Michael Hammer ESD Faculty Seminar March 2005 Enterprise Engineering with Processes or In the Footsteps of Monty Python © 2005 Hammer and Company. All

Michael HammerESD Faculty SeminarMarch 2005

Enterprise Engineering with Processes

or

In the Footsteps of Monty Python

© 2005 Hammer and Company. All rights reserved. MIT ESD.38J-Faculty 3/05

© 2005 Hammer and Company. All rights reserved. MIT EDS.38J-Faculty 3/05

1-2

Some Interesting Results

Oil company: filling orders

cycle time reduced by 75%, cost reduced 45%, customer satisfaction increased 100%

Trucking firm: sales

RFP cycle time reduced 95%, win rate increased 70%

Consumer packaged goods: product deployment

lead time reduced 50%, inventory reduced 25%, backorders decreased 50%

Auto insurer: claims handling

cycle time reduced 90%

Computer firm: product development

time to market reduced 75%, development costs reduced 40%, customer satisfaction increased 25%

Electric utility: new connections

cycle time reduced 90%, personnel required reduced 70%

What makes them even more interestingWhat makes them even more interesting


1-3

The Underlying Theme: Process

Concept: end-to-end workas opposed to piecemeal work

Definition: an organized group of related tasks that work together to create a result of valuetransformation of inputs into outputsstructured purposeful work

Some common processesorder fulfillment order acquisitionprocurement demand creationproduct development plan to produce

Themescross-functionaloutcome-focusedcontext for activitieswork, not structuretasks, not peoplesmall in number

The realityprocesses are present but unrecognized in every enterprisereversing a 200 year legacy


1-4

The Classical Organization

Designers: Smith, Taylor, Ford

Capabilities: control, planning, scalability

Environment: stability and growth

Designers: Smith, Taylor, Ford

Capabilities: control, planning, scalability

Environment: stability and growth


1-5

The Old Way

CSR Line tester Field service technician

Dispatcher


1-6

Customer Service as a Process

CCA Zone technician


1-7

The Old Way

Sales Engineering

ManufacturingTooling


1-8

Sample Development as a Process

Sales andEngineering

ManufacturingToolingEngineering


1-9

The Process Approach to Performance Improvement

Identify the enterprise’s processes

a business model in process terms, driven by strategic goals

Measure process performance

and set design goals

Create high-performance process designs

specifying precisely how tasks fit together

replacing inherited default designs

Implement new process designs

after suitable testing

including supporting training, infrastructure, and technology

Improve process performance

on an ongoing basis

Improved performance through improved design


1-10

The Process Lifecycle

Understand sourceof performance gap

Develop intervention plan

Set performancetarget

Measure processperformance

Understandcustomer needsand benchmarkcompetitors

Ensure process compliance

Improve execution

Improve design

Modifydesign

Replacedesign

Design, document, and implement process


1-11

The Dimensions of Process Design

What tasks are to be performed

Who performs which tasks

When tasks are performed

Whether tasks are performed

Where tasks are performed

What information tasks employ

With what precision tasksare performed


1-12

Repeatabilityformal design

Improvabilitycontext and process Adaptability a handle for change

Accountabilityownership

Manageabilitymeasures and comprehensibility

Flexibilityseparation of work and resources

Process Ilities


1-13

Representations of a Process Control flow

effective for time-oriented changes

Information flow

effective for information-based simplification


1-14

The Old Way

P/OPurchasing Vendor

Payables Receiving

I

$

P/O goods


1-15

The New Way

P/OPurchasing Vendor

Payables Receiving

$ goods

notification


1-16

Representations of an Enterprise Organization chart

who we are

P and L statement

how much we make

Balance sheet

what we own

Product catalog

what we sell

Customer list

whom we serve

Mission statement

what we aspire to


1-17

TI Semiconductor Business Process Model Customer Communication

Market

Strategy Development

Product Development

CustomerDesign

andSupport

Order Fulfillment

Enablers

Manufacturing Capability Development

Concept Formulation

Product Development

Manufacturing

Customer

Source: Texas Instruments(Reprinted with permission) © 1992 Texas Instruments Inc. All rights reserved.


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Desiderata of a Process Model

Simple

Customer-centric

Natural

Holistic

Precise

Comprehensive and all-encompassing

Non-hierarchical and non-organizational

Processes, not functions

Stable, non-product-dependent


1-19

An Organizational Model (But Not an Organizational Chart)

Owner

Owner

Owner

Coach Coach Coach Coach

C

U

S

T

O

M

E

R

S

Centers of Excellence

Processes


1-20

Metricsprocessed-based performance measures

Information systemsintegrated systems to support process work Facilities work spaces to reinforce team work and process flow

Human resource systemsjob descriptions, career models, and compensation systems designed for process performers

Management systemsbudgeting, planning, and financial systems focused on processes Cultureattitudes and values of teamwork, customer concern, and personal responsibility

Integration mechanisms for ensuring that processes work together as well as individually

Aligning with Processes


1-21

System simplicity

vs. component

complexity

The Tradeoff

Documents

Michael Hammer ESD Faculty Seminar March 2005 Enterprise Engineering with Processes or In the Footsteps of Monty Python © 2005 Hammer and Company. All