Business Process Management PDF

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

1 Lesson 3 Business Process Management from input to output … what else? ing. Massimiliano Oleotto Learning Objectives 2 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. Why do business professionals need to know BPM? 3 In 2023 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q1. Why do business professionals need to know BPM? 4 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 1 5 Q1. Why do business professionals need to know BPM? • • • companies arrange people work using Business Processes, alias BP better understand of “the whole picture” of a company maybe you’ll be a process owner (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 6 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 7 A Process is not… a court process, of course (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 8 1st thing → a Process is every transformation that takes place when some inputs become some outputs adding value Adding value means that 1+1=3 and not that 1+1=2 (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 9 Output has more value than input because it is more useful than input to ... the user who will use it In a business context that user is … a customer (!) And it doesn’t matter if he/she is inside or outside your company Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 10 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 A Performance is an activity that has a (planned) objective and produces an (actual) result Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 11 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 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 12 An objective is a desired goal an organization has decided to pursue There are two categories of objectives: • effectiveness → actual outputs / planned outputs • efficiency → (actual) outputs / (actual) inputs Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 13 3nd thing → a Business Process is characterized by these definite elements: • • • it groups related Performances 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 14 Related Performances can be grouped using a criterion → if you group the performances using Value Chain, PDCA and Implementation Level as criteria, you obtain a collection of Business Processes called Extended ERP As a result of grouping Related Performances you have: • a Process Map • both Processes and SubProcesses Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 15 Business processes have three characteristics in Extended ERP: → the 1st one is location in Value Chain Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 16 Business processes have three characteristics in Extended ERP: → the 2nd one is location in PDCA Strategic Tactical Operational Anthony Triangle PDCA performance IS Strategic Governing (Acting) company decisions DSS Tactical Planning and resources (Managerial) Controlling management MIS Executing (Doing) TPS Operational Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto everyday activities Q2. What is a Business Process? 17 Business processes have three characteristics in Extended ERP: → the 3rd one is implementation level Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 18 The definite boundaries of a Business Process may not fall within a business function → processes are “transversal” to functions Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 19 You can have innovative process-based organization beside traditional function-based organization Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 20 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q2. What is a Business Process? 21 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 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Action Learning Objectives – Recap 2 22 Q2. What is a Business Process? • • • • a Process is every transformation that takes place when some inputs become some outputs adding value: 1+1=3 (!) in a business context: inputs are Resources, transformation are Performances, and outputs are Products a BP has 3 more elements: grouping of related performances, 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. What is the link between IS and Business Process? 23 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 SYSTEM INFORMATION Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto BUSINESS PROCESS Q3. What is the link between IS and Business Process? 24 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 HW Information SW Data Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Roles Procedure People Q3. What is the link between IS and Business Process? 25 Yesterday we did not have Computers, and tomorrow we will not have … people (!) yesterday IS Business Process IS Roles People Information Procedure Data Roles Procedure People tomorrow IS Business Process IT HW Information SW Data Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Automated Roles SW HW Q3. What is the link between IS and Business Process? 26 We can truly understand why we use the FiveComponents Framework for explaining an IS Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q3. What is the link between IS and Business Process? 27 Topic Lesson IT Data Processing BPM 1 2 3 So… here it is the BIG PICTURE from Lesson 1 to Lesson 3 (!) Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 3 28 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 29 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 30 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 31 Objectives must be appropriate for strategy and communicated to the people Every objective must have a measure – it is called metric or KPI Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 32 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 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 33 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 34 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 ➢ 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 35 STAGES OF IS EVOLUTION IN A COMPANY Stage 1: Stage 2: Stage 3: Stage 4: Stable Multiple dysfunction Semifunctional enterprise Integrated enterprise Extended enterprise Historical Reactive Reactive Efficient Proactive Effective Strategic Driver Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 36 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 37 sequential customer order request Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 38 parallel customer order request Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q4. When a Business Process is good? 39 Which of the two examples is the best? It depends on ... what the objectives of the process are (!) sequential Lead Time Outcome parallel Variable → it can be the Fixed → standard sum of the three response response time times Rigid → 1 “no” is enough to have the CO rejection Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Flexible → with 3 “no” you could have the CO acceptance (Sales Dept overrule) Learning Objectives – Recap 4 40 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) 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 41 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 processes, and (b) to establish process governance [ABPMP CBOK] → BPM is the discipline that translates Strategy into actions by analyzing, implementing, governing and improving (good) Business Processes Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 42 improve analyze govern implement Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 43 BPM Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 44 What are the benefits of BPM? • • • • Business Processes → it deletes the suboptimization 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 45 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 46 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 47 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 48 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 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 49 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q5. What is BPM? 50 Topic So… here it is what we are going to do in the next 7 lessons (!) Abstract “the whole picture” BPM Analysis on a ERP System ERP System BPM Implementation implementation how to manage an BPM Governance ERP System extend IS beyond BPM Improvement ERP System Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Lesson 4-5 6-7 8 9-10 Learning Objectives – Recap 5 51 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 to 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q6. How can a Business Process be improved? 52 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q6. How can a Business Process be improved? 53 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q6. How can a Business Process be improved? 54 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Q6. How can a Business Process be improved? 55 Organization and Information Systems | a.y. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto Learning Objectives – Recap 6 56 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto References 57 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. 2023-2024 | Diego Campagnolo – Massimiliano Oleotto