As shrinking budgets lead to more lay-offs, Canadian firms across various sectors are becoming acutely conscious of how each employee’s time, skills and outcomes affect the bottom line.
This awareness, in turn, has sparked much interest in a management approach called business process management or BPM.
As a holistic management strategy, BPM’s aim is to continuously optimize business processes. Among other things, it uses software and IT expertise to do this.
He was speaking at a Technology Insights presentation by Computer World Canada last week.
Beggs said in the present economic climate, senior corporate executives are intent on cutting costs and making their businesses nimble. In pursuit of these goals, they also realize their business model is a “core asset” and something they should be paying more attention to.
Evidence of this growing awareness at the highest corporate levels is to be found in an IBM study of global CEOs conducted last year.
Eighty-three per cent of CEOs polled said they expected “substantial or very substantial” changes in the market. And 98 per cent planned on modifying their business model in response.
That’s the good news.
The not-so-good news is that even now, most companies – when reviewing business operations – don’t consider the big picture, said Beggs.
They’re so often clueless about which processes work, and which don’t.
Data used to monitor and analyze various facets of the business is often outdated, or collected in an ad-hoc manner. The result is faulty analysis and decision making, and an inability to make effective changes.
Beggs cites the example of JetBlue Airways, the American airline that last year left hundreds of passengers stranded inside planes that sat on the tarmac for around 16 hours.
Reason: the company’s business model didn’t allow them to bring the planes back to the gate after leaving it.
JetBlue Airways had no process in place for organizing a ground crew to bring a plane back to the gate, Beggs noted. This gap in process left customers angry and, in all likelihood, affected future ticket sales.
By taking a hard look at their business processes and improving them, companies can avoid such costly mistakes, the BPM specialist said.
A useful tool, in this context, is software that offers insight into overall business performance, and helps firms make quick and effective decisions, as well as identify gaps and issues in their existing model.
There are all sorts of reasons why companies would be interested in business process management, the current financial crisis being one of them, says a Canadian analyst.
Some firms have been forced to lay off staff and want those who remain to become more productive, noted Maureen Fleming, program director of BPM and middleware at technology research firm IDC in Framingham, Mass.
Others may want to get a better handle on work being done by employees, and how to automate and optimize workflow to improve performance.
“BPM allows us to see what people are doing and improve it,” she said.
It can also help companies to reduce costs by finding “money leaks” (areas of wasteful expenditure) and reducing those through new policy.
How to get started
When starting to implement BPM, selecting the right process and team is key, said Patricia Nielsen, Websphere services specialist at IBM Canada.
She said business managers and IT professionals should work together – looking at real-time data – to identify key performance indicators (KPIs).
These KPIs should then be used to formulate policy that helps the business run more effectively.
Nielsen noted that more than 40 per cent of CEOs are changing business models to boost collaboration, and research indicates such inter-departmental co-operation is essential for business success.
For instance, by sharing insights with IT staff, companies can double productivity gains, according to a London School of Economics study.
Team members should have a cross-departmental perspective, Nielsen suggested, and everyone should have a vested interest in the success of a project.
The project should “bridge the gap between business and IT,” she said. “Ninety per cent of projects fail when this bond is missing, so companies should think of a formal way to engage both sides.”
But she said the business – rather than the IT – side of the team should have final ownership, because it’s the business folk that are ultimately responsible for ROI.
When deciding which process to improve, look at what makes you special, she said – what makes you stand out from the competition.
And while the first selection need not be absolutely critical to the business, it “can’t be insignificant either,” Nielsen said. “A good business process to choose would be one which spans more than one functional unit or domain.”
Her advice is to avoid selecting a process with a solution already set in motion.
Nielsen also recommends developing a three- to five-month scope for implementing the plan. Tangible results should be seen and shared as quickly as possible.
Beggs (IBM Canada’s national BPM specialist) cited real life examples of business processes selected by companies for improvement.
For instance, a human resources firm decided to speed up the time it took to pay new hires. While improving this process wasn’t critical to the business, they knew it would significantly improve employee relations, if successful.
The process improvement took nine weeks and the firm was able to apply lessons learned to future BPM initiatives.
New York State also used business process management to reduce a backlog of cases in its tax department, he said.
By automating and transforming the manual, paper-intensive tax return process, the backlog was reduced by 60 per cent and the refund inventory (the amount spent on having to pay interest on backlogged tax returns) reduced by 70 per cent.
The state also received an unintended bonus.
By automating process, the legislature was able to check online if there was money in the budget for a particular process rather than depend on a paper- and people-intensive process.
This saved the government $30 million a year.
Nielsen recommends using business process management with a service-oriented architecture (SOA).
SOA, she said, enables the creation of services as “building blocks.”
It allows for use of existing assets and for changes to be introduced without creating a whack of new code.
And how does this help companies optimize business processes?
According to Nielsen, by packaging IT capabilities as a set of reusable services, business processes can be tweaked on demand, in response to marketplace changes.
Based on selected KPIs, she said, leaders can to track and modify the business processes as they flow, allowing for easy spotting of bottlenecks or delays and responding immediately.
Also, by setting “triggers,” process monitoring can be automated so specific actions are launched when certain events occur in running processes.
“This capability can produce real competitive advantage,” said Nielsen, and ensure operations critical to the business are running and effective at all times.
When to act
Paul MacKay, worldwide leader of Websphere business events at IBM Ltd. says business leaders can use BPM in tandem with business events processing to determine when to act.
By looking at an individual “event”, meaning any electronic signal pointing to a change in business, and placing it into the bigger context, patterns will develop that help leaders decide when to act or react.
Sixty per cent of CEOs say they want to use increasing data available to them to improve business practices, according to IBM’s 2008 report.
The benefits of using business event-processing technology to define patterns and determine responses can be impressive, MacKay suggested.
He said one of the three largest insurance companies in the U.S. experienced this.
It tracked visitors to its Web site that abandoned their shopping cart before making a purchase – and co-related those events with others involving inquiries about the same product at their call centre.
This data was then used to initiate an e-mail marketing campaign to increase sales. It was targeted at users who thought about purchasing that product and had entered their e-mail address.
MacKay said the way to determine which events are important is to ask: “What’s a situation in your business you can benefit from, generate revenue with, or mitigate risk, by doing something?”