The question is often asked why you would need BPM software if your business already has implemented ERP and business specific applications. What makes a process important and why does it matter?
If you are in a competitive market, then it does matter. Porter recognised this in the mid eighties and wrote Competitive Advantage: Creating and Sustaining Superior Performance. In this book Porter shows that competitive advantage depends on all of the specific activities needed to create products and services and on the way the company organised those activities together into processes and ultimately into value chains. Porter’s concept of value chains links business processes across the organisation into measurable, end to end actions that define the way the organisation delivers its value proposition.
These value chains are the entities that make companies unique. It is the specific way that they transform their input into products or services that are deemed “valuable” by their customers.
The Geary Rummler diagram above describes Value Chains or Core Business Processes in the context of resources, customers and markets, competition, social and regulatory environments and the internal “silo” structure of most organisations. The structure of the internal functions may differ from business to business but the fundamental principles remain the same. The Value Chain of Core Business Processes drives each organisation’s unique competitive advantage. All businesses operate in this framework even though the internal structure may differ.
Customer expectations are based on how effective and efficient these processes work. Effective processes help organisations in fast growth scenarios whereas efficient processes optimise resources without compromising service levels in slow growth or recessionary business cycles. Customer retention in these recessionary cycles is as important as finding new customers while servicing them with fewer resources.
Business Process Management becomes a strategic initiative in this framework. It becomes a planned approach to understand, maintain and improve the Value Chain that is at the core of the business. Business Process Management (BPM) focuses on understanding the Value Chain by:
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documenting (mapping and modelling) the core business processes;
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maintaining these processes through automation, process controls and integration; and
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improving the Value Chain by analysing process performance indicators, implementing process changes in an agile process management environment and measure the results of those changes in a continuous improvement effort.
Porter’s Value Chains evolve with and organisation as business models, conditions and the competitive landscape change. It requires a flexible environment and processes can’t be “cast in concrete” as many failed ERP implementations show. The challenge is not with the transactional capability of the ERP solution, but rather its ability to adapt to changing business processes that are often external to the control of the business. The competitive advantage of most of the successful businesses today is not in the capability of their ERP but in their ability to deliver valued products and services through flexible, adaptive and unique processes.
Processes do matter and so does the technology that supports them. Many processes can be maintained without systems but the November 2008 Aberdeen Research Report – BPM and Beyond : The Human Factor of Process Management – reports that Best in Class organisations that have implemented BPM systems achieved a 53% improvement in process consistency, compared to a 13% improvement for the Industry Average and a 13% decline for Laggards.
The same report reveals the strategic nature of processes in the Value Chain as business executives listed the following as the top priorities that drive the focus on process management:
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45% – Need to reduce operational cost;
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41% – Need to improve process agility and innovation;
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26% – Challenge of managing multiple disparate information systems;
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22% – Pressure to improve customer service; and
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17% – Pressure to increase sales and drive new business.
Processes do matter. It is the only leverage that a business has to distinguish itself from competitors, operate in a compliant efficient way and deliver the unique value proposition that will keep it in business in time to come.
Filed under: Performance Management
