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MTAT Business Process Management Lecture 1 – Introduction

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1 MTAT.03.231 Business Process Management Lecture 1 – Introduction
Marlon Dumas marlon.dumas ät ut . ee

2 About this course Objective Related courses
To introduce the discipline of modeling, analyzing, automating and monitoring business processes. Related courses Enterprise System Integration – Integrating applications to automate or support business processes Software Economics – Economic assessment of IT projects Data mining – Mining business process execution logs

3 Structure of the course
14 lecture+practice sessions covering: Process Modeling Process Analysis Process Redesign Process Automation Process Monitoring & Mining Team Project

4 Grading 8-12 hours per homework ≈ 60 hours in total
Six assignments (25 points in total) ≈ 40 hours Project (25 points) Technical exam: Modelling, Analysis, Redesign, Mining Business exam: Modelling, Automation, Mining Exam (50 points), free choice between:

5 Readings and resources
Course material posted on course Web page Textbook Dumas, La Rosa, Mendling & Reijers: Fundamentals of Business Process Management, Springer 2013 You can download chapters or whole book if inside the university network (see “Readings” section of web site) Use message board for questions

6 What is a Business Process?

7 Issue delivery Package receipt products Issue Load invoice truck
Prepare shipment Schedule payment Schedule delivery Check & confirm PO Unload truck Notify shipment Image from: By Bidgee (Own work) [CC BY-SA 3.0 (http://creativecommons.org/licenses/by-sa/3.0)], via Wikimedia Commons All work in a company is part of something larger Modern orgs are to say the least complex structures: through X-ray we see different people interacting with machines, IT systems etc. The defyning trait of a modern organization is the last amount of activities that an organization performs. Let’s consider a distribution center of a whole sellers: buys supplies from producers, stores in warehouses and distribution centers and sells and delivers to grocery stores Obtain PO confirm. Check Invoice Match incoming payment Request PO change

8 ITN286 - Process Engineering and EWS
Lecture - 4 March 1999 Serve meal Load dish- washer Bring menu Take order Collect payment Collect laundry Brush grills Unload dish- washer Collect laundry This complexity, though in a smaller scale, can be observed in the businesses around the corner, eg. A restaurant Clean kitchen surfaces Greet & seat Sweep & mop Present bill QUT Brisbane, Dr. Michael Rosemann

9 Business processes Business Process Assets & Partners Organisation
Function A Function B Function C Financial Business Process Human Resources Customers Technology Looking at the activities individually is not going to help us conceptualize and manage the complexity of an organization. BPs add structure to this. To understand what a BP is, it helps see an organization as a system supported by IT and be organized in functions: e.g. accounts payable (paying money to suppliers, e.g. checking, accepting and rejecting invoices, making payments etc.), accounts receivable (everything to collect money: getting money, matching them with invoices) in a whole seller org we will have warehouse… etc., However an organization is more complex than that. It includes assets and partners…. Ultimately an organization is about satisfying a customer or set of customers, e.g. retailers for whole sellers. Talk about value and spanning different org. functions It may appear from the previous examples that orgs perform random sets of activities. However this is not the case. Any organization can be seen as a system where work is performed along a number of business processes. A process is triggered by a need from someone (the process customer) and ending with an outcome that is of value to the customer. It involves activities (functions) performed by several stakeholders… Materials

10 PO received Check & confirm PO Package products Load truck Notify
shipment Issue invoice Match payment Payment made PO issued Obtain PO confirm. Schedule delivery Unload truck Issue delivery receipt Check invoice Schedule payment Goods arrived Let’s get back to our WS example. Before we saw a constellation of activities, however there are two main business processes: One BP deals with retailers in order to sell goods. The other BP does the dual: It starts when we issue the PO to buy from the supplier. It entails activities such as … etc.

11 ITN286 - Process Engineering and EWS
Lecture - 4 March 1999 Customer arrived Greet & seat Take order Bring menu Serve meal Present bill Issue invoice Customer paid Kitchen is dirty Load dish- washer Clean kitchen surfaces Brush grills Collect laundry Sweep & mop Unload dish- washer Kitchen is clean Similarly, in our restaurant we have at least 2 BPs: one to sell food to customers, the other to maintain the kitchen What do we see in common to all these businesses? We see they are… Emoticon from QUT Brisbane, Dr. Michael Rosemann

12 A business process is… a chain of events, activities and decisions
...involving a number of actors and objects, ….triggered by a need and leading to an outcome that is of value to a customer. Examples: Order-to-Cash Procure-to-Pay (aka Purchase-to-Pay) Application-to-Approval Fault-to-Resolution At least we hope it will deliver value to the customer The order to cash is the first example we saw [add quote-to-order and lead-to-quote] The procure to pay is an example of acquiring goods in stock for later reselling them to retailers A-to-A is found in gov orgs but also in private organizations. E.g. a passport or a vacation leave or recreation leave in a company F-to-R starts … --- Importantly, BPM is not about improving the way individual activities are performed, but rather, it is about managing entire chains of events, activities and decisions that ultimately add value to the organization. Within the broad context of the above definition, BPM regroups a body of methods for managing business operations on the basis of process models. Process models represent the understanding that people in the organization have about how work is done or should be done. They act as the bridge between business operations and IT systems. They allow us to understand how IT systems contribute to adding value to the organization by streamlining its work practices. Ogni processo comincia con un evento. Per esempio, l’order-to-cash process comincia quando si riceve un ordine dal cliente, e completa quando si riceve il pagamento dal cliente Events correspond to things that happen ``atomically'', meaning that they have no duration. For example, the arrival of a plant to the depot is an event. This event may trigger the execution of series of activities. For example, when a plant arrives, the site engineer inspects the plant. This inspection is an activity, in the sense that it takes time. When an activity is rather simple and takes relatively little time, we call it a task. For example, if the inspection that the site engineer performs is quite simple -- e.g. just checking that the plant received corresponds to what was ordered -- we can say that the ``plant inspection'' is a task. If on the other hand the inspection of the plant requires many steps -- such as checking that the plant fulfills the specification included in the purchase order, checking that the plant is in working order, and checking the plant comes with all the required accessories and safety devices -- we will treat it as an ``activity''. The distinction between task and activity is not always clear-cut. This is why, very often people will use the term task and activity interchangeably. Order-to-cash: This is a process that starts when a customer places an order to purchase a product or a service, and ends when the product or service in question has been delivered and the corresponding payment has been received. An order-to-cash process encompasses activities such as purchase order verification, shipment (in the case of physical products), delivery, invoicing, payment receipt and acknowledgment. Quote-to-order: This process typically precedes the order-to-cash process. It starts from the point when a ``request for quote'' is received from a customer, to the point when the customer places a purchase order. The order-to-cash process takes the relay from that point on. The combination of a quote-to-order and the corresponding order-to-cash process is called a quote-to-cash process. Procure-to-pay: This is a process that starts when a stakeholder within an organization -- typically an employee -- determines that a given product or service needs to be purchased. It ends when the product or service has been delivered and paid for. A procure-to-pay process includes activities such as approving the purchase, obtaining quotes, selecting a supplier, issuing a purchase order, receiving the goods (or consuming the service), checking and paying the invoice. Procure-to-pay can be seen as the dual of quote-to-cash in the context of business-to-business interactions. [For every procure-to-pay process there is a corresponding quote-to-cash process on the supplier's side.] Issue-to-resolution. This is a process that starts when a customer raises a problem, such as a complaint related to a defect in a product or an issue encountered when consuming a service. The process continues until the customer, the supplier, or preferably both of them, agree that the issue has been resolved. A variant of this process can be found in insurance companies that have to deal with ``insurance claims''. This variant is often called claim-to-resolution or claim-to-settlement. Settlement = liquidazione Triggering event = l’evento che innesca una nuova instanza

13 “My washing machine doesn’t work…”
Negative outcomes (value-reducing): Fault not repaired in a timely manner Fault repaired but customer pays more than expected Positive outcomes (value-creating): Fault repaired with minor intervention Fault repaired, covered by warranty Insurance Company Service Dispatch Centre Technician Call Centre Customer Parts Store Customer Customer Let’s take as an example the process for fixing a washing machine… VALUE fault-to-resolution process

14 Your turn Think of an organization and a process in this organization:
Is it order-to-cash, procure-to-pay, fault-to-resolution… Who is/are the customer(s)? What value does this process deliver to its customer? Who are the key actors of the process? List at least 3 outcomes of the process.

15 What is Business Process Management? And why should I care about it?

16 Managing Performance (Rummler’s Framework)
Business Environment Economy Culture Regulatory Assets & Resources Organisation Performance Planning Performance Management Stakeholders Financial Value Human Resources Function A Function B Function C Business Process Business environment imposes constraints on… Within this context the organization needs to plan and manage performance in order to deliver value to customers and to stakeholders KPIs + how to manage process performance in order for processes to meet the KPIs --- where do BPs sit in the context of an organization? ’adozione di processi orientati alla “collaborazione interna ed esterna” ed all’innovazione continua nonché il superamento di logiche organizzative funzionali BPs \. Basically: economy, regulations and the organization’s culture (what sort of people are available) all play a role to guide the way processes are modelled. BPs span across different functions of an organization (END-TO-END BPs), i.e. they are not usually restricted to one department or unit within the organization. Other constraints for bps to operate are performance measurement, done at a strategic level, and performance management, which is done and limited by the available technology, e.g. the IT systems. Input to the system, and thus to the processes are the org. resources, e.g. financial, human, technology available and material. The output of BP, that is the area of impact, is (to focus on) customer satisfaction, which is the core objective of the processes themselves. Also, investors (usually the business owners) need to be satisfied of the result of their BPs (KPIs are met, QA…). Taken from the Organizational Performance Framework of Rummler Technology Customers Materials Competitors

17 Process performance If you had to choose between two services, you would typically choose the one that is: F… C… B…

18 Process performance If you had to choose between two services, you would typically choose the one that is: Faster Cheaper Better

19 Process performance Three dimensions of process performance Time Cost
Quality

20 ITN286 - Process Engineering and EWS
Lecture - 4 March 1999 Improving business process performance Customer arrived Greet & seat Take order Bring menu Serve meal Present bill Issue invoice Customer paid Emoticon from QUT Brisbane, Dr. Michael Rosemann

21 How would you improve this process?
Outsource to Customer Standardize Eliminate Cooking Automate Invest and Build Re-sequence Eliminate Waiters Come vedete, migliorare un processo puo riguardare l’introduzione di nuovi prodotti, come il buffet o il Menu Daily Specials, o servizi, come la consegna automatica delle pietanze al tavolo. Alcuni si interfacciano direttamente con il cliente (come i binary e pertanto generano benefici direttaemente per il cliente), altri invece sono cambiamenti di back-end, come l’ordinazione automatica via Bluetooth o la risequenzializzazione degli ordini

22 Business Process Management (BPM)
Body of principles, methods and tools to design, analyze, execute and monitor business processes, with the aim of improving their performance. Business Process Management (BPM) is the art and science of overseeing how work is performed in an organization in view of ensuring consistent outcomes and identifying and taking advantage of improvement opportunities. In this context, the term ``improvement'' may take different meanings depending on the objectives of the organization. Typical examples of improvements include reducing costs, reducing execution times and reducing error rates. BPM is not about improving the way individual activities are performed. Rather, it is about managing entire chains of events, activities and decisions that ultimately add value to organizations and its customers.

23 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.” Bill Gates

24 In other words… Process Change Yields Information Technology Business
Value Enables Yields Process Change BPM provides a natural ground for bridging IT and business, because many (perhaps most) IT projects in enterprises are ultimately aimed at improving a business process Index Group (1982)

25 Why BPM

26 How to go about BPM?

27 The BPM lifecycle Dopo aver visto cos’e’ BPM e perche’ e’ utile, legando BPM agli imperativi di management aziendale, vediamo COME BPM riesce a raggiungere tali obiettivi, cioe’ a produrre valore per un’organizzazione Una serie di metodi: BPM lifecycle Process identification = assegnare delle priorita’ alla gestione dei processi Process monitoring and controlling = I processi in esecuzione, sia manuali che automatici, vengono monitorati al fine di controllare che le loro performance siano allieante alle nostre aspettative, e che I processi siano conformi alla struttura definita nei rispettivi modelli Process modelling mainly takes place during process discovery, where we want to document the processes of an organization as-is It also takes place during redesign, when we model the to-be processes and in implementation, where we convert these conceptual models that we have built so far into executable specifications, that can be carried out by a BPMS. In this course we will focus on modelling conceptual as-is business processes. We will also cover the identification phase, by showing how we can get to a set of business processes through a process architecture.

28 Process architecture Australian water supplier example
Management processes Core processes Waste and surplus water = acque reflue ed in eccesso Support processes

29 Importance (priority)
Process portfolio Australian retailer example Primary focus Y Process Health Importance (priority) High Low Good Poor L O Q B J M R H P U V X I K A N C G W Z D E T F 4 Importance Dysfunction Feasibility = For each process, it should be determined how susceptible they are to process management initiatives, either incidental or on a continuous basis. Most notably, culture and politics involved in a particular process may be obstacles to achieve results from such initiatives. In general, process management should focus on those processes where it is reasonable to expect benefits. [CULTURE & PEOPLE] Clearly, the three aspects of importance, dysfunction and feasibility are fully orthogonal. 3 messages: Not too many projects in parallel because it’s too costly (time, resources) Not too many projects in parallel because of increased coordination complexity (processes are interrelated) Don’t tackle the process that is the most strategically important and dysfunctional, because you will have high chances of failure. Rather, start with a small number of projects as Davenport say, and learn from these Should all processes that are dysfunctional, of strategic importance, and feasible to manage be subjected to process management initiatives? The general answer to this question is that for most organizations this is not feasible. Recall again that process management consumes resources. Even when there is a clear incentive to, for example, redesign various existing business processes, most organizations lack sufficient resources—people, funds, and time—to do so. Only the largest organizations are able to support more than a handful of process improvement projects at the same time. A good case in point is IBM, an organization known to have process improvement projects going on within all its existing business processes on a continuous basis. Another caveat of carrying out many simultaneous process management efforts is that these will create coordination complexity. Remember that processes may be linked to each other in various respects, such that measures taken for one process should be synchronized with those taken for other. As Davenport [10] describes: Most companies choose to address a small set of business processes in order to gain experience with innovation initiatives, and they focus their resources on the most critical processes. Each successful initiative becomes a model for future efforts. What is happening in some organizations is that widespread efforts are made to at least model all important business processes, delaying the decision to make the step to more advanced BPM efforts (e.g. process redesign or automation). The idea is that process models are a cornerstone of any further BPM efforts in any case and that their existence will help to better understand where improvements can be gained. Creating a model of a process leads to the valuable insight how that process works at all, and can provide a good basis for small improvements that can easily be implemented. On the downside, such an approach bears the risk that major improvements are missed and stakeholders develop a feeling of a lack of return for the efforts. It should be stressed here, too, that the actual modeling of business processes is not an element of the process identification stage. --- Note that it may very well be that a strategically important process is also the process that can be expected to be the most difficult one to manage, simply because so many earlier improvement efforts have already failed. An organization may not have a choice in such a situation. If a strategic process cannot be improved, this may turn out to be fatal for an organization as a whole. Think of a situation where the process to come up with new products creates much turmoil and conflicts within an organization: If the issues cannot be sorted out, the company may stop functioning quickly. In other settings, it may be more important to gain credibility with process management activities first. This can be accomplished by focusing on problematic processes of milder strategic importance but where there is a great desire to change. If successful, an improvement project at such a place may give credibility to the process management approach. These are not choices that can be easily prescribed without taking the specific context into situation. The various evaluation outcomes should be balanced to reach a list of those processes that should receive priority over others. QUT Brisbane, Dr. Jan Recker

30 The BPM lifecycle What is happening in some organizations is that widespread efforts are made to at least model all important business processes, delaying the decision to make the step to more advanced BPM efforts (e.g. process redesign or automation). The idea is that process models are a cornerstone of any further BPM efforts in any case and that their existence will help to better understand where improvements can be gained. Creating a model of a process leads to the valuable insight how that process works at all, and can provide a good basis for small improvements that can easily be implemented. On the downside, such an approach bears the risk that major improvements are missed and stakeholders develop a feeling of a lack of return for the efforts. It should be stressed here, too, that the actual modeling of business processes is not an element of the process identification stage.

31 Business process model
Invoice handling example Tipicamente un processo puo essere accompagnato da un RACI Responsible, Accountable, Consulted, and Informed e altri tipi di diagrammi, e.g. Organizational Chart, Data Model...

32 The BPM lifecycle

33 Qualitative process analysis
Root-cause analysis example Milieu = social environment Equipment rental process

34 Quantitative process analysis
Process simulation example

35 The BPM lifecycle

36 Process redesign Cost Time Flexibility Quality AS-IS process model
TO-BE process model Cost Quality Time Flexibility Principles and heuristics

37 The BPM lifecycle

38 Process implementation
Process automation Executable process design Configuration & coding Testing ... Process change management Job redesign Training management plan Performance ….

39 The BPM lifecycle

40 Process monitoring & controlling
Dashboards, alerts & reports Event stream Model-based analytics (p. mining) DB logs

41 Roles in the BPM lifecycle
BPM group Analyst System administrator Process owner Process participants Developer

42 Course structure Weeks 2-3 Weeks 11-14 Weeks 4-5 Week 6: Lecture 12
Dopo aver visto cos’e’ BPM e perche’ e’ utile, legando BPM agli imperativi di management aziendale, vediamo COME BPM riesce a raggiungere tali obiettivi, cioe’ a produrre valore per un’organizzazione Una serie di metodi: BPM lifecycle Process identification = assegnare delle priorita’ alla gestione dei processi Process monitoring and controlling = I processi in esecuzione, sia manuali che automatici, vengono monitorati al fine di controllare che le loro performance siano allieante alle nostre aspettative, e che I processi siano conformi alla struttura definita nei rispettivi modelli Process modelling mainly takes place during process discovery, where we want to document the processes of an organization as-is It also takes place during redesign, when we model the to-be processes and in implementation, where we convert these conceptual models that we have built so far into executable specifications, that can be carried out by a BPMS. In this course we will focus on modelling conceptual as-is business processes. We will also cover the identification phase, by showing how we can get to a set of business processes through a process architecture. Weeks 8-10 Weeks 6-7

43 Introduction to Process Modeling
Next Week Introduction to Process Modeling


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