Business Process Management for Enterprises

Ing. Antonio Caforio

Centro Cultura Innovativa d’Impresa

Università del Salento

antonio.caforio@unisalento.it

Business Motivation

Ends

What an enterprise wants to be

End Vision

Goal

“Be the premier software services

provider for SMEs”

“20% increase in market share in the

next 3 years”

Business Motivation

Means

What an enterprise has decided to do in order to achieve an End

Mean Mission

Strategy

What is Mission

A Mission should consist of

An action (i.e “provide”, “make”, “deliver”, …)

A product or service (i.e. “aircraft engine components”, “pizza”, …)

A market or customer segment (i.e. “airlines”, “city-wide customers”, …)

Mission Vision makes operative

A Mission or a Value Proposition

“Provide pizza of good quality quickly at home to all customers

in the neighbourhood”

What is Strategy

A Strategy is

an approach accepted and pursued by an enterprise to achieve its goals, given the environmental constraints and risks

Strategy Goal directs efforts

towards

What is Strategy

“The essence of strategy is choosing to perform the activities differently than rivals do” M. Porter

What is Strategy

“The essence of strategy is choosing to perform the activities differently than rivals do” M. Porter

Southwest Airlines

Activity Map

Taken from : M. E. Porter; “What is Strategy?”; Harvard Business Review, Nov-Dec 1996

Strategy Types

• Ryanair

• Eurospin

Cost Leadership

• Apple

• 3M

Differentiation

Niche Specialization

Porter’s Competitive Strategies

What is Goal

A Goal is

a statement about a future state or condition of the enterprise that is desirable to be achieved through appropriate Means

Strategy Goal directs efforts

towards

How to define Goals

The Balanced Scorecard (BSC) Approach

Ritaglia e disponi

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

“If we succeed, how will we look to our shareholders?”

“To achieve our vision, how must we

look to our customers?”

“To satisfy our customers, which processes must we excel at?”

“To achieve our vision, how must our

organization learn and improve?”

How to define Goals

BSC Dimensions

Ritaglia e disponi

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

• Productivity Strategy

• Revenue Growth Strategy

How to define Goals

BSC Dimensions

Ritaglia e disponi

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

• Productivity Strategy

• Revenue Growth Strategy

• Customer satisfaction

• Customer retention

• Customer acquisition

• Customer profitability

• Market share

• Account share

How to define Goals

BSC Dimensions

Ritaglia e disponi

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

• Productivity Strategy

• Revenue Growth Strategy

• Customer satisfaction

• Customer retention

• Customer acquisition

• Customer profitability

• Market share

• Account share

• Operations management processes

• Customer management processes

• Innovation processes

• Regulatory and social processes

How to define Goals

BSC Dimensions

Ritaglia e disponi

Financial Perspective

Customer Perspective

Internal Perspective

Learning & Growth

Perspective

• Productivity Strategy

• Revenue Growth Strategy

• Customer satisfaction

• Customer retention

• Customer acquisition

• Customer profitability

• Market share

• Account share

• Operations management processes

• Customer management processes

• Innovation processes

• Regulatory and social processes

• Human Capital

• Information Capital

• Organizational Capital

Value Proposition and Goals

Strategy Types and the BSC Customer Perspective

Source: R. S. Kaplan, D. P. Norton; “Strategy Maps: Converting Intangible Assets into Tangible Outcomes”; Harvard Business Press, 2004

Strategy Maps

Source: R. S. Kaplan, D. P. Norton; “Strategy Maps: Converting Intangible Assets into Tangible

Outcomes”; Harvard Business Press, 2004

Strategy Maps

Low Cost Airline Example

Source:

R. S. Kaplan, D. P. Norton;

“Strategy Maps:

Converting Intangible

Assets into Tangible

Outcomes”; Harvard

Business Press, 2004

The path from Vision and Mission

Vision

Mission Strategy

Strategy Map

Balanced Scorecard

…

Means towards Ends

MeanMission

Strategy

EndVision

Goal

…

Means towards Ends

MeanMission

Strategy

EndVision

Goal

Business Processes

realized by

What is a Process

“a sequence of steps performed for a given purpose”

(IEEE)

“the logical organization of people, materials, energy, equipment, and procedures into work

activities designed to produce a specified end result”

(Pall, Quality Process Management, 1987)

“a structured, measured set of activities designed to produce a specific output for a

particular customer or market. It implies a strong emphasis on how work is done within an

organization, in contrast to a product focus’s emphasis on what. A process is thus a

specific ordering of work activities across time and space, with a beginning and an end,

and clearly defined inputs and outputs: a structure for action. ... Taking a process approach

implies adopting the customer’s point of view. Processes are the structure by which an

organization does what is necessary to produce value for its customers”

(Davenport ,1993)

“a collection of activities that takes one or more kinds of input and creates an output that is

of value to the customer”

(Hammer & Champy’s ,1993)

Types of Processes

Deliver Products

Manufacture Products

Manage Orders

Develop New

Products

Core

Processes

Develop Strategy

Evaluate Enterprise

Performance

Maintain Policies

Management

Processes

Develop HR

Develop IT Systems

Maintain Facilities

Support

Processes

The Value Chain Concept

A Value Chain is

a comprehensive collection of all of the activities that are performed to design, produce, market, deliver, and support a product line.

Va

lue

Ch

ain

Management Processes

Core Processes

Support Processes

Administer Contracts

Create New Products

Manage Programs

Ensure

Customer

Satisfaction

Produce Products Deliver Products

Provide HR

Provide Information

Systems & Services Manage Facilities

Process Architecture

Level 3

Level 2

Level 1

VC Value Chain

Business Process 1

Business Process 2

Business Process 3

Process 3.1

Process 3.2

Sub-Process

3.2.1

Sub-Process

3.2.2

Sub-Process

3.2.3

Business Process 4

Process 4.1

Process 4.2

A Process Architecture is

a hierarchical decomposition of the processes that are contained in a value chain.

Level 3

Level 2

Level 1

VC ValueChain

Business Process 1

Business Process 2

Business Process 3

Process3.1

Process3.2

Sub-Process

3.2.1

Sub-Process

3.2.2

Sub-Process

3.2.3

Business Process 4

Process4.1

Process4.2

How to create a Process Architecture

Reference Frameworks

KPIs

Reference Process Architecture

An Example

from Standards:

APQC

(www.apqc.org)

Building Process Architectures

x.0 Category

x.x Process Group

•x.x.x Process

•x.x.x.x Activity

Building Process Architectures

2.0 Develop and Manage Products

and Services

• 2.2 Develop products and services

• 2.2.1 Design, build, and evaluate products and services

• 2.2.1.1 Assign resources to product/service project

• …

• 2.2.1.3 Develop product/service design specifications

• …

• 2.2.1.6 Build prototypes

• …

• 2.2.2 Test market for new or revised products and services

• 2.2.3 Prepare for production

3.0 Market and Sell Products and Services

• 3.1 Understand markets, customers, and capabilities

• 3.1.1 Perform customer and market intelligence analysis

• 3.1.1.1 Conduct customer and market research

• …

• 3.1.2 Evaluate and prioritize market opportunities

• 3.2 Develop marketing strategy

• 3.3 Develop sales strategy

• 3.4 Develop and manage marketing plans

• 3.5 Develop and manage sales plans

4.0 Deliver Products and Services

• 4.1 Plan for and acquire necessary resources (SCP)

• 4.2 Procure materials and services

• 4.3 Produce / Manufacture / Deliver product

• 4.3.1 Schedule production

• 4.3.2 Produce product

• …

10.0 Manage Environmental Health

and Safety (EHS)

• 10.1 Determine environmental health and safety impacts

• 10.2 Develop and execute EHS program

• 10.3 Train and educate employees

• 10.4 Monitor and manage EHS management program

• 10.5 Ensure compliance with regulations

• …

Building Process Architectures

2.0 Develop and Manage Products and Services

2.2 Develop products and services

• 2.2.1 Design, build, and evaluate products and services

• 2.2.1.1 Assign resources to product/service project

• …

• 2.2.1.3 Develop product/service design specifications

• …

• 2.2.1.6 Build prototypes

• …

• 2.2.2 Test market for new or revised products and services

• 2.2.3 Prepare for production

3.0 Market and Sell Products and Services

• 3.1 Understand markets, customers, and capabilities

• 3.1.1 Perform customer and market intelligence analysis

• 3.1.1.1 Conduct customer and market research

• …

• 3.1.2 Evaluate and prioritize market opportunities

• 3.2 Develop marketing strategy

• 3.3 Develop sales strategy

• 3.4 Develop and manage marketing plans

• 3.5 Develop and manage sales plans

4.0 Deliver Products and Services

• 4.1 Plan for and acquire necessary resources (SCP)

• 4.2 Procure materials and services

• 4.3 Produce / Manufacture / Deliver product

• 4.3.1 Schedule production

• 4.3.1.1 Generate line level plan

• 4.3.1.2 Generate detailed schedule

• 4.3.1.3 Schedule production orders and create lots

• 4.3.1.4 Release production orders and create lots

• 4.3.2 Produce product

• …

10.0 Manage Environmental Health

and Safety (EHS)

• 10.1 Determine environmental health and safety impacts

• 10.2 Develop and execute EHS program

• 10.3 Train and educate employees

• 10.4 Monitor and manage EHS management program

• 10.5 Ensure compliance with regulations (11184)

• …

Operations Management

Processes

Customer Management

Processes

Innovation Processes

Regulatory and Social Processes

Internal Perspective

Learning and Growth Perspective

Building Process Architectures

Information Capital

Organization Capital

Human Capital

Process Performance Measures

Process performance are measured through

Key Performance Indicators (KPI)

Process perfomance are measured against a Service Level

Service Level Agreement (SLA)

Efficiency

Quality Service

Percentage of Rejects Delivery on-time

Productivity

Process Performance Measures

Key Performance Indicators (KPI)

External KPI

– Throughput time, waiting time, service level

Poor performances cause loss of money!!!

Internal KPI

– Rate of resource utilization, number of cases, cost of resources

Good performances can be expensive!!!

PPM from frameworks

Performance Attribute Level 1 Metric

Supply Chain Delivery Reliability Delivery Performance

Perfect Order Fulfillment

Supply Chain Responsiveness Order Fulfilllment Lead Times

Supply Chain Costs Cost of Goods Sold

Total SC Management Costs

SCOR Framework

Process Name Metric

2.1 Manage product and service portfolio Total cost to generate new product/service ideas per

$1,000 revenue

Total R&D cost per business entity employee for the

current reporting period

2.2 Develop products and services Average time-to-market in days for new

product/service development projects

Number of FTEs who develop and manage products

and services per $1 billion revenue

APQC Framework

Key Performance Indicators

Auto Transportation example

Type KPI Metric

Efficiency

Trucks Utilization Hours Utilized /

Hours Available

Routing Efficiency KMs with load /

KMs travelled

…

Quality

Wrong Delivery Wrong Deliveries /

Total Deliveries

Damages Total number of

damages

…

Service Delivery Time Average DT

Delivery on time Pct Dot

Process Management

Plan

Work

Execute

Work

Monitor & Control

Work

Set Goals

Establish Process

Define Plans, Resources

Determine Budget

Gather Information

Monitor Processes

Develop Forecasts

Take Preventive/Corrective Actions

Use

Inputs

to

Produce

Outputs

Processes and the Organizational Chart

Management

Engineering Production Marketing Sales

Value Chain

Develop New Product

Build Product

Sell Product

Source: P. Harmon; “Business Process Change: A Guide for Business Managers and BPM and

Six Sigma Professionals”; MK Press, 2007

Quality Standards

UNI EN ISO 9001:2008

Principles of Quality Management

Customer orientation

Leadership

Personnel Involvement

Process Orientation

Systemic approach to management

Continuous improvement

Facts-based Decisions

Beneficial interrelationships with suppliers

UNI EN ISO 9001:2008

Product Realization

Management

Responsibility

Measures,

Analysis and

Improvement

Resource

Management

Cu

sto

mer

Req

uir

em

en

ts

Process

Classification

Primary Processes

Secondary Processes

Cu

sto

mer

Sati

sfa

cti

on

Continuous improvement of the QMS

input

output

Information

Flow

Quality Standards

Product

Information Flow

References

APQC.org; “APQC Process Classification Framework 6”, http://www.apqc.org/process-classification-framework - last accessed on October 2013

G. Bracchi, C. Francalanci, G. Motta; “Sistemi informativi e aziende in rete”; McGraw Hill Italia, 2001

M. E. Porter; “Competitive Advantage: Creating and Sustaining Superior Performances”; The Free Press,1985

M. E. Porter; “What is Strategy?”; Harvard Business Review, Nov-Dec 1996

R. S. Kaplan, D. P. Norton; “Strategy Maps: Converting Intangible Assets into Tangible Outcomes”; Harvard Business Press, 2004

P. Harmon; “Business Process Change: A Guide for Business Managers and BPM and Six Sigma Professionals”; MK Press, 2007

Supply Chain Council; “SCOR Reference Framework”, http://supply-chain.org/scor - last accessed on October 2013

OMG Specification; “Business Motivation Model”; 2010

UNI EN ISO 9011:2008, International Standards Organization