play.
Formalized systematic process management has a long history, especially in industrial companies. It started with the development of routings and related bills of material to keep capital-intensive production processes on track. The next generation of BPM added more sophisticated tools for quality and efficiency management, like Six Sigma or lean approaches. Process management also became more and more popular in administrative areas and service industries. In a third step, information technology started to enhance process management by applying tools like process automation engines or process repositories. BPM started to become a management discipline for strategy execution across the organization.
In Industry 4.0, leading to BPM 4.0, leveraging the power of the internet to enhance process management. The use of cloud-based technologies, such as robotic process automation (RPA), blockchain or connecting physical products through the internet with digital tools can deliver significant competitive advantage. BPM 4.0 provides this management approach as part of the “enterprise 4.0”.
BPM 4.0 helps focus on the processes that matter most for an organization, improve those processes in an intelligent way by leveraging the opportunities of digitalization where appropriate and sustain those improvements by governing their processes accordingly. BPM 4.0 is a management discipline that enables organizations to execute their strategy in the digital age at pace with certainty.
Identifying the right process improvement initiatives
Organizations only compete through 15 percent to 20 percent of their business processes, the other 80 percent-plus are commodity processes that are necessary, but their performance can be at industry average.
Applying common industry practices for those processes is sufficient. Sophisticated optimization or innovation initiatives don’t pay off.
This is different for high-impact processes. For those processes, more elaborate improvement approaches are justified and often required. Related improvement projects in general have a higher priority. The challenge many organizations face is that they don’t know what their high-impact processes are. The discipline of BPM 4.0 helps identify those high-impact processes, and the successes are not limited to the United States, as examples come in from Europe, the Middle East, Africa and Australia.
High-impact processes can be identified through a systematic assessment of the impact of each process on the business strategy, represented through appropriate value drivers. Value drivers describe what an organization needs to get right to make its strategy happen.
A shift of improvement initiatives to high-impact processes resulted in significantly higher overall efficiency. Likewise, a biologics company in the United States used such an assessment to identify where it had to launch new projects to reduce overall cost while simultaneously increasing customer service and innovation.
In our hyperconnected world, the business environment and the strategy of an organization change much faster than in the past. Therefore, it is necessary to adjust a process impact assessment frequently and compare different scenarios. This is where new digital process impact assessment tools help. These tools can be accessed through the cloud, minimizing cost and effort for a process impact assessment.
Process improvement projects are defined and prioritized based on the impact of the involved processes and their overall impact on strategy. The prioritization of projects also changes with changing value drivers. This provides transparency to the impact of projects, which often touch not just one but several business processes.
The resulting dynamic project portfolio management allows organizations to target best value through process improvement and transformation initiatives and adjust the project portfolio based on changing company and market requirements. This is the foundation of the discipline of BPM 4.0 and creates its role as a “value switch” for the digital age.
Agile process improvement leverages digital opportunities
Business processes are not equal. Different processes require different improvement approaches.
Customer-facing processes, for example, may require approaches like customer journey planning combined with design thinking methods. High-cost transactional processes are normally best improved through appropriate digital automation, for example robotic process automation (RPA). Inter-enterprise processes are starting to be handled using blockchain technologies.
These are just a few examples for different improvement methods. A key task of BPM 4.0 is to examine a process to identify the right improvement approaches and combine short-term results with larger transformational changes that need some more time.
Many organizations are struggling with selecting the appropriate way to improve their processes. A major financial company in Australia, for example, was betting on RPA and went live with more than 1,000 software robots to automate tasks. These bots were placed within two years and, a year later, the company had stopped the use of the automation tools.
The digital initiative had created too many issues: Processes changed more often than expected, so the bots created too many expectations that had to be handled manually. Eliminating a bottleneck created big downstream issues that nobody had foreseen, and cost reduction was less than expected. Hence, the organization decided to analyze its end-to-end processes more carefully to understand better how to improve them.
However, a more traditional approach may take too much time for the fast changing digital world. Rapid improvement approaches are required. Those approaches use agile principles to identify smaller improvement opportunities quickly and collect enough information about the process to decide effectively on transformational changes and the related digital technologies.
Looking simultaneously on processes, people and technology options and using agile thinking to come up with incremental benefit scenarios can lead to a truly value-driven approach.
Such a rapid improvement approach is supported in BPM 4.0 through cloud-based process modeling and repository tools and different process mining techniques. Modeling methods, like the business process modeling notation (BPMN), support the effective use of those tools.
Dynamic improvement using agile principles enabled through digital tools is another core component of the discipline of BPM 4.0. It enables the value-driven use of digital process technologies where these technologies makes sense.
Sustaining process improvements in a digital world
In order to keep improved business processes on track, an appropriate process governance approach is required. It needs to be clear how the performance of a process and the success of an improvement initiative are measured.
Required responsibilities and accountabilities need to be defined. Process owners, for example, have to initiate new improvement or corrective activities when appropriate because of changing business conditions or insufficient outcomes of previous improvement activities. Process stewards provide the arms and legs for the owners to enable the execution of activities. Process sponsors and appropriate governance bodies set the direction and resolve conflicts, e.g., with functional leads of the organization.
A global financial organization, for example, went through a major digital transformation with sophisticated process automation. This conglomerate’s goal was to increase agility while maintaining the required legal compliance.
However, when initial change requests for processes and underlying technology came up, it turned out that the required agility was not that easy to achieve. Changes in one functional unit often had unintended impacts in other areas. Hence, the traditional functional management and governance structure did not work to make decisions with the best results for the overall organization. Process governance is required, delivered through BPM 4.0 as a “value network” across the traditional functional organization.
The process organization does not replace the functional organization but enables cross-functional thinking and acting when necessary. In the digital age, this enterprise-wide view is critical to realize the full potential of digital technologies.
To give members of the process governance organization the necessary visibility into business processes, the use of process repositories, if possible combined with process mining tools, is required. These digital tools have become key enablers of an effective cross-functional process governance.
Once a process improvement project is finished, the expected business results are often not fully achieved since this requires some time, for example, to reduce stock levels. However, it is important to manage this value realization carefully and control the new processes pragmatically. This is a task of the process governance organization. Digital tools for integrated control management can help here, in conjunction with the transparency that process repositories provide.
Establishing the discipline of BPM 4.0
Since process management has become a real management discipline, just as human resources (HR) or finance, it also needs to be implemented accordingly.
One idea that can help organizations embrace the discipline of BPM 4.0 is through the process of process management (PoPM), which could be owned by a new C-suite executive, the chief process officer, or CPO. The CPO would organize BPM-discipline, just as another process owner organizes.
Related BPM 4.0 subprocesses have to be established, for example, to identify process improvement initiatives, manage improvements or provide process governance. Managers need to apply BPM 4.0 principles to their own organizations. However, there is not one set of PoPM processes that fits every organization. The PoPM needs to fit in the context of a specific organization and provide appropriate capabilities.
The BPM discipline supports the entire life cycle of a business process: Design, implementation, execution and control of the process. Through this life cycle it moves strategy into people and technology-based execution, minimizing necessary time and risk. It leverages digital technologies for operational improvements and for a streamlined process management, hence for the PoPM itself. However, the discipline of BPM 4.0 is not just about digital technologies but about aligning people and digital capabilities.
A process management discipline is especially important in the digital age. Since many information technology components are moved to the cloud, business processes become the main asset that stays in the organization. It is crucial to manage and leverage those assets effectively to achieve competitive advantage. BPM 4.0 is not just nice to have but becomes necessary for a company to achieve high performance – or even just to survive.
Digital and often cloud-based BPM maturity assessment tools help to define required capabilities and identify capability gaps. These gaps can then be systematically closed in the context of process improvement initiatives. Hence, an organization builds a capability and applies it right away to create the best value, as described in the first edition of Value-Driven Business Process Management: The Value-Switch for Lasting Competitive Advantage. The discipline of BPM 4.0 uses digital solutions to improve its own performance, and it applies the same agile principles to itself that it leverages in improvement and transformation projects.
The discipline of BPM 4.0 becomes the value switch for the digital age, enabling fast results at minimal risk through appropriate use of digital opportunities.