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Managing the processes of a company is somewhat like an athletic competition, except that the stakes are so much higher. In a game, if you write the rules that everyone must play by, you have a great deal of control over the outcome of things. In business, individual processes are the way things like production or order fulfillment or reverse logistics get done. If you manage these processes, to a great extent you can control the outcome of things, such as increased productivity, greater efficiencies and lower costs. In business process management, 'Control the process' could well be the watchword. "Those companies that easily adapt and change the rules of their playing field will be more successful," says Janelle Hill, vice president and research practice lead for BPM at Meta Group.
No doubt, many companies have been aware of the benefits of business process management, or BPM, for years now. They may even have migrated to BPM from business process reengineering initiatives 10 or more years old. But many in management are considering BPM for the first time, and the reasons are clear, according to analysts, software developers and systems integrators: Pressures from competitors, Wall Street and an unforgiving economy have mandated that expenses be shaved wherever possible.
But like early adopters, newbies to BPM are learning that process management is not a one-time effort that optimizes a company form top to bottom, or a simple implementation of a plug-and-play piece of software; it's a never-ending quest for improvement across company departments and divisions. And they see in some cases that all company processes need to be examined, though experts recommend that such analysis and "what-if" modeling be done one process at a time.
Moreover, it has to be realized that processes that were considered optimal years ago might have been superseded by events, especially if a company alters its business model, strategy or markets in some way.
So where do you start? Opinions vary on whether you need outside help in process scrutiny. This view holds that, who knows your business and its processes better than you do? But many feel the sophisticated nature of process analysis may be over the heads of many company managers, especially when it comes to assessing the technology and solutions that may bring the hoped-for improvements.
In any event, a good starting point is to define a process's lifecycle by recognizing where it begins and ends, whether it has multiple functions or touches several departments or companies. If it crosses several functional boundaries, the process usually crosses a lot of software boundaries as well.
Can you better manage a process by throwing labor at it? Probably not. Aside from the obvious undesirable of labor-added cost-so-called human capital is error-prone. The likelihood of "variability" in the process is increased. The goal is to employ a methodology and rigor that removes or at least lessens the deviation.
The evil in variability is in what Eric Austvold, research director of AMR Research, calls "margin leakage." The greater the variability in the process, the greater the opportunity to erode margins, he says. "When a customer places an order, your organization's ability to fulfill that order without any deviations from the original plan means you had an accurate understanding of what the customer truly wanted and the ability to manage the resources at your disposal to meet that customer's expectations. And the likelihood of your increasing that has a lot to do with removing variability in processes."
'Own' The Process
Business process management starts at home because it involves processes that are internal to a company, that it "owns." In the financial services industry, for instance, banks may look to improve their loan origination process. That service, depending on how well it is performed, may make that institution more attractive to potential customers than a competitor bank down the street, but the service itself is largely commoditized. In essence, the service, or "product" as banks call it, is the same from one institution to another: loans are loans. The way it is performed, internally, is the differentiator. The same is true in the insurance industry, which also has been an early adopter of BPM. Both industries are highly focused on the way they deliver customer service.
BPM doesn't necessarily end at home. Dell's direct-ship-to-customer process, for example, is anything but internal. It intimately involves trading partners, and customer anger falls directly on Dell if one of those partners fails to deliver a laptop within the promised timeframe. Consequently, Dell uses BPM technologies to manage that relationship, and that of "distressed" shipments-the returns process.
"In the leading organizations, you start to see more inter-company and cross-company boundary collaboration," Austvold confirms.
But you don't have to be at the helm of a major financial institution or computer company to adopt BPM. There seems to be no reason why any company, regardless of size or industry vertical, shouldn't re-examine its business processes, says Hill. "Overall we find almost every industry is really taking a closer look at how they actually conduct business with an eye toward streamlining and improving their operational execution."
The impetus can be due to regulation in a given industry, cost pressure or changing competitive landscape. "Globalization and opening up of markets in other parts of the world are contributing to businesses looking at how they do business, where they do business and what their business practices and processes are."
As outsourcing has gained prominence, a highly distributed global business challenge has arisen. Processes embedded in software that was state-of-the-art years ago may have been superseded and no longer optimal for dealing with far-flung operations. Austvold says they may need to be "functionally decomposed and reorchestrated or managed in a different relationship because in a lot of cases, they need to be managed across geographical boundaries."
Realizing that business is global and never stops is key to successful business process management, and is in part what distinguishes BPM from its predecessor, business process reengineering, Hill says.
"Now there's recognition that business is global, it's running 24 hours a day, that business cycles are shorter and constantly accelerating. There is no one best way of doing things that's going to be really durable. There is more focus now on continuously changing and improving as opposed to a one-time wholesale reengineering; you know-'If we just get it right this one time, it will hold us for about 20 years.' It's more a matter of the ability to constantly adapt. How you do business will become the real source of competitive differentiation."
|"It's the ability to constantly adapt. How you do business will become the real source of competitive differentiation."|
- Janelle Hill of the Meta Group
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