How process management in the context of digital business strategy impacts firm performance

Posted by on

This article summarises the results of the paper “Organized complexity of digital business strategy: a configurational perspective“, written by Y. Park and S. Mithas, published by MIS Quartely in 2020.

The paper addresses the issue of how firms should configure organizational capabilities to achieve competitive advantage in digital environments. Digital business strategy consists of several organizational capabilities, digital and non-digital, listed below, that work together to influence the firm’s competitiveness.

  • Leadership (including how senior leaders set and deploy organizational values, short- and longer-term directions, etc.)
  • IT-enabled information analytics (including data availability, reliable and user-friendly systems, etc.)
  • Strategic planning (including the strategy development process, strategic objectives and the timetable for achieving them)
  • Customer focus (how the organisation identifies the needs and preferences of customers and markets to ensure the continued relevance of the products/services offered and to develop new opportunities).
  • HR focus (formal and informal mechanisms of employee motivation, effective communication and knowledge/skills sharing, effective succession planning for senior leadership, etc.)
  • Process management (capabilitiy to design and manage product and service processes, growth processes, and support processes).

One of the findings of the empirical study is that the combination of information and analytics, customer focus and process management drives financial performance of manufacturing companies. This means that manufacturing companies need to combine information & analytics capabilities with customer focus and process management capabilities to achieve high financial firm performance.

Process Information in the Cloud

Posted by on
by Kevin McCormack

One of the most important directions in organizations today is the adoption of process-oriented approaches to measuring and managing costs. However, as firms move further through the life-cycle of these change programs, they will need to begin measuring processes and their outputs, and to continually refine their designs. Customers will not be satisfied unless performance is good on all of these dimensions (cost, time, quality, variability).

Activity-based cost management tools did not generate process maps, had no customer focus, and did not lead to bottom-up ideas for generating continuous process improvement. This has resulted in the “lack of context” for these measures and therefore, ineffective usage and actions. They were developed for reporting to management not as a feedback loop for action to be taken by the process teams and individuals.

The challenge is to extrude the slender filament of germane information from the piles of the trivial and irrelevant.

The process of constructing the process map and identifying the measures then becomes the sorting and filtering process for the relevant measures. The analysis done by consultants in measuring the cost, time, variability or output quality of a broad, cross-functional process is frequently the first time any process performance information was generated. Such ad hoc measurement, however, is expensive and infrequent; it cannot be the basis for ongoing process management.

The best approach to institutionalizing the collection of process information is to use information technology to gather it. Therefore, companies must typically build new information systems expressly for the purpose of capturing process performance information. The cloud is ideally suited for this. It makes data connected, broadly available and infinitely configurable. Not to mention affordable. If you add block chain technology, it makes it very secure due to block chain’s internal encryption. 

The best information will be wasted if it is not routed to the people in the organization who need it to perform their jobs. Those who actually execute a process should have information on their own performance (and its relationship to overall process performance), and enough information on problems to address and resolve causes.

In order for process information to be of any value, it must be systematically analyzed and interpreted, and acted upon.

This is the challenge for today. Building broadly available process information that is affordable. It can now be done.

Dr. Kevin McCormack
Northwood University
Midland, Michigan USA
mccormac@northwood.edu

How the Internet of Things is Driving Process Innovation

Posted by on

Across all industries, smart, connected products – such as connected cars, machines and plants – are changing the way manufacturing companies interact with their customers and ultimately run their businesses. This new generation of offerings results from the merging of the physical and digital worlds, often referred to as the Internet of Things (IoT). IoT solutions involve equipping physical objects and devices with sensors and connectivity, as well as digital cloud-based applications. In this process, so-called digital data streams transmitted from the “thing” (i.e., the machine, the plant, the device) to the cloud provide real-time data about the device’s usage and behavior as well as environmental parameters (so-called IoT field data).

The paper, “Driving Process Innovation with IoT Field Data,” authored at ETH Zurich as well as the University of St. Gallen, describes how manufacturing companies are using IoT field data for process innovation at all stages of the product lifecycle. According to the paper, digital data streams can provide valuable insight into product performance and usage. This insight and the associated transparency can be used for process innovation in the four phases of the product lifecycle (see figure below):

IoT, smart connected products, and process innovation
Smart, connected products and process innovation. Adapted from Bilgeri et al. (2019)

These four business processes are:

  1. Development process: for example, IoT field data such as device state, usage or failure information is used to define (technical) product specifications.
  2. Production and logistics process: IoT field data provides information to optimize or adapt production processes (adaptation of process design / optimization of production process).
  3. Marketing and sales process: How is the product used by different customers? By continuously collecting IoT field data different customer and market segments can be derived.
  4. After-sales and service process: IoT field data enables manufacturers to reduce inefficiencies in handling support processes.

Enclosed are the details of the paper: Dominik Bilgeri, Elgar Fleisch, Heike Gebauer und Felix Wortmann: Driving Process Innovation with IoT Field Data. In: MIS Quarterly Executive, September 2019, https://aisel.aisnet.org/misqe/vol18/iss3/5/

The Responsibilities of the Process Owner

Posted by on

There is no doubt that the process owner is a key role within business process management. But what are the exact responsibilities of the process owner? A recent study by Danilova (2019) addressed this topic by conducting a systematic literature review including 100 academic papers and 10 books on business process management.


As a result, the paper divides the process owner’s responsibilities into five categories: planning and organizing, process performance management, process improvement and innovation, team leadership, and stakeholder management and advocacy.

Planning and organizing:

  • Design the process
  • Define subprocesses and process boundaries (process map)
  • Ensure standardization and documentation of processes
  • Advocate compliance with the process
  • Approve variations when necessary
  • Provide guidance as to handling exceptions and errors
  • Coordinate activities
  • Ensure alignment with strategy and execute strategies
  • Influence resource allocation
  • Ensure process compliance with external obligations

Process performance management:

Process improvement and innovation:

  • Follow the competitive environment, technological progress and changing customer requirements
  • Detect and evaluate needs and opportunities for incremental process improvement and innovation
  • Receive change suggestions from the organization
  • Check for possible suboptimization
  • Initiate process change
  • Coordinate and lead change project
  • Promote the process design

Team leadership:

  • Lead a process team

Stakeholder management and advocacy:

  • Create process awareness
  • Represent and promote the process
  • Communicate with stakeholders
  • Maintain and promote a strong customer focus
  • Collaborate with other process owners
  • Collaborate with functional managers
  • Maintain contact with suppliers
  • Promote and facilitate teamwork in the organization
  • Secure feeling of ownership among process employees

The full paper can be found here: Danilova, K.B. (2019), “Process owners in business process management: a systematic literature review”, Business Process Management Journal, Vol. 25 No. 6, pp. 1377-1412. https://www.emerald.com/insight/content/doi/10.1108/BPMJ-05-2017-0123/full/html

Further interesting articles on the role of the process owner are found here:

The Value Creation Machine

Posted by on

The book “Die Wertschöpfungsmaschine” (a suitable English title would be “The Value Creation Machine”) deals with the question of how value creation can be optimally organized. The authors see process and organizational structures that do not fit the strategy as the biggest obstacle for companies to give their best.

Andreas Suter, Stefan Vorbach and Doris Wild-Weitlaner (2019): Die Wertschöpfungsmaschine (available in German only)

Without grey theories the book introduces into a new, but already often used approach, how one tailors processes and organization to the business strategy. The focus is on the roles and responsibilities in the company from the perspective of value creation. The arguments are conclusive, comprehensible and very practical on the basis of numerous case studies from industry and service sectors.

The key idea is the focus on the internal and external interfaces to customers and suppliers. Processes and organizational units should be controlled consistently by means of simple client-supplier relationships. The simpler and clearer the interfaces are, the more value can be increased for the customer, operational complexity reduced, idle times and expensive overhead structures for planning, coordination and monitoring eliminated. In addition, the matrix organization can be avoided.

Originally, the “value creation machine” was developed at Graz University of Technology in the 1990s and first published as a book in 2004. If one compares the first publication with the one now available, it is easy to see how it has been further developed and extended to include important subject areas such as “innovation management”, “process cost management” and “digitisation”. The service character of many businesses has also been massively expanded.

BPM 2018 – The 16th International Conference on Business Process Management

Posted by on

BPM 2018 is the 16th conference in a series that provides the most prestigious forum for researchers and practitioners in the field of Business Process Management. The conference will take place in Sydney, Australia from September 9-14, 2018.

BPM 2018 introduces a new structure, based on three tracks:

  • Track I: Foundations
  • Track II: Engineering
  • Track III: Management

Track I includes contributions that investigate the underlying principles of BPM systems, computational theories, algorithms, and methods for modeling and analyzing business processes.

Track II covers business process intelligence, including process mining techniques, and the use of process models for enactment, model-driven engineering, as well as interaction with services and deployment architectures like the Cloud. It also covers BPM systems in particular domains, such as digital health, smart mobility, or Internet of Things.

Track III’s areas of interest include a wide range of capability areas that are relevant for BPM, such as strategic alignment, governance, methods, information technology, and human aspects including people and culture. The conference provides contributions that advance the understanding on how organizations can develop such capabilities in order to achieve specific objectives in given organizational contexts.

The conference website can be found here.

Simple Business Process Modelling Using Spreadsheets

Posted by on

Because business process modelling techniques and tools exist in numerous variants, I’d like to share a very simple and practical process modelling approach. The software which is used is a simple spreadsheet software, and the process modelling technique is based on the Business Process Modelling Notation (BPMN).

  • Roles / departments are modelled as so-called swim lanes.
  • Within a swim lane, the role’s activities are positioned.
  • Activities are connected with arrows.
  • Furthermore, IT tools which support certain activities may also be depicted.

An Excel-based example can be downloaded here. Process elements can be easily arranged in the grid holding the ALT key while dragging the elements. This grid-based layout makes the model beautifully arranged.

Simple and practical process modelling

Process Management in Sales

Posted by on

“Companies with more developed sales processes enjoy greater sales performance”, say Jason Jordan and Michelle Vazzana in their book entitled Cracking the Sales Management Code. They argue that sales managers need a set of formal business processes. Other business functions like manufacturing or finance have formal business processes in place that allow for consistent execution and robust measurement of the activities. This visibility is required in order to exercise control and continuously improve. In the absence of standardized processes to enable active management, sales managers often have unmanageable chaos rather than “command” over their sales force. The authors further argue that every sales force should customize its sales processes to the way it does business, but it should not be responsible for defining what sales processes are. Here is an overview of the fundamental sales processes:

  • Call Management: Planning and conducting individual customer interactions.
  • Opportunity Management: Strategically navigating a multi-call sales cycle.
  • Account Management: Maximizing long-term value from a single customer.
  • Territory Management: Allocating effort efficiently across different types of customers.
  • Sales Force Enablement: Investing in improved sales force execution.

BPM 2016 – The 14th International Conference on Business Process Management

Posted by on

The 14th International Conference on Business Process Management (BPM 2016), hosted by the Federal University of the State of Rio de Janeiro, will take place in Rio de Janeiro, Brazil, September 18-22, 2016.

The BPM Research Track will focus on topics such as

  • Decision management and BPM
  • Processes in the Internet of Things and wearable devices
  • BPM lifecycle management
  • BPM people and culture
  • BPM maturity: success factors and measures
  • Process change management
  • Reference process models
  • Process modeling language
  • Qualitative and quantitative process analysis (e.g. process simulation)
  • Incremental process improvement
  • Process innovation
  • BPM and other process improvement disciplines (e.g. Lean management, Six Sigma, Total Quality Management)
  • Process mining

The BPM Industry Track allows showcasing the latest initiatives, exchanging experiences and networking among BPM experts around the world. The conference will also be complemented by several workshops, tutorials, panels and demos.

More information can be found on the conference website.

How to Build a Process-Oriented Organization

Posted by on

The 10th Business Process Management Conference, organized by the University of Ljubljana, Faculty of Economics, took place in Ljubljana, October 14-15, 2015. The keynote speech “Process Management Practices, Organizational Excellence, and Firm Performance” by M. Kohlbacher was about organizational excellence, i.e. how the organization needs to be designed to gain rigoros performance improvements. Buiding on real world examples, it was shown which process management practices should be deployed in practice and how the organization’s business processes have to be designed in order to improve the firm’s key performance indicators. The key building blocks of a process-oriented organization are as follows:

On the top of all endeavors, there is the customer with her needs. Between the customers and the suppliers, there is the enterprise boundary:

1_customer

Inside the enterprise boundary, the company’s value adding business processes are located:

2_business_processes

The overall goal is it to build a customer-oriented organization. So, internal customer orientation is needed, too. In order to implement internal customer orientation, the organization is designed in a way that the business processes relate to each other like customers to suppliers. In its essence, customer-supplier-relationships are built between the organization’s business processes. Every business process has a defined customer and may also have one or more supplying processes. The customer process is ordering, the supplier process is fulfilling the order and supplies the result back to the ordering process:

3_customer_supplier_relationships

So far, business processes were considered as black boxes. When the black box is opened, the activities of the business process can be seen (process design of a single business process):

4_detailed_process_design

IT-systems are supporting the business processes:

5_IT_systems

Another important element of process management is the role of the process owner. For every business process, a process owner is defined who is responsible for (i) the design of the process, and (ii) for the performance of the process:

6_process_owner

Process performance measurement needs to be in place. This is done by developing key performance indicators (KPIs) for the business processes. Process performance indicators are metrics which numerically capture the performance of a business process. It is important that the KPIs are derived from business strategy and internal/external customer requirements:

7_process_performance_measurement

Having KPIs in place, process performance can be measured and processes can be continuously improved (continuous process improvement):

8_continuous_improvement

In summary, the performance of the firm can be significantly improvement through building a process-oriented organization by using the following main concepts:

  • customer-supplier relationships between the business processes
  • process owners
  • process performance measurement, and
  • continuous process improvement initiatives