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© Richard Welke 2002 CIS 4120: Define/Innovate BP’s Richard Welke Director, CEPRIN Professor, CIS Robinson College of Business Georgia State University Atlanta, GA Session 2: Processes, Services & Metrics
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 What is a business process? From Miers & White: A systematic set of activities that take a “business event” to a successful outcome What is an example of a business event? A collection of business activities that create value for the customer (outside-in thinking) From Wikipedia (repeated in W&M): A collection of interrelated tasks which accomplish a business goal (inside-out thinking) 2
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 3 Categories & types of BP ’ s Some “high-level” business processes: Supply chain management, demand chain management, product/service design, customer service, contract management, etc. Made up of a myriad of lower-level “part processes”: Account management Advance planning & schedule Advertising Assembly Asset management Benefits administration Branch operations Budget control Build to order Call center service Capacity reservation Capital expenditures Check request processing Collateral fulfillment Collections Commissions processing Compensation Component fabrication Corporate communications Credit request/authorization Customer acquisition Customer inquiry Customer requirements Customer self-service Customer/product profitability Demand planning Distribution/VAR management Facilities management Financial planning Financial close/consolidation Hiring/orientation Installation management Integrated logistics Internal audit Inventory management Investor relations Invoicing IT service management Knowledge management Manufacturing Manuf. capability development Market research & analysis Market test Materials procurement Materials storage Order dispatch & fulfillment Order management Organizational learning Payroll processing Performance management Physical inventory Planning & resource allocation Post-sales service Problem resolution management Process design Procurement Product data management Product design & development Product/brand management Production scheduling Program management Promotions Property tracking/accounting Proposal preparation Publicity management Real estate management Recruitment Returns & depot repair Returns management Quality control Sales channel management Sales commission planning Sales cycle management Sales planning Service agreement management Service fulfillment Service provisioning Shipping … Zero-based budgeting “Process Catalog” Where to start? MIT, NIST
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 4 A project is also business process Consider the representation of a project (MS-Project) A process is a project that’s executed multiple times (multiple flows, event triggers) Think about normal project issues and metrics Sub-process (Activity) Precedenc e Relations Resources (Roles) Activity Property A simple form of BP Model (no loops!
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Some inter-related questions for you … If a process exists, why does it exist? Put another way, if a business process is the solution or answer, what’s the problem or question?? When studying a phenomenon such as a business process should one start by: Improving the solution? Better understanding the problem that it’s the solution for? Should we assume the question or question the question? 5
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 6 Process discovery The task of extracting & identifying a coherent business process within an organization’s collection of tasks, activities, events and decisions It involves: Bounding the process (taken up next) Finding the process owner(s) Defining the operative metrics Discovering “happy path” & “rainy day” aspects If everything works without exceptions (happy path) What are the problem cases, exceptions -- “What if” Modeling the “as is” Confirming the discovered process with its owners, users (stakeholders)
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 7 Process bounding The problem – where to draw the boundary for what’s included in your “as-is” BP? ?
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Definition of the “Boundary problem” How to determine which process elements (e.g. tasks, activities, logic, roles) are to be explicitly included in the business process under consideration? And, therefore, what are the process interfaces to other agents and their tasks? What criteria (metrics) are to be used in determining if a chosen boundary is “better” or “worse” than another boundary? The issue of what constitutes “better/worse” business processes is an open (research) question Generally assessed by static or dynamic outcomes But we need business process design metrics as well 8
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Approach taken Applying “servitization” principles to the definition of the process boundary Basic tenet: Every service has an underlying business process that delivers (produces) the service being sought However … not all arbitrarily defined business processes deliver a defined business service Service and process are the “dual” of one another Where there’s a service, there’s an underlying business process Where there’s a business process, there should be an associated, defined service (or services) 9
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 10 A service approach to process bounding Service is an “interface” between client and its underlying process Client has a “Problem-to-be-solved” (by the service) Process interacts with its client(s) via a “service interface” Client’s initiating event starts process; Process delivers result back Discovery approach is iterative refinement Sometimes start with the service aspect (& scope the process) Sometimes start with the process aspect (& determine service) Initiate Response Client Service interfaceBounded (encapsulated) process that delivers service
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Service basics Services share a set of common principles Defined customer/client Client has a “problem-to-be-solved” (Christensen) The service deliverable partially or completely solves it The client has a set of “value” metrics Their view (not the process owners view) of what the significant KPI’s are for the service Sometimes formalized as an SLA The service is initiated (triggered) and a “normal and expected” result (response) is received by the client The client can be internal or external to the organization providing the service The service of interest may, in turn, rely on use of other services (for which this service is the client) 11
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Service definitions Economics (noun) A set of one-time consumable and perishable benefits Marketing A means of delivering value to customers by facilitating outcomes customers want to achieve without the ownership of specific cost and risks Blended An economic activity offered by one party to another, to bring about desired results in recipients or in objects or other assets for which purchasers have responsibility Ours An offering to a customer (consumer) that the customer initiates via an interface, and in so doing begins one or more underlying actions), whose normal and expected result is either a delivered response or a change in some object that the customer seeks to change 12
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 13 Framing the business service-process The initiating event (start event) The processes response to the trigger A short “X-to-Y” description that captures the nature of the service provided (e.g. Request-to- Appointment) Value metrics: Performance measures associated with the client’s perception of value (tend to be external, effectiveness related) Process metrics: Performance measures associated with the underlying process operation (tend to be internal, efficiency related) Value metrics: 1. 2. 3. 4. Process metrics: 1. 2. 3. 4. 5. ? ? The Client (with Problem To Be Solved ) Outcome (client) innovation Operational (process) improvement/innovation
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 14 Example value metrics Availability Anytime, anyplace 24 x 7 x 365 Example metric: %time request accepted/calendar period Know me Personalized interaction, tailored information Example metric: Amount of (constant) personal information required to total amount of information provided Tailor to (changing) needs Mass customization (market of one) Example metric: Perceived flexibility of solution One-stop fulfillment (single point of contact) Understand the full need Organize to fulfill it, service it, replace it Minimize client-experienced transaction costs (time, $) Search, alternative evaluation, selection, delivery, return Transparency across multiple channels (omni-channel) Bricks, clicks, mobile, face-to-face, etc. Some metrics that might matter to the process client
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 15 Types of process metrics Time-based Cycle-time (total average, variance in time) Resource-based Time and cost consumption (e.g. Activity- Based Costing) Resource scheduling and competition (flexibility, use) Cash-to-cash (receipts and expenditures) Quality Error-rates in deliverables (average, variance) Metrics that matter to the process owner
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Example process metrics w/measures Resource consumption & utilization Total (direct/indirect) cost/transaction % resource utilization/week Transit (or cycle) time Average transaction time through process 3-sigma (three std. deviations) transit time Transit time variability (+/- 3-sigma) Quality/defects % aborted transactions % completed transactions containing errors Response to load % increase in cycle-time for a 2x increase in transaction volume Compliance with controls and regulation # of compliance “variations” per 100 transactions All internal & external controls monitored and adhered to 16
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Role of metrics in BPM 17 1.Determine Metrics 3.Critique process 2.Discover process Improvemen t potential Innovation potential Process Metrics Value Metrics 5.Operatin g process 5.Operatin g process 4.First “to- be” process BAM Dashboar d Justification
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 IC-2-1 Consider the service of providing concert tickets online Answer the following questions about this: Generic customer name PTBS Value metrics Initiation of service Normal and expected results How would you name it as a service (x –to- y) Process metrics (imagine you run this service) Is it “core or non-core” (criticality) 18
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Metrics and KPI’s (1) KPI’s Key performance indicator: What a manager has to do “right” (focus on) in order to meet performance objectives and the measure(s) that indicate this High level examples: Financial: Asset utilization Customer: Customer satisfaction Environment/community: Support local organizations Internal: Delivery in full Employee satisfaction: Satisfaction surveys and increased retention Learning & growth: Increased empowerment, expertise and adaptability 19
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Metrics and KPI’s (2) Metric’s (hard – quantitative & soft – qualitative) Measurable values with units associated with them Examples: Dollar revenue gained from top 10% of customers this week % of payments made by direct credit Billing accuracy Revenues/total assets (%) Revenue in sales “pipeline” Inventory items above/below target limits Sales to selling cost ratio Adherence to schedule (tasks performed on time/total tasks) Claims frequency % contractors to total staff Employee motivation index 20
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Example exercise on services & metrics 21 Process begins with the author of a screenplay submitting their work to a literary agent. The literary agent, in turn, selects a potential producer who might be interested in the work and forwards it that person. The producer employs a script reader who first reviews the screenplay. If the reader decides it’s not acceptable, they return it to the writer. Else, it’s forwarded on to the producer who reads the screenplay. The producer can either decide to reject it, purchase it outright, or take an option on the work. If rejected, the producer sends a notification to the writer. If either of the other two options he/she proceeds to (concurrently) find a director for the film as well as get agreement from a star actor to anchor the film. Once these agreements are made, the producer sends off the screenplay to several film companies to see if one or more of them will agree to do the production. After these results are in, producer will notify writer that their screenplay will either be produced, or an option taken on it. Who’s the process owner? Who’s the client? Where’s the process boundary? What’s the service provided?
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 22 Writer to producer business process Who is the client? Who is the process owner (and scope)? Are there services the process draws from? What’s the service definition? What are possible value & process metrics?
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 23 Depending upon assumptions - solution Submit screenpla y Decide to produce Receipt-to- Produce decision Submit screenpla y Decision to produce Tender-to- produce Writer Submit proposal Commit to film Proposal-to- commitment
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Re-drawn to conform to BPMN 24
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Seen as a set of services 25 Screenplay submission –to- Produce decision ScreenplayDecision One Man Show, Inc. InitiateResponse Spectacular Mega Films InitiateResponse Two-for-the-Money InitiateResponse
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 26 Another example : Claims-handling process Receive notification Create auto claim Register auto claim Assign claim to adjustor Validate claim Negotiate settlement Check assessment report Assessment process Request Assessor Assessment Investigate claim Record acceptance Initiate payment & repair Close claim Policies Claim Assess Request Claim Assess Report Customer Notification Cust. Service Claims Adjustments Assessment Boxes & Arrows version of a process model
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 Claims processing – BPMN version 27
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 28 Some questions … Is this really one service to the end-customer (claimant)? There are at least three, customer determined phases Submission of claim Negotiation of settlement Repair and bill submission to check (and the client here might be the repair shop, not the client It’s likely there’s an intermediary – the agent If so, they are the client for the first insurer service (submission) Loss notify Repair approval and amount Notification -to- Payment Insured Client Client Loss notify First offer to settle Notificatio n-to- Payment Receive counter offer Best-and- final offer Negotiate- to-Agree Bill for repairs Payment for repairs Repair-to- Payment Referre d Case Negotiate d Settlem’t Negotiate -to-Agree The client’s hidden process
CIS4120Fa13 Session 2: Processes, Services & Metrics © Richard Welke 2008-13 29 Questions regarding line of service thinking Does this alternative representation … Suggest a different (set of) process model(s)? Imply a different set of value/performance metrics If so, would you end up with different a “should-be” Would you be able to visualize this if you hadn’t first modeled the process? Even if this isn’t how the process currently works, is it a possibility for a “should-be” model? Does this service model suggest opportunities for sourcing? What might you do to improve the “overall” client experience?
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© Richard Welke 2002 CIS 4120 Fa12: Define/Innovate BP’s Richard Welke Director, CEPRIN Professor, CIS Robinson College of Business Georgia State University.
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