BPM1 Introduction to BPM PDF

BPM1. Introduction to BPM Prof. Dr. Jochen De Weerdt Lecture overview 1. The world of Business Process Management (BPM) 2. The BPM lifecycle 3. Process discovery: as-is process modelling Many of the slides in this presentation are based upon lecture material from W. van de...

BPM1. Introduction to BPM Prof. Dr. Jochen De Weerdt Lecture overview 1. The world of Business Process Management (BPM) 2. The BPM lifecycle 3. Process discovery: as-is process modelling Many of the slides in this presentation are based upon lecture material from W. van der Aalst 2 (TU/e), M. La Rosa (QUT), J. Mendling (WU Vienna), and M. Dumas (University of Tartu). Lecture material Dumas, M., La Rosa, M., Mendling, J., Reijers, H. (2018) Fundamentals of Business Process Management. Chapter 1 Chapter 2 Chapter 5 (Sections 5.1, 5.2, and 5.3) 3 1. The world of Business Process Management (BPM) 4 Business Process Management: What is it? Body of principles, methods and tools to design, analyze, execute and monitor business processes 5 Why BPM? “The first rule of any technology used in a business is that automation applied to an efficient operation will magnify the efficiency. The second is that automation applied to an inefficient operation will magnify the inefficiency.” 6 Why BPM? Information Yields Technology Business Value Enables Yields Process Change Index Group (1982) 7 How to engage in BPM? Continuous Process Improvement (CPI) Does not put into question the current process structure Seeks to identify issues and resolve them incrementally, one step at a time and one fix at a time Business Process Re-Engineering (BPR) Puts into question the fundamental assumptions and principles of the existing process structure Aims to achieve breakthrough, for example by removing costly tasks that do not directly add value 8 Our phenomena of interest: Business processes Collection of related events, activities and decisions, that involve a number of actors and objects, and that collectively lead to an outcome that is of value to an organization or its customers. Examples: Order-to-Cash Quote-to-Order Procure-to-Pay Application-to-Approval Fault-to-Resolution (Issue-to-Resolution) Claim-to-Settlement “If it does not make at least three people mad, it’s not a process.” Hammer and Stanton (1995) 9 “My washing machine doesn’t work…” Insurance Call Centre Company Technician Customer Customer Parts Service Store Dispatch Centre VALUE fault-to-resolution process 10 Processes and outcomes Every process leads to one or several outcomes, positive or negative Positive outcomes deliver value Negative outcomes reduce value Fault-to-resolution process outcomes: Fault repaired without technician intervention Fault repaired with minor technician intervention Fault repaired and fully covered by warranty Fault repaired and partly covered by warranty Fault repaired but not covered by warranty Fault not repaired (customer withdrew request) 11 What is a business process: Recap 12 The core elements of a process Activities active elements (e.g. ‘enter sales order’) time-consuming, resource-demanding state-changing Events passive elements (e.g. ‘sales order has been entered’) represent conditions / circumstances atomic, instantaneous 13 The core elements of a process Business Objects (or Data) the organizational artifacts that undergo state changes physical or electronic information examples: sales order, digital object, consulting proposal Actors (or Resources) the entities performing process activities and generating events human and systems examples: financial officer, warehouse clerk ERP, CRM, SAP, application X… 14 How do we combine these? 1. What needs be done and when? - Control flow 2. What do we need to work on? – Data 3. Who’s doing the work? - Resources (humans & systems) Finance ERP Invoice Report Invoice Department Enter Check no Invoice Invoice Post Invoice mismatches Invoice Details Mismatches Invoice received posted Invoice DB Invoice Senior Finance Officer mismatch Block exists Invoice Invoice blocked 15 Process perspectives Enter Invoice Check Invoice no Post Invoice mismatches Invoice Details Mismatches Invoice received posted Control flow perspective “what needs to be done and when” mismatch exists Block Invoice predecessor/successor relationship among activities and events Invoice blocked the central information depicted in a process model Data perspective “what do we need to work on” Invoice Report Invoice DB input/output data to activities complements the control flow Finance ERP Resource perspective Department “who’s doing the work” human participants and systems that perform Senior Finance Officer control flow activities and generate events complements the control flow 16 2. The BPM lifecycle 17 BPM lifecycle …design, analyze, execute and monitor business processes… Process identification Process Process architecture architecture Conformance Conformance and and Process As-is As-is process process performance performance insights insights discovery model model Process monitoring and Process controlling analysis Executable Executable Insights Insights on on process process weaknesses weaknesses and and model model their their impact impact Process Process implementation To-be To-be process process redesign model model 18 Process identification What? Identify an organization’s business processes Prioritize their management based on certain criteria Why? Understand the organization Maximize value of BPM initiatives 19 Process identification steps 1. Designation phase Enumerate main processes Process Architecture Determine process scope 2. Evaluation phase (a.k.a. process selection) Prioritize process based on Importance Health Prioritized Process Portfolio Feasibility After Davenport (1993) 20 Process Enumeration “Most businesses have just three core processes: 1. Sell stuff 2. Deliver stuff 3. Making sure you have stuff to sell and deliver” Geary Rummler 21 Porter: Types of processes Management Processes Customers / Stakeholders Suppliers / Partners Core Processes Support Processes 22 After Michael Porter (1985) Example: a wholesaler’s core, support and management processes Core processes Sales (lead-to-quote, quote-to-order, order-to-cash) Purchase-to-Pay (direct procurement, e.g. supplies replenishment) … Support processes Purchase-to-pay (indirect procurement, e.g. parts replenishment, operational resources replenishment…) HR (policies update, recruitment, induction, probation…) … Management processes Suppliers management (suppliers planning, suppliers acquisition…) Logistics management (logistics planning, logistics controlling…) … 23 Relations between core, support, and management processes Management processes Sign Contracts provide direction, rules and practices Establish Sourcing Plan Evaluate Vendors Procedure Vendors Process Core processes Fill Order Process generate value as they are directly linked to Receive Approve Deliver Fill Order external customers Order Order Order Reorder Supplies Support processes provide Stock Process Order resources to be used by other Supplies Supplies processes Receive Supplies 24 Example: wholesaler’s process architecture Strategic Management Logistics Suppliers Management Management Warehouse Demand Management Management Process Management processes group Direct Sales Distribution procurement Marketing Service Core processes Indirect Finance IT HR procurement Support processes 25 Example: insurance company’s process architecture Strategic Management Corporate Market Investor Development Development Relations Management processes Risk Assessment & Management Marketing & Sales Underwriting Policy Claims Management Servicing Management Payments Collection and Disbursement Assets Management Core processes Finance/ Legal/ Reinsurance IT HR Treasury Audit Support processes 26 Exercise: classify by process type These groups of processes are typically performed at a university. Categorize each process group as core, support or management Sport Indirect HR services procurement Strategic Teaching Management award courses IP Marketing Management Course Additional Management services mgt Language Admission IT training Market Teaching management professional courses 27 Solution: identify process types 28 Process scoping Processes are interdependent → insights into interrelations required Specialization: general – special product/service Horizontal: upstream – downstream processes and their value chains Vertical: main processes – sub-processes Process architecture 29 Value chain modeling Chain of processes an organization performs to deliver value to customers and stakeholders More generally, a mechanism to group high-level business processes according to an order relation (can be applied to core, support and management processes) business process Procure-to-service order relation 30 Guidelines to identify horizontal boundaries in value chains 1. Change of a key business object in the process 2. Change of granularity of a main business object 3. Change in frequency/time 4. Change in intermediate outcome/resolution/objective 31 Example: wholesaler’s value chain Core processes 32 Typical value chains for core processes Think around three main steps: Imagine it (design new product/service) Build it (source, assemble, deliver product/service) Sell it (market, sell, service product/service) Example: producer Specializations Stocked products: MTO products: ETO products: 33 Example: value chains for an IT service provider Design Market Sales Deliver Service Systems Integration Outsourcing Network Services Enterprise Server Technology 34 Example: value chain of non-core processes Support processes HR Accounting Management processes Suppliers management Risk management 35 Example: wholesaler’s process architecture & value chains Strategic Management Warehouse Logistics Management Management Suppliers Demand Management Management Management processes Box: Chevron: Direct Sales Distribution groups procurement collapsed Procure-to-Service processes/ value chain value chains Marketing Service Core processes Indirect Finance IT HR procurement Support processes 36 Alternative: a consultancy firm’s process architecture – groups Manage Firm 1.1 1.2 1.3 1.4 1.5 Management Plan the Govern the (Re)design Develop Methods Change the processes Business Business Processes & Standards Business Expanded process Relate to Clients Core 2.1 2.2 2.3 2.12 group Optimize Develop Raise Awareness Evaluate Client processes Stakeholder Service Offerings of Services Solution Delivery Relationships Optimize Portfolio Deliver Solutions 2.4 2.5 2.6 2.7 2.8 Plan Delivery of 2.13 Deliver Provide Gain Initiative Deliver Business Service to Service Adjust Portfolio Infrastructure Professional Commitment System Solutions Corp. Solutions Services Optimize Solutions 2.9 Operate 2.10 2.11 Infrastructure & Retire Solutions Support Users Business Systems Support Firm 3.1 3.2 3.4 3.6 Support 3.3 3.5 Provide Expert Provide HR Acquire Goods & Provide Working Provide IT Tools Obtain Financial processes Advice & Capabilities Services Facilities Services Knowledge 37 Typical artifacts for vertical scoping Value chains Chains of processes. Stay at a high level. Rule of thumb: 3-7 processes E.g. Procure-to-service, Risk management Typical focus of process enumeration (Root/Main) Processes Build up value chains and affect each other. They are abstract E.g. Lead-to-quote, Quote-to-order, Order-to-cash Subprocesses Build up processes. They are detailed, involve multiple activities and can be layered on different levels of abstraction (i.e. sub-subprocesses) E.g. Order shipment, invoicing Process tasks Build up processes and sub-processes. They are atomic and performed by human beings, IT systems or equipment E.g. Approve invoice 38 Process architecture: hierarchical view Level 1 Process Landscape Process hierarchy Level 2 Main Processes (e.g. BPMN) Level 3+ Subprocesses, Tasks (e.g. BPMN) 39 How many levels in a process architecture? 40 Example: hierarchical process architecture of an insurance company Level 1 Strategic Management Corporate Market Investor Development Development Relations Management processes Risk Assessment & Management Marketing & Sales Underwriting Policy Claims Management Servicing Management Payments Collection and Disbursement Assets Management Core processes Finance/ Legal/ Reinsurance IT HR Treasury Audit Support processes 41 Example: hierarchical process architecture of an insurance company Level 2 Strategic Corporate Marketing Investor Management development development relations Process group Define Define offering Plan Design & manage business concept & and customer investor corporate policies long-term vision value proposition relations Develop Define pricing Build Process Manage business investor subgroup knowledge strategy strategy relations Manage Manage Manage Define and manage strategic change & investor channel strategy initiatives improvement relations Manage Communicate partners with stakeholders Manage investments & divestments Management processes 42 Example: hierarchical process architecture of an insurance company Level 3 Develop business strategy Define offering and customer value proposition Process subgroup Develop overall Define offering and positioning mission statement Evaluate strategic Develop value proposition Main options Select long-term business process Validate value proposition strategy Coordinate functional and Develop new branding operational strategies Align functional and operational strategies Create organizational design Develop organizational goals Formulate business unit strategies Management processes 43 Example: hierarchical process architecture of an insurance company Level 4 Develop overall Main mission statement process Define current business Formulate Subprocess mission Communicate mission Management processes 44 Designation via reference models A reference model is used as a template to design the process architecture Examples: Information Technology Infrastructure Library (ITIL) Supply Chain Operations Reference Model (SCOR) Process Classification Framework (PCF) Control Objectives for Information Technology (COBIT) Value Reference Model (VRM) Voluntary Interindustry Commerce Solutions (VICS) eTOM Business Process Framework Performance Framework 45 Example: APQC Process Classification Framework (PCF) Industry-neutral enterprise model Open standard for benchmarking Four levels Categories Process group Process Activity 46 APQC PCF Overview Category 47 APQC Classification Framework Group Activity Process 48 The evaluation phase (aka process selection) 1. Importance Which processes have the greatest impact on the organization‘s strategic goals? 2. Health (or Dysfunction) Which processes are in the deepest trouble? 3. Feasibility Which process is the most susceptible to successful process management? Prioritized Process Portfolio 49 Example: prioritized process portfolio of a financial institution Short-term action High Feasibility Loan Rating Low controlling Contract preparation Medium Loan decision Loan market High evaluation Handling of payments Loan planning Loan application Low Poor Health Good Possible Strategic fit? 50 3. Process discovery: as-is process modelling 51 BPM lifecycle …design, analyze, execute and monitor business processes… Process identification Process Process architecture architecture Conformance Conformance and and Process As-is As-is process process performance performance insights insights discovery model model Process monitoring and Process controlling analysis Executable Executable Insights Insights on on process process weaknesses weaknesses and and model model their their impact impact Process Process implementation To-be To-be process process redesign model model 52 Process discovery 1. Defining the setting This phase is dedicated to assembling a team in a company that will be responsible for working on the process. 2. Gathering information This phase is concerned with building an understanding of the process. Different discovery methods can be used to acquire information on a process. 3. Conducting the modeling task This phase deals with organizing the creation of the process model. The modeling method gives guidance for mapping out the process in a systematic way. 4. Assuring process model quality (see later) This phase aims to guarantee that the resulting process models meet different quality criteria. This phase is important for establishing trust in the process model. 53 Who is involved? Domain expert Process analyst 54 Stakeholders in Detail 55 Challenge 1: Fragmented process knowledge I make a photocopy before handing over the application Why can‘t I directly provide cash after approval? We bundle refinancing to get better interest rates. 56 Challenge 2: Domain experts think on instance level “Every trip is different.” “You cannot really compare. Our customers go to different places in different seasons using different modes of transportation.” “We can never do anything exactly in the same way. There are so many special conditions.” 57 Challenge 3: Knowledge about process modelling is rare “Could you please tell me, whether this diagram correctly shows your process?” 58 Elicitation techniques used at the process discovery (process modelling) stage 1. Document analysis 2. Observation Evidence-based 3. Process mining: Automated process discovery 4. Interview-based 5. Workshop-based 59 1. Document analysis Documents point to existing roles, activities and business objects Formal documentation in terms of Organization chart Employment plan Quality certificate report Internal policies Glossaries and handbooks Forms Work instructions 60 2. Observation Observe what people do at their workplace Trace business objects in the course of their lifecycle Inspect the work environment 61 3. Process mining: Automated process discovery Make order form Cas Case Activity Name Origin Originat Timestamp Extra Extra Activity Name Timestamp eIDID or ator Data Data 001 Make order form Mary 20-07-2010 14:02:06 … 001 Make order form Mary 20-07-2010 14:02:06 … 002 Make order form Jane 20-07-2010 15:45:29 … Scan invoice 002 Make order form Jane 20-07-2010 15:45:29 … 001 001 Scan invoice Scan invoice John John 10-08-2010 09:52:31 10-08-2010 09:52:31 … … Genetic Miner 001 001 Central registration Central registration John John 10-08-2010 10:00:36 10-08-2010 10:00:36 … … HeuristicsMiner Central registration 002 Scan invoice John 11-08-2010 09:15:22 … 002 Scan invoice John 11-08-2010 09:15:22 … 002 Central registration John 11-08-2010 09:20:01 … Central 002 001 Accepted registration John Sophie 11-08-2010 13-08-2010 09:20:01 08:20:54 … … Rejected Accepted 001 002 Accepted Accepted Sophie Sophie 08:21:12 13-08-2010 08:20:54 … 002 001 Decentral rejection Accepted Sophie Mary 14-08-2010 08:21:12 13-08-2010 14:15:14 … 001 Decentral End System 14-08-2010 14:15:15 … 001 rejection Mary 14-08-2010 14:15:14 … 002 Decentral approval Jane 16-08-2010 19:22:56 … Decentral revision Decentral approval Syste 001 End 14-08-2010 14:15:15 … 002 Invoice booked m System 16-08-2010 19:22:59 … 002 Decentral End System 16-08-2010 19:22:56 19:23:00 … 002 approval Jane 16-08-2010 … 003 Make order form Mary 19-08-2010 07:52:41 … Invoice booked Decentral rejection Syste 002 Invoice booked 16-08-2010 19:22:59 … 004 Make order form m Mary 19-08-2010 15:21:39 … Syste Fodina 002 End 16-08-2010 19:23:00 … m 003 Make order form Mary 19-08-2010 07:52:41 … End 004 Make order form Mary 19-08-2010 15:21:39 … 62 4. Interviews Structured vs. unstructured interviews Assumption: analyst and stakeholder share terminology Then, questions target at identifying deviations from standard processing Interview Validation Modeling Correct Complete Verification Sound 63 5. Workshops Gather all key stakeholders together One process analyst, multiple domain experts Participants interact to create shared understanding Often: software-supported, a model is directly created during the workshop (separate role) Model is reference point for discussions Alternative: brown-paper workshops 64 Strengths and Weaknesses Technique Strength Weakness Document Analysis Structured information Outdated material Independent from Wrong level of availability of abstraction stakeholders Observation Context-rich insight Potentially intrusive into process Stakeholders likely to behave differently Only few cases Automatic Discovery Extensive set of cases Potential issue with Objective data data quality Interview Detailed inquiry into Requires sparse time of process process stakeholders Several iterations required before sign-off Workshop Direct resolution of Synchronous availability conflicting views of several stakeholders 65 Organizing the gathered material and conducting the modelling task 1. Identify the process boundaries 2. Identify activities and events 3. Identify resources and their handovers 4. Identify the control flow 5. Identify additional elements 66 1. Process boundaries Under which condition does the process start? With which result does it end? Which perspective do you assume? 67 2. Identify activities and events 68 3. Identify resources and handovers 69 4. Identify control flow 70 What should you know and what should you be able to do? You should know: how a business process is defined, what the core elements are of a business process are and what the field of BPM is about the different phases in the BPM life cycle, give examples of activities and techniques used in each of these phases what process identification is and how designation and evaluation of business processes serves as a starting point for BPM initiatives what process discovery (= as-is process modelling), who is involved, what the challenges are, what techniques are used, what their strengths and weaknesses are, and which steps should be undertaken for modelling as-is processes You should be able to: contrast and compare different elicitation techniques for process modelling 71