What is BPM?

The importance of BPM in a fast changing business environment

Introduction
Businesses worldwide are under increasing pressure from fierce competition, a fast-changing business environment and more demanding customers. There are three trends that contribute to this pressure:

• globalization means that we have to compete with companies from across the world who are electronically connected to our markets – the old barriers of country and geography are being removed;
• the rate of change - technological change, legislative and regulatory change, innovation in services and products - is accelerating, forcing organisations to become more agile and flexible;
• in order to compete we need to automate high-value processes like ‘new product introduction’, but these types of knowledge-intensive process are hard to automate.

All of these pressures have encouraged a new interest in analyzing how businesses can operate more flexibly and effectively. Business Process Management (BPM) is emerging as the preferred approach to achieving corporate agility and efficiency. BPM combines a management approach and supporting technology that can transform an organisation’s performance. This article explains why BPM is essential to developing an agile business that can thrive in today’s fast changing business environment.

What is BPM?

What is BPM?
Since the beginning of the industrial age we have been analyzing how work can be more effectively carried out. With Business Process Reengineering (BPR) and Total Quality Management (TQM) in the 1990s managers began to analyse their businesses in terms of their core business processes – the sequence of human and system activities required to complete a business goal such as procurement. The goal was to understand how processes could be designed to be more effective, with less redundancy.

To illustrate a common business process, we can use procurement as an example. Procurement usually starts with someone identifying a product or service they wish to purchase and then filling out a Purchase Order. This order is then passed to their supervisor for approval before being sent to the finance department. Finance orders the good or service from the supplier, and subsequently matches the order with a supplier’s invoice and pays for the purchase when the good or service has been delivered.

This helps us provide a more precise definition of a business process. A business process describes the flow of work around an organization. It describes how tasks are structured, who performs them, their sequencing, how long they take and what information is required to complete them. Operating a successful business depends on well designed and well executed business processes.

Over the last forty years there has been huge investment in automating business processes, initially through writing specific software applications for functions such as payroll processing, and then through acquiring commercial products such as ERP (enterprise resource planning) systems. These systems can fully automate a process that is restricted to a particular business unit (e.g. the finance or HR department) but when a process runs across a number of departments, with different reporting lines, and where a lot of human intervention is required, the automation is usually poor, with manual hand-offs, duplicate data entry and other inefficiencies.

Another serious drawback with standard software packages is that the business logic for the process is embedded in the software application – it is not easily visible to the owners of the business. Sometimes only the IT staff fully understand how key company processes are organised. To make a change to your business process, you have to ask the software vendor to change their product, or else ask your IT department to write custom software code. This means that businesses are forced to invest time and money in making expensive changes to their systems or else their staff are forced to compromise, changing how they carry out their work to fit the capabilities of their systems. The business processes are inflexible because of the difficulty and time required to change the software applications that support them.

Business Process Management addresses these issues. It builds on the best analytical and management techniques developed from BPR and TQM, and marries these to newly available technologies which can be used to overcome the old inflexibility. BPM is a structured approach to analyzing, automating and continuously improving an organization’s processes.

The Elements of a BPM Solution
Typically the Business Process Management lifecycle has four elements:

• analysis and modelling of the current and desired business processes;
• automation of those process models;
• monitoring the performance of the automated processes and
• subsequently optimizing these processes.

A BPM improvement programme looks at business processes from their initial design, through to their automation, performance monitoring and ongoing optimization. New business process products, called Business Process Management Suites (BPMS), provide tools for graphically modelling and improving end-to-end business processes, including where those processes interact with existing systems.

Process analysts analyze the current business processes, looking at the flow of work, how IT is used to support the process, the motivation of staff, the physical environment in which work takes place, the roles, organisation structure, skills and training of staff, and the policies and rules within the organisation. Using graphical process models the analysts optimize the process design, looking for unnecessary manual steps, duplicate entry into multiple systems, unclear lines of responsibility and steps carried out in sequence that can be executed in parallel. They also focus on ways to prevent errors occurring in the process (“right first time”) to reduce time spent on fixing problems after they happen. Finally, they specify target performance levels (in terms of cost, effort and milestones).

The BPM Suites do not simply document how you would like your business to run with graphical flow charts. Once the process model is complete, it can be deployed to a process automation engine for interpretation i.e. the model is executable, to use a technical phrase. The process automation engine takes the process model, interprets and then orchestrates the actual process, pushing work tasks to people and to systems, streamlining how the processes run across your entire organisation.

Next, as the new business processes begin to operate within the organisation, BPM suites provide a Business Activity Monitor to enable managers to monitor the ongoing performance of their processes. Key Performance Indicators (KPIs) are defined and the Business Activity Monitor gathers information on the selected metrics. Most of these monitors can display performance information in real-time through graphical dashboards. Operational managers can quickly identify bottlenecks and drill-down to the causes of any performance problems.

Finally, having modelled, automated and monitored the business processes, a full BPM solution will also provide an Optimization component, that helps to continuously improve how a process performs, by changing process attributes to ensure more efficient execution. Usually the Optimization component has two aspects – it can suggest optimizations to your processes during operational execution (‘runtime’), e.g. by routing a backlog of tasks to another location or department; and it can suggest longer-term improvements to the overall process design based on observing the performance of a process over time e.g. remove a path in a process that is only executed less than 1% of the time.

Why is BPM Important to Achieving Agility?
Gartner Research defines Agility as “the ability of an organization to sense environmental change and to respond efficiently and effectively to that change. In practice, agility is about rapid access to information (both internal and external to the organization) that drives real-time actions.” BPM delivers on the promise of achieving corporate agility.

• Firstly, by making business processes explicit (as easy-to-use graphical models), business owners now own the process. For the first time they can view their business processes and change them directly – the business rules and logic are no longer hidden inside software applications, and process flows are no longer controlled by computer programmers.
• Secondly, because changing the process model equates to a change to the executing business process, managers can rapidly and frequently change how their organizations operate. This speed of change is simply not possible when business process logic is embedded in standard software products.
• Thirdly, BPM technology provides managers with a real-time picture of how their company operates and the ability to react quickly to that information. There are no longer significant delays in understanding where a particular process is underperforming or where key activities are running over-budget or over time – you now see this graphically as it occurs. This enables organizations to flexibly and effectively react to changing circumstances, rather than being locked in to a predefined execution path.
• Fourthly, BPM technology enables organizations to automate those processes that have previously resisted automation – knowledge centric processes, where there is a great deal of human discretion and involvement, where decision paths are unpredictable at design time and where a lot of collaboration is required. Arguably these processes can only be tackled with a BPM approach, and arguably these are the processes (such as new product design, customer service management) that potentially provide the greatest competitive value.
• Finally, BPM enables organizations to leverage their existing investment in IT systems. BPM suites sit as a layer above existing systems, combining them and orchestrating them in new ways that lets business prolong the lifetime of their IT assets and extract greater value from them.

In summary, businesses everywhere are having to compete more aggressively while adapting rapidly to change. To succeed, organizations will have to become both more efficient and more agile. BPM provides the best, and possibly the only, approach to achieving the kind of agility that is required.