1. Slide 0 www.jit-technologies.com Jon Strickler www.jit-technologies.com www.agileelements.com The Business Value of BPM

2. Slide 1 www.jit-technologies.com A BPM Case StudyA Model for ROI Quantification A BPM P : Assoc of BPM Professionals The Future of BPM Session Objectives

3. Slide 2 www.jit-technologies.com A BPM CASE STUDY The Business Value of BPM

4. Slide 3 www.jit-technologies.com EXECUTIVE SUMMARY

5. Slide 4 www.jit-technologies.com We analyzed ’s bank card claim processing 52 processors work 18,000 claim transactions/mo worth $1.8M Governed by Regulation E which dictates standards and maximum cycle time for claims Includes ATM and Debit Fraud and Dispute Excludes Claims Intake Center (CIC)

6. ATM and Debit Creidt Claims - 52 processors work 18,000 claim transactions/mo worth $1.8M Become 100% Reg E Compliant Gain Efficiencies – Reduce Work In Progress, Cycle Time, Touch Time Reduce Costs: Reduce Write-offs, Charge Backs, and Mitigation Rate Validation of Problem Justification of Project 770% ROI projections 3 year NPV of $4.5M Improving efficiency from 25% to 55% will save $875k each year Visualization of Solution

7. We found the process to be manual, inefficient and paper intensive Manual work assignment using tally sheet Tracking and reporting on process is through manually generated reports Approximately 6,000 sheets of paper printed by the team each day 11 different systems require duplicate keying and multiple look-ups New paper is created to document research, communicate charge backs and write to customers

8. Our Solution Approach simplifies process and increases efficiency C ORRESPON - DENCE M GMT I NTEGRATED U SER E XPERIENCE Automated work assignment Integration used to reduce or eliminate re-keying of data, and the need to work within multiple systems Automated capture and attachment of research evidence and correspondence Real-time, automated reporting and performance dashboards Implementation process improvements including straight-through processing for claims under $20

9. BPM architecture enables numerous improvements in user experience and process Web Services Integration Layer Enterprise Systems BPMS Single User Interface for Each Persona Real-Time Reporting Dashboards Automated Work Allocation Workflow & Process Orchestration Letter Generation Automated Calculation of Provisional Credit General Ledger Safe Issuer Direct Acquire Navco Imagesoft General Ledger Letter Macro Mail Merge FTBS Falcon MPS Fidelity Processor Manager / Supervisor Exec / VP Document Management

10. Slide 9 www.jit-technologies.com Improving Card fraud process using BPM will result in a Net Present Value of $4.5M In less than 6 months the solution will have paid for itself The solution has an ROI of over 770% 5 Year Cash Flow

11. Slide 10 www.jit-technologies.com APPROACH

12. Slide 11 www.jit-technologies.com viewPoint Assessment Approach Approximately 10-20 Days Problem Definition User-centric Discovery Analysis Solution Proposal Stakeholders agree upon goals and success criteria Whiteboard high- level process Discuss pain points Identify process participants Prioritize goals Identify metrics Observe and interview participants in work environment Gather current process metrics Observe process participants doing work Gather artifacts Identify opportunities for improvement Tailor a solution to your unique needs Map improvements to goals Design improved process Mock-up key user experience roles Calculate and validate estimates Agree to recommendations and improvement potential Review proposal with stakeholders Understand process improvements Present user interface mockups Refine projected return on investment Approximately 10-20 Days

13. Slide 12 www.jit-technologies.com Our solution addresses key goals 1.Regulatory Compliance 2.Cost Savings 3.Efficiency 4.Customer Experience

14. Slide 13 www.jit-technologies.com FINDINGS

15. We found the process to be manual, inefficient and paper intensive

16. Research and Assignment is NVA and uses automated queuing poorly Open all transactions to get info that is not displayed in the list Balance work across 23 processors 1 claim at a time using tally sheets QA is a duplication of the 1 st step performed by the processors Open all transactions, though only manual transactions are fixed

17. Of about 13 min spent in claim processing, 20% of time (2.4 min) is spent making claim decisions Verify transaction information Investigate & Decide Look up on Mainframe or Other system Look up on Mainframe or Other system Re-Key & QA data Re-Key & QA data Sort, Copy, Transport Sort, Copy, Transport Create 1200 new pieces of paper/day

18. Support staff & others off-load much of the non- value added work from claim processors Look up on Mainframe or Other system Look up on Mainframe or Other system Copy, Fax, Scan, Sort, Transport Copy, Fax, Scan, Sort, Transport Re-Key & QA data Re-Key & QA data

19. Slide 18 www.jit-technologies.com Much of the team is support staff; Of claim processor effort, most is non-value add Support Staff (23) Claim Processors (29) non-value add non-value add value-add value-add 20% = 2.4 Min 80% 24 Minutes of Processing

20. Benchmark KPIs Indicate Room for Improvement Reducing process inefficiencies could free up 45% of process time= 35,000 hours annually or $875K Cycle Time is 60% over goal Error Rate is 5X benchmark

21. Slide 20 www.jit-technologies.com RECOMMENDATIONS

22. Slide 21 www.jit-technologies.com The solution addresses needs of individual people within the process Claims Processors Mangers & Supervisors Executive

23. Slide 22 www.jit-technologies.com Processor Dashboard Provides access to all functionality through one UI Work Lists always available from the dashboard or fed to processors by clicking “Get Next” Real-time performance metrics are front-and-center, providing motivation for processors (“peer pressure” approach) Processors are always aware of their performance measures and where they stand among their peers

24. Slide 23 www.jit-technologies.com Processing Screens Guide the user through the process step- by-step All case contents consolidated into a tabbed container. User experience guides the user through the process step-by-step. Information about the overall claim is separated into its own section. Transaction-specific information is displayed directly below the transactions and arranged into logical sections.

25. Slide 24 www.jit-technologies.com Processing Screens Integrate mainframe applications Checklist ensure the processors perform all necessary research. Systems required for research displayed within the system, Will research the ability to click a button to attach a screen shot as a document to the file. Automatic research and calculation of reversal fees

26. Slide 25 www.jit-technologies.com Processing Screens Enable automated letter generation Automatic letter generation within the process flow Letter displayed within the system for processor to review. Fields auto- populated from systems of record to ensure quality Letters automatically attached to case folder and printed to one central printer.

27. Slide 26 www.jit-technologies.com Manager Dashboard: Staff Performance Work list for items that get escalated for manager assistance Historical view of overall staff performance by claim type Real-time staff performance metrics, including top three processors for Fraud and Disputes Processor performance charts with ability to view by claim types (Fraud or Dispute)

28. Manager/Supervisor Work Allocation Ability to specify work allocation using rules based on claim type, claim amount, or any other attribute of a claim. Ability to assign or un-assign users from a work list at any time.

29. Slide 28 www.jit-technologies.com Executive / VP Real-time staff performance metrics, including top three processors for Fraud and Disputes Historical view of process metrics Monthly report of claims by source Transaction volumes by work type

30. Slide 29 www.jit-technologies.com  Eliminate manual configure, print, transport, sort, copy, scan  Eliminate the up to 3 duplicate data entry steps for each letter  Eliminate the up to 4 QA checks on each letter  Eliminate need for printers at each processor desk Automate Correspondence Management using data from Clear Claims and centralized print & mail

31. Automate Work Assignment with rules-based, optimized queuing of front & back end processing  Eliminate 30 hours per week assigning work  Help meet Reg E deadlines  Streamline work with better logic  Adjust work based on current loads  Improve recovery rate GET NEXT

32.  Capture research for archive and charge back without need to manually print, scan transport, sort and fax  Increase electronic archive from 3 months to regulated 7 years  Automate fax for charge backs Electronically capture, transmit and archive to improve efficiency & drastically cut paper related costs 50% reduction = $60K per year in paper-related cost savings

33.  Correct at least 10 identified work-arounds and system short comings  Integrate GL Voucher completion, submission and reconciliation Streamline the process and reduce non-value added work and associated cost, errors and ramp-up Increase Process Efficiency from current 15% to 55% (up 300%) Anticipated savings of 35,000 processing hours Amounts to $875K savings each year

34. Use BPM to orchestrate the process; integrating with 11 different systems GL Tickets

35. Provide real-time visibility to track and manage as the process is executed  Eliminate the approximately 20 hours per week collecting metrics  Reduce time to take corrective action to better meet Reg E time limits

36. Solution Approach reduces process effort and increases efficiency Correspondence Management

37. Integrated User Experience Solution Approach reduces process effort and increases efficiency

38. We created models to allow analysis & process improvement simulations As-Is

39. Slide 38 www.jit-technologies.com ROI

40. In less than 6 months the solution will have paid for itself The solution has an ROI of over 900% 5 Year Cash Flow Improving your process using BPM will result in a yearly savings of $622,000 The solution has a net present value of $5.2M

41. Slide 40 www.jit-technologies.com Improving Card fraud process using Process360 will result in a Net Present Value of $4.5M over 5 years Return Summary

42. Slide 41 www.jit-technologies.com Major drivers of savings are improved process and automation Improved Process Efficiency 30-40% Improved Process Efficiency 30-40% Reporting & Oversight time Quantitative Targets Better Insight Into Process Processing Cost Measurable Results Error Situations / Rework 80% Error Situations / Rework 80% Cost of fixing errors & monitoring Reg E Compliance Automate & Integrate Paper Cost

43. Slide 42 www.jit-technologies.com Improved efficiency results in cost savings… Benefit Estimates

44. Slide 43 www.jit-technologies.com NPV is calculated using a 5 year time horizon 5 Year Cash Flow

45. Slide 44 www.jit-technologies.com A MODEL FOR ROI QUANTIFICATION Business Value of BPM

46. Slide 45 www.jit-technologies.com Most common objection to BPM Source: Forrester October 2007 US and UK Enterprise Architecture and Business Process Management Online Survey 60%

47. Slide 46 www.jit-technologies.com A Business Case Assessment Builds the rational for Investing:

48. Copyright 2009 © All rights reserved. Global 360 Inc. 47 Typical Assessment Methodology: Persona Analysis Interviews & Observation As-Is Process Metrics / KPIs Goal Alignment Usability Analysis To-Be Process User Interface Mockups ROI Calculation Process Discovery Solution Approach Approximately 10-20 Days Problem Definition User Centric Discovery Analysis Solution Proposal

49. Slide 48 www.jit-technologies.com ROI Estimation Steps 1. Use broad measures to understand what impact is possible 2. For each Benefit Strategy, gather data to estimate return 3. Create Value Model that maps Qualitative Targets to Measurable Results 4. For each Solution Approach, estimate costs 5. Use the ROI Estimator Spreadsheet to document and calculate value 6. Refine approach based on value; focus on high return areas 7. Document qualitative benefits not well quantified in ROI; this should be the exception 8. Verify assumptions with business

50. Slide 49 www.jit-technologies.com Metric Definitions  Volume = Output, usually expressed in units or $’s  Productivity = Output per unit of time  Cycle Time = Time spent in process = Work Time + Wait Time = WIP/Exits where WIP is the total units being worked or in the process  Quality = Error rate = Errors/Output usually expressed as a % or sigma value. 6σ = 0.0003% errors  Efficiency = Productive time divided by total time expressed as a %. Can be a measure of cycle time or work time. Efficiency (CT) = value added work time/total cycle time Efficiency (Work) = value added work time/total work time Value Added Time = time spent producing customer valued output without waste ~ straight through processing time (STP)

51. Slide 50 www.jit-technologies.com Typical Metric Benchmarks Measure TypicalGoodBest in Class Error Rate10%1%0.001% Efficiency (CT) 5%35%75% Efficiency (Work) 10%55%99% Customers should at least reach Good performance in improved processes

52. Create a Value Model to show relationship between improvements and return Reaction Time ↓ 90% Reaction Time ↓ 90% Problem Orders ↓ 50% Problem Orders ↓ 50% On-time Ship ↑ 5% On-time Ship ↑ 5% ↓ Error Handling Premiums & Cost Quantitative Targets: Reduce Setup Errors ↓ 45% Reduce Setup Errors ↓ 45% ↓ Monitoring & Firefighting Cost ↓ Processing Costs ↓ Cancelled Orders Fax Automation / Efficiency ↑ 100% Fax Automation / Efficiency ↑ 100% Measurable Results: ↑ New Orders

53. Slide 52 www.jit-technologies.com Financial Definitions  ROI: Return on Investment is the ratio of money gained or lost on an investment relative to the amount of money invested usually expressed as a percentage. ROI=(benefit/cost)  NPV: Net Present Value is a standard method for using the time value of money to appraise long-term projects. It measures the excess or shortfall of cash flows, in present value terms, once financing charges are met.  IRR: rate of return used to measure and compare the profitability of investments, also called the effective interest rate.  Payback Period: refers to the period of time required for the return on an investment to "repay" the sum of the original investment.

54. Slide 53 www.jit-technologies.com Strategic Investments may require a formal ROI

55. Slide 54 www.jit-technologies.com ROI model is encoded in the Estimator xls

56. Slide 55 www.jit-technologies.com Identify Which Benefit Strategies Apply  Benefit Strategy Matrix outlines strategies for generating benefits  Helps Remind of strategies Identify when they apply Group for quantifying return  May be customized for special opportunities TypeBenefit StrategyExample Targeting Questions Increase Productivity 1.Use fewer resources to reach desired objectives  What business processes are paper intensive, (eg: Ordering, HR on-boarding, and correspondence management)?  Are there areas that cannot scale without added headcount or expense?  Have workarounds been implemented to compensate for inadequate systems?  Are there complex or error prone processes that can be better supported? Improve Coordination 2.Reduce time and effort to complete work that requires multiple people, skills or applications  Do individuals have to use multiple software applications to complete process steps or update multiple applications with the same or similar data?  Do teams need to work collaboratively, coordinate activities, or gain expertise quickly?  Are there multiple capture mechanisms, sales channels or service channels that need to be coordinated?  Are there areas where work spans multiple organizations?

57. Slide 56 www.jit-technologies.com Ways to grow benefits

58. Identify benefits from Solution Approach Solution ApproachBenefit Strategy Implement BPM to ensure setup completes all necessary setup 11. Reduce effort & cost to respond to errors (includes scrap and rework) Implement BAM for Order to Book process monitoring and automated reporting 3. Reduce time to get oversight information 12. Reduce monitoring and inspection costs OCR for fax order capture with automated email confirmation and exception queue 1. Use fewer resources to reach desired objectives 16. Reduce costs of document handling Overall Benefits 14. Drive customers to use lower-cost channels 19. Complete key business processes better to capture more customers 20. Grow repeat orders website call center BAM for real-time monitoring Oracle ERP Interface Siebel Order fax  OCR Order Capture  BPM for automated setup

59. Slide 58 www.jit-technologies.com Category Benefit Strategy Return Questions Improve Efficiency 1.Use fewer resources to reach desired objectives  Number of people in process work  Average loaded rate  Annual salary increases  Number of orders/items processed  Hours per week per person  Number of orders/items processed  Annual growth in sales/volume  Time to be removed per transaction  Percent improvement in productivity 2.Reduce time and effort to complete work that requires multiple people, skills or applications  Number of people in process (users)  Average loaded rate  Time spent collaborating per week  Percent improvement in productivity 3.Reduce time to get oversight information 4.Improve ability to optimize individual, organization and process performance 5.Improve Asset Allocation  Number of people in process (users)  Number of people in process (mgrs)  Average loaded rate  Time workers spend doing reporting today  Percent improvement in productivity  Time managers spend creating reports  Percent improvement in productivity--  Time today that is under utilized/not effective used  Improvement in utilization --  Effort to make an improvement or buy asset  Number improvements/purchases  Improvement in allocation Gather Data to Estimate Return Tool: Benefit Strategy Matrix Tie Numbers to Benefit Strategies Collect Estimation Numbers The ROI Estimating Spreadsheet is final documentation of answers Some strategies have multiple ways to collect Specific strategies may need customization

60. Benefit Example ROI Category Benefit Type StrategyExample Targeting Questions Example Return Questions Improve Efficiency Increase Productivity 1. Use fewer resources to reach desired objectives What business processes are paper intensive Are there areas that cannot scale without added headcount or expense? Have workarounds been implemented to compensate for inadequate systems? Are there complex or error prone processes that can be better supported? Annual growth rate Number of people in process (users) Average loaded rate (users) Number of orders/items processed per person per hr Hours per week per person Time to be removed per transaction -AND/OR- Percent improvement in productivity 85 processors $20/hr loaded rate 7 items/hr 0.01 hr/trans savings (30 sec) NPV = $1.58M over 5 years at 7% cost of capital 6% annual growth 4% annual raises 40 hrs/wk 50 wks/yr  What is NPV?

61. Tool: ROI Estimator Spreadsheet  Uses 28 strategies from Benefit Strategy Matrix  Documents assumptions with modularized questions to calculate cost, benefits and ROI  May not cover all opportunities – be prepared to enhance

62. Document all Assumptions and Calculations

63. Estimate Time and Cost for each Implementation Approach  Get professional services involved to estimate implementation effort  Get sales for quote on software licensing & imaging  Customer IT usually provides hardware estimates

64. Apply to all applicable benefit strategies  Investment - $581,000  Benefits  Return on Investment (ROI=371%, NPV=$1.9M)

65. Slide 64 www.jit-technologies.com Qualitative Impacts – Not Fully Captured in ROI Model  Customer Satisfaction: Better delivery leads to tighter cooperation with customers & preferred partners  Inefficiencies: The distribution centers have less disruption from normal operations to meet exceptions and expediting requirements Fewer inventory imbalances that lead to delayed orders and forecasting problems Better planning due to accurate information Fewer returns processing Billing can happen earlier leading to less carrying costs and more interest  Brand identity and competitive advantage Poor performance no longer erodes Company’s image Prevent market share lost due to customer defections and returns from missed delivery commitments  Operations is happier

66. Slide 65 www.jit-technologies.com Verify assumptions before presenting results  Re-engineering your process using BPM will result in a yearly savings of $439,000 per year In less than 9 months the solution will have paid for itself The solution has a Net Present Value of $1,650,000

67. Slide 66 www.jit-technologies.com Other Considerations  Tell a compelling value story  Requires commitment from both sides  Engage customer to create ownership for the assessment  Put benefits in terms they understand “Reduce costs to recover from errors” -vs- “Eliminate firefighting and excessive expediting”  Some soft benefits will not be fully quantifiable – that’s OK  Make all assumptions explicit  Models may not anticipate all special cases - may need enhancement

68. Slide 67 www.jit-technologies.com ABPMP Association of BPM Professionals

69. Slide 68 www.jit-technologies.com ABPMP Mission  To engage in activities that promote the practice of business process management  To Promote and Evolve the Guide to The Business Process Management Common Body of Knowledge (BPM CBOK®)  To foster the development and advancement of the skills and competencies of the professionals who work in this discipline  To validate the professional qualifications and certify BPM practitioners

70. Slide 69 www.jit-technologies.com BPM CBOK™ 9 Knowledge Areas

71. CBPP ® Examination

72. Slide 71 www.jit-technologies.com Contacts  www.abpmp.org  Denver ABPMP on linkedin.com

73. Slide 72 www.jit-technologies.com THE (NOT SO FAR OFF) FUTURE OF BPM The Business Value of BPM

74. Slide 73 www.jit-technologies.com The value of BPM grows in the future:  By 2012, 20 per cent of customer-facing processes will be knowledge-adaptable and assembled just in time to meet the demands and preferences of each customer, assisted by BPM technologies.  By 2013, dynamic BPM will be an imperative for companies seeking process efficiencies in increasingly chaotic environments.  Through 2014, the act of composition will be a stronger opportunity to deliver value from software than the act of development.  By 2014, business process networks (BPNs) will underpin 35 per cent of new multi-enterprise integration projects.  By 2014, 40 per cent of business managers and knowledge workers in Global 2000 enterprises will use comprehensive business process models to support their daily work, up from 6 per cent in 2009. Source: Gartner, Five Business Process Management Predictions, January 2010

75. Slide 74 www.jit-technologies.com BPMS trends  Dynamic Case Management  Adaptive  Real-time Process Guidance  Social Dynamic Case Management Wave

76. Slide 75 www.jit-technologies.com QUESTIONS? www.jit-technologies.com www.agileelements.com jon@jit-technologies.com ABPMP Feb 24, 4:30 location TBD