Business Process Management (BPM) initiatives are growing in popularity – largely because so many organizations have proven the value that BPM can deliver.
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BUSINESS PROCESS SO LUTIONS 2WH ITE PAPER Summary . 3Realizing Enterprise Process Advantage® .3Gaining and Maintaining Project Sponsorship .4Developing a Business Case ..4Step One: Validate the Starting Point ..5Step Two: Benchmark the Current Process State .6Step Three: De˜ne Performance Metrics and Success Criteria .7Step Four: Optimize for the Future Process State .8Case Study: Justifying BPM across the Enterprise 10Step Five: Develop a Return on Investment Model ..12The Real Cost of Implementing BPM .13Conclusion ..14Common BPM Pitfalls to Avoid: 15APPENDIX A: CASE STUDY EXAMPLE OF ROI MODEL Œ U.S. ENGINEERING SERVICES FIRM 16Soft Bene˜ts Calculation .16Total Projected Project Costs Example .17 ROI Calculation .18Aggressive Scenario ..18Conservative Scenario ..19
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BUSINESS PROCESS SO LUTIONS 3WH ITE PAPER Summary Business Process Management (BPM) initiatives are growing in popularity Œ largely because so many organizations have proven the value that BPM can deliver. With a relatively low investment in technology and resources, huge gains in process ef˜ciency, productivity, control, and business agility can be achieved. But unfortunately a large number of BPM projects fail to launch at all due to the inability of business or IT managers to build the credible business case needed to get upfront sponsorship and funding. The real value of BPM is realized from continuous planning and measurement, and the business case needs to be developed with transparent success criteria and fireal worldfl metrics in mind. Yet any business case is only as good as the validity and trueness of the project™s architecture and assumptions. Prioritization and validation of assumptions is part process (methodology) and part tools (simulation and modeling). An iterative approach should be taken to enable closed-loop analysis or a firound-tripfl approach for comprehensive modeling, validation, implementation and re˜nement for continuous process improvement. This white paper is designed to provide a repeatable framework for developing a business case for new or continued justi˜cation of BPM projects Œ with the objective being to help accelerate the startup time and enable more organizations to realize success from BPM. Realizing Enterprise Process Advantage® The opportunity for realizing business value from Business Process Management (BPM) initiatives is signi˜cant and unlike virtually any other area of software. This is due in part to the intimacy and interplay between BPM systems and the core business activities within which they exist. When done right, successful BPM initiatives (herein referring to projects involving both business process analysis and the implementation of business process management software) change the entire notion of applications, by allowing core systems to respond to process context, rather than driving processes around the limits of technology. In this way BPM changes the nature of application management and the notion of fiapplicationsfl altogether Œ allowing both IT and business users to avoid the complexity of disparate, siloed systems and instead focus on business processes at a higher level. This opens up the opportunity to improve cross- departmental processes and leverage process ef˜ciency and excellence as a means to drive strategic advantage Œ or an Enterprise Process Advantage ®. There are three fundamental characteristics of BPM that make this technology the game changerŠ 1. BPM is Incremental. One of the core advantages of BPM is that it need not require you to conquer all problems at once in order to deliver results. Rather projects can start small, while still making a large impact. As management sage Peter Drucker observed in his seminal work Management Challenges for the 21st Century, fiContinuous process improvements in any one area eventually transform the business. They lead to innovation. They lead to new processes. They lead to new business.fl To paraphrase, it is less important to start with the perfect process candidate than it is to establish a leverage point from which to extend into other opportunities. 2. BPM is Measurable. BPM is unique among technology-based initiatives in its ability to incorporate metrics and measurement parameters at the outset of the project and to automatically capture and track them along the way. BPM presents the opportunity for an immediate and material impact on business performance and visibility. Consultant Tip Use ‚Quick Wins™ to Establish a Track Record for Gaining Sponsorship of Larger Projects
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BUSINESS PROCESS SO LUTIONS 4WH ITE PAPER 3. BPM is Repeatable. BPM presents a compound bene˜t where the skill set and competencies gained from the ˜rst process deployed can be leveraged to automate and improve multiple processes throughout the organization for years to come. Gaining and Maintaining Project Sponsorship After nearly a decade of market research on what drives successful BPM implementations, the answer for what prevents them is consistently filack of sponsorshipfl by upper management. In other words, the single largest hurdle to BPM implementation is cited as ˜nding someone (an executive or a department) to pay for and champion it. Often departmental teams ˜nd the opportunity but not the resources to implement a BPM project, and are unable to win management support despite what may be to them an obvious need or potential bene˜t. There is no doubt that budget plays a role in whether or not sponsorship is found. Yet another factor is the perception of career endangerment. A new project Œ and particularly one which involves changing IT infrastructure Œ can be viewed as a distraction for the core business or even worse as a potential career-killer. Who wants to take on another ERP project and all the inherent risk it carries with it? Too often, timidity and a lack of available attention span exceed the spirit of innovation otherwise needed by senior management to spearhead BPM initiatives. Yet when successfully implemented, BPM initiatives can be a great career enhancer. One of the best secondary outcomes of a successful BPM project is the establishment of a BPM fiCenter of Excellencefl or competency center. Because BPM can be introduced incrementally, it lends itself to multiple projects and viral adoption. As nothing succeeds like success, a successful project in one area of the ˜rm inevitably leads to demand in other departments. BPM can create heroes, and many BPM project leaders evolve their role to become enterprise-wide process consultants and transformation agents. Gaining sponsorship is about building and presenting a credible business case. If sponsorship is lacking, it is almost always because a convincing business case has not been developed. A lack of sponsorship, even in the face of such compelling bene˜ts as described above, can be a blessing for a prospective project, as it requires its promoters to more carefully scrutinize the business case and in doing so removes much of the potential risk and uncertainty. In contrast, one of the worst ways to begin a project is by sacri˜cing focus for the sake of adapting to meet the agenda of any sponsor willing to fund the project Œ especially if there is not a sound business case to back up the change in focus. Too often, the need for sponsorship and funding forces project leaders to compromise preferred approaches and target areas, resulting in a BPM initiative that is set up for failure right from the outset. A carefully prepared business case can help prevent this tragic mistake. The right way to win sponsorship is by using short-term project wins to show proof- points and build credibility, and then to leverage these wins to initiate and deliver change across larger project areas Œ in other words, leverage the incremental and measurable qualities of BPM to achieve repeatable success. Developing a Business Case BPM initiatives succeed or fail based on the business case. It is both the means for gaining and maintaining management support and the mechanism by which you validate the project™s success. Even with project sponsorship in place, at some point it will be necessary to present the forecasted bene˜t anticipated through your proposed BPM deployment. This requires an understanding of the business bene˜ts and how they will be derived. The question then is fiWhat will you present to illustrate and prove these bene˜ts?fl The answer is the business case. In simple terms, developing a business case for BPM requires the articulation of how things are done today, how they can be done better, plus the cost and bene˜t of Consultant Tip Avoid the Path of Least Resistance; Spend the Time Necessary to Develop a Validated Business Case
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BUSINESS PROCESS SO LUTIONS 5WH ITE PAPER getting from the former to the latter. In more speci˜c terms, a successful business case requires the development of a step-based business value framework that follows a core set of activities and objectives: Step One: Validate the Starting Point Step Two: Benchmark the Current Process State Step Three: De˜ne Performance Metrics and Success Criteria Step Four: Optimize for the Future Process State Step Five: Develop a Return on Investment Model © Copyright 2011, OpenText Corporation Define Performance Metrics & Success CriteriaValidate Starting Point Benchmark Current Process3 1 2 Optimize for Future Process4 5 Develop ROI ModelBuilding a Business Case for BPM This framework presents a high-level methodology or logical approach for developing a business case, which also serves as a benchmark for tracking performance to plan during the implementation. While it is not meant to replace the implementation methodology, it is an appropriate framework for managing the ˜rst phases of decision-making, leading up to the selection and procurement of a BPM solution. And once you have a BPM technology solution in place, this framework can be repeated over time for each new process project to be deployed on that solution Œ creating a series of fiminifl business cases to ensure that you remain focused on driving business value in all of your BPM initiatives. Step One: Validate the Starting Point Before developing a business case, you must identify and gain consensus on the ˜rst process or set of processes to be included in the BPM project. Whether or not sponsorship is in place, there needs to be a clearly understood process area as the starting point. Because it is the initial proof point of the BPM initiative, it should be a process that offers a strong chance for success. The proof-of-concept stage is the wrong time for heroics, so begin where a quick win can be realized. Avoid overly complex, politically charged, or highly distributed processes that require buy-in from many parties outside your own domain. Generally this also means initially avoiding processes that are already rigidly de˜ned. These will be much harder to change and improve than more ad hoc processes. Consultant Tip Start by Focusing on fiWhatfl and fiWhenfl Rather Than fiWhyfl and fiHowfl
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BUSINESS PROCESS SO LUTIONS 6WH ITE PAPER In addition, look for processes that are causing immediate pain in the business. These processes will allow you to demonstrate a compelling need to move quickly and will often have a clear sponsor who can be leveraged to help champion and fund the effort. You will get a double win in these cases Œ delivering business value and solving a known problem or challenge that will make business users happy. Examples of processes that often meet these criteria are new customer intake, contract management, procurement, product change reviews, human resources processes, or instilling control and visibility for a particular compliance deadline. These processes are typically manual, paper-intense, ad hoc, fraught with inconsistency and inef˜ciency, and a source of frustration for those involved Œ characteristics that make them perfect candidates for BPM. Step Two: Benchmark the Current Process State Once the area of focus is identi˜ed, the next step is to establish a ficurrent statefl benchmark of the process. This is not intended to be a comprehensive re- engineering exercise, but rather an opportunity to better understand the process in question. This can be achieved by examining the fiwhat,fl fiwhen,fl and fiby whomfl work is performed Œ a good way to capture and document this information is by interviewing key stakeholders and process participants. This exercise is also an opportunity to begin understanding stakeholder motivations and process legacy. Each process has a history and may or may not re˚ect how it should be performed in the current business environment. Often this offers great opportunity for improvement. Yet overly scrutinizing this at the beginning can lead to a political battle or cause stakeholders to become defensive. So rather than getting entangled in politics, begin by simply documenting how things are done today, including speci˜c steps and activities, the frequency with which they are performed, and the duration of individual activities Œ and be sure to note obvious bottlenecks, issues, or areas of improvement. Next, start to identify the interdependencies and links between activities in terms of individual roles. Examine each individual™s role in the process, asking fiwhen do you?fl and fiwhy do you?fl questions about process fisteps.fl The goal is to build the context around process steps, so that a process can be de˜ned and modeled as a set of interrelated but discrete activities, rather than simply a loosely de˜ned sequence of actions. In addition, start to identify system dependencies in the process Œ what data is accessed when and by whom and in what system does it reside? Also, are there steps in the processes that are purely system-based? If so, those should be noted. This information will be helpful down the road in de˜ning integration points and, because the ability to tie together disparate systems under a single process layer is a key bene˜t of BPM, information on the systems involved in the process and how often they are accessed will be useful input to the business case. Next, focus on the fiwhite spacefl between activities, speci˜cally the precedents (what happens before) and dependents (what happens after) as well as the ˚ow of information and how it changes from one activity to another. This is also an opportunity to identify bottlenecks, without directly implicating any speci˜c roles or individuals. Do this by asking questions such as fiWhat are you waiting on most often?fl and fiHow could the process be improved without changing your job?fl During the ˜rst phase of process capture, most of the work is spent in de˜ning and capturing basic parameters, such as activity names, roles, information sets, as well as goals and metrics. This can be done with a spreadsheet or other tool for capturing notes, but it also presents a great opportunity for introducing a process modeling tool. Visual tools allow people to more clearly see linkages between roles and activities, and even more importantly, allows you to develop models that can be easily evolved into the fifuture statefl of a process, whereas a spreadsheet or paper document does not offer that value. Consultant Tip Leverage Visual Process Models to Engage Stakeholders in De˜ning Their Roles in the Process and to Reduce Resistance to Change
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BUSINESS PROCESS SO LUTIONS 8WH ITE PAPER At the end of the day, however, the greatest bene˜t of any successful BPM initiative is the agility gained by having access to data and visibility across the business that you have never had before and having the tools in place to allow you to adapt processes, actions, and measurements accordingly. This enables you to develop a closed-loop environment to support a rapid roundtrip from fiinformation-to-actionfl through an increased ability to forecast, assess and respond to internal and external change. This agility comes from a variety of factors that a BPM solution affords Œ including accelerating effective exception handling, enabling the separation of business logic and application logic, and allowing application behavior to be driven by process context. While agility may seem at ˜rst like a dif˜cult bene˜t to de˜ne and describe, the measurable indicators of agility are reduced rework, faster problem resolution and other cycle times, reduced downtime, minimization of an IT backlog, or increased customer self-service. © Copyright 2011, OpenText Corporation Most organizations have existing performance goals and objectives. These may be explicitly de˜ned as Management by Objective (MBO) or as a Balanced Scorecard. Otherwise they may be more strategic in nature such as fiReduce customer service calls by 30%fl or fiIncrease new account revenue by 25%fl Œ most often these do not have any speci˜c process tied to them so it represents an opportunity to identify the processes that will directly in˚uence these objectives and show how improving those processes can improve overall business success. Although BPM initiatives should not be force-˜t to arbitrary goals, the ability to align process improvements directly to corporate objectives provides a clear and effective framework for illustrating business value and gaining executive sponsorship. Step Four: Optimize for the Future Process State Once a process is captured in its current state and associated metrics are de˜ned, it can be leveraged to model a more optimal future state. Improvements can be identi˜ed in part through process modeling and simulation alone but the greatest opportunities for improvement, however, will come from the successful deployment of a complete BPM suite Œ which will provide not only modeling and simulation, but also the automation, management, and analysis capabilities necessary to realize the Consultant Tip Focus on De˜ning Measurable Outcomes to Support Higher Level Goals and Objectives
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BUSINESS PROCESS SO LUTIONS 9WH ITE PAPER full potential that true business process management has to offer. A complete BPM suite also automates the collection of metrics and creates a valuable audit trail. Improvements can be made in both the human-centric and system-based activities associated with a process. Simulation can be applied to both types of activities. Because a change in one area might impact the results of another, the ability to model and simulate both system-facing and user-facing activities in the same solution offers substantial advantage over specialty tools that focus only on human- centric processes or only on system-to-system integration. A combined view allows for the discovery of process inef˜ciencies, design problems and potential application improvements across the entire process, all during the analysis stage when changes are the easiest and least costly to make. A word of caution, however, simulation introduces the risk of focusing on sizzle over substance. When presenting the business case it is better to avoid hyping animated simulation and instead focus on the quality of the data and the degree of fiwhat iffl analysis supported. Finally, do not spend too much time trying to create the perfect process. Often getting a process automated and deployed even in its current state yields fast cost savings and productivity improvements. It is better to realize these savings early and then focus on analyzing the real data captured by the BPM suite to simulate and apply process improvements. For this reason, many organizations opt to leave process simulation to the end of the implementation Œ a decision that has paid off in high return-on-investments and fast wins to justify additional process deployments. BPM and the Mythical Man Month fiThe Mythical Man-Monthfl is a book by Fred Brooks ˜rst published in 1975, which illustrates that adding manpower to a late engineering project only makes it later. Brooks ˜rst presented this analysis focused on software engineering, however, it has been shown to be true for other fiknowledge workfl requiring skilled individuals, such as claims processing or mortgage origination. This theory, commonly referred to as Brooks™ Law, holds that the productivity of any group is reduced by the number of participants in the process and is negatively impacted by the introduction of new works. This is largely caused by the need for education of new resources and by increased inef˜ciency in communication and the overhead of coordination between greater numbers of individuals. This notion also presents a compelling case for the value of BPM, by leveraging the ability to streamline communication, facilitate handoffs, and embed instructions within work items. For example, when an insurance claim is transferred from a customer service rep to an adjuster, it typically requires further research and information gathering, and then is subject to the interpretation and assumptions of the individuals involved. By managing these handoffs within a BPM suite, much of the uncertainty and inconsistency in work quality can be eliminated through data validation and skills- based routing. For this reason, Brooks™ Law presents an opportunity for uncovering and identifying existing soft dollar costs wherever handoffs between roles can be found. Consultant Tip When Identifying Areas for Process Improvement Look for Handoffs of Work Between Roles
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BUSINESS PROCESS SO LUTIONS 10WH ITE PAPER Company Stats Pharmaceutical/Healthcare #23 on Fortune 500 List 14,000 employees Keys to Justifying the First BPM Process Started with one visible, high-return project. Identi˜ed several additional processes where BPM could be applied in the future. Leveraged ROI model to justify investment BPM technology Œ with added bene˜t that the technology could be leveraged across additional processes in the future. Keys to Extending BPM across the Enterprise Estimated ROI for each project. Focused only on high-value processes for BPM projects. Created a Process fiCenter of Excellencefl or fiSteering Committeefl to assess new BPM projects. Leveraged ROI/bene˜ts model to justify investment in services, hardware, and additional software needed for each project. Negotiated an Enterprise License Agreement with a proven BPM vendor to get maximum value. As a very large distributor in the pharmaceutical industry, the company had numerous relationships with manufacturers, pharmacies, and hospitals. In addition, the company managed distribution of both brand-name and generic drugs. The company is challenged not only with physical distribution and inventory management, but also by the complexities of contract and relationship management with its many manufacturers and customers. Managing the contract and pricing details associated with each of these relationships is people-intensive and time-consuming Œ but it is also critical to the company™s bottom-line pro˜tability. And as a large multi-billion dollar organization with over 14,000 employees, the company has numerous processes that are candidates for increased ef˜ciency. These characteristics all point to the need for effective Business Process Management (BPM). In 2004, the company selected its Contract & Chargeback process as the ˜rst candidate for a formal BPM project. This is the process that drives the establishment of pricing and terms with each of its manufacturers and then controls compliance with pricing terms and payment of rebates from the manufacturer if the company is forced to sell at a lower price to compete. The process represents a cash ˚ow of approximately $10 billion a year Œ and any disputes or inaccurate pricing data result in costly delays in getting the refunds the company is owed. The company built a business case to justify this BPM project Œ focusing on the hard dollar bene˜ts it would realize in the form of lower headcount, fewer disputes, and more accurate pricing information as well as soft bene˜ts such as faster processing of price changes and better supplier and customer relationships. The company also outlined several additional processes that could be candidates for BPM in the future, selecting several of the highest-value ones to cite as part of the business case Œ this helped make the business case for investing in BPM technology even stronger as it would be a technology that could be leveraged across other areas of the business. Case Study Justifying BPM across the Enterprise Œ One Step at a Time
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BUSINESS PROCESS SO LUTIONS 11WH ITE PAPER The company selected OpenText Metastorm BPM (MBPM) and successfully implemented the Contract & Chargeback process with one of its largest manufacturers. The project was extremely successful and delivered a high return on investment Œ thus building the foundation of credibility the company needed to expand the use of BPM to other areas of the business. Having established a close relationship with OpenText as its BPM vendor, the company was able to work with the vendor to hold educational workshops in other departments to educate them on the value of BPM and help them identify processes that would be potential candidates for use of the technology. OpenText helped the company ˜ne-tune the business case for several of the projects that were identi˜ed during the education sessions and to negotiate an Enterprise License Agreement that would allow for extensive use of the software at much lower price than they would pay if each project were licensed separately. The company also established a Process Center of Excellence Œ a panel of key business and IT people who assess processes, help with business case development, and oversee BPM projects to ensure they are successful. This company is a role model for the right way to justify BPM Œ start with high-value project, invest proven BPM technology from a proven vendor, leverage results to extend BPM to other parts of the organization, and iterate the process of building a business case for each project to ensure it is successful. By taking the time to build a strong business case and secure sponsorship for its BPM initiatives, the company has saved millions of dollars and established BPM as a credible and critical part of its IT and business infrastructure. © Copyright 2011 OpenText Corporation A Proven Path to Enterprise BPM Selected High-Value Process (Contract & Chargeback) Identified Benefits to be Achieved (Hard Dollar & Soft Benefits) Got Sponsorship and fiSold the Business Casefl Evaluated BPM Vendors Selected Metastorm Implemented Successful BPM ProjectPromoted the Results of the First Project Œ Even Won an Industry Award for Its Innovation & Success with BPM Held BPM Education Sessions for Other Parts of the Business Identified Several Additional Project Candidates Œ Focused on the Top 4 for the Business Case Negotiated an Enterprise License Agreement with Metastorm Established a Process Center of Excellence Committee to Sign-off on BPM projects Instilled an Ongoing Approach for Justifying and Expanding Use of BPM across the Organization START END
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