BPM can go far beyond modelling, standardising and improving processes. A holistic approach to BPM puts the process at the centre of how we connect strategy, people, systems, compliance, quality and more. With this kind of understanding, BPM can prove itself as a management approach to align and act on strategy. This post compiles some key principles that are foundational to such an understanding. This is not a complete picture, but will hopefully provide some useful ideas on how to expand the application of BPM. Some principles are rudimentary, others cover a lot of ground, some of these will be the topic of future posts.
A process transforms input into value-adding output
A process transforms input from a supplier into output that will be used by the customer. This is reflected in the acronym widely known in six-sigma: ‘SIPOC’. The output produced by one organisation becomes the input of the next organisation.
Input could be raw materials, personnel, tools and materials, information etc. Outputs are the products, services and information that are used by the customer as raw materials and so on.
The cost and effort going into processing inputs is only worthwhile if the value that has been added from input to output is something the customer is willing to pay for – plus a margin.
Processes drive operational and strategic performance
The value a process adds to the input when producing the output is the value of that output to the customer and this can be called as the effectiveness of the process. This is primarily about doing the right thing, i.e. delivering the optimal output to the customer with the right specifications, service-level, price etc.
Effectiveness is one of 4 ‘Es’: Economy, Efficiency, Effectivenes and ESG.
- Economy is the cost at which I can procure the inputs – the lower the better as long as I can still be effective
- Efficiency is ratio output / input, i.e. how much output can produce with how little output – this is about doing things right, how well we work
- Effectiveness is the value of the output to the customer – the focus is on doing the right thing
- ESG covers sustainability and ethical aspects of the process in the dimensions environment, social aspects and governance
Using a balanced scorecard, process performance can be mapped to customer and financial performance to visualise the impact of processes on strategic goals and objectives. A simpler but useful approach is to simply visualise on the organisations process map which process drives which goals and objectives.
The value of the process output is the degree to which it benefits the performance of the customer process
We have already defined the effectiveness of a process as the value of the output to the customer. Here we take a closer look at the value to the customer. The value of an output to the customer is the degree to which the output serves to improve the customer’s process performance (i.e. the customer’s 4 Es).
If a tool is longer-lasting it will improve the efficiency of the process. If a surface treatment a company provides is harder wearing, this will improve the effectiveness. A useful way of thinking here is in term of output, outcome and benefit. The output may be a laser tool to cut steel plates. The outcome is that the customer buying the laser tool can cut steel plates in shapes with much finer detail with less errors. The benefit is that the customer can provide new and better products to its own customer with less waste (therefore improving both effectiveness and efficiency).
If the performance improvement enabled by an output is difficult to imitate or substitute, this becomes a distinctive competence that gives the organisation a strong position towards the customer and can leveraged as a competitive advantage.
Processes drive the economy by providing value adding output across the value chain
As organisations across the value chain process inputs to deliver value adding outputs, the cumulative value increases. Within national boundaries this overall output can be measured as GDP.
Processes run in the context of the external environment that poses threats and opportunities
STEEPL is an acronym that represents a framework to analyse the far external environment. The letters relate to social, technological, environmental, economical, political and legal factors that influence how an organisation can operate, i.e. how its processes can run. These factors may represent threats (e.g. stronger data protection laws, make it more difficult to run digital marketing campaigns) or opportunities (e.g. digital technologies make it possible to provide services globally). Influences from the far environment are generally difficult and slow to change (without strong lobbying) and processes must be adapted to comply with these constraints.
The supplier market and the customer market indicated left and right of the diagram above, but also the job market, represent the near external environment with which the organisation needs to interact. A useful analysis tool for initial high-level insights is Porter’s five forces.
The opportunities and threats from the near and far external environments are the first two quadrants of a SWOT analysis.
Processes manifest the organization’s strengths and weaknesses that interact with the external environment
The analysis of threats and opportunities refer to the external dimension of the SWOT analysis. These interact with the internal strengths and weaknesses which relate to the internal dimensions of the SWOT in the quadrants ‘O’ and ‘T’.
The strengths and weaknesses of an organisation can best be identified in the process. A common tool for this is a value chain analysis. It is possible to search strengths and weaknesses in other views of the organisation such as the organisation, infrastructure, leadership etc. But if these do not manifest in the process, they are not really relevant. Process performance represents what we are able to do (effectiveness) and how well we are able to do it (efficiency) and these aspects can be mapped to strategic goals. If a weakness or a strength does not manifest in the process, it does not impact the organisations performance. Taking a process view on strengths and weaknesses is a useful perspective to identify strengths and weaknesses that are relevant to the SWOT analysis.
The configuration of the processes defines the strategic positioning and differentiation of an organisation
Porter (1985) suggests that the strategic position of an organisation depends on the configuration of its activities (i.e. its processes). Looking at the diagram above, we can see that the processes are naturally distinctive between different industries. The art of strategic positioning, is to configure processes so that they are distinct within the industry and they therefore differentiate the organisation from competitors. This avoids doing more of the same and competing on price.
For example with the advent of budget airlines, Ryan Air did away with expensive customer loyalty programs and catering services and changed the processes at the boarding gates to radically reduce airplane turn-around times. This provided a distinct offering that was appreciated by many consumers. Premium airlines have not been able to replicate this position as all processes need to be configured cohesively towards this way of working to be effective, from the recruiting of the board crew to longer-lasting snacks against extra pay.
Processes can be viewed as a hierarchy
There are different ways of defining hierarchical layers for the view on an organisation’s processes, and this is one example. Level 0 is the organisation in the context of the near and far external environment. Level 1 is the value chain of the organisation. Level 1 can be extended to include activities of more than one organisation if customers and suppliers collaborate to strengthen the overall value chain. Level 0 and Level 1 are the levels of strategy analysis and formulation with each process in the value chain being assigned to strategic goals.
Level 2 is the individual end-to-end process. An end-to-end process starts with an external customer demand (e.g. a new tool), ends with the fulfillment of that demand (the tool is delivered, installed and operational) and fully processes the related object (e.g. customer order). Level 2 processes need to be managed and improved holistically.
Level 3 is a way of breaking down and end-to-end process to get a better overview. In some cases it is convenient to add levels if the end-to-end process is long or complex.
Level 4 is the task-level where the process hits the road. Users and machines perform the actual work using systems, tools and other resources. Additional levels could be added for sub-tasks, data structures etc.
The process view links strategy, organization, systems, resources
There is a significant distance between the strategic levels 0 and 1 and level 4 where the work is done. This gap may be visible in the organisational culture whether senior management does its gemba walks and interacts with workers or recedes to office desks and board rooms. The process view helps visualise, discuss and manage the link between strategy, performance, tasks, people and resources.
Processes must be improved holistically and end-to-end
Level 0 and 1 are about strategy analysis and formulation, i.e. about doing the right thing.
Level 2 is about strategy implementation and operational improvement, i.e. doing it right. Proven improvement methodologies such as lean or six-sigma tend to focus on level 3 and 4, as this is where people can continuously improve the way they work. This is not wrong, but carries the risk that a measurable and impressive improvement is an improvement within a task or a sub-process, but does not contribute to or even hinders overall value creation.
The dimension for assessing and prioritising process improvements should be the end-to-end process. An end-to-end process
- starts with the need of an external stakeholder and ends with the fulfillment of that need
- Completes the processing of an object such as a customer order, a purchasing order or a job vacancy
- Runs across functions
- Has a process owner
A holistic view of the process includes not just the tasks but the people how execute the tasks, the tools and systems they use, safety and ethical considerations etc. A process improvements therefore needs to include the motivation and enablement of people, leadership, management of resources etc. to be sustainable.
The management process design and manage the value chain- The support processes provide resources to the value chain
The focus so far has been on the value chain of the organisation. This does not run independently, but needs resources and needs to be managed.
The management process defines the strategic purpose and initial design of the value chain and allocates authority and resources. The design of the management process is discussed in this blog-post.
Support processes provide the resources (e.g. qualified personnel, infrastructure, IT-Systems) and information (e.g. controlling) required to run and manage the value chain.
As mentioned in the introduction, these elaborations are neither complete nor detailed, but hopefully there are points that help to position BPM as a as a management discipline that actively involves all levels of the organisation from strategy formulation over strategy implementation all the way to daily task execution and continuous improvement. BPM can provide the view, the thinking and the methodology needed to achieve this degree of alignment between intent and action.