OCEB2F 02 Business Process Concepts and Fundamentals

Module 2. Business Process Concepts
and Fundamentals⌘

Source of Information⌘

Laury Verner, The Challenge of Process Discovery, BPTrends, May 2004

• http://www.bptrends.com/publicationfiles/05-04%20WP%20Process%20Discovery%20-%20Verner1.pdf

Bruce Silver, Three Levels of Process Modeling with BPMN, BPMS Watch, April 2008.

• http://brsilver.com/three-levels-of-process-modeling-with-bpmn/

Source of Information⌘

	Howard Smith & Peter Fingar, Business Process Management: The Third Wave, Fourth Anniversary Edition, Meghan-Kiffer, 2007 [ ISBN-10: 0929652347 ]
	Martyn Ould - Meghan-Kiffer, Business Process Management: A Rigorous Approach, 2005 [ ISBN-10: 0929652274 ]
	James F. Chang, Business Process Management Systems: Strategy and Implementation, 2005 [ ISBN-10: 084932310X ]

Fundamental aspects of Business Processes⌘

• BPM as a management philosophy has been discussed since 1990s.
• Several management principles are associated with BPM. Most of these concepts are identical to BPR and TQM concepts.
• BPM's first principle is: processes are assets that create value for customers (Chang)
  • Functions or individuals do not produce value for customers (e.g. sales function).

Process Characteristics⌘

• Characteristics of business processes
  • Have customers
  • Properly designed processes reflect how a business executes its business
• Core processes and processes that generate the most value to customers should be managed and continuously improved
  • Management of a process involve measuring, monitoring, controlling and analyzing.
• IT is an essential enabler - provides real-time processing information that is important to monitor and control business processes.
• Processes have their origin in the industrial engineering discipline. Originally considered to improve manufacturing and logistics functions.

Business Processes⌘

• Part of the focus of Process Analysis arises from complexity
• Organization Complexity
  • Condition of having many diverse branches and autonomous but interrelated and interdependent components or parts linked through many interconnections. In the context of an organization, complexity is associated with
    • (1) interrelationship of the individuals,
    • (2) their effect on the organization, and
    • (3) the organization’s interrelationships with its external environment.

BP Definition⌘

Fingar and Smith's "Third Wave" BP definition:

• A business process is the complete and dynamically coordinated set of collaborative and transactional activities that deliver value to customers.

Characteristic of Processes⌘

• Large and complex, involving the end-to-end flow of materials, information and business commitments
• Dynamic, responding to demands from customers and to changing market conditions.
• Widely distributed and customized across boundaries within and between business, often spanning multiple applications on disparate technology platforms.
• Long-running – a single instance of a process may run for years
• Automated – at least in part. Routine or mundane activities are performed by computers wherever possible, for the sake of speed and reliability
• Both "business" and "technical" in nature – IT processes are a subject of business processes and provide support to larger processes involving both people and machines. End-to-end business processes depend on distributed computing systems that are both transactional and collaborative

The Third Wave⌘

• Fingar and Smith created a breakthrough in the way information systems are designed and implemented.
  • Transforming the processes they automate and replacing the re-engineering revolution
  • Pioneering companies are building the agile enterprise
• The goal is to become High Performance Organization (HPO)

Three Waves of BPM⌘

	Fredrick Taylor's (1920's) theory of management, processes where implicit in work practices and not automated
	BPR (1990's) aimed to help organizations fundamentally rethink how they do their work in order to dramatically improve customer service, cut operational costs, and become world-class competitors
	BPM (2003) - processes are the fundamental building blocks that have been hidden, now they must be made visible, explicit and transparent to all stakeholders, so they can be improved and optimized

Third wave processes are:

• First-class citizens in the world of automation
• Managed and controlled
• Change is the goal, the ability to change is far more prized than the ability to create in the first place

Process Centric Organizations⌘

Functional vs Process Centric Focus⌘

Functional vs Process Centric Focus⌘

	Functional Organization	Process Organization
Work Unit	Department	Team
Key Figure	Functional Executive	Process Owner
Benefits	Functional excellence Easier work balancing because workers have similar skills Clear Management direction on how work should be performed	Responsive to market requirements Improved communication and collaboration between different functional tasks Performance measurements aligned with process goals

Functional vs Process Centric Focus⌘

Weaknesses	Barrier to communication between different functions Poor handover between functions that affects customer service Lack of end-to-end focus to optimize organization performance	Duplication of functional expertise Inconsistency of functional performance between processes Increase operational complexity
Strategic Value	Supports cost leadership strategy	Supports differentiation strategy

Quiz⌘

Select sectors which in your opinion are process oriented and which functional focus?

• Insurance
• Banking
• Public sector
• Manufacturing
• Financial
• Telecommunication
• Cars

Function vs Process Organizations⌘

Organizations with a strong process-focus are different than a functional organization

• Process orientation is used in insurance, financial services and others
• Functional orientation is still present in services, small enterprises and other companies

Identifying (Discovering) business processes⌘

• Why does process discovery presents a challenge?
• A mistaken assumption: companies know how their business processes work.
  • Process knowledge is often tacit i.e. 'in the minds of the participants'
  • Participants have a local view of the process. No one has an end to end, global view of the process.
  • Laury Verner's Definition of Process Discovery is to 'transform the organizational understanding of current business process from tacit or implicit to explicit. An explicit process will communicate the structure and details of business processes in such a way, that everyone can understand them and make appropriate decisions.'

Discovery Roles⌘

• Subject Matter Expert (SME) - the source of information about the process (business manager, worker on the front line, who performs process tasks day after day, an IT professional, especially when the process is heavily automated)
• Sponsor - business executive deciding process scope and the goals. Explains the current business problems, identifies processes that need to be discovered, and establishes the timetable for the overall project.
• Analyst - person with engineering or IT background, responsible for compiling, organizing, analyzing, and presenting the information gathered from the SME’s.

Approaches to Process Discovery⌘

Discovery sessions can be approached in different ways

• Centralized or Distributed
• Top-down or Bottom up
• Free form or Structured

Centralized or Distributed⌘

• Centralized: Analyst assembles multiple Subject Matter Experts (SME's) together for a series of workshop sessions.
• Distributed: Analyst obtains information from SME's in a separate discover sessions. The Analyst captures a series of “process fragments,” which are portions of an entire end-to-end process.

Top-down or bottom up⌘

• Top down: start with large scale processes and divides them into smaller scale processes
  • Example: Start with the "Order to Cash" process and decompose it into a series of constituent processes (Manage Customer Contact, Enter Order, Process Order, Bill Customer, and Receive Payment)
• Bottom up: The SME's offer information about their process responsibility, analysts gather this local information and assemble it into a process context.

Free Form or Structured⌘

• Free Form: SME's informally describe the processes, its issues examples, war stories, etc.. After the raw information is captured, the analyst will structure this information into visual diagrams and written document.
• Structured: the SME responses to a pre-defined set of questions, structured and organized to ensure consistency.

Process Discovery Example⌘

In a process discovery project, experts complete a adobe form, built by the analyst, with attributes and question that define of each activity they know. How is this approach classified according to Laury Verner?

Output of Process Discovery⌘

• The purpose of discovery is to provide insight into the underlying business problems that motivated the discovery
• The outcome is the foundation for a diagnosis of the 'As-is' processes and as a basis for the design of the 'To-be' processes
• From the knowledge base generated in discovery we need to create work products
• The two most important types are visualization work products (diagram) and analysis work products (job description, etc..)

More... The Challenge of Process Discovery, Laury Verner

Process Discovery Output⌘

• The Process Space
• Process Topology
• Process Attributes

Process Space⌘

• We do not generally conduct discovery in order to discover a single process
• A high-level value chain like “produce a match” is really a complex network of interrelated processes
• It is important to understand the ways that processes feed one another.
  • For example, the order management process feeds data to the billing process
• The discovery requirement is therefore to identify all the relevant processes and to understand their integration points
• One effective way to organize processes is to create a hierarchy
• In this way, higher level processes can be decomposed into lower level processes, in a series of layers
• At the lowest layer of the hierarchy are the activities - individual process steps that are not decomposed

Process Topology⌘

• We first must know the individual process steps or activities
• Second, we need to know the shape of the process i.e. the flow logic: process entry and exit points, sequential flow of activities, decisions, forks and joins.
• This information is essentially visual and we need a visual rendition to understand the topology

Process Attributes⌘

• It is important to understand the detailed attributes of the process and the attributes of each activity in the process
• Without this information, it is impossible to perform simulation or to create analytical reports

Process Attributes⌘

Examples of attributes of the process as a whole:

• Process Owner: Who is the business owner of the process?
• Purpose: What is the ultimate purpose of the process?
• Customer: On whose behalf is the process performed?
• SME: What is our source of information for the discovery?

Process Attributes⌘

Examples of attributes of each activity in the process:

• Roles: Who performs the activity?
• Resources: What tools are used?
• Data: What data structures does the activity consume and produce?
• Duration: What is the touch time and total time of the activity?
• Description: What is done in the activity?
• Rules: What business rules govern the performance of the activity?
• SME: What is our source of information for the discovery?

Levels of BPMN Process Modelling
(Bruce Silver)⌘

• Descriptive modeling
  • Abstract, high-level, simple to communicate across the organization
  • Requires understanding of fundamental concepts such as pools and lanes, tasks and subprocesses and sequence flow, not the complexities of BPMN's various flow control and event patterns
• Analytical modeling
  • More details, showing all the steps, including the exception paths required to analyze process performance using simulation or to create details requirements for an IT implementation. Requires understanding of BPMN's various decisions and merge patterns, event and exception handling patterns. Hierarchical representation of the end to end business process

Levels of BPMN Process Modelling
(Bruce Silver)⌘

• Executable modeling
  • BPMN is a part of the executable process implementation. Imposes many validation constraints.
  • Modeling at this level is somewhat vendor tool-dependent.

More: Bruce Silver, Three Levels of Process Modeling with BPMN, BPMS Watch, April 2008.

Levels of Modelling (BPMN Spec)⌘

• Processes (Orchestrations):
  • Private (internal) business process
    • Internal to a specific organization, similar to workflow
    • Two types of private Processes: executable and non-executable.
  • Public process
    • Represents the interactions between a private business process and another process or participant.
    • Only those Activities that are used to communicate to the other Participant(s) are included in the public Process.
• Collaboration
  • Depicts the interactions (messages exchanges) between two or more business entities.
  • A Collaboration usually contains two or more Pools, representing the Participants in the Collaboration.

Levels of Modelling (BPMN Spec)⌘

• Choreography
  • A Choreography is a definition of the expected behavior, basically a contract, between interacting Participants.
  • While a normal Process exists within a Pool, a Choreography exists between Pools (or Participants).
• Conversation
  • A Conversation is a logical grouping of Message exchanges.
  • It is a particular usage of a Collaboration diagram.

Example of Private Business Process⌘

Example of Public Process⌘

Example of Collaboration⌘

Example of Choreography ⌘

Example of Conversation ⌘

Tying Business Processes to Goals and
Objectives⌘

• Processes are there for a reason
• Example Goals
  • Deliver a product
  • Provide a covered medical benefit to a patient
  • Manage a research budget
• Process models must show how it is achieving the goals set for it, and the points in the processes where those goals can be said to have been achieved or maintained
• Identify point in the activity of a particular role where the state of the process is 'goal achieved'
• Process Goals are not steps or activities or decisions
• Martyn Ould's example: A process for handling a reported credit card loss, once there has been an interaction with the customer in which the latter has been sent a new credit card, the goal Client has been sent replacement credit card has been achieved.

Point-wise vs Steady state Goals⌘

Two types of goals: point-wise goals and steady state goals

• Point wise are the goals of the process with respect to a user, customer or stakeholder
  • Example: Prepare a quote
• Steady-state goals are continuous, metric objectives over a number of process instances or all the process instances
  • Example: 80% of quotes are prepared in less than 15 min

Module 2. Questions⌘

• What are the two types of goals?
• What is the difference between Functional and Process Centric Organization?
• How many Levels of BPMN Process Modelling do we have?