MTAT.03.

231
Business Process Management

Lecture 2 – Process Identification

Marlon Dumas

marlon.dumas ät ut . ee

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Course structure

Process
identification Week 2

Process Weeks 3-4

discovery

Process
Weeks 12-14 monitoring and
Gover- Process Weeks 5-7
Strategy nance analysis
controlling

Culture

Weeks 10-11 Process Process Weeks 8-9

implementation redesign

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Process identification

What?
1. Identify an organization’s business processes
2. Prioritize their management based on certain criteria

Why?
1. Understand the organization
2. Maximize value of BPM projects
Process identification steps
1. Designation step
• Enumerate main processes Process
Architecture
• Determine process scope

2. Prioritization step (aka Process selection)

Prioritize processes based on: Prioritized
• Importance Process
• Health Portfolio
• Feasibility

After Davenport (1993)

Process Enumeration

“Most businesses have just three core processes:

1. Sell stuff
2. Deliver stuff
3. Making sure you have stuff to sell and deliver”

Geary Rummler
Porter: Types of processes

Management
Processes

Customers / Stakeholders
Suppliers / Partners

Core Processes

Support Processes

After Michael Porter (1985)

Example: core, support and management processes
Wholesaler
Core processes
• Sales (lead-to-quote, quote-to-order, order-to-cash)
• Purchase-to-Pay (direct procurement, e.g. supplies replenishment)
•…

Support processes
• Purchase-to-pay (indirect procurement, e.g. parts replenishment,
operational resources replenishment…)
• HR (policies update, recruitment, induction, probation…)
•…

Management processes
• Suppliers management (suppliers planning, suppliers acquisition…)
• Logistics management (logistics planning, logistics controlling…)
•…
 Relations between core, support, mgt processes

Management processes Sign

Contracts
provide direction, rules and
practices
Establish
Sourcing Plan
Evaluate
Vendors
Procedure Vendors
Process

Core processes
Fill Order Process
generate value as they
are directly linked to Receive Approve Deliver
Fill Order
external customers Order Order Order

Reorder
Supplies
Support processes provide
Stock Process Order
resources to be used by other Supplies Supplies
processes
Receive
Supplies
Example: process architecture
Wholesaler

Strategic
Management

Logistics Suppliers
Management Management
Warehouse Demand
Management Management
Process
Management processes group

Direct
Sales Distribution
procurement

Marketing Service
Core processes
Indirect
Finance IT HR
procurement
Support processes
Example: process architecture
Insurance company

Strategic
Management
Corporate Market Investor
Development Development Relations
Management processes

Risk Assessment & Management

Marketing & Sales

Underwriting Policy Claims
Management Servicing Management
Payments Collection and Disbursement
Assets Management
Core processes
Finance/ Legal/
Reinsurance IT HR
Treasury Audit
Support processes
Solution: identify process types
Process scoping

Processes are interdependent  insights into interrelations

required
• Specialization: general – special product/service
• Horizontal: upstream – downstream processes and their value chains
• Vertical: main processes – sub-processes

Process architecture
 Value chain modeling
• Chain of processes an organization performs to deliver value to
customers and stakeholders
• More generally, a mechanism to group high-level business
processes according to an order relation (can be applied to
core, support and management processes)

business
process
Procure-to-service

order
relation
Guidelines to identify horizontal boundaries in
value chains
1. Change of key business object in the process
2. Change of granularity of main business object
3. Change in frequency/time
4. Change in intermediate outcome/resolution/objective
Example: value chain
Wholesaler
Core processes
Typical value chains for core processes
Think around three main steps:
• Imagine it (design new product/service)
• Build it (source, assemble, deliver product/service)
• Sell it (market, sell, service product/service)

Stocked
products:

Specializations
MTO
products:

ETO
products:
Example: value chains for service provider
IT service provider

Design Market Sales Deliver Service

Systems Integration

Outsourcing

Network Services

Enterprise Server Technology

Example: value chain of non-core processes
Support processes

HR:

Accounting:

Management processes

Suppliers
management:

Risk
management:
Example: process architecture & value chains
Wholesaler

Strategic
Management

Warehouse Logistics
Management Management
Suppliers Demand
Management Management
Management processes
Chevron: Direct Box:
Sales Distribution
collapsed procurement
groups
Procure-to-Service
value chain processes/
Marketing Service
Core processes value
chains
Indirect
Finance IT HR
procurement
Support processes
Alternative: process architecture – groups
Consultancy Firm
Manage Firm
1.1 1.2 1.3 1.4 1.5
Management Plan the Govern the (Re)design Develop Methods Change the
processes Business Business Processes & Standards Business

Expanded
Relate to Clients
Core 2.1 2.2 2.3 2.12 process
Optimize
group
Develop Raise Awareness Evaluate Client
processes Stakeholder Service Offerings of Services Solution Delivery
Relationships

Optimize Portfolio Deliver Solutions

2.4 2.5 2.6 2.7 2.8
Plan Delivery of 2.13 Deliver Provide
Gain Initiative Deliver Business
Service to Service Adjust Portfolio Infrastructure Professional
Commitment System Solutions
Corp. Solutions Services

Optimize Solutions
2.9
Operate 2.10 2.11
Infrastructure & Retire Solutions Support Users
Business Systems

Support Firm
3.1 3.2 3.4 3.6
Support 3.3 3.5
Provide Expert Provide HR Acquire Goods & Provide Working
Provide IT Tools Obtain Financial
processes Advice & Capabilities Services Services Facilities
Knowledge
Typical artifacts for vertical scoping
Value chains
Chains of processes. Stay at a high level. Rule of thumb: 3-7 processes
• Procure-to-service, Risk management

(Root/Main) Processes
Build up value chains and affect each other. They are abstract
• Lead-to-quote, Quote-to-order, Order-to-cash

Subprocesses Typical focus of Process enumeration

Build up processes. They are detailed, involve multiple activities and can be layered on
different levels of abstraction (i.e. sub-subprocesses)
• Order shipment, invoicing

Process tasks
Build up processes and sub-processes. They are atomic and performed by human beings, IT
systems or equipment
• Approve invoice
Process architecture: hierarchical view

Level 1
Process
Landscape

Process hierarchy
Level 2
Main
Processes
(e.g. BPMN)

Level 3+
Subprocesses, Tasks
(e.g. BPMN)
How many levels in the process architecture?

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Example: hierarchical process architecture
Insurance company

Level 1
Strategic
Management
Corporate Market Investor
Development Development Relations
Management processes

Risk Assessment & Management

Marketing & Sales

Underwriting Policy Claims
Management Servicing Management
Payments Collection and Disbursement
Assets Management
Core processes
Finance/ Legal/
Reinsurance IT HR
Treasury Audit
Support processes
Example: hierarchical process architecture
Insurance company
Level 2

Strategic Corporate Marketing Investor Process

Management development development relations
group
Define Define offering Plan
Design & manage
business concept & and customer investor
corporate policies
long-term vision value proposition relations

Develop Build Process

Manage Define pricing
business
knowledge strategy
investor subgroup
strategy relations

Manage Manage Manage

Define and manage
strategic change & investor
channel strategy
initiatives improvement relations

Manage Communicate
partners with stakeholders

Manage
investments &
divestments

Management processes
Example: hierarchical process architecture
Develop Define offering
Process
Insurance company business
strategy
and customer
value proposition subgroup
Define
Develop overall
offering and
mission statement
positioning

Main
Evaluate strategic Develop value
options proposition process
Level 3
Select
Validate value
long-term business
proposition
strategy

Coordinate
Develop
functional and
new branding
operational strategies

Align
functional and
operational strategies

Create
organisational
design

Develop
organisational
goals

Formulate
business unit
strategies

Management processes
Example: hierarchical process architecture
Insurance company

Level 4

Develop overall Main

mission statement
process
Define
current business

Formulate Subprocess
mission

Communicate
mission

Management processes
Designation via reference models
A reference model is used as a template to design the process
architecture

Examples:
• Information Technology Infrastructure Library (ITIL)
• Supply Chain Operations Reference Model (SCOR)
• Process Classification Framework (PCF)
• Control Objectives for Information Technology (COBIT)
• Value Reference Model (VRM)
• Voluntary Interindustry Commerce Solutions (VICS)
• eTOM Business Process Framework
• Performance Framework
Example: APQC Process Classification Framework (PCF)

• Industry-neutral enterprise model

• Open standard for benchmarking
• Four levels
• Categories
• Process group
• Process
• Activity
APQC PCF Overview

Category
 APQC Classification Framework

Group

Activity

Process
Prioritization (aka Process Selection)

1. Importance
Which processes have greatest impact on the organization‘s strategic
objectives?
2. Health (or Dysfunction)
Which processes are in deepest trouble?
3. Feasibility
Which processes are most susceptible to successful process
management?

Prioritized process portfolio

Hammer, Champy (1993)

Example: prioritized process portfolio
Financial institution

Short-term action
High Feasibility
Loan Rating
Low
controlling Contract
preparation Medium
Loan
decision Loan market High
evaluation
Handling of
payments Loan
planning
Loan
application
Low
Poor Health Good
Possible Strategic fit?
Prioritization

1. Importance
Which processes have greatest impact on the organization‘s strategic
objectives?
2. Health (or Dysfunction)
Which processes are in deepest trouble?
3. Feasibility
Which processes are most susceptible to successful process
management?

Prioritized process portfolio

Hammer, Champy (1993)

Example: prioritized process PICK chart
Financial institution

Short-term action
High Feasibility
Loan Rating
Low
controlling Contract
preparation Medium
Loan
decision Loan market High
evaluation
Handling of
payments Loan
planning
Loan
application
Low
Poor Health Good
Possible Strategic fit?
BPM Lifecycle
Process Discovery

1. Defining the setting: This phase is dedicated to assembling a

team in a company that will be responsible for working on the
process.
2. Gathering information: This phase is concerned with building an
understanding of the process. Different discovery methods can
be used to acquire information on a process.
3. Conducting the modeling task: This phase deals with organizing
the creation of the process model. The modeling method gives
guidance for mapping out the process in a systematic way.
4. Assuring process model quality: This phase aims to guarantee
that the resulting process models meet different quality criteria.
This phase is important for establishing trust in the process
model.
Who is involved?

Domain Expert Process Analyst

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Stakeholders in Detail

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Challenge 1:
Fragmented Process Knowledge

I make a photocopy
before handing over
the application

Why can‘t I directly

provide cash after
approval?
We bundle
refinancing to get
better interest rates.
Challenge 2:
Domain Experts think on Instance
Level
”Every trip is different.“

”You cannot really compare.

Our customers go to different
places in different seasons
using different modes of
transportation.“

”We can never do anything

exactly in the same way. There
are so many special
conditions.“

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Challenge 3:
Knowledge about Process
Modelling is rare
”Could you please tell me, whether this diagram correctly
shows your process?“

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Expertise of Process Analysts

Problem understanding
Episodic knowledge available to get to root of problem
Knowledge organisation helps to structure problem
Problem solving
Trigger identification (problem-related cues)
Hypothesis management (formulation and testing of hypotheses)
Goal setting (what needs to be achieved next)
Top-down strategy driven by analysis goals
Modelling skills
Well-structured and laid out
Systematically labelled
Explicit start and end points of a process
Appropriate granularity and decomposition
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Process Discovery Techniques

Evidence-based
Document analysis
Observation
Process mining

Interview-based

Workshop-based

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Document Analysis

Documents point to existing roles, activities and business

objects

Formal documentation in terms of

Organization chart
Employment plan
Quality certificate report
Internal policies
Glossaries and handbooks

Forms

Work instructions

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Observation

Observe what people do at their workplace

Trace business objects in the course of their lifecycle
Inspect the work environment

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Process Mining

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Interviews

Interview

Validation Modeling
• Correct
• Complete
Verification
• Sound
Structured vs. unstructured interviews
Assumption: analyst and stakeholder share terminology
Then, questions target at identifying deviations from standard
processing
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Workshops

Gather all key stakeholders together

One process analyst, multiple domain experts
Participants interact to create shared understanding
Often: software-supported, a model is directly created during
the workshop (separate role)
Model is reference point for discussions
Alternative: brown-paper workshops

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Strengths and Weaknesses
Technique Strength
Document Analysis • Structured information
• Independent from
availability of
stakeholders
Observation • Context-rich insight into
process
Automatic Discovery • Extensive set of cases
• Objective data
Interview • Detailed inquiry into
process
Workshop • Direct resolution of
conflicting views
Weakness
• Outdated material
• Wrong level of
abstraction
• Potentially intrusive
• Stakeholders likely to
behave differently
• Only few cases
• Potential issue with data
quality
• Requires sparse time of
process stakeholders
• Several iterations
required before sign-off
• Synchronous availability
of several stakeholders
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Effort of Process Discovery

Consider that the order process of your favorite online

book retailer has ten major activities that are
conducted by different persons. How much time do
you need approximately for creating a process model
that is validated and approved by the process owner?
Make appropriate assumptions.
Process Discovery Effort

This process contains ten major activities that are executed by

different persons. We can assume that there will be a kickoff
meeting with the process owner and some important domain
experts on day one. One day might be required to study available
documentation. An interview with one domain expert can take
from two to three hours, such that we would be able to meet two
persons per day, and document the interview results at night
time. Let us assume that we meet some persons only once while
we seek feedback from important domain experts in two
additional interviews. Then, there would be a final approval from
the process owner. This adds up to one day for the kickoff, one
for document study, five days for the first iteration interviews, and
further five days if we assume that we meet five experts three
times. Then, we need one day for preparing the meeting for final
approval with the process owner, which would be on the following
day. If there are no delays and scheduling problems, this yields 2
+ 5 + 5 + 2 = 14 work days as a minimum.
Any Difference in Discovery?

Consider the following two

companies.
• Company A is young, founded
three years ago, and has grown
rapidly to a current toll of one
hundred employees.
• Company B is owned by the
state and operates in a domain
with extensive health and
security regulations.
How might these different
characteristics influence a
workshop-based discovery
approach?
Discovery and Culture

Before starting with process discovery, it is important to

understand the culture and the sentiment of an organization.
There are companies that preach and practice an open culture in
which all employee are encouraged to utter their ideas and their
criticism. Such organizations can benefit a lot from workshops as
participants are likely to present their ideas freely. In strictly
hierarchical organizations, it is necessary to take special care
that every participant gets an equal share of parole in a workshop
and that ideas and critique are not hold back. It might be the case
that the young dynamic company has a more open culture than
the company with extensive health and security regulations. This
has to be taken into account when organizing a workshop.
Organizing the Gathered Material

1. Identify the process boundaries

2. Identify activities and events
3. Identify resources and their handovers
4. Identify the control flow
5. Identify additional elements.
Process Boundaries

• Under which condition does the process start?

• With which result does it end?
• Which perspective do you assume?
Identify Activities and Events
Identify Resources and Handovers
Identify Control Flow
Your modeling project

For your modeling project, capture

• Control flow
• Activities
• Gateways
• Conditions
• Events
• Resources

Describe the process in such a way that it can be used to

trace in which state the admission/doctor-studies is and
who is conducting which steps of processing.
Quality Assurance
Is this process model of good
quality?

Deadlock
Syntactic Quality: Verification
Is this process model of good
quality?

Deadlock

Labeling
Formulate Labels Adequately

• Activities as Verb-Object
• Events as Object-Passive-Participle
• Conditions with reference to Object
Semantic Quality: Validation

• Correctness and
• Completeness

Domain Expert Process Analyst

Pragmatic Quality: Layout

Models must look nice

Seven Process Modeling
Guidelines (7PMG)

G1 Use as few elements in the model as possible

G2 Minimize the routing paths per element
G3 Use one start and one end event
G4 Model as structured as possible
G5 Avoid OR routing elements
G6 Use verb-object activity labels
G7 Decompose a model with more than 50 elements
Explain which 7PMG guidelines point to potential
for improvement. Remodel the process based on
your observations.
The reworked process
Summary

• Domain expert and process analyst have different

strengths and limitations in process discovery
• There are various discovery methods
• Quality Assurance is important