Lesson 3: Business Process Management (PDF)

1 Lesson 3 Business Process Management from input to output … what else? ing. Massimiliano Oleotto 2 Learning Objectives...

1 Lesson 3 Business Process Management from input to output … what else? ing. Massimiliano Oleotto 2 Learning Objectives Q1. Why do business professionals need to know BPM? Q2. What is a Business Process? Q3. What is the link between IS and Business Process? Q4. When a Business Process is good? Q5. What is BPM? Q6. How can a business process be improved? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 3 Exam Question – text When a Business Process can be good? 1. When value flows through it 2. When it’s structured 3. When it’s clearly identified 4. When its objective is unique Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q1. Why do business professionals need to know BPM? 4 In 2024 every company organizes people work in Business Processes – even if the company organization is still “by function” and not “by process” You can have a better understand of “the whole picture” of your organization One day in the not distant future maybe you’ll be responsible for a Business Process, i.e. a process owner Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q1. Why do business professionals need to know BPM? 5 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 6 Learning Objectives – Recap 1 Q1. Why do business professionals need to know BPM? companies arrange people work using Business Processes, alias BP functioning the better understand of “the whole picture” of a company maybe you’ll be a process owner (!) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 7 Here, we have to understand three things: what is a Process? what is a Process in a business context? what are the definite elements that characterize a Business Process? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 8 A Process is not… a court process, of course (!) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 9 1st thing → a Process is every transformation that takes place when some inputs become some outputs adding value without value you process don't have Adding value means that 1+1=3 and not that 1+1=2 (!) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 10 Q O Output has more value than input because it is more useful than input to... the user who will use it We have to In a business context that user is … a customer (!) extend the process because we have And it doesn’t matter if he/she is inside or outside your company to consider 5 and Customer t value trough the process Porter usefullness of the product at the end there is the profit Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 11 2nd thing → a Process in a business context is a Process in which: the inputs are Resources the transformation is a set of Performances the outputs are Products ② A-Performance is an activity that has a (planned) objective and produces an (actual) result => = Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 12 It was a Management guru who “replaced” activity with performance in a business context → in 1954 Peter Drucker conceived the MBO The key element of a performance is the objective ↓ It's inside WHEN SCOPE You are able It can be MUSTBE - some ACHIVIED GOALS to discribeit reached major - Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto objectives OBJ  Q2. What is a Business Process? 13 An objective is a desired goal an organization has decided to pursue When pursuing it, there are two ways to consider: effectiveness → actual outputs / planned outputs efficiency → (actual) outputs / (actual) inputs Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 14 3nd thing → a Business Process is characterized by these definite elements: it groups related Performances GROUPING it has definite boundaries it has a procedure that specifies the way in which each Performance must be executed by actors Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 15 Related Performances can be grouped using a criterion → if you I CAN GROUP PERFORMANCES group the performances using Value Chain, PDCA and Implementation Level as criteria, you obtain a collection of 00 Business Processes called Extended ERP NO SOFTWARE BUT 20 : As a result of grouping Related Performances you have: a Process Map both Processes and Sub- Processes Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 16 Business processes have three characteristics in Extended ERP: → the 1st one is location in Value Chain Company Model Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 17 IT'S AN ACTIVITY MODEL Business processes have three characteristics in Extended ERP: → the 2nd one is location in PDCA DIVEDES IN 4 PROCESSES Anthony Strategic D PDCA performance IS Triangle Decision suport system Governing company D Strategic DSS (Acting) decisions Tactical Manag inf Sys. Tactical Planning and resources. & MIS (Managerial) Controlling management Transactions Processing Operational Executing everyday Systems A Operational TPS (Doing) activities transactions Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 18 Business processes have three characteristics in Extended ERP: → the 3rd one is implementation level PROCESSES : · INVENT. BEST practice Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 19 The definite boundaries of a Business Process may not fall within a business function → processes are “transversal” to functions The scope is efficiency because : to satisfy the customer Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 20 You can have innovative process-based organization beside traditional function-based organization not se are Reper Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 21 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q2. What is a Business Process? 22 A procedure is: a set of instructions which must be followed by an actor – generally people to execute each performance of course … managing Information with an IS Process Procedure Action link Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  23 Learning Objectives – Recap 2 Q2. What is a Business Process? DVALUE a Process is every transformation that takes place when some inputs become some outputs adding value: 1+1=3 (!) 2) PERFORMANCE in a business context: inputs are Resources, transformations are Performances, and outputs are Products ③ GROUPING BOUNDARIES a BP has 3 more elements: grouping of related performances, PROCEDURES boundaries among functions, and procedures explaining how performances must be executed … using an IS Extended ERP is the collection of BP using Value Chain, PDCA and Implementation Level (Best Practice) criteria Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q3. What is the link between IS and Business Process? 24 IS is a system that uses IT to support the execution of Business Processes by managing Information So, the link between Business Processes and IS is … Information INFORMATION BUSINESS INFORMATION SYSTEM PROCESS Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q3. What is the link between IS and Business Process? 25 It is possible to break down a IS and its Business Process interaction in components using Information as the link between them → A Role is a subset of Performances in a Business Process executed by a particular actor today IS Business Process IT Information Roles HW SW Data Procedure People Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q3. What is the link between IS and Business Process? 26 Yesterday we did not have Computers, and tomorrow we will not have … people (!) people and paper yesterday IS Business Process IS Roles Information Roles People Procedure Data Procedure People tomorrow IS Business Process IT Information Automated Roles ↓ - HW SW Data SW HW Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q3. What is the link between IS and Business Process? 27 We can truly understand why we use the Five- Components Framework for explaining an IS Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q3. What is the link between IS and Business Process? 28 Topic Lesson IT 1 IS Data Processing 2 BPM 3 Business Process Man. So… here it is the BIG PICTURES from Lesson 1 to Lesson 3 (!) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 29 Learning Objectives – Recap 3 Q3. What is the link between IS and Business Process? the link between IS and BP is Information an IS can be explained with the Five-Components Framework: HW and people are actors, SW and Procedures are instructions, and Data is the bridge between computers and humans Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 30 Knowing what a Business Process is, you can recognize when a Business Process is good: value → value flows through Business Process, so Business Processes must work together performances → choose objectives and measures elements → keep Structured and Dynamic Business Processes distinct IS → don’t confuse Business Process and IS Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 31 1 THE VALUE YOU HAVE TO IDENTIFY IT You can “see” how the value flows through the company using Value Stream Mapping → with it you can highlight what is good, what needs to be changed and what needs to be eliminated Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 32 Objectives must be appropriate for strategy and communicated to the people Every objective must have a measure – it is called metric or KPI A BUSINESS PROCESS IS GOOD IF WE HAVE A DASHBORD Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 33 Structured and Dynamic Business Processes are related to stability of flow → it means that a Business Process can be repeated with few or no differences Easily suported by an is Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 34 First comes the BP and then the is We know that a IS supports Business Processes, not leads them However, today IS is playing an essential role in Business Processes, so they can be used to improve them A survey carried out in 2019 by an ERP vendor to manufacturing and distribution companies revealed that after implementation, 49% of companies said they improved all business processes, and only 5% said they did not improve them. So, we can say that ERP led to business process improvement for 95% of companies. Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 35 It’s true, an IS can be used to improve a Business Process but... it can also hinder it (!) This takes place when there are information silos In a functional structure every Every is is called SILOS function has its own is Information silos exist when there are isolated IS, and this happens when they are designed for a functional purpose So, different functional departments have its own IS → they have a “silo mentality” This can be cost efficient but brings to the interruption of Data flow among activities Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 36 STAGES OF IS EVOLUTION IN A COMPANY Stage 1: Stage 2: Stage 3: Stage 4: Stable Multiple Semi- Integrated Extended dysfunction functional enterprise enterprise enterprise Historical Reactive Reactive Proactive Strategic Efficient Effective Driver ITALY 2024 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 37 Information silos may suggest you that Business Processes do not exist in some companies → nothing could be more wrong Business Processes exist in all companies regardless of whether they have been identified or formalized (!) Until then, however, they remain black boxes → that’s why identifying and formalizing Business Processes leads to Process Transparency Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 38 sequential customer order request Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 39 THE BEST parallel customer ↓ order request DEPEND ON THE OBJ. Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q4. When a Business Process is good? 40 Which of the two examples is the best? It depends on... what the objectives of the process are (!) sequential parallel Variable → it can be the Fixed → standard Lead Time sum of the three response response time times Flexible → with 3 “no” you Rigid → 1 “no” is enough could have the CO Outcome to have the CO rejection acceptance (Sales Dept overrule) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 41 Learning Objectives – Recap 4 Q4. When a Business Process is good? value must always flows through BP objectives must be measured by KPI unlike Dynamic Process, a Structured Process is more easily supported by IS because of its standard IS can support and improve BP – but also hinder it (Information silo) BPM BPs exist in all organizations regardless they have been identified or formalized – but it’s important to identify and formalize them (Transparency) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 42 Business Process Management is a management discipline that integrates the strategy and goals of an organization with the expectations and needs of customers by focusing on end‐to‐end processes. BPM comprises strategies, goals, culture, organizational structures, roles, policies, methodologies, and IT tools to (a) analyze, design, implement, control, and continuously improve end‐to‐end of common body processes, and (b) to establish process governance [ABPMP CBOK] language → BPM is the discipline that translates Strategy into actions by analyzing, implementing, governing and improving (good) Business Processes Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 43 improve analyze govern implement Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 44 BPM Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 45 What are the benefits of BPM? Business Processes → it deletes the sub- optimization thanks to the better understanding of “the whole picture” Management → since all activities are performances, it deletes non adding-value activities customers → it enhances customer satisfaction Strategy → it leads to continuous improvement Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 46 Sub-optimization is the best solution from a department point of view but not from a company point of view With sub-optimization every department works only on its own and only for its own success → BPM aims to eliminate this Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 47 Are there activities that are non adding-value activities in a business context? Yes, there are … they are called waste → by integrating Lean Management, BPM aims to eliminate this Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 48 Using BPM means a higher customer satisfaction because: it helps to meet customer expectations it increases the quality of the products it opens the possibility to reduce prices (through cost reduction) Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 49 Using BPM means a process improvement and this improvement can be continuous Process improvement means that a process better achieves its objectives based on its measures LEAN MANAGEMENT TOOLS liter improvements min products defects lang term obj/short term Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto actions  Q5. What is BPM? 50 All we said may suggest that every company change can be reached with the BPM → nothing could be more wrong Company changes always require the involvement of people (!) Change Management can be used to help people make company changes Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q5. What is BPM? 51 Topic Abstract Lesson So… here it is what we “the whole picture” are going to do in the BPM Analysis 4-5 on a ERP System next 7 lessons (!) ERP System BPM Implementation 6-7 implementation how to manage an BPM Governance 8 ERP System extend IS beyond BPM Improvement 9-10 ERP System Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 52 Learning Objectives – Recap 5 Q5. What is BPM? Business Process Management, alias BPM, is the discipline that translates Strategy into actions by analyzing, implementing, governing and improving (good) Business Processes it has some benefits: it deletes sub-optimization and waste, it increases customer satisfaction, it leads to continuous improvement it helps organization in change things – but to really change them, Change Management is needed Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q6. How can a Business Process be improved? 53 There are various approaches used to improve a Business Process … we already know it But they all have one thing in common → the two possible way you can do it In a nutshell: do the improvement with a single fast jump? or do it with many small slow steps? Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q6. How can a Business Process be improved? 54 Business process re-engineering BPR does the improvement with a single fast jump The improvement is: fundamental → it rethinks the process from the ground up innovative → it doesn’t take the existing process into account decisive → it aims to one big improvement Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q6. How can a Business Process be improved? 55 Continuous Process Improvement CPI does the improvement with many small slow steps The improvement is: incremental → it adjusts the process where it is needed conservative → it improves the existing process persistent → it aims to many small improvements Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto  Q6. How can a Business Process be improved? 56 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 57 Learning Objectives – Recap 6 Q6. How can a business process be improved? there are many approaches to improve a BP they all have one thing in common, i.e. the two possible way you can do it Business Process Re-engineering do the improvement with a single fast jump, while Continuous Process Improvement do it with many small slow steps Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 58 Exam Question – text When a Business Process can be good? X 1. When value flows through it 2. When it’s structured 3. When it’s clearly identified NEEDS formalization 4. When its objective is unique no , it can have more Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto 59 References Course book: ❑ Earl McKinney Jr. David M. Kroenke – Processes, Systems, and Information, An Introduction to MIS – Chapters 1-2, 5, 12 Other books: ❑ Association of Business Process Management Professionals – BPM CBOK – Chapters 1-2 ❑ Massimiliano Oleotto – La mappa dei processi aziendali operativi nelle PMI, Come evitare di perdersi in azienda – Chapter 2 Organization and Information Systems | a.y. 2024-2025 | Diego Campagnolo – Massimiliano Oleotto