BIS 3106: Business Process Management

Lecture Two: Introduction to Business Process

Management

Makerere University
School of Computing and Informatics Technology

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Outline

1 Introduction
Business Process

2 Core Elements of a Business Process

3 BPM

4 BPM Lifecycle
Process Identification
Process Discovery
Process Analysis
Process Redesign
Process Implementation
Process Monitoring and Controlling

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Outline

1 Introduction
Business Process

2 Core Elements of a Business Process

3 BPM

4 BPM Lifecycle
Process Identification
Process Discovery
Process Analysis
Process Redesign
Process Implementation
Process Monitoring and Controlling

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Outline

1 Introduction
Business Process

2 Core Elements of a Business Process

3 BPM

4 BPM Lifecycle
Process Identification
Process Discovery
Process Analysis
Process Redesign
Process Implementation
Process Monitoring and Controlling

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Outline

1 Introduction
Business Process

2 Core Elements of a Business Process

3 BPM

4 BPM Lifecycle
Process Identification
Process Discovery
Process Analysis
Process Redesign
Process Implementation
Process Monitoring and Controlling

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Processes Everywhere

Every organization - be it a governmental body, a non-profit

organization, or an enterprise - has to manage a number of
processes.

Typical examples of processes that can be found in most

organizations include:
Order-to-cash:
- Process performed by a vendor.
- Starts when a customer submits an order to purchase a product or
a service.
- Ends when the product/service in question has been delivered to
the customer.
- Customer then makes the corresponding payment for the
product/service.

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Processes Everywhere

Quote-to-order:
- Process typically precedes an order-to-cash process.
- Starts when a supplier receives a “Request-for-Quote” (RFQ) from
a customer
- Ends when the customer in question places a purchase order based
on the received quote.

Procure-to-pay:
- Process starts when someone in an organization determines that a
given product or service needs to be purchased.
- Ends when the product or service has been delivered and paid for.
- Activities such as: obtain quote, approve purchase, select a supplier,
issue purchase order, receive goods/consume service, check/pay
invoice.

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Processes Everywhere

Issue-to-resolution:
- Process starts when a customer raises a problem/issue.
- E.g., complaint related to a defect in a product or an issue
encountered when consuming a service.
- Process continues until the customer and the supplier, or both agree
that the issue has been resolved.
- Variant of this process is in insurance companies: “insurance
claims” and this called claim-to-resolution.

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Processes Everywhere

Application-to-approval:
- Process starts when someone applies for a benefit/privilege.
- Ends when the benefit/privilege is either granted or denied.
- Typical in government agencies, e.g., when a businessman applies
for a permit to open a business (e.g. a restaurant).
- Another process here is the admissions process in a university.

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Core Elements of a Business Process (1)

Events
- passive elements
- represent conditions/circumstances
- happen atomically instantaneous and have no duration
- E.g., Arrival of an equipment at a construction site

Activities
- active elements
- time-consuming,
- resource-demanding,
- state-changing
- E.g., When a piece of equipment arrives, the site engineer inspects
it.
- Takes time and is an activity

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Core Elements of a Business Process (2)

Task
- When an activity is simple - seen as one single unit of work it is a
task.
e.g., inspection by the site engineer can be simple - just check that
the equipment received corresponds to what was ordered.
- Then equipment inspection is a task.

If equipment inspection requires many steps - considered as an

activity.
(a) check that the equipment fulfils the specification included in the
purchase order
(b) check that the equipment is in working order
(c) check the equipment comes with all the required accessories and
safety devices.
Then equipment inspection is an activity.

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Core Elements of a Business Process (3)

Decision Points
- Points in time when a decision is made that affects the way the
process is executed.
E.g. As a result of the inspection, engineer may decide that the
equipment should be returned or be accepted.

- Decision affects what happens later in the process

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Core Elements of a Business Process (4)

Business Objects (or Data)

- the organizational artifacts that undergo state changes
- physical or electronic information
examples: sales order, digital object, consulting proposal

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Core Elements of a Business Process (5)

Actors (or Resources)

- the entities performing process activities and generating events
- human and non-human (systems, equipment, software)
- examples:
financial officer, warehouse clerk
ERP, CRM, SAP, application X.
- Human resource classified by:
roles - based on functional characteristics
organizational units - based on groups, departments

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Processes and Outcomes

Example of a fault-to-resolution process.

“My landline phone doesn’t work....”

Insurance
Call Centre Company
Technician

Customer Customer
Parts
Service Store
Dispatch
Centre

VALUE
fault-to-resolution process

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Processes and Outcomes

Every process leads to one or several outcomes, positive or

negative
- Positive outcomes deliver value
- Negative outcomes reduce value

Fault-to-resolution process outcomes

- Fault repaired without technician intervention.
- Fault repaired with minor technician intervention.
- Fault repaired and fully covered by warranty.
- Fault repaired and partly covered by warranty.
- Fault repaired but not covered by warranty.
- Fault not repaired (customer withdrew request).

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What is a (Business) Process?

Collection of inter-related events, activities and decisions, that involve

a number of actors and resources, and that collectively lead to an
outcome that is of value to an organization or its customers.

Event
*

delivers Business 1..* Activity

Outcome
1..* Process

*
Positive Negative Decision
Outcome Outcome involves Point
gives
value to Legend

1..* * * consists of
Customer Actor Object is a
* zero, one or many
1..* one or many

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How do we combine the core elements of a process?
(Based on BPMN)

1 What needs be done and when? - Control flow

2 What do we need to work on? – Data
3 Who’s doing the work? - Resources (human & systems)

Finance ERP Invoice Report Invoice

Department
Enter Check
no
Invoice Invoice Post Invoice
mismatches
Invoice Details Mismatches
Invoice
received posted

Invoice DB Invoice
Senior Finance Officer
mismatch Block
exists Invoice
Invoice
blocked

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Process Perspectives: Control flow

Control Flow Perspective

- “what needs to be done and when”
- predecessor/successor relationship among activities and events
- the central information depicted in a process model

Enter Check
no
Invoice Invoice Post Invoice
mismatches
Invoice Details Mismatches
Invoice
received posted

mismatch Block
exists Invoice
Invoice
blocked

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Process Perspectives: Data

Data Perspective
- “what do we need to work on”
- input/output data to activities
- complements the control flow

Invoice Report Invoice

Invoice DB Invoice

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Process Perspectives: Resource

Resource Perspective
- “who’s doing the work”
- human participants and systems that perform control flow activities
and generate events
- complements the control flow

Finance ERP
Department

Senior Finance Officer

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What is BPM?
Body of principles, methods and tools to design, analyze, execute
and monitor business processes.
Business processes are the focal point of BPM,
BPM involves different phases and activities in the lifecycle of
business processes
In this course, we will focus on BPM based on process models.

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Why BPM?

BPM provides a natural ground for bridging IT and business.

Many IT projects in enterprises are ultimately aimed at improving
a business process.

Information Yields
Technology Business
Value

Enables
Yields
Process
Change

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How to Engage in BPM

- Continuous Process Improvement

Does not put into question the current process structure
Seeks to identify issues and resolve them incrementally, one step at a
time and one fix at a time

- Business Process Reengineering

Puts into question the fundamental assumptions and principles of the
existing process structure
Aims to achieve breakthrough, for example by removing costly tasks
that do not directly add value

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The Ford Case Study (Hammer 1990)

Ford needed to review its procurement process to:

- Do it cheaper (cut costs)
- Do it faster (reduce turnaround times)
- Do it better (reduce error rates)

Accounts payable in North America alone employed > 500 people

and turnaround times for processing POs and invoices was in the
order of weeks.
Hammer, M., (1990). “Reengineering Work: Don’t Automate,
Obliterate”, Harvard Business Review, July/August, pp. 104-112.

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How the process worked? (“as is”)

Purchasing process at Ford at the initial stage.

Every purchase went through the purchasing department.

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Reengineering Process (“to be”)

Central database - store information on purchase orders.

Goods arrived - check whether the delivery matched what was
originally purchased.

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The Ford Case Study (Hammer 1990)

The Result......
- 75% reduction in head count
- Material control is simpler and financial information is more
accurate
- Purchase requisition is faster
- Less overdue payments

Why automate something we don’t need to do?

Automate things that need to be done.

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BPM Lifecycle

BPM encompasses the entire lifecycle of business processes.

BPM lifecycle provides a structured view of how a given process

can be managed.

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BPM Lifecycle

First question before on a BPM initiative is “what business

processes are we intending to improve”?
- Operational problems to be addressed
- Business processes that are posing the operational problems.
If the organization has engaged in BPM initiatives before -
- an inventory of business processes is available
- scope of these processes has been defined
If organizations have not engaged in BPM before -
- BPM team starts by identifying the processes relevant to the
problem
- Delimit the scope of the processes
- Identify relations between the processes

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BPM Lifecycle

Process
Identification

Process architecture

Conformance and Process

performance insights Discovery
As-is process
model

Process monitoring
Process
and controlling
analysis

Insights on
Executable weaknesses and
process model their impacts

To-be process
Process model Process
implementation redesign

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Process Identification - (1)

Initial phase of a BPM initiative is process identification.

Leads to a process architecture - form of a collection of processes
and links between these processes representing different types of
relations.

Core processes
Support processes
Management processes

Quote handling
Product delivery
Invoice handling

Detailed quote
handling process

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Process Identification

BPM initiative - ensure that the business covered by BPM lead to

positive outcomes.
Business Processes deliver maximum value to the organization in
servicing its clients.
Important to measure the value delivered by a process in BPM.
How?

Before analysis of any process - define process performance

measures.
Will be used to determine if a process is in “good shape” or in
“bad shape.”

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Process Identification

Three dimensions used for process metrics: cost, time and quality.
Do it cheaper, do it faster, do it better.

Cost Time Quality

Cost per
Cycle time Error rates
execution

Resource Waiting SLA

utilization time violations

Non-value-
Customer
Waste adding
feedback
time

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Process Identification

Cost-related measures are a recurrent class of measures in the

context of BPM.
- In equipment rental process, a performance measure is the total
cost of all equipment rented by BuildIT per time interval.
Time-related measures, e.g., cycle time.
- E.g., The average amount of time elapsed between the moment an
equipment rental request is submitted by a site engineer and the
delivery of the equipment to the construction site.
Quality quality, e.g., error rates - percentage of times that an
execution of the process ends up in a negative outcome.
- E.g., In the equipment rental process a measure is the number of
pieces of equipment returned because they are unsuitable, or due to
defects in the delivered equipment.
Identification of such performance measures is crucial in any BPM
initiative.

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Process Discovery - (2)

After process identification need to understand the business

process in detail.

Phase is termed as process discovery - the current state of each of

the relevant processes is documented in the form of one or several
as-is process models.

One of the outcomes of this phase is as-is process models.

Models should reflect the understanding that people in the

organization have about how work is done.

Process models are meant to facilitate communication between

stakeholders involved in a BPM initiative.

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Process Discovery

Several languages for modeling business processes

diagrammatically exist -oldest notation is a flow chart.
Any diagrammatic process model consists of these types of nodes:

(a) Activity nodes - describe units of work that may be performed by

humans or software applications.
(b) Control nodes - capture the flow of execution between activities.
(c) Event nodes - tells that something may/must happen within the
process or in the environment of the process that requires a reaction.
e.g., arrival of a message from a customer asking to cancel their
purchase order.

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Process Discovery

Several languages for modeling business processes

diagrammatically exist, e.g., Petrinets, EPCs, YAWL models,
WF-nets
Widely used standard for process modeling is Business Process
Modelling Notation (BPMN).
- Activity nodes are represented as rounded rectangles.
- Control nodes (called gateways) are represented using diamond
shapes.
- Activity and control nodes are connected by means of arcs (called
flows) that determine the order in which the process is executed.

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Process Discovery
During this phase, we identify stakeholders, observe, interview,
build insights - map to a process model.
Process model representing an initial fragment of the equipment
rental process.

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Process Discovery

Process model shows 2 decision points.

Process participants - site engineer, clerk, works engineer.

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Process Analysis - (3)

In this phase issues associated to the as-is process are:

- identified
- documented
- quantified using performance measures.

Output of this phase is a structured collection of issues.

Issues are prioritized in terms of their impact and estimated effort

required to resolve them.

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Process Analysis

E.g., One potential issue in BuildIT’s equipment rental process is -

cycle time is too high, site engineers don’t get required equipment
on time.

This causes delays in various construction tasks/construction

projects.
To analyze these issues - collect information about the time spent
in each task of the process.
- Time spent doing work and idle time.
- Time needed for rework if something went wrong.

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Process Analysis

The analyst needs to find out:

- what % of cases the availability of equipment check fails
- how often the clerk needs to do some rework

Using this information the analyst employs several techniques to

trace down the cause(s) of long cycle times.
Need to identify ways of changing the process in order to reduce
the cycle time.

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Process Redesign - (4)

Next phase is to identify and analyze potential remedies for the

issues.

Process improvement - goal is to identify changes to the process.

Multiple change options are analyzed and compared in terms of

the performance measures.

Analyst considers multiple possible options for addressing a

problem.

Changing a process is not as easy. WHY??

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Process Redesign

Changing a process is not as easy WHY??

1 People are used to work in a certain way and might resist changes.
2 Change may imply modifying the information system(s)
underpinning the process
- change may be costly
- change may require changes in the organization that coordinates the
process - also in other organizations.

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Process Redesign

Multiple change options are analyzed - compared in terms of

performance measures.

Process redesign and process analysis go hand-in-hand.

When new change options are proposed - are analyzed using

process analysis techniques.

The most promising change options are combined - leads to a

redesigned process.

Output of this phase is a to-be process model - basis for the next
phase.

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Process Implementation - (5)

When process has been redesigned:

- necessary changes in the ways of working are implemented
- IT systems of the organization are implemented

This phase is called process implementation.

E.g. Put in place an IS to record and to track equipment rental

requests, Purchase Orders associated to approved requests and
invoices associated to the POs.

Train the process participants to use the redesigned process.

Changes required to move from the as-is process to the to-be

process are prepared and performed.

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Process Implementation

Process implementation covers two aspects:

Organizational change management - activities required to change

the way of working of all participants involved in the process.
These activities include:
(a) Explain changes to the process participants - understand changes
introduced and why changes are beneficial.
(b) Put in place a change management plan - stakeholders know when
changes be put into effect, transitional arrangements will be
employed to address problems during the transition to the to-be
process.
(c) Train users new way of working and monitoring the changes -
smooth transition to the to-be process.

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Process Implementation

Process implementation covers two aspects:

Process automation - development and deployment of IT systems

that support the to-be process.
System support process participants to perform process tasks:
(a) Assign tasks to process participants
(b) Help process participants to prioritize their work
(c) Provide process participants with the information they need to
perform a task
(d) Perform automated crosschecks where possible.

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Process Monitoring and Controlling - (6)

When the redesigned process is running - collect relevant data

from process.

Analyze the data to determine how well the process is performing.

Consider the process performance measures and performance

objectives.

Bottlenecks, recurrent errors or deviations - intended behavior are

identified and corrective actions are undertaken.

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Process Monitoring and Controlling

As Michael Hammer said: “every good process eventually becomes

a bad process unless continuously adapted and improved to keep
up with the ever-changing landscape of customer needs,
technology and competition. ”

The phases in the BPM lifecycle should be seen as being circular:

the output of monitoring and controlling feeds back into the
discovery, analysis and redesign phases.

If new issues arise in the same or in other processes -requires the

cycle to be repeated on a continuous basis.

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BPM Summary

BPM lifecycle helps to understand the role of technology in BPM.

Information Technology (IT) is a key instrument to improve
business processes.
As Bill Gates, once famously put it: “The first rule in any
technology used in a business is that automation applied to an
efficient operation will magnify the efficiency. The second is that
automation applied to an inefficient operation will magnify the
inefficiency”.
This means that learning how to design and improve processes -
and not only how to build an IT system to automate a narrow
part of a business process - is a fundamental skill that should be in
the hands of any IT graduate.
Graduates need to understand how technology, and particularly
IT, can be used to optimize the execution of business processes.

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BPM Exercise

Study the BuildIT process.

With respect to the above process, consider the following
questions:
1 Who are the actors in this process?
2 Which actors can be considered to be the customer (or customers)
in this process?
3 What value does the process deliver to its customer(s)?
4 What are the possible outcomes of this process?

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