CHAPTER 1 Introduction “The early years ofthe 21st century brought astounding changes to indus- try: the dot-com crash, the globalization and widespread outsourcing of business functions, increased regulatory and standards pressures, and a peck at a future full of nanotechnology, artificial intelligence, and bio- engineered products that will far surpass human capabilities. All of these changes have forced organizations to become “leaner and meanet” to sur vive, but being lean and mean alone does not guarantee survival ‘A.2004 study by the London School of Economics and the McKinsey Company" shows that companies that managed both processes and their technology deployments to support their business processes experienced significant gains over those who did not. Companies that neither had much technology support for work nor managed their business processes ‘experienced no gains from business investments relative to other com panies. Companies that minimally managed their business processes but had a high level of technology support experienced a 2% return on their investments. Companies that actively managed their business processes but had a low intensity of technology for work suppore experienced an 89% gain. This shows that simply making no other changes than managing business processes can Iead to higher returns. And companies that both actively managed business processes and had a high intensity of technol- ‘ogy support for work experienced, on average, 20% gains in recurns on the investment. These results highlight the importance of both intelligent process management and strategic, intelligent technology deployment in supporting business processes. Thus in the search for survival capabilities, organizations have come to understand that excess of any sort is costly and should be removed. “The frst step in removing excess is to understand business processes, the ‘work those processes accomplish, and how that work relates to the orga~ nization's mission. Any process, process step, or process product (e.g.,4 PROCESS MAPPING AND MANAGEMENT document, e-mail, data, or other product of a process step) that does not contribute to the organization's mission, or its ability to mect its mission, But just removing excess does not guarantee survival. Processes need to be nor only efficient but also effective. Where efficiency is driving out waste and minimizing costs (or doing things right), ¢fécriveness is doing the right things to generate revenue. Both efficiency and effectiveness are required for survival. In striving for effectiveness, companies need co plan and deploy technologies and other aids in order to accomplish the work that will not only speed the process but aso enhance the company’s image, provide new ways to do work, and otherwise improve internal operations, Further, companies annually spend an increasing amount on planning, developing, monitoring, improving, and automating their ‘Automated business processes model some organizational work to a very detailed level. Such a business process definition is important for the success of many activities, including the following: + Management is difficult, if not impossible, ifthe processes being managed are not completely and explicitly known, + Organizational structuring or restructuring (eg, changes accomplished during reengineering efforts) requites knowledge of the importance and contribution of business processes, + Installation of cross-functional software, such as enterprise resource planning software (ERP; e.g., SAP), requires intimate knowledge of business functions and their processes. + Application scoping, definition, and development are unlikely 10 be successful if not based on fully defined processes and all supporting detailed information + Servitizing of the information technology (IT) function is the application of process management to IT; therefore, it requires knowledge not only of IT processes but also of how to manage those processes across organizational silos. Business process analysis uses business process maps to determine the appropriateness of changes relating to restructuring or the introduc tion of new business technologies, such as computer applications or newINTRODUCTION 5 ‘manufacturing technology. Sets of process maps are developed to define the current business and proposed changes, which may result in one set ‘of maps per proposed alternative. While other techniques for graphi- cally depicting an organization have been used, business process maps are genetic and not specifically technology driven—they are therefore more «easily accepted by business executives This book is about removing waste from organizations by busi- ness process mapping, analysis, change, measurement, and continuous improvement. The book is also about optimizing and measuring the efficiency and effectiveness of processes in order to improve the overall revenue of an organization, thereby improving its chances of survival. While this is not specifically a technology book, we will discuss how to analyze and select technologies that can optimally support work once the processes have been streamlined. Keep in mind that without a good pro- cess foundation, technology is unlikely to obtain the expected gains. An understanding of process must come frst. ‘Other ingredients of survival include being innovative, being fucure oriented in trying new techniques and technologies, being capable of continuous change, being able co time changes to optimize the prob: ability of success, and luck, While luck cannot be guaranteed, the book does address the future orientation, innovation, and continuous change aspects of organizational management and timing Why Do We Care About Processes? ‘We cannot say why we care about processes without first defining what a process is, A proces isthe set of activities (repeated steps or tasks) that accomplishes some business function. In a perfect world, a process con- sists of the following components (as illustrated in Figure 1.1) + inpur—that is, daa, informacion, or materials that are used in the process + the process steps to transform or otherwise manipulate the input + some ouput—that is, a good or service that results from the process + feedback inthe form of monitoring and metrics on output quality that are used to regulate and improve the process6 PROCESS MAPPING AND MANAGEMENT Input - Process +Output Feedback Figure 1.1. Process PO + feedback. So why do we care about processes? Business processes involve how work gets done. Process understanding is important because you can- not manage what you do not know or understand. Further, processes ate the basis of organizational functioning, Therefore, any business improve- ment involves process analysis and process improvement. Managing process understanding and conduct ensures process repeatability. As whole organizations follow standardized processes, che should improve all aspects of business conduct, including customer satisfaction. Thus managing processes—or not—affects organizational outcomes, including profitability Every project of any type that spans organizational boundaries has some characteristic phases in common. These phases relate to process improvement projects, which are explained in the next section, resulting organizational maturity Overview of Project Conduct Any project follows similar phases of work. These phases are mentioned here because they are assumed in any process improvement endeavor. However, the details of these phases are not covered here because they divert axcention from process understanding and improvement, which is the primary focus of this book. [A genetic project ideally includes stages for organization strategy development, which spawns development of tactical initiatives, which then spawns development of individual projects. While mature orga nizations may develop strategy, tactics, and projects in this way, many companies ate less sophisticated and more ad hoc in their approaches to management, Such less sophisticated companies may only realize a prob- lem when it results in lost sales or customer complaints Process architecture is an abstraction depicting an overview of an orga- nization as a set of critical processes, often in the form of a matrix. TheINTRODUCTION 7 architecture documents all critical processes for the organization and includes items such as the date of last improvement, process success, busi- ‘ness functions that participate in the process, and organizational process interrlationships and dependencies. As processes are monitored, prob- lems in work conduct can be identified and process improvement projects recommended. Thus process architecture is a tool to identify continuous improvement needs of the organization. All projects require project management, Project’ management includes activities for planning, coordinating, scoping, costing, time esti- mating, quality assuring, staffing, communicating, procuring, and risk ‘managing. Project management issues relevant to process improvement projects are addressed in the next chapter, However, project management isa significant topic in its own right and is therefore not covered in detail in this book. Similarly, all process improvements are essentially change projects. Change management has its own requirements, and itis a complex activ ity that relates to organizational culeure and the radiealness and type of change. Many fine books are available on this subject, so i is only briefly discussed here in the context of key issues ‘Thus the phases of strategizing, architecting, managing, and chang- ing relate to any project and, asa result, are considered beyond the scope of this book. This book concentrates on the actual process improvement activities needed to architect and engineer a well-designed, appropriate process, The next section describes the key aspects of process improvement activities and identifies the chapters in which these copics are discussed. Process Improvement Project Conduct Process improvement projects proceed through their own process in the steps depicted in Figure 1.2. Process improvement projects begin with an initiation activity, which results in mapping and documenting the target process (or processes). Once documented, the target process proceeds through three types of problem analyses for improvement: leaning the pro- cess of unneeded tasks, leaning the process to further improve the remain- ing process steps, and greening co minimize the environmental impact of the process. Following analysis, the process is redesigned, a case for change is developed, and changes ate recommended. Once the changes are approved,& PROCESS MAPPING AND MANAGEMENT ~> Jay cm FY pratyte ex Change sescsan = Figure 1.2. The process of process improvement. implementation planning begins, with error-proofing used co remove the potential for problems and to guarantee identification of problems should they occur. Measures or mettics are developed to monitor the success of the changes and to take the process into the future. Initiating a process improvement project begins with a series of inter: views, the goal of which is to develop sufficient understanding for staff and to plan the improvement project. In chapter 2, we introduce these concepts and a call-center case that is used throughout the book to illu trate many concepts After identifying processes through interviews and determining one or a small number of processes for further analysis, che processes ate mapped, Process mapping is discussed in both chapters 3 and 4. Process maps depict roles, tasks, process steps, and all initiating and terminating events and conditions, Many processes cross organizational boundaries, and to ensure optimal improvement, all stakeholders should be part of any improvement project. Chapter 3 develops the technique of process ‘mapping, defining cach icon and its usage and a method for mapping processes, The chapter also describes alrernative techniques sometimes used for process mapping and the knowledge behind each step required for optimal improvement. Chapter 4 expands on mapping techniques and develops techniques for dealing with time, geography, and other variations that can alter theINTRODUCTION 9 ways in which maps are drawn, In addition, common ertors ate depicted with an example of the error and an example of the correct mapping technique. Process improvement requires knowledge behind process (or process step) history, purpose, problems, method of conduct, current metrics, reliance on information from external sources, and so on. Pro- cess understanding includes all ofthese and is required for map validation and documentation, which are also discussed ‘When process steps are identified as having problems, techniques for determining she extent, severity, and impact of the problems are used to determine the focus of improvement. These techniques include matrices, checklists, and various graphical forms, which are addressed in chapter 5 Problem-finding techniques may surface all of the critical needs for change, but these techniques can sometimes miss historically acceped process steps or wasted movements that are also unneeded. The next chap- ters deal with identifying and removing any unnecessary steps. Chapter 6 discusses lean manufacturing methods as applied to process improve- ment, Lean tenets allow us to find and remove waste from processes. ‘Then, in chapter 7, other techniques that lead to process “cleaning” assist in improving remaining process steps. Both of these chapters aso rely on Six Sigma concepts to improve process activites and outcomes, Alternatives for spreading or shifting responsibility for process steps are evaluated in chapter 8. A key motivation for these alternatives is envi ronmental friendliness thac reduces paper input, paper use, or production through a particular process. Thus this step is referred to as an analysis for “greening” the process. One alternative is automation. Process automation, not only reduces paper but also increases throughput of a process while allowing automated tracking of workflows through service jobs. Alterna- tives for automation range from adaptations of off-the-shelf sofware capa bilities, o use of process automation tools, o customized applications that ‘track workflows. Each alternative requires careful analysis and deployment in order to ensure a positive outcome. Another alternative for spreading o shifting responsibilty isthe shift- ing of activities to customers (or others) as a coproduction initiative Coproduction off-loads work to others who add unpaid, value-adding capabilities to a product. Coproducers can be the public, customers, of other companies with some stake in the outcome. Since coproduction,10 PROCESS MAPPING AND MANAGEMENT as discussed here, takes place mostly on the Internet, it, 00, can reduce paper that would otherwise be created to deal with user concerns. Once a process has been leaned, cleaned, and greened, itis ready to bbe reconstructed for optimal performance. Chapter 9 addresses the rede- sign of the process map, which shows all proposed changes. Redesign includes the application of ideas From all analyses as well as the evaluation of innovative approaches for performing the work that might be beyond those considered in the greening section. ‘The seemingly simple cask of developing a proposed process can spawn many other tasks, for instance, for outsourcing, Therefore, making a case for change that encompasses all expected forms of change and spawned projects is important, Chapter 9 describes the types of financial analysis required for the case for change. Once changes are approved, process error-proofing is performed. Pro- cess error-proofing seeks to identify all possible points of failure (includ ing human) and to design the resulting solution to reduce the likelihood, provide detection, and otherwise manage potential points of failure. The ‘more complex and automated the process, the greater the possibilty that points of failure will occur and the more eritical this step becomes. Final activities relate co proving that recommendations for change were successful and developing the case for change in a final report. Chapter 10 describes the development of mettics for both daily manage- ‘ment and customer reporting. Once the redesign and engineering is com- plete, the process is ready to be implemented. The remainder of chapter 10 defines how to document the process improvement project and its ree- ommended outcomes—organization and technology changes. Building on the case for change, the accompanying financial analysis, which high- lights the cost-benefit analysis for the recommended change, is presented. ‘Asan example, a sample final project report is presented in appendix A following chapter 10. The sample report is presented as evidence that al aspects of work requite evaluation, as the presenting problem is often merely a symptom of other problems. Finally, many changes in process orientation are actually performed, as precursor activities to the development of a service orientation for the company: In this book, Toften distinguish between immature and mature “scrvitized” organizations. This distinction is important, as the compa- nies in both camps have clea, relevant differences that constrain or facili- tate different solutions for process improvementINTRODUCTION 1 ‘Macure organizations are managed through “formal, repeatable, and secure operational processes.”* Many of these organizations—for exam. ple, Proctor & Gamble and Johnson Contols—are the best in their industries. Through discipline, these companies have mastered cross- functional management through a service orientation to deliver a quality ‘customer experience. ‘Change management for continuous improvement is embedded in the processes of mature organizations as a normal consequence of any breakdowns in quality experience delivery, Therefore, process change initiation, while having more “ceremony,” is one facet of risk manage- ment that pays off, leading to nearly 100% successful change efforts in ‘mature organizations as compared with about 40% success for immature organizations? ‘Contrast this well-oiled machine of an organization with an immature ‘organization. Immature organizations buy in to Nicholas Carr's notion that “TT doesnt matter treating IT as a necessary evil that drains assets. Such organizations frequently believe the controlled management of IT is not possible. Immature organizations frequently throw technology at 1 problem because it is cheaper than changing people. These firms are lucky to get any retuens from their IT investments.® Immature organizations frequently have cultural clashes between. IT and the rest of the company, which works based on adversarial rela- tionships that rely on last-minute heroics to achieve IT changes. As IT changes are implemented, licde attention, if any, is paid to the people doing the work that IT supports. Training if present, is incomplete, and support is inconsistent. ‘Most organizations fall somewhere between these ewo extremes. The important distinction is that in mature organizations, the ideas in this book are already embedded in daily work life, while in immature orga- nizations, this book's ideas seem radical, overkill, or even impossible to accomplish Ironically, every organization can become a mature, servitized organi- zation, but doing so requires great and unwavering management, a com- mitment to excellence, and an understanding of what servitizing means. "The last chapter both summarizes this book and discusses the path to ser vitizing through a discussion of IT service management. The book's body12 PROCESS MAPPING AND MANAGEMENT of knowledge is summarized with expectations for the facure of process management and its role in the servitizing of business. Summary Businesses have come to understand that to be efficient and effective, they nced to manage their work processes and support good processes with IT. Process management is important because you cannot manage what you do not know. Since processes are the basis for all organizational operations, development of lean, clean, and green processes support orga nizational cost savings and quality management goals.