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1 The Role of the CIO and IT in the Matter of Process Improvement Tom Coleman, CBPP Chief Information & Process Officer Process Owner, Strategic Planning ABPMP Chicago Meeting Sears Holding Corporation 3333 Beverly Road Hoffman Estates, IL October 14, 2010

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2 ABPMP Agenda Sloan introduction Strategic issues Role and position of process BPM toolkit / methodologies Role of IT Results

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3 Sloan Company Overview 104 year old company Privately held, mid-sized Mfr. of specialized plumbing products Primary System: Enterprise Applications

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4 Major Sloan Locations Illinois (HQ, Design Center, Mfg, DC) China (Design Center, Mfg) Arkansas (Foundry) Massachusetts (Design Center, Mfg) Michigan (Design Center, Mfg) Mexico ( Mfg, DC) California (DC) Pennsylvania (DC) Regional Offices

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5 Sloan Products

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6 ERP Success Distribution Degree of Success 1 2 3 4 5 6 7 8 9 10 Number of Companies Bell Curve X

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7 ERP Success Distribution ( bi-modal curve) Degree of Success Interpreted from a drawing done by Dr. Hammer in February 1998 1 2 3 4 5 6 7 8 9 10 Number of Companies Functional Focus Process focus

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8 2002 Process Direction at Sloan Sloan drivers during 2002 strategic planning 1. E asy T o D o B usiness W ith (ETDBW) 2. Focus on customers and outcomes 3. Define goals in customer terms 4. See work in end-to-end terms (processes) 5. Focus beyond continuous improvement to process design 6. Use metrics for improving, not just accounting 7. Form a collaborative, team-based organization 8. Think outside the box 9. Embrace a vision beyond enterprise boundaries 10. Continuously learn Move towards becoming a lean process enterprise An enterprise in which all work is thought of, designed, performed, and managed as process work by everyone.

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9 NPDI New Product Development Process DGP Demand Generation Process STP Source-to-Pay Process OAP Order Acquisition Process OTC Order-to- Cash Process SPP Strategic Planning Process EPM Employee Performance Mgt Process GQA Global Quality Assurance Process S&OP Sales & Oper Planning Process MDM Master Data Mgt Process ECM Engineering Change Mgt Process PCM Shop Process Change Mgt Process CSP Customer Support Process AOP Annual Operating Plan (Budget) Process BPM Business Process Mgt Process Strategic Governance Process Governance Processes Core Processes Enabling Processes 2002 Sloan Enterprise Process Model W WW

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10 The Proliferation of Change Initiatives and Programs M&A BSC Reengineering SoPK

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11 Sloan Lesson Outbound Logistics Sub-process Order-to-Cash Order Acquisition New Product Dev Customer Support Demand Generation Strategic Planning Engineering Chg Mgt Master Data Mgt Plant Maintenance Employee Perf Mgt Procure-to-Pay Sourcing Business Process Mgt

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12 Sloan Lesson Outbound Logistics Sub-process Order-to-Cash Order Acquisition New Product Dev Customer Support Demand Generation Strategic Planning Engineering Chg Mgt Master Data Mgt Plant Maintenance Employee Perf Mgt Procure-to-Pay Sourcing Business Process Mgt 12 Processes 6 Sub-processes each (avg.) 72 sub-processes ------------------------------------------------- 5 months dev each (avg.) ------------------------------------------------- 360 month effort (1 team) 30 years of work (1 team)

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13 Do we believe the only way to reach a global optimum is by insuring local optimums? Source: E. Goldratt

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14 Sloan Process Struggles The sum of the local optimums is NOT equal to the global optimum (Eliyahu Goldratt) Incrementalism is innovations worst enemy (Nicholas Negroponte) Chronic good enough incremental investments deteriorate long-term market position (Gartner)

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15 Innovation is the transformation of a business process, market offering, or business model to boost value and impact for the enterprise, customers, or partners. Forrester Research

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16 So What Kind of Change is Needed? CEOs thoughts on change 13% see little change 22% see moderate change 65% see significant change Sloan executive: Transmogrification! How successful are you at change? 15% very successful 32% successful 33% some success 20% little or no success or no experience Source: IBM 2006 survey

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17 Order To Cash Prospect to Order Product Development (NPD) Goals Strategy Objectives Customer Support Old and New Wheels of Competitive Strategy 1980 Source: Michael E. Porter (Competitive Strategy) 2005 Source: T. Coleman Goals Strategy Objectives Finance MfgMktg Sales Service HREngineering Other 1980 2005 Functions

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18

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19 BPM is a management discipline that treats processes as assets that directly drive enterprise performance through operational excellence, business agility, and strategic differentiation. What is BPM at Sloan?

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20 NPDI New Product Development Process DGP Demand Generation Process STP Source-to-Pay Process OAP Order Acquisition Process OTC Order-to- Cash Process SPP Strategic Planning Process EPM Employee Performance Mgt Process GQA Global Quality Assurance Process S&OP Sales & Oper Planning Process MDM Master Data Mgt Process ECM Engineering Change Mgt Process PCM Shop Process Change Mgt Process CSP Customer Support Process AOP Annual Operating Plan (Budget) Process BPM Business Process Mgt Process Strategic Governance Process Governance Processes Core Processes Enabling Processes 2002 Sloan Enterprise Process Model W WW

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21 DGP Demand Generation Process OAP Order Acquisition Process STP Source-to-Pay Process OTC Order-to- Cash Process CSP Customer Support Process SPP Strategic Planning Process EPM Employee Performance Mgt Process BPP Business Planning Process QAP Quality Assurance Process S&OP Sales & Oper Planning Process MDM Master Data Mgt Process ECM Engineering Change Mgt Process PCM Shop Process Change Mgt Process NPD New Product Development Process AOP Annual Oper Plan Process BPM Business Process Mgt Process Strategic Process Governance Processes Core Processes Enabling Processes 2010 Sloan Process Model

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22 Integrated Processes (S&OP Example) Strategic Planning Process Order-to-Cash Source-to-Pay Processes Demand Gen. Order Acquisition Customer Support Processes New Product Development Process Business Planning Annual Op Plan Processes Org Design Chg Mgt Recruiting/On-brd Processes Sales & Operations Planning Process

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23 Process Design Process Implementation Process Improvement BPM Business Process Management (Process Lifecycle Mgt) Monitor & Measure

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24 The BPM Toolkit SoPK BSC

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25 Business Process Management (BPM) Process Lifecycle Management Process Redesign Sustaining Improvement Process Redesign Process Improvement

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26 LEVEL 0 DIAGRAM VERSION

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27 Process Out of Control (May require SI/CI)

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28 Process In Control (May require redesign) Process is in control but is not close to delivering the desired performance

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29 LEVEL 0 DIAGRAM VERSION

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30 Sloan Business Process Design (AKA BPR: Business Process Design/Redesign) Symptoms, diagnosis, cure, treatment

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31 Sloan Levers of Transformation Integrated with Sloans Strategic Plan Process Redesign or Improvement Policies, Rules, Procedures Computing & Technology Organization Structure Change Management Roles & Job Changes Paradigm Shifts Communications Knowledge Facilities

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32 LEVEL 0 DIAGRAM VERSION

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33 A Continuous Improvement Process (Incremental / Sustaining Improvement) Define Problem Measure Problem Analyze Problem ImproveControl From BPM Process D M A I C (other tools TOC, PDCA, Lean, etc.) Ad hoc Improve- ment

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34 Summary Improvement Types Process Design / Redesign End-to-end process focus; pieces in context Use the as-is process to understand not improve Focus is on new process design (to-be) Tops down process decomposition Is always strategic Sustaining Improvement Focus on pieces of an end-to-end process Use the as-is process to zoom in on problems Focus is on root cause analysis & problem solving Bottoms up work Often is not strategic

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35 16 Best Practices for BPM 1.Strategy drives process 2.Focus is operational excellence and strategic differentiation 3.Strategy, process, resources, lead & lag metrics are aligned 4.Process design is end-to-end and delivers the value proposition 5.Zoom in to improve; zoom out to design 6.Methods used for improvement & design differ 7.A toolbox of change and process methods is used synergistically 8.For transformation, all the levers of holistic change are engaged 9.Functions are morphed horizontally to be process friendly 10.VPs have Executive Process Owner (EPO) responsibilities 11.Powerful Process Owners are key leaders 12.A Process Transformation Office is formed with BPM governance 13.A Process Council of top executive lead 14.The best and brightest are on process teams 15.Time is taken during process work for learning & growth 16.Dont implement systems; implement processes

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36 Emerging Role of the CIO and IT

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37 CEOs Greatest Concerns Source: The Conference Board -- 2006 Survey of 658 CEOs and Chairmen

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38 CIO Survey Says Greatest impact areas 1. Improving Business Processes 2. Reducing enterprise operating costs 3. Increased use of information/analytics 4. Improve workforce effectiveness 5. Attracting and retaining new customers 6. Managing change initiatives 7. Creating new products and services 8. Targeting customers and markets 9. Consolidating business operations 10. Expanding customer relationships 11. Supporting regulation and compliance 12. Creating new sources of competitive advantage Source: Major Technology Research Company 2010

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39 Support corporate strategy and the customer value proposition by helping to design, develop, and deliver world-class, inter-enterprise business processes and support technologies Sloan IT Vision Drive CEO Update:

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40 IT Roles at Sloan 2000 --- Business Need --- IT viewed as ineffective 2000 Traditional IT Process Improver Process Innovator Entrepreneur Automation Continuous Improvement Process Redesign Breakthrough Innovation IT Role:

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41 IT Roles at Sloan 2003 --- Business Need --- IT viewed as nuisance By some execs 2003 Traditional IT Process Improver Process Innovator Entrepreneur Automation Continuous Improvement Process Redesign Breakthrough Innovation IT Role:

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42 IT Roles at Sloan 2004 --- Business Need --- Traditional IT Process Improver Process Innovator Entrepreneur Automation Continuous Improvement Process Redesign Breakthrough Innovation IT Role:

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43 Desired IT Role from Sloan CEO --- Business Need --- Traditional IT Process Improver Process Innovator Entrepreneur Automation Continuous Improvement Process Redesign Breakthrough Innovation IT Role:

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44 Conventional System Development Vs. Process Design Development Conventional Project Preparation Business Blueprint Realization Final Preparation Go Live & Support Sloan Process Design Mobilization Diagnosis Design Development Implementation Post Implementation Focus: -No change mgt -As-is process improved -Automation -Limited learning -No org and job changes -Low ROI -Functionally focused team -Functional bosses rule Focus: -Massive change mgt -As-is process replaced -Innovation fully engaged systems -Extensive learning -Org and job changes -High ROI -Customer focused team -Customer is the boss

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45 IT Considerations Tools alone do little to help the organization An IT organization can gain high process credibility by removing technology as THE major discussion point IT is usually knowledgeable about whats possible Often IT is the only function that sees across the entire enterprise The value of IT is proportional to how integrated company systems are to core processes in support of the value proposition IT should not define itself by its tools

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46 IT Must Dos IT must have its technical house in order IT must step out of traditional roles IT must understand the change imperative whether it is implicit or explicit IT must free itself from keeping the lights on and other incremental work IT must connect the appropriate methodology to the change imperative (e.g., process improvement, process design, PMO, CM, etc.) In many organizations, IT must become process management leaders

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47 IT Transformation CPO?CIO CIPO Version 3: ? BT: Business Technology is a term first used by Forrester Research

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48 IT Transformation CPO?CIO CPO? Version 3: ? BT: Business Technology is a term first used by Forrester Research

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49 If you are going to be successful with SAP you need to forget about SAP. Tom Coleman 1996

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50 Sloan Process Design Update 2004 Strategic Planning Process (SPP) Master data Management Process (MDM) Engineering Change Management Process (ECM) 2005 New Product Development Process and Introduction (NPDI) 2006 New Product Development Process and Introduction (NPDI) Tool Management Process (TMS) 2007 Customer Support Process (CSP) (Phase 1) Employee Performance Management Process (EPM) (Phase 1) 2008 Global Quality Assurance Process (gQA) Order-To-Cash Process (OTC) Order Acquisition Process (OAP) 2009 Sales and Operations Planning Process (S&OP) Source-To-Pay Process (PTP) 2010 Demand Generation Process (Planned) Innovation Process (IP)

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51 Sample Sloan Process Results Strategic Planning Process (SPP) Generic strategy discussions to a full mgt process with the BSC Employee Performance Mgt (EPM) SPP driving goals & appraisal throughout the company Customer Support Process (CSP) XX% call abandon rate reduced to X% New Product Development (NPD) Multi-stage NPD with development silos eliminated to co-located teams with stage-gates Order Acquisition Process (OAP) Automate pricing/approvals; reworked credit process Quality Assurance Process (QAP) Sigma/COQ levels; BPR/CI processes designed & deployed Master Data Mgt (MDM) XX day SAP MDM loads to