Managing processes gives firms a leg up

Every business is essentially a collection of processes - some strategic, some tactical, but all necessary. And today's middle and back office processes are increasingly complex, full of deeper interactions across systems and dependent on more collaborative activities between users. But what exactly is a business process?

Essentially it is defined as a set of coordinated activities, carried out either by people or automatically, that together deliver tangible value to the business when it is executed.

Business process management (BPM) is the discipline of managing and measuring the performance of a business against strategic goals through the formalization of middle and back office business processes that describe how business is conducted as a set of coordinated activities. It often includes the use of technology to aid in modeling, execution and management of those processes.

Many of the typical challenges that business leaders are facing every day often relate to how the business is managing its middle and back office processes. These challenges might include a lack of visibility into how the business is run, because business processes are not documented, or real processes differ from documented processes. There may be issues regarding low productivity due to manual execution of processes that span divisional domains or are hard to otherwise automate.

Customer satisfaction may be waning due to long response times, unhandled exceptions in customer processes, or complex, uncoordinated customer service. The organization may be unable to launch new business tactics quickly to compete effectively or attack new opportunities. There may even be issues associated with complying with government, industry or internal regulations as well as service level agreements with customers and partners.

Every business is driven according to a set of business processes that explicitly or implicitly define how transactions are executed, records are kept, how customers are serviced and how to interact with suppliers. Parts of business processes take place inside IT systems while other parts are handled by humans. Whenever a process can be migrated from an informal and ad-hoc execution to a formalized sequence of steps that are executed as a program, the business can achieve great improvements in productivity, compliance and quality of service.

Therefore, enterprises are constantly seeking to formalize and automate business processes.

So how can BPM tackle those typical challenges business leaders face that were outlined earlier - lack of visibility, low productivity, indifferent customer satisfaction or the inability to launch new business tactics quickly? BPM does it by focusing on all phases of the business process life cycle.

The first is the model. In many cases the solution starts with understanding and formalizing the process itself. Enterprises often operate on ad-hoc processes that "just work" but are not well described or well understood. With a formal and executable process model, the whole enterprise has a single point of reference.

The second is execution. Even if the process model already exists, it is often the case that the executed process is not the same as the modeled process. Process execution must be automated and based on the same model asset that was used for modeling (what is called a shared model). That is the only way to ensure that the executed process is always the same as the modeled process.

The third way that BPM helps to deliver seamless process integration in the middle and back office is by measurement. Key performance indicators and other business metrics can be defined directly in the process model. As processes are executed, process owners continuously track these indicators to gain operational visibility and identify opportunities for optimization.

Finally, optimization. Once the model-execute-measure loop is closed, the process model can be optimized based on measurements during execution, thereby enabling continuous process improvement.

BP takes the BPM road

Take the example of BP, the world-leading energy company. With annual sales of $262 billion, over 28,000 retail locations, 19 refineries in operation and exploration activity in 26 countries, BP is a very large and complex company. As such, it is easy for routine tasks, like invoice processing, to become cumbersome and inefficient. Following a series of mergers and acquisitions in recent years, the lines of business within BP found themselves using a hodgepodge of invoicing systems and approval processes. With an average of 15,000 invoices in play at any one time, BP knew the current situation was not sustainable.

At one point, up to 40 people were working full time to handle the task manually. As one might expect with a manual process, it was difficult to track where an invoice was at any given time. There were lots of job codes to remember, data had to be re-keyed into a master SAP system and, in general, there were many opportunities for human error and duplication of effort.

The author is senior technology evangelist with BEA Systems

(China Daily 12/20/2007 page15)