Lecture 1

Introduction to
Business Process Management
MNGT 8188
Session 2, Y12

Dr Paul Walsh
walsh.paul@optusnet.com.au
 2

Definition of a Process (Operational View)

A series of steps or activities that uses one or more
kinds of INPUT and transforms them into an OUTPUT
for the CUSTOMER.

Inputs Outputs

Supplier(s) ACTIVITIES THAT TRANSFORM INPUTS Customer(s)

Input Value: $ or Internal
“The Process” Customer
• Labour
• Materials • Manufacture Output Value: $ +
• Technolo • Back office function • Product
• Configuration or Assembly of • Solution/Advice
gy
• Energy parts • Completed
• Knowledg • Proposal or Quotation Service
• Service Execution Intro BPM 2
e
Historical Functional View
Performance Management is
based Around the
“Functional Organisation”

Marketing Manufacturing R&D

Maintenance Operations

Performance Management – Planning, Reporting, Budgeting, Risk Management

3
Disadvantages of a “Functionally
Run” Business
1. Employees may become isolated from customer
needs
2. Accountability for customer requirements may become
blurred
3. Knowledge may not be shared across functional
boundaries.
4. Priorities tends to be functional area first, not
necessarily whole-of-organisation or customers.

4
Three paradigm shifts
Management Focus
Managing Processes Focus on
efficiency and control of
enabling and operational
processes.
Process Effectiveness/
Enterprise Effectiveness
1980’s Process
Improvement
Management Practices
•
•
Process thinking/management;
Team based (collaborative)
decision making, problem solving
and improvement;
• Process Scorecards;
• Cross-process collaboration.

Managing Organisational Organisational Effectiveness • Budgeting & Budgetary control;

• Hierarchical organisational
Units (Divisions,
Departments, Work Groups) 1920’s, Alfred Sloan, “The
structure (usually by function);
• Leadership;
Focus on efficiency and Multi-divisional Corporation” • Effective management decision
making and problem solving.
control of organisational units.
Managing Individual • Time & motion studies;
• Standardised procedures;
Workers. Focus of efficiency • Standard times & costs;
and control in what Individual Effectiveness • Financial incentives;
individuals workers do. • Supervisory control.
1910’S, Scientific
Management,
Frederick Taylor 5
Modern Idea - Provision of Value to
Customers though Core Processes
Department Department Department
A B C

Core Processes Cut Across Work Groups

Knowledge Sharing & Collaboration

Customer Dept. A Dept. B Dept. C Customer Customer

Executives often manage vertically via budgets but people

at the front-line work horizontally.
6
Definition of a Core Process
 Business Process Management Group www.bpm.com

 A Core Process is defined as a set of macro linked

activities that take a customer input and transform it to
create a customer output which is of value to the
customer.

 The Core Process approach seeks to align resources

and optimise the activities across each functional area.
The trick is to describe the business as the customer
sees it and maximise knowledge transfer on what
matters to customers.

 Often linked to form an End-to-End or E2E view of a

business.
7
Think “End-to-End” or “From-To”
States

Customer Acquisition Opportunity-to-Sale

Supply Chain Order-to-Cash

Management

Customer Service Issue-to-Resolution

8
 Marketing Marketing Marketing Sales / Customer Sales Staff
Staff Staff Staff Relation Staff

Core Processes Core 1: Attract New Customer

Can Be Broken Understand
Customer’s
Develop
New
Generate
Customer
Provide Product
& Service
Offering
Products and
Down Into Sub- Need Product Awareness Information
Services

Processes & Unit Sales Staff Sales Sales Staff Sales Credit Credit Credit

Responsibilities
Admin Staff Staff Analyst Analyst Manager

Core 2: Process Credit Application

Added eg Credit Collect Pre Analyze Data Survey Assess Decide
Credit
Credit Card Application Customer Entry Customer Credit Credit
Requirement Application Application
Generation Application

Division Sales Staff Customer Relation Customer Back Office Staff

Staff Service Staff

Core 3: Facilitate Credit Payment

Offer Customer Handle Receive Provide Regular
with Payment Customers' Inquiry Payment from Billing Statement
System Option & Complaint Customer to Customer

Collection Staff Collection Staff Remedy Staff Inventory Staff

Core 4: Manage Default Payment

Send Collection Directly Approach Collect Asset from Liquidate

Notification to to Customer Non-performing Collected
Customer (by phone, visit) Customer Assets

9
Process View or Process Architecture
Major Processes
Sub-Process 1 Sub-Process 2

Many people think of what they do as a

set of activities that they do repeatedly.
To create a more effective approach,
Activities their thoughts have to transform from
activity thinking to process thinking.

1. Obtain … We all perform tasks at various levels and

2. Add … are therefore quite familiar with this
Tasks 3. Move to … concept.
What About Support Processes

All the Other

Activities a
Company Does?

Information Technology Function

Human Resources Function

Finance & Admin Function

Companies are in C
U
business S
because of T
customers. But O
M
there are other E
things they have R
to do to stay in S

business!

Corporate or Shared Services 11

Supply Chain Management

Gordon Stewart, Stewart, et al. (1997). "Supply-chain operations reference model (SCOR): the
first cross-industry framework for integrated supply-chain management." Logistics Information
Management, Vol. 10, no.2, pp. 62-67. 12
Example: Westpac

 Distribution
 Manufacturing
 Shared Services
Shared
Services

13
Core vs Support Processes
Example - Manufacturing Company

Core Processes

New Product Development

Supply Chain Management

Attract & Retain Customers

15
Example - Consumer Goods
Company
Core Processes

New Product Development

Brand Development

Retail Outlet Management

Integrated Logistics

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Example: Operations Division within
Morgan Stanley
Settlements TSG CSG CMD GNM Reconciliations

Account Opening

Settlements & Security Transactions Clients

Manage Positions

Clearing
Manage (Intermediaries) Agents Houses
etc

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Example - The Dupont Company

Core Processes

Planning

Deliver the Current Offering

Renewal

18
Example - Small Computer Software
Developer

Core Processes

Market Intelligence

Product Specification

Product Development

Product Installation

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Example - Carpark Operator

Core Processes

Establish New Sites

Landlords

Manage Relationships

Market Products

Customers

Provide Parking Services

Manage Revenue Collection

“The Business”

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 Activity - Template for Core Processes –
[Do on a “SHOULD BE” basis]
Organisational Structure

Existing

New

Core Processes

Customers
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Convention for a Naming a Process

The name of a process should start with a doing-verb; for example

provide, manage, service and develop.
Avoid goal-like verbs that imply process improvement eg
improve, increase and reduce.
The nature of the product or service (eg energy services,
consultancy services, project management, footwear, music) should
be included.
Names of processes should not include adjectives and
adverbs such as efficiently, effectively etc. These are catered for in
goals or objectives.

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Core Process - Starter Kit
• · Develop New Products and Services • · Brand Management

• · Manage Projects • · Logistics Management

• · Attract & Retain Customers • · Manage Product

Categories
• · Manage Customer Relationships • · Account Management

• · Service Customers • · Business

Development
• · Order Processing • · Product Sales & Marketing

• · Supply Chain Management • · Deliver Solutions

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 Michael Porter’s Value Chain - Porter
coined the terms “Vertical” and
“Horizontal” Organisation
Generic value
chain: Organisation infrastructure

Support Human resource management

Ma
activities Technology development

rg
in
Procurement
Differences:
Value Chain vs Core Inbound Operations Outbound Marketing Service
Processes logistics logistics and sales

in
• More focus on operations eg

rg
convert raw materials to product

Ma
& after-sales service
• Does not address relationships
between activities as Business
at Work Diagram will do
• Aim is to understand the Primary activities
potential sources of
differentiation

Source: Michael E Porter Competitive Advantage: Creating and Sustaining Superior Performance Free Press 1985
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ISO 9000 Quality Management
Process Model
QUALITY MANAGEMENT SYSTEM
CONTINUAL IMPROVEMENT
i
i s n
n Management a t
t responsibility t e
e i r
r
s e
r e
f
e q s
Resource Measurement, a t
s u
management analysis, c
t i e
improvement t
r d
e e
i
d o
m p
n
e
p a
n Product
a t Input Output r
(and/or service) Product/
r s t
realisation service
t y
y

25
Example: Public Sector- Local
Government Council
Plan the City’s Development
(Major Stakeholders)
• Natural Environment
• Built Environment
• Community

Service Provision
• Information
• Regulatory
• Non-Regulatory
Manage Compliance
• Inspections
• Parking Officers
Asset Maintenance
• Natural
• Built

Leadership, Advocacy & Facilitation

• Community Events
• Community Groups
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Example - Red Cross

Core Processes

Get a Volunteer

Volunteers
Train a Volunteer

Place a Volunteer

Beneficiarie
Provide Field Support
s

27
 “Business At Work”
Diagram

If the organisation chart shows

accountability and reporting
relationships, what diagram
shows how “value is added” to
customers?

28
Example of a “Business at Work”
Chart
= Flow of parts
= Flow of Inform ation
C ore Processes R&D
• N ew Product D evelopm ent
R& D D base

• O rder G eneration & Fulfillm ents

Production Planning M anufacture Product Inspection & Testing Finished G oods
Sales
contact
quotation

order
Custom er order by Prod. Purchasing V endor
phone, fax, letter D base

Sales D base Purchasing D base

Custom er service
• Integrated L ogistics Custom er

Paym ent

W arehouse D base
Picking Packing Shipping Invoice
W arehouse

29
IBM Core Processes
Product Processes
Requirements Translation Design Enterprise
Collections Development Processes
and Definition
Manufacturing Planning
Market
Segment Delivery Financial
Selling Personnel
Mgmt. Info. Sys.
INTERFACES

Ordering
Legal
Distribution Communications
Market Billing Public Relations
Place Collection
Service
Business
Processes 30
Example of “Business at Work” Chart -
Computer Services Company
Offer Specifications
Capital Plans Delivery Capability Preparation Resource Planning

Performance Metrics
Service Expectation

Service Delivery Management

New Service Definition

Volume Projections Contract Agreement

Contract Negotiation

Service Requests

Customer Expectation Management

Performance Experience

Available Capacity

31
NSW Workcover MINISTER,
OHSR COUNCIL,
WORK COVER BOARD

approval and
amendments
WorkCover
WorkCover Administration Act, 1989

redevelop

Scheme
amend/

control
OH&S database OH&S educators, policy officers OH&S
rehabilitation
reports guidelines,
complaints
CP1: PROACTIVELY PROMOTE COMPLIANCE referral

work safety complaints

OHS information

OHS information
accidents
reports

consultation
REHABILITATE INJURED WORKERS

accidents report database, region 1,2,3… safety inspectors

accreditation officers

rehabilitation accident
information accidents notification
notification

CP2: RESPOND TO INCIDENT

rehabilitation inspection,
service
EMPLOYEES EMPLOYERS
prosecution,
complaints injury reports, advice
premium $

accreditation compensation
rehabilitation services claim
REHABILITATION INSURANCE
rehabilitation database

consultation PROVIDERS COMPANIES

premium levy $,
license to insure
CP4:

claims data

compensation
reports

refer CP3: ENSURE COMPENSATION OF INJURED WORKERS resolve

injured disputes &
workers claims
compensation database claims officers, funds mgrs

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 Understand Design Market
Markets and Products and and
Customers Services Sell

Process View - AP&QC

1995 Produce and
American Productivity & Quality Centre Deliver for
Manufacturing
Organisations
Invoice and
Service
Customers
Produce and
Deliver for
Service
Organisations

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Guiding Principles –
Business at Work Diagram
 Simple and concise – showing how value is
added to the customer – customer-centric
view
 Show how core processes link to one another
and produce outputs (major workflows)
 Show macro customer contact points
 Embellishments eg IT Systems,
responsibilities, suppliers, partners

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What is BPM ?
agreed process
following the
everyone is
• Check that Process Improvement
customers value
to deliver what • Identify internal best practices and adopt
• Understand how them as the official process
processes • Look for opportunities to improve
document key • Collect ideas for improvement – implement
• Identify and those that stand up to rigorous testing
• Expect continuous improvement – set new
with staff
ent meetings and targets each year
Managem BUSINESS in management
PROCESS
process metrics
Process • Refer to the
MANAGEMENT reliable
timely and
yet simple,
Process Owner comprehensive
are
• Appoint a process owner ensure metrics
• Owner needs to be able to influence all areas system(s) –
of the customer to customer experience measurement
process
• Review the
ent
Measurem 35
Knowledge Areas for BPM

1. Core Processes
2. Managing through a Process View (Process
Architecture)
3. Strategic Management via Balanced Scorecard
4. Performance Measurement (KPIs)
5. Process Improvement eg Lean Six-Sigma

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Process Improvement Movements
Focus

Internal External
Change to the Firm to the Firm

Continuous
Improvement
Gradual
Lean Six- Benchmarking
Sigma
Radical
Reengineering

This course will concentrate on

Lean Six Sigma while providing
overviews of the others. 37