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Business Process Management in the Downturn

Originally published July 15, 2009

Today, businesses are increasingly looking to business process management (BPM) technologies. With the pressures of commoditization and globalization comes the need to find new ways to differentiate and protect margins. Traditional product differentiation is no longer sustainable and companies are really only left with three strategies: 1) accept that their products are going to come under intense margin pressure and focus on efficiencies in manufacture and distribution, 2) develop new products and features on faster cycles to continuously stay ahead, or 3) focus on the customer experience and the services that support their products as their main differentiator.

Whichever strategy (and it is usually a combination of all three) a company chooses, process becomes the central mechanism for change and control. But, process management itself is not new, so all of this is only really half of the equation. As a management discipline, process management and improvement has been around for decades (disguised as TQM, Six Sigma, Lean, etc.), but what has been missing from all of these is the ability to utilize IT as a true partner in process initiatives.

IT has traditionally been seen as a roadblock when it comes to process improvement and rapid business change. This is where BPM changes the game and why it is now coming to the forefront. The business is much more aware now than at any time in the past that information and technology can be a central pillar in their competitive weaponry, and IT is stepping up to align with business strategies and value creation. Couple this with the desire to increase return on existing IT assets (the significant amounts invested in IT over the last decade) and growing maturity in service oriented approaches to reuse these capabilities and the argument for BPM (with an SOA foundation) becomes extremely strong.

Impact of the Economic Downturn

The pressures created by the current recession are introducing further incentives for organizations to look at BPM as revenue growth falls and margins come under even greater pressure. The laser-like focus on cost management is creating an increased realization of the value of a process management approach. In addition, many organizations are realizing that trust levels with their customers have taken a knock over the last 18 months and are starting to focus on new initiatives to improve their customer-facing processes.

Perhaps the most striking impact has been on the increased interest in business activity monitoring (BAM) solutions. There is a real need to increase the levels of operational transparency, auditability and control as a result of the downturn. This is partly in conjunction with cost cutting measures – businesses want to be smarter about how they cut costs and have the insight into how any cost-cutting measures will impact other business metrics such as customer satisfaction. There are always trade-offs in the decisions that protect margins, and most companies are ill-equipped to handle them effectively. It is also a direct result of an increased focus on risk management. Strong growth over the last decade has meant that many organizations did not need to “look under the covers.” But now, especially with significant increases and changes in regulation around the corner, businesses are investing in operational transparency solutions such as BAM.

Best Practices for Deploying BPM

So, while BPM is particularly well suited to the current pressures facing business and IT, it is not a “silver bullet.” The good news is that there have been enough successful implementations of BPM solutions over the last few years for the industry to have built up a strong foundation of best practices. There are numerous factors that go into a successful implementation of BPM technology, but here are a few of the most critical:

Make decisions based on facts: An understanding of your current level of performance and a focus on the key performance indicators (KPIs) that are critical to achieving your objectives is an absolute prerequisite for starting down the BPM path. Far too many organizations jump into large initiatives to improve end-to-end processes armed only with experience, assumption, gut-feel and high-level guidance from an ill-defined strategy. An organization should “measure first.” Define the KPIs that are critical to your operational area to see in real-time how these processes are performing, where the issues arise and what the root causes are.

Ensure there is a strong understanding and alignment around strategy: An organization can have the best strategy in the world, but unless it has been mapped onto supporting processes and translated into KPIs that can be used to assess and control performance, then it is all for naught. You MUST start with a clearly defined strategy and set of near-term goals and you MUST communicate that simply and effectively to operational units that are responsible for day-to-day tactics.

Foster innovation at the “front lines”: Innovation is a team sport, not a management best practice. Once performance is well defined and the organization is aligned around a clear strategy and operational measures, you must ensure that front-line workers are empowered with the information and tools to identify and implement day-to-day process improvements. This is where we learn from previous best practices with process improvement methodologies. Kaizen initiatives (emanating from post-war Japan and targeted at continually improving all functions of a business) have been some of the most successful. Here significant improvements in operational efficiency have been driven by shop-floor workers, but only when the right culture and incentives were established in the organization alongside the tools and information flow.

Invest in the infrastructure as well as the tools: All this innovation needs to be implemented rapidly. This can only happen if the IT department has an infrastructure that facilitates reuse and rapid, iterative composition of new capabilities. BPM and SOA go hand in hand. Business cannot be empowered to move with greater process agility if IT is still stuck maintaining functional applications.

  • Michael Lees
    Michael is Senior Director of Global Product Marketing at Software AG with responsibility for the company’s business process management (BPM) solutions. He is co-author of BPM Basics for Dummies. You can reach him at mike.lees@softwareag.com.


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