Managing Processes for Performance

This article originally appeared in the members only BPM Strategies Magazine.   Join today to receive your own copy. 

Business process management (BPM) technology continues to grow and mature. Yet, the breadth and complexity of business processes seems to be expanding at an even faster pace.

Driven by massive reductions in transaction costs, a new generation of business redesign possibilities is being exploited by businesses to gain competitive advantage. Once a highly manual and iterative process, outsourcing has been made easier by the latest integration technologies such as SOAP, XML, Web services, and service-oriented architectures (SOAs).

As these technologies get deployed, businesses are finding they can no longer rely on a fixed set of partnerships or supply chains; rather, they rely on virtual value chains; that is, the digitized relationships inside and outside their own management network to enable rapid business event response. These responses, and the business processes that enable them, span multiple enterprises and multiple transaction applications systems. The problem for managers is how to traverse these networks, so that even the most basic business processes can be managed within a framework that measures actual process performance against objectives.

Measuring Actual Process Performance

Take the example of an OEM that outsources order capture and fulfillment operations with two distinct vendors, but holds billing and collections in-house. By definition, the management relationship between operations is digitized. Data integration can be achieved for both visibility and transaction processes (read efficient) and the overall customer service process can be deemed 'cost effective.' However, the network and process is virtual and may not be effective. Lost orders and incorrect billing can send managers on firefights for weeks attempting to uncover gaps in the data and/or the process. For the process to be managed effectively, the operations manager will need to establish a framework for performance management and then manage the process to a predetermined business objective like overall customer satisfaction.

Since operational performance management (OPM) is the practice of managing the effectiveness of operational-centric business activities and processes to a common set of goals and objectives, the business managers need to determine how to best manage the performance of the business process. If a business manager operates within a virtual value chain, this will require that the manager not only determine the objective, but also determine how the process will be optimized for efficiency and effectiveness and how the process will be aligned, that is driven, coordinated and targeted across the virtual network, toward that objective.

Performance Management Methodology

The place to start is applying the performance management methodology to your operation. A critical piece to this methodology is the PerformanceCycle. This process employs a three-step, "understand-optimize-align," closed-loop process that links the business and user requirements. This process then provides the mechanisms to assess and utilize technology that can provide people with information and, through collaboration, reduce the cycle time required to make decisions or take action.

For your processes, you will need to define how they fit within the performance management framework. That framework will include the analytics that you will use as the common metrics and measurement system for all process improvement projects in the enterprise. It is critical that these process improvement metrics be tied to higher-level performance improvement goals and you do not get lost in the maze of lower-level or transaction-oriented metrics.

Done right, process performance management will provide you with the alignment tools to understand why processes are not performing well. During analysis, these tools will provide the project teams with the data to assess the productivity impact of proposed solutions. The process data should also help the business team and the IT organization arrive at a common understanding of the business need and the solution definition. The degree of success of the resulting change initiative should be factually determined and based on common metrics before and after the process change or performance improvement "cut-in."

All this assumes that you have already assessed your core strategic and operational processes and developed a process performance plan that describes the potential of your operational processes to contribute to strategic goals. It also assumes that you have set priorities for operational process improvement that will have the greatest impact on strategic objectives. If that is complete, then you are ready to apply the time and attention and the application of technology to process management and improvement.

Technology Choices

Be aware that most business activity monitoring and business intelligence solutions and many BPM solutions have limits in providing process performance management tools. Most do not link higher-level performance goals and strategic objectives to the operational processes. Few approach the data created in the virtual value network as a process stream. Most do not provide functionality for data capture, monitor and evaluation of the critical machine-to-machine, machine-to-person and person-to-person interactions within the virtual network (see Table 1).

Table 1: Process Interactions

What should you be looking for in a process performance management solution? Look for approaches attuned to the level of the complexity of your business process network. Choose solutions that tie your corporate performance targets to your processes. Consider technology that monitors, simulates and links critical activities, especially if all or part of your process is outsourced. Don't be distracted by the promises of a service-oriented architecture unless you see clear evidence that the 'service application' will contribute to significant improvements in both operational and strategic process performance.

Colin Snow is vice president and research director at Ventana Research, where he heads up the Operational Performance Management (OPM) practice, focusing on the alignment of business and information technology in the areas of supply chain, operations, and business process management. He brings 10 years of enterprise software experience from vendors like PeopleSoft, as well as over 15 years of industry experience in manufacturing, planning, and services from firms like Olympus America to his work

colin.snow@ventanaresearch.com

This article originally appeared in the members only BPM Strategies Magazine.   Join today to receive your own copy.