8:05-9:00

Making Process Real –Engaging the CXOs

Alec Sharp, Consultant and

Founder, Clariteq Systems

Consulting Ltd

Keynote presentation

Making Process RealEngaging the ExecutiveJuly 28, 2010 – Sydney, Australia

Alec SharpConsultantClariteq Systems Consulting Ltd.West Vancouver, BC, Canadaasharp@clariteq.comwww.clariteq.com www.twitter.com/alecsharp

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MakingProcessReal Facts and assumptions

The facts:I’ve spent many years working with “process” –often with people who don’t know, don’t want to know, or actively dislike it– many were C-level executives– I’ve learned a few things about how to bring them around.

The assumptions:– You’ve read the speaker bio– You’d prefer I just get on with it

So let’s dive in with three baseline ideas…

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MakingProcessReal

Workers –

It’s a horror film:

“My Incredible Shrinking

Employment Prospects!

Executives –It’s a ransom note from expensive consultants!

Managers –I have hundreds, and I don’t need any more!

1 – They might not love “process” as much as you do

“Process”

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MakingProcessReal Lots of evidence of fear of “process”

* not a nicecomparison

Downsizing and Reengineering:Corporate Lobotomy*

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MakingProcessReal Six Sigma in particular faces a backlash

JUNE 11, 2007

Inside:Six Sigma: So Yesterday? In an innovation economy, it's no longer a cure-all

The cover:3M’s Innovation Crisis: How Six Sigma Almost Smothered Its Idea Culture

A CEO I worked with:“I want to disband the Six Sigma group. They think the whole company is just a data collection mechanism being run for their experiments.”

Many other articles on six stigma

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MakingProcessReal 2 – Making the business case for BPM may not work

Benefits of BPM – the usual suspects

1. Reduce costs and increase efficiency(The perennial #1)

2. Improve customer service

3. Increased responsiveness

4. Regulatory compliance

BUT…

1. _________________________________________

2. _________________________________________

Fill in the blanks – why not promote BPM with these claims?

Every other discipline makes the same claims…

… so nobody believes you anyway.

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MakingProcessReal

“First, we need executive commitment…” – False!

Later, you need executive commitment, but it doesn’t start there.

Key elements:

• Examples are good, stories are better – start collecting!

• Simple visuals everyone can use to support their message

• Consistency and repetition

3 – You won’t start at the top

Mid-level –present compelling idea

or information

BP initiatives

Executive –“We need to

do this!”

BP initiatives

BP initiatives

Support!

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MakingProcessReal Executive interest – three to five key points

1. It’s essential to have clarity on what a business process really is

2. Existing performance measures are often functionally aligned and work against business processes

3. Success with business processes dependson taking a holistic view in which six enablers are considered

4. Enterprise system implementations must include a business process perspective

5. Business processes can’t be great at everything – a single differentiator or strategic discipline should be chosen

must cover

pick and choose

Whatever you do…Don’t preach,

don’t overreach

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MakingProcessReal 1 – What is a business process?

An “end-to-end, cross-functional, business process” is larger than most people expect when they think of “a process.”

Key point:Different process professionals will have very different ideas of what a process is:• Six Sigma• ISO 9001• Lean• Business Process Management (that’s us!)

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MakingProcessReal Process – the elephant in the room

It’s a PROCESS!

The problem – “process blindness”

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MakingProcessReal

end-to-end process: Fulfill Order

Different perspectives on “business process”

Logistics process

Sales process

A/Rprocess

Six Sigma –focus on defects and variation in “our lithography process”

Manufacturing process

Lean practitioner –focus on flow within in “ our fabrication process”

Functional perspective –focus on internal efficiencies in “ our manufacturing process”

Business Process Management –end-to-end alignment of “ our Fulfill Order process”

Fabrication Assembly

Packaging&

Labeling

litho

ISO 9001 –focus on documenting procedures in “our custom labeling process”

Procedure:This contains a lot of tiny tiny text that’s really much too small to ever be read by mere mortals. It describes a procedure for completing some minor task in a process. And, it goes on for a surprisingly long time, while I try to fill this silly little box just to make a point. Maybe I should have found some clip art of a book, or some such. But, it’s late and I just want to get this done!

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MakingProcessReal Does it matter? Yes!

IdentifyProspect

QualifyProspect

SolicitProspect

One process: Acquire Customer

IdentifyProspect

SolicitProspect

QualifyProspect

etc.

At a Financial Services company,important activities were seen as separate processes

Rewarded for number of prospects

Expected to contact allprospects

Rewarded for long-term viability

of client

Sequence, metrics, and rewards worked against the sales funnel.

Rewarded for high-quality

prospects

Identify likely prospects,

good fit

Smaller number of prospects, more time to tailor solicitation, higher conversion rate

Process and metrics supports sales funnel.

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MakingProcessReal An example for your repertoire – part 1

Telephone company needs to improve its Service Provisioning processes

Service Order

Managementprocess

FacilitiesManagement

process

Service Assurance

process

Installationprocess

Customer Updateprocess

• “Service Provisioning” – “ins”, “outs”, “moves” (install new service, disconnect service, relocate service)

• Five “processes” misidentified, five teams get started on “process” improvement –the directive is to “achieve operational efficiencies”

• Each team makes substantial improvements to efficiency in their “process,” largely through new constraints like batching and scheduling of orders

The outcome…? Service is worse! Financial impact! What went wrong?

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MakingProcessReal An example for your repertoire – part 2

Three errors – vague process naming, confusing proce ss with organization, and not focusing on what the client actually wanted fro m the triggering event

Customer Service

Network Monitoring

Installation&

Repair

Customer Records &

Billing

Facilities Management

Process: Move Telephone Service

Capture Service Order

Confirm Service Quality

Install Premise

Equipment

Activate Customer Account

Assign Network Facilities

Process: Move Telephone ServiceTrigger:Customer wants telephone service moved.

Customer result:Telephone service is moved

Telco result:Active account with receivable posted

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MakingProcessReal 2 – Cross-functional issues

The performance goals of the functions (divisions, departments, …) that participate in a business process usually conflict with the goals of the business process (if process goals are stated at all)

Key points:• A “process vs. function” diagram clearly

shows the different perspectives • A business process needs an owner to

rationalize the competing objectives

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MakingProcessReal Cross-functional and human issues

Wherein we introducethe perverse incentive,

the unintended consequence, and their ramifications

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MakingProcessReal Unintended consequences – are they the law?

In the introduction to Levitt and Dubner’s latest…

“Was there a theme to Freakonomics?”

“…the book did have a unifying theme, even if it

wasn’t obvious at the time, even to us.”

“People respond to incentives, although not

necessarily in ways that are predictable or manifest.

Therefore, one of the most powerful laws in the

universe is the law of unintended consequences.”

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MakingProcessReal Anticipating the unanticipated

“What we've got here is failure to communicate...”anticipate…”

“Unintended consequences”

are most often a failure to anticipate.

There are techniques and frameworks that help.

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MakingProcessReal A true story of Function vs. Process

Logisticsgoal:lower

shippingcosts

Salesgoal:

late-quartersales

A/R goal:

precision in collections

Manufacturinggoal:

maximize machine

utilization

Sales Manufacturing Accounts Receivable

Logistics

Process: Fulfill Order Process goal:Responsiveness by providing the shortest order-to-cash cycle time

ReceiveOrder

PlanOrder

FabricateOrder

DeliverOrder

CollectPayment

AssembleOrder

StageMaterial

MoveWIP

Poor process performance because everyone was working hard and meeting their targets !

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MakingProcessReal

Sales Production Accounts Receivable

Logistics

This doesn’t mean functions are bad!

triggering event

finalresultsProcess: Fulfill order

• A centre of expertise –an efficient way to provide resources across multiple processes

• Specialized skills, knowledge, tools• Work is ongoing• Organizational design is usually

based on functional areas• We prefer not to use the somewhat

negative term “functional silos”

FunctionProcess• End-to-end business processes

deliver essential results by aligning the work of multiple functions

• Results are discrete – “countable”• Must be explicitly identified and

managed as a whole

Ultimately, business processes are all about alignment

cylinder of excellence –

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MakingProcessReal Processes and functions – three key points

Customer Front Office

Finance Back Office

Operations

agency

Issue Operating Permit

� The first step in managing processes is to figure out what they are – they don’t identify themselves

� Performance goals for the functions must align with the performance goals of the process

� Processes need an owner / steward to set direction, ensure alignment, and resolve conflict

It takes concerted effort – nothing happens by accident

Has an owner!

Needs an owner!

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MakingProcessReal 3 – The enablers of a business process

The performance of a business process is determined by multiple factors – the enablers.

Key point:The factors that get the most attention (process workflow design and information technology) are seldom the crucial factors. The crucial factors are:• Motivation and Measurement• Human Resources• Policies and Rules

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MakingProcessReal The factors that matter

Business Process

enables enables enables enables enables enables

WorkflowDesign

Information Systems

Motivation & Measurement

Human Resources

Policies and Rules

Facilities(or other)

• Actors• Steps &

decisions• Flow -

sequence and handoffs

• Applications• Data• Information• Integration

• Employee assessment and incentives

• “Reward and punishment”

• Process performance indicators

• Constraints• Business

rules that the process enforces

• External & internal

• Workplace layout

• Equipment• Furnishings

• Skills• Matching

actors to tasks

• Recruitment, selection and placement

Enabler – A factor that can be adjusted to impact process performance.

Business mission,

strategy, goals, & objectives

Culture, core competencies,and management style

enables constrains

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MakingProcessReal

Consider each enabler during assessment and design

• Mismatch of work needs and facility

• No support for team work

• Layout that impedes flow of people or material

• Unavailable information

• Re-keying of data

• Missing functionality

• Awkward interfaces

• Lack of support for workflow

• Too many actors

• Non-value -added steps

• Duplicate steps

• Delays and bottlenecks

• Excessively sequential

• Inappropriate performer or process measures

• Internal rather than customer focus

• Measures of tasks vs. outcomes

• Mismatches between task value and performer

• Inappropriate recruiting and placement

• Too little empowerment

• Out-of-date policies or numerical limits

• Excessive review or approval steps

• Restrictive labor contracts

• Overly complex coding

Business Process

enables enables enables enables enables enables

WorkflowDesign

Information Systems

Motivation & Measurement

Human Resources

Policies and Rules

Facilities(or other)

Business mission,

strategy, goals, & objectives

Culture, core competencies,and management style

enables constrains

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MakingProcessReal

Eventually, we will determine how individual processes really work by mapping who, does what, when.

This allows the assessment of the as-is process, and design of the to-be process, enabler by enabler:

WorkflowDesign

Information Systems

Motivation & Measurement

Human Resources

Policies and Rules

Facilities(or other)

That’s the main reason we model as-is workflow

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MakingProcessReal 4 – Processes and information systems

When major information systems are implemented without regard to end-to-end business processes, overall results range from “okay” to awful. (How awful?)

Key point:Major companies often re-implement systems they already have in order to make them more process-oriented

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MakingProcessReal Misunderstanding “process”

• Global manufacturer implementing ERP

• Four primary modules:

– Sales

– Manufacturing

– Logistics

– Finance

• Determined to do it right:

“This will be a process-oriented implementation!”

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MakingProcessReal

How the “process-oriented” implementation worked out

Logistics function

Sales function

Production function

A/Rfunction

end-to-end process: Fulfill Order

Logistics process

Sales process

Production process

A/Rprocess

Salesmodule

Manuf’gmodule

Logistics

module

A/Rmodule

Logisticsmodule

Salesmodule

Manuf’gmodule

Accounts Receivable

module

Experience proves that software implementations are far more successful when they are truly process oriented

Conflicts: timing, coding, terminology, data formats, performance targets, …

Same software, process-driven implementation:

Missing the point about “process”:

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MakingProcessReal Success with ERP implementation

• Study by the late Michael Hammer,

“godfather of BPR”

• Observed that success of ERP implementations

varied wildly

• Worked with ~200 companies to assess their

degree of success with ERP implementation

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MakingProcessReal Success with ERP implementation

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Success (ROI, etc.) ranked from 0 - 100 5 10

Num

ber

of e

nter

pris

es

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MakingProcessReal The usual guesses…

Success (ROI, etc.) ranked from 0 - 100 5 10

Num

ber

of e

nter

pris

es

Normal distribution

Skewed optimistically

Skewed pessimistically

Reallypessimistic

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MakingProcessReal Winners and losers in ERP implementation

Success (ROI, etc.) ranked from 0 - 100 5 10

Num

ber

of e

nter

pris

es

WinnersLosers

Process first,

IT secondary

IT focus,Functional orientation

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MakingProcessReal 5 – Choosing what to excel at

A business process, like a company, can’t be all things to all people – it’s essential that a differentiator is chosen.

Key point:A lack of clarity around the differentiator, or conflicting statements about what it is, are a major source of stress and frustration

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MakingProcessReal

Great processes don’t try to be all things to all people –strive to be great at one differentiator, and good at the other two…

OperationalExcellence

ProductLeadership

CustomerIntimacy

Consistent, predictable, error-free, and efficient.

More efficient, but less flexible in changing direction or meeting needs of individual customers.

Tailors service delivery to the processes of individual customers.

More flexible for adapting to needs of individual customers, but less efficient.

Continuous and rapid introduction of new

products and services.

More flexible for adapting to needs of

new offerings, but less efficient.

The original reference:The Discipline of Market LeadersMichael Treacy and Fred WiersmaAddison-Wesley 1995

Too often, companies lack focus or focus on the wrong discipline.

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Process goals: know your “differentiator”

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MakingProcessReal The #1 differentiator problem

Engineering:Product

Leadership

Functional area 1

Functional area 1

Functional area 1

End-to-end business process

Participants in a single end-to-end business process aiming for different differentiators without realizing it

Finance:Operational Excellence

Sales:Customer Tailored

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MakingProcessReal More differentiator problems

• No clear differentiator –

Stuck in the Bermuda triangle

• A business process being specifically directed to excel at two differentiators, most commonly:• Operational excellence – “We must be the low-cost provider!”• Customer intimacy – “We must do what it takes for each client!”

• Making a strategic change to the differentiators without explaining the rationale to staff

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MakingProcessReal Recap – the three to five key points

1. It’s essential to have clarity on what a business process really is

2. Existing performance measures are often functionally aligned and work against business processes

3. Success with business processes depends on taking a holistic view in which six enablers are considered

4. Enterprise system implementations must include a business process perspective

5. Business processes can’t be great at everything – a single differentiator or strategic discipline should be chosen

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MakingProcessReal Contact info

� Me: asharp@clariteq.com

� My company: www.clariteq.com� My book: Workflow Modeling, Second Edition

is now available (it’s a complete rewrite)

� Microblog: www.twitter.com/alecsharp� My ERwin data modeling blog: www.erwin.com/expert_blogs� See www.bptrends.com for “From the Trenches” columns