It’s been a few days since my last posting, for which I apologise. This has been due to starting work on a new project, which entails mapping the To-Be processes for a Maltese Government Department project.

The original As-Is Processes were previously mapped in Visio, as part the early stages of the project.  I am not great fan of using Visio for mapping business processes. It is difficult to manage standardising of conventions, and in this case the Visio cannot be imported into the tool I am working with because it has been developed using a very basic nomenclature.  

That aside I decided to try, in this case, to drive them towards using BPMN (Business Process Management Notation) using a Business Process development tool. In looking round for a tool I came across ARIS Express. I have used Aris and Oracle BPA (Oracle BPA is built on Aris) on a number of projects but using their EPC convention. Since the acquisition of Aris by Software AG it seems they have become more open to using the BPMN standards. I was delighted to find ARIS Express which is a free version of Aris, all be it with a reduced functionality that also supports BPMN V2.0.

ARIS Express is a simple tool to use and I find sufficient for documenting processes. There is no database with ARIS Express and so the diagrams have to be stored in a folder, which means that the links between objects have to be redefined if the folder structure is changed. The other inconvenience is the Pools and Swim lanes are placed in the workspace and objects are dropped onto the pool / swim lanes objects rather than defining the pool / swim lanes as attributes in the process activities objects. The limited number of attributes on the objects is a problem as this prevents swim lane analysis by multiple dimensions i.e. Organisation, Department, and Role etc.

One thing I do like is the ability to use traditional ARIS conventions with the BPM Notation as this provides a means of linking the Value Chain Diagrams to the BPMN detailed processes improving navigation. Also I the documentation generated by ARIS is good providing very detailed process information.

As I build more processes, there will be around 80 to 100 processes in all, I will get a better idea of the capability of the tool but, my first impression is good.  The link for ARIS Express download is http://www.ids-scheer.com/en/ARIS/ARIS_Platform/ARIS_Express/151392.html , also I have below is a attachment with the standard BPMN convention defined in ARIS Express.

 BPMN 2 Elements.doc (285.00 kb)

I have had a number of comments regarding the use of Entity Level Business Modeling. So let me try to explain why I use this method of describing the business.

This type of model is used by accounting firms to provide a means for their audit staff to understand the characteristics of a business and assess the risks associated with none performance. We often view our business from an internal perspective and do not consider how external organisations see us as a business. It is important if we need to attract investors, appease the regulatory bodies and convince internal stakeholders to describe our business in a manner that provides a risk assessment on non-performance and the steps management will take to corrective the situation.

What I will try to do is use a Telco example shown below extracted from one of the models I have created to illustrate how the Entity Level Business Model works. After this you can make your judgment as to how usefulness of this approach might be to you.

 

The overview diagram is a succinct way of showing a typical business model illustrating clearly the external factors that impact the internal processes. When reviewing a Business Process Management or Business Intelligence project it is advantageous for the Business Architect to have a clear understanding of the business drivers. This diagram although simplistic provides a good overview and is used to obtain an agreement with the client on their understanding of their business. This can be taken one step further to gain agreement with the customer on the Value Chain.

Once we have the overview diagram and value chain agreed we can then move to a specific level 1 process (End-to-End) and put together the information required to start building the detailed process diagrams. There is a template for doing this which I have described in a previous blog. However, what I will do now is select a level 1 process and show a generic completed template form. The process I have selected is “Customer Care and Billing”

Process Description	The customer care and billing process covers the end-to-end process associated with: 1.       Handling an initial customer order 2.       Fulfilling the order 3.       Generating a bill 4.       Collecting cash for the service provided.  It is also concerned with: ·         Maintaining customer satisfaction to ensure they do not switch to another provider or cease service; and ·         Providing different types of customer services It is important to view the above as one process rather than four separate processes as inefficiencies or problems anywhere along the chain impacts the level of collection and customer satisfaction.
Process Objectives	1.       Meet specific needs and service levels required by new and existing customers 2.       Attract and retain customers 3.       Deliver tailored services through appropriate distribution channels 4.       Meet management information requirements 5.       Prevent fraud and bad debts 6.       Deliver adequate structured billing data on expected media
Critical Success Factor Key Performance Indicator (KPI) Service Order Processing (Obj. 1,2) ·         Span of time to activate the customer ·         Service Order Aging ·         Held order levels and Aging Customer Service Level Quality (Obj. 1,2,3) ·         Customer Satisfaction ·         Churn rate Subscriber Billing Expectations (Obj. 1,6) ·         Change requests  concerned with delivery of Billing Cash Processing (Obj. 5) ·         Days outstanding analysis Installation and Repairs Expectation (Obj. 1,2,3,4) ·         Trouble Ticket Aging Billing Adjustments (Obj. 5,6) ·         Customer billing enquiry levels ·         Customer & Service profitability ·         Churn rates ·         Rate of bad debts / credit adjustments
Input	Key Activities		Output
·         Customer base data ·         Completed Customer Orders ·         Customer Reliability Information ·         Order Change Request ·         Service Information ·         Customer Information ·         Network Availability Information ·         Order/Service Billing Enquiries ·         Cancellation Statistics ·         Network/ Service/Billing Problems ·         Credit Notes Issued ·         Call Data  Recording ·         Legal and Specific Accounting Regulations ·         Payment Data and Methods ·         Accounts Receivable			·         Customer Invoice ·         Held Over ·         Cash Receipt Trouble Ticket ·         Service Order ·         Financial Accounting Entries ·         Updated Network Information ·         Satisfied Customer ·         Fraud Information ·         Service Order Confirmation ·         Active Circuit ·         Service level Statistics ·         Credit Notes
Systems	·         Service Order Processing ·         Message Processing ·         Automatic Call Distribution	·         Billing System ·         Customer Remittance Processing	·         Customer Enquiry and Error Correction ·         Service Provisioning System
Classes of Transactions	Routine ·         Service order processing (SO) ·         Access service requests (ASR) ·         Held order processing ·         Billing and collection ·         Cash application ·         Settlements ·         Billing adjustments (fraud, etc.) ·         Trouble ticket processing ·         Interconnection billing	Non-routine ·         System implementation and upgrades ·         Rating table changes (can also be a routine transaction) ·         Tariff structure changes ·         Settlement process changes ·         Service level changes	Accounting Estimates ·         Bad debt / credit adjustment reserve ·         Earned and unbilled revenue ·         Billed and unearned revenue ·         Accruals for interconnect billing
Risks Which Threaten Objectives		Management Responses linked to Risks
A.      Inadequate service level (Obj. 1,2) B.      Improperly trained customer service representatives (Obj. 1,2) C.      Delays in service and/or repair provisioning (Obj. 1,2,3) D.      Lack of employee personal accountability (Obj. 4) E.       Provisioning errors (Obj. 3) F.       Billing / cash processing errors (Obj. 5,6) G.     Fraud (Obj. 5) H.     Billing delays (Obj. 6)		Þ     Customer interviews (A) Þ     Setting quality targets (B) Þ     Monitoring performance targets (C) Þ     Accountability and responsibility assignments (D) Þ     Reconciliations (E) Þ     Customer credit analysis (F,G) Þ     Monitoring performance targets (H)
Other Symptoms of Poor Performance	·         Deterioration in service order, held order or trouble ticket ageing	·         Undesired levels of customer churn	·         Undesired levels of customer complaints, billing adjustments, etc.
Performance Improvement Observations	·         Strategy consulting ·         Business process management	·         Billing system evaluation and selection ·         Billing system implementation	·         Revenue assurance ·         Controls assessment ·         Call center process consulting

The methodology provides a framework for setting the Process Objectives and linking the Critical Success Factors (CSFs) to both the objectives and Key Performance Indicators (KPIs). This is important as quite often I am asked how to define the operational KPIs, which hopefully now is explained.  Another important consideration is that the main functions groups within the End-to-End process are defined and linked to their Inputs, Outputs and Systems for maintaining the data along with the main transaction groupings.

The risks of non-performance are also discussed and their impact on achieving the objectives along with how management perceive their responses to mitigate the problem. The document also tries to identify the areas to be considered for performance improvement. This can be very useful information when identifying the “Quick Wins” during a Business Process Improvement project.

The information for the input to the “Entity Level Business Model” is captured during workshops with Process Owners and Stakeholders. Usually the workshops will include those process owners and stakeholders that interface to the Level 1 Process under discussion. In preparation for the workshops I consider competitive companies and how they are structured as well as their financial performance. This is useful benchmark data and helps with understanding the businesses competitive pressures. There may also be specific industry frameworks with predefined industry processes that can be considered i.e. SCOR (Supply Chan) and eTOM (specifically for Telcos).

The Business Process models are usually built at a high level in this stage of the Business Modeling process. For those of you who are familiar with the Supply Chain Council Reference Model (SCOR) or APQC – Process Calcification Framework (PCF) it would be comparable to their Level 1 and Level 2 process maps i.e. Process Category or Group.

The starting point for me is usually developing an Entity Business Model, this enables the Major Categories of Business Processes to be defined, to support the Business Model, within a standard framework. I have a number of standard models developed for various industries that I have accumulated over time which I use to accelerate the process. The Entity Business Model illustrated is an example of Shipping Industry Model. When working for a number of Container Shipping companies I refined the diagram to just focus on a specific segment of the Shipping Industry. After an agreement has been reached on the categories of Business Processes a value chain diagram is created for those process categories that create value for the business and those that support value creation. At the same time the organisation structure defined in the Resourcing Model can be mapped to the Processes Categories so that high level responsibilities can be considered.

When mapping Business Processes I recommend that a BPM/BPA system is used so that conventions can be standardised and change management can be addressed through the development and aligning of the processes to the specific business requirements. Many of the systems have simulation capability which can be useful, plus it keeps a history of the changes, capturing how you arrive at the Process Model.

The Value Chain is defined by the Value Proposition and Profit Model. Since we are concerned at this stage with the Value we bring to our customers and how we diferentiate oursleves from the competition the focus initially will be on the Core Processe. The Value Chain Core Processes manages suppliers, internal product development, production and logistics as well the Sales and after Sales Service. Therefore they manage the cash-to-cash process which is ultimately captured and reported in the Financial Management system.

Also I would recommend that a CPM software solution is considered for Financial Planning, Budgeting and Forecasting as it allows business drivers to be defined and “what if” simulation to applied to various test scenarios. Also in some industries pricing and product strategies play a significant part in the Business Modeling process and may also need further maintenance through the business year. Also history plays a large part in prediciting future forecasts and demand plans which require sofisticated algorithums to be applied to provide a more accurate result.

The Resourcing Model can quite complex as it needs to ensure there are sufficient resources to deliver the Value Proposition and achieve the Profit Mode. It is not just a Human Resourcing model it covers all aspects of resourcing:

1.       Finance Management– That there is sufficient working capital to meet the operational needs of the business.

2.       Human Resources Management– The human resource plan has the appropriate skills and experience to deliver the value Proposition.

3.       Fixed Assets Management – That there is sufficient capacity and investment in assets to meet the business needs in terms of delivering the products or services to the customers.

4.       Materials Management – Ensure that the supplier contracts deliver the quality and reliability to meet the customers demand for products and services.

 Funding

In previous Blog “Starting with the Cash–to-Cash Business Process” I discussed the sources of cash to meet the operating needs of a business. This is an important factor in ensuring there is sufficient Working Capital to support the Profit Model. Cash is the life blood of a business and if the flow of cash is insufficient to meet the operational needs of a business there can be very serious consequences.

The Cash Cycle is defined as the length of time between the purchase of raw materials and the collection of accounts receivable generated in the sale of the final product. However, what we are really interested in is the impact on the business of not being able to meet the daily cash needs of the company. The Cash reservoir is supported by the unused short term loans to supply the day to day cash needs of the business.  Flowing into the reservoir is accounts receivable, which is the payment from the customers for products and services. As we indicated previously in the Profit Model, labour and materials is the two main out goings in the operational model. The Cash Cycle is expressed as a formula “Inventory Days plus Payable Days minus Receivable Days equals Working Capital Days”.  Whereas “Working Capital is equal to Current Assets minus Current Liabilities” a positive working capital means that the company is able to pay off its short-term liabilities from the available cash, accounts receivable and inventory. If a company is unable to pay its creditors then a plan should be in place to obtain additional loans from the various sources of funding i.e. disposal of assets, raising of equity capital etc., in conjunction with a strategy to reduce operating costs. The funding strategy at this stage should be based on how an investor will perceive your business and what returns they would expect to see from investing in the business.

Human Resources

The skills and expertise required to meet the requirements of the business is critical to its success. Also as this is a heavy ongoing expense, care needs to taken in the way human resources are brought into the business and right from the outset how their success will measured and rewarded. No Human Resource should be indispensable, the business will develop a life of its own and so succession planning needs to taken into account.

The organisation structure will be considered at this stage and how the resources are distributed to meet the business requirements. This structure becomes very important once we start investigating business processes and defining ownership and responsibilities.

An important consideration also is to ensure that the planned Human Resources accept responsibility for performance and are actively engaged in business process improvement schemes embarked upon by the business. It is extremely difficult to introduce and get acceptance for performance related payment schemes once employees are used and comfortable with a basic salary plan. Also by pushing the performance indicators and ownership lower down in the organisation there is less requirement for intermediate management and hence an increase in control over costs.

Fixed Assets Management

There is usually a significant investment in Machinery and Buildings etc. to deliver the products and services. This varies depending on the industry type. There may also be requirement for the Assets to be strategically placed to better service the customers. An outsourcing strategy can be considered to investigate better ways of managing the investment in expensive assets with a focus on freeing up more funding for investing in the delivery of products and services.

Material Management

The Supply of materials is a key area and sits in the Value Chain of an organisation. The selection of suppliers and the negotiated contracts will impact the way a business delivers its products and services to its customers. It also impacts the Working Capital strategy for an organisation affecting the Working Capital days. Key also to this is the strategy to be adopted by the business on the receiving of materials i.e. how often are deliveries made, are raw materials purchased and manufacture into final products or sub-assemblies purchased and only the final assembly performed. Or as is becoming popular now is the whole manufacturing and logistics processes sub-contracted. Finally the quality standards are negotiated with suppliers to meet the Value Proposition previously defined.

To help understand the areas of coverage in this Blog I will define my perception of Business Performance Management. All too often people assume Performance Management is Business Intelligence (BI). This is not the case, BI is one of the legs on the stool and as the diagram shows there two more legs and a framework within which it is defined and implemented.

The diagram highlights the three main areas which are:

·         Corporate Performance Management

·         Business Intelligence

·         Business Process Management

The framework within which the solution is built is usually part of an Enterprise Architecture (EA). As to what EA framework is used is very much down to the preference of the EA Team. During the course of this Blog I will endeavour to cover all these areas based on my experience and preferences. There is another important factor to cover which is Programme Management since implementing Performance Management comprises of multiple complex projects. The projects have many interdependencies that need to be tied together to ensure the sequence and priorities in which deliverables are made are consistent and do not impact adversely pervious deliverables.

In the centre of the diagram there is a red box called “Assigned Accountability”. One of the most difficult parts of a Performance Management project is assigning ownership of performance metrics, especially at the operational levels within a business. This has a major impact on the existing culture within and often involves assigning performance related incentives to individuals and groups who are responsible for the management of the activities that impact the performance metrics. Since activities are part of a process and processes are affected by upstream and downstream processes difficulties can arise from poor performance that has an impact on the achievements and aspirations of dependent performance metrics owners. Managing these changes is a difficult task and needs a strong management team to mitigating the risk associated with delivering a successful Performance Management Programme.

Performance Management is a top down driven programme that becomes embedded in the culture of an organisation. It is a continuous process that enables an organisation to respond to change quickly and adjust to the changing economic and market dynamics as they occur. Technology plays a large part in the delivery of a successful programme expanding its reach and response to an ever changing business environment. Performance Management projects rely heavily on applications and tools to document and deliver a successful outcome. I will expand on this in future Blogs.

When considering where to start on a business process project I like to investigate the Cash-to-Cash process. I think of the Cash-to-Cash process as the “Cash Supply Chain” managing the key business resource of money. This is an essential ingredient to the survival of the business and the achievement of its Strategy.

There are many KPI’s (Key Performance Indicators) derived from the Cash-to-Cash process. All focused on managing the “Cash Tank” that fuels the company’s progress through its lifelong business journey. The diagram shows a financial perspective which is essential when dealing with investors and organisations that supports the business through its growth and stability objectives. The diagram illustrates clearly how a business maintains sufficient cash resources to meet their resourcing needs, or risk serious financial consequences.

A key measure on a business is whether it has sufficient cash available to meet its short term responsibilities (short term liabilities). There are a number of key ratios used by investors to gauge the liquidity of a business i.e. Current Ratio, Quick Ratio and Working Capital to Sales which are some of their favourites. However, when considering the internal operations of a business, the focus should be more on Working Capital Days.

 

The illustration shows the funding requirements for a business and highlights the points of measure which can be applied to control this process and reduce the organisation exposure. We are all very conscious of the recent economic events and the impact this has had on business. This very simple diagram illustrates the importance of time gap between cash-out and cash-in and the impact that product quality and effective resource management can have on this process. This can be taken further when investigate the impact of the cash-to-cash process on the supply chain and how this affects the relationships between the business and its customers and suppliers.

The importance of the external factors and how they can impact they have on the business is shown in the above diagram. All businesses should have similar internal measures in place to ensure external relationships with Investors, Customers and Suppliers are well maintained and focused on meeting the goals and objectives of the business. It is ideal if the relationships within the supply chain are transparent from a planning perspective to ensure there are no surprises and that the satisfaction level is of the highest standard.

In the next couple of Blogs I will share my views on the development and implementation cycle of a Business Process Project. When considering a BPM or BI project I have a number of criteria that I review. This has arisen from my experience of engaging in projects that end up purely as a documentation exercise to be archived and never seen again.

The following are some of the considerations I take ito account before engaging on a BPM project:

1.       There should be a compelling need, driven top down within the organisation.

2.       There is a well defined business model.

3.       The Business Processes take Input and provide Output to the Strategic Planning and Corporate Performance Management systems. In other words the Processes are directly linked to the Profit Model which in turn is derived from the organisations Value Proposition.

4.       There are well defined planning cycles within the organisation so that performance can be measured against plan. Also so Business Processes can be adjusted or re-designed to meet the goals and objectives of the Plan.

5.       There are well defined End-to-End processes which all other processes are decomposed from.

6.       There is a model to define accountability for managing the processes.  

7.       Business Intelligence is utilised to monitor and analyse the outcomes of the processes and their impact on the organisations performance.

8.       The Stakeholders within the organisation undertake to implement a culture of continuous process of improvement (there is acceptance that this is not a one-off exercise and it is a continuously evolving, contributing to the success of the organisation).

The diagram I have included is a typical BPM cycle and should be reflected in the project plan. My next Blog will provide a more detailed plan.

Through the use of the Entity level Business Model I am able to establish the 3 main categories of processes:

1.       Strategic Management Processes

2.       Core Business Processes

3.       Resource Management Processes.

These process categories can be represented in a Value Chain Diagram which illustrates how all the process within an organisation affect profit and create value.  In conjunction with the Value Chain, I would recommend the use of a Benchmarking Framework such as APQC – Process Calcification Framework (PCF).  This is particularly useful for Business Process Management as it provides a standard Nomenclature for distinguishing process categories and their decomposed components.

At the outset of all BPM projects participants should agree a standard convention and nomenclature. It provides a means for all BPM developers and project participants to establish a consistency throughout the project and set a baseline on which future enhancements and improvements can be measured. 

To provide a basis for establishing a Unique Identifier the APQC Process Classification Framework (PCF) provides a standard nomenclature framework of unique identity numbers down to the activity level that is divided into 4 levels.

1.       Category: The highest level within the PCF is indicated by whole numbers (e.g., 8.0 and 9.0)

2.       Process Group: Items with one decimal numbering (e.g., 8.1 and 9.1) are considered a process group.

3.       Process: Items with two decimal numberings (e.g., 8.1.1 and 9.1.2) are considered processes.

4.       Activity: Items with three decimal numbering (e.g. 8.3.1.1 and 9.1.1.1) are considered activities within a process.

Most Business Process Tools require that each element has a unique identifier, which is usually assigned by the software. However, in my opinion it is better to adopt a standard such as APQC – PCF as it provides a classification system for grouping processes and activities and for establishing a performance framework on which to identify areas of improvement and manage future changes.

I have successfully used this framework recently on a WebSphere Business Modeler project, in conjunction with IBM’s Business Component Model. It proved to be an invaluable tool in lining up the business processes and activities to the Component Model structure.

My next Blog was going to focus a little more on Ratio Analysis as a follow on to my previous discussions. However, when researching for an opportunity I am pursuing, I came across an interesting Harvard Business School video interview with Clayton M. Christensen entitled “Should You Reinvent Your Business Model”.  

During this interview he touched on how technological innovations can cause significant disruption to businesses and may require a new business model to adapt to the disturbance. One of his examples was the evolution of the Computer Industry from mainframes to mini computers to PCs. In the interview he takes IBM as a good example of a company that managed its way through this evolution where many failed. He discusses how IBM did not try to adapt its existing business models to manage its way through these changes but started entirely new organisations in each case with its own innovative Business Model. His reasoning is that as technology evolves the resources requirements change, cost structures transform and the profit margins reduce as volumes increase and so entirely new business models are required to meet the new demand.  

When asked to define a business model he states there are main four elements which need to be considered when investigating the impact of disruptive innovation:

1.       All Business Models start with a Value Proposition

2.       Next stage is a Profit Formula to establish a cost structure to support technological changes and the new demand for the product.

3.       Then put into place a Set of Resources i.e. People, Products, Technology, Buildings, and Equipment etc. working inside of the profit formula.

4.       And then Processes are developed within this framework to get things done

This explanation helped me put some of my ideas and previous experiences into perspective. Its shows the importance of understanding the impact of external change within the life time of an organisation. Also it highlighted the relationship between processes and profit and, how, sometimes process improvement will be insufficient if the business model radically changes. Finally technological innovation is not the only factor into today’s dynamic markets that creates a disruptive business model; economic cycles and the depth of recession can have the same devastating impact if not addressed though new business model.