Process architecture - Part I

This is the first lecture on process architecture from the course IAB203 - Business Process Modelling, that I delivered in Sem 1 2015.

1. CRICOS No. 00213J
a university for the
worldreal
R 1
A/Prof. Marcello La Rosa
BPM Discipline
Queensland University of Technology
IAB203 –Business Process Modelling
Week 9, 28 Apr 2015

2. Process IdentificationProcess
identification Conformance and
performance insights
Conformance and
performance insights Process
monitoring and
controlling
Executable
process
model
Executable
process
model Process
implementation
To-be process
model
To-be process
model Process
analysis
As-is process
model
As-is process
model Process
discovery
Process architectureProcess architecture Process
redesign
Insights on
weaknesses and
their impact
Insights on
weaknesses and
their impact
3

3. What?
1.Identify an organization’s business processes
2.Prioritize their management based on certain criteria
Why?
1.Understand the organization
2.Maximize value of BPM projects
How long?
Processes change over time (“dynamics of time”)
•identification should be exploratoryand iterative
•improvement opportunities are time-constrained
Process identification

4. 1.Designation step
•Enumerate main processes
•Determine process scope
2.Prioritization step (aka Process selection)
Prioritize processes based on:
•Importance
•Health
•Feasibility
Process identification steps
After Davenport (1993)
Process
Architecture
Prioritized
Process
Portfolio

5. Process enumeration
There is no “number fits all” -it really depends on
organization’s domain and size
Rule of thumb: 10-20 processes
Trade-off:
•ensuring process scope is manageable, since…
•process scope determines potential impact

6. •Order-to-cash
•Lead-to-quote
•Quote-to-order
•…
Example: enumeration
Wholesaler
•Staff recruitment
•Staff induction
•Staff probation
•Policies update
•…
•Supplies replenishment
•Operational resources
replenishment
•…
•Demand forecasting
•Logistics planning
•…
•Strategy development
•…
•Suppliers planning
•Suppliers acquisition
•…

7. Process architecture

8. Components of a process architecture
Core Processes
Management
Processes
Suppliers / Partners
Customers / Stakeholders
Support Processes
After Michael Porter (1985)

9. Core vs support processes (Porter)

10. Core, support and management processes
After Michael Porter (1985)
•Strategic and Planning
•Budgeting
•Compliance and Risk management
•Investors, Suppliers and Partners management
Management
processes
•Design and Development
•Manufacturing
•Marketing and Sales
•Delivery and After-sale
•Direct procurement
Core
processes
•Indirect procurement
•Human Resources
•Information Technology
•Accounting, Financial and Legal
Support
processes

11. Core processes
•Sales (lead-to-quote, quote-to-order, order-to-cash)
•Direct procurement (supplies replenishment)
•…
Support processes
•Indirect procurement (parts replenishment, operational resources
replenishment…)
•HR (policies update, recruitment, induction, probation…)
•…
Management processes
•Suppliers management (suppliers planning, suppliers acquisition…)
•Logistics management (logistics planning, logistics controlling…)
•…
Example: core, support and management processes
Wholesaler

12. Strategic
Management
Warehouse
Management
Suppliers
Management
Logistics
Management
Management processes
Finance
Indirect
procurement
IT HR
Coreprocesses
Supportprocesses
Wholesaler
Example: process architecture
Demand
Management
Sales
Direct
procurement
Distribution
ServiceMarketing
Process
group

13. Strategic
Management
Corporate
Development
Investor
Relations
Risk Assessment & Management
Market
Development
Management processes
Marketing & Sales
Underwriting
Management
Policy
Servicing
Claims
Management
Payments Collection and Disbursement
Assets Management
Finance/
Treasury
Legal/
Audit
Reinsurance IT HR
Core processes
Support processes
Insurance company
Example: process architecture

14. Example: process architecture
Core
Processes
Support
Processes
Management
Processes
Australian water supplier

15. Example: process architecture
Broadcasting company

16. Process scoping
Processes are interdependent insights into interrelations
required
•Specialization: general –special product/service
•Horizontal: upstream –downstream processes and their value chains
•Vertical: main processes –sub-processes
Process architecture

17. Scoping a process
Key scoping questions:
1.When does a given process instance start?
2.When do we consider a process completed?
3.What key objects does the process manipulates?
4.Who participates in the process?
5.Who owns the process?
A well-scoped process:
•Has a clear start, clear end (input, output)
•Has a clear, coherent set of “main objects” and “participants”
•Has a clear owner

18. Guidelines to identify horizontal boundaries
1.Change of key business object in the process
2.Change of multiplicity of main business object
3.Change in frequency/time
4.Change in intermediate outcome/resolution/objective

19. Guidelines to identify horizontal boundaries (cont’ed)
1.Core processes
•From an input to an outcome that generates value
•Decompose by identifying intermediate outcomes
2.Support processes
•From a need to a resolution
•Decompose by identifying intermediate resolutions
3.Management processes
•To control other processes
•Decompose by identifying intermediate objectives

20. •Chain of core processes an organization performs to deliver
value to customers and stakeholders
•More generally, a mechanism to group high-level business
processes according to an order relation (can be applied to
core, support and management processes)
Valuechain modeling
Procure-to-service
business
process
order
relation

21. Example: value chain
Wholesaler
Core processes

22. Building up a value chain (for core processes)
Think around three main steps:
•Imagine it (design new product/service)
•Build it (source, assemble, deliver product/service)
•Sell it (market, sell, service product/service)

23. Building up a value chain (for core processes)
Example: Producer
Stocked
products:
MTO
products:
ETO
products:
Specializations
After Paul Harmon, 2014

24. Example: value chains for service providerServiceDeliverSalesMarketDesign
Systems Integration
Outsourcing
Network Services
Enterprise Server Technology
IT service provider
After Paul Harmon, 2014

25. Support processes
HR:
Accounting:
Management processes
Suppliers
management:
Risk
management:
Example: value chain of non-core processes

26. Strategic
Management
Warehouse
Management
Suppliers
Management
Logistics
Management
Management processes
Procure-to-Service
Finance
Indirect
procurement
IT HR
Core processes
Support processes
Wholesaler
Example: process architecture & value chains
Demand
Management
Groups
processes/
value
chains
Collapsed
value
chain
Sales
Direct
procurement
Distribution
ServiceMarketing

27. Alternative: process architecture –groupsManagement
processes
1.1
Plan the
Business
1.2
Govern the
Business
1.3
(Re)design
Processes
1.5
Change the
Business
1.4
Develop Methods
& Standards
Manage Firm
2.1
Optimize
Stakeholder
Relationships
2.2
Develop
Service Offerings
2.3
Raise Awareness
of Services
2.12
Evaluate Client
Solution Delivery
Relate to Clients
2.4
Plan Delivery of
Service to Service
Corp.
2.5
Gain Initiative
Commitment
2.13
Adjust Portfolio
Optimize Portfolio
2.6
Deliver
Infrastructure
Solutions
2.7
Deliver Business
System Solutions
2.8
Provide
Professional
Services
Deliver Solutions
2.9
Operate
Infrastructure &
Business Systems
2.10
Retire Solutions
2.11
Support Users
Optimize Solutions
Core
processes
3.1
Provide Expert
Advice &
Knowledge
3.2
Provide HR
Capabilities
3.3
Provide IT Tools
3.5
Obtain Financial
Services
3.4
Acquire Goods &
Services
Support Firm
3.6
Provide Working
Facilities
Support
processes
Consultancy Firm
Expanded
process
group

28. •Process stakeholders and objectives, e.g. via a Stakeholder-
Objectives Matrix
•Process context, e.g. via a SIPOC (Suppliers, Inputs, Process,
Output, Customers) Diagram
•Process guides and enablers, e.g. via an IGEO
(Input/Guides/Enablers/Outputs) Diagram
Process architecture: further process attributes

29. •Process owner, responsible for the effective and efficient
operation of the process being modeled
•Primary process participants, i.e. those who are directly involved
in the execution of the process under analysis, e.g. customers and
internal staff
•Secondary process participants, i.e. those who are directly
involved in the execution of the preceding or succeeding
processes
Identify process stakeholders

30. •Primary (hard) process objectives
•Time, cost, quality
•Compliance, agility…
•Secondary process objectives
•To purchase goods, to hire new staff members
•Accompany with appropriate process metrics
•Let involved stakeholders define their priorities
Identify process objectives
Core
Processes
Support/
Management
Processes

31. Claims handling process
Example Stakeholder-Objectives matrix
Primary stakeholders Objectives
Customer Maximize policy value,
Smooth experience
Process owner Minimize process costs
Claimshandler Minimize idle times
Stakeholder pairs Conflicting objectivesShared objectives
Customer, Process ownerPolicy value vs process
costs
Process owner, Claims
handler
Process costs and idle
time
Customer,Claims handler Smooth experience and
loweridle times

32. References
Required
•M. Dumas, M. La Rosa, J. Mendling, H.A. Reijers, “Fundamentals of Business Process
Management”, Springer, 2013, Chapter 2
Recommended
•T.H. Davenport, “Process Innovation: Reengineering Work Through Information Technology”,
Harvard Business School Press, 1993
•M. Hammer, J. Champy, “Reengineering the Corporation: A Manifesto for Business
Revolution”, HarperCollins, 1993
•M.E. Porter, “Competitive Advantage: Creating and Sustaining Superior Performance”, Free
Press, 1985
•P. Harmon, Business Process Change, Morgan Kaufmann, 2014 (3
rd
edition)
•M. Rosemann, “Process Portfolio Management”, BPTrends, April 2006
•R. Dijkman, I. Vanderfeesten, H.A. Reijers, “The road to a business process architecture: an
overview of approaches and their use”. BETA Working Paper Series, WP 350. Eindhoven
University of Technology, Eindhoven (2011)
Web-sites
•http://www.value-chain.org (Value Reference Model)
•http://www.mindtools.com/pages/article/newSTR_66.htm (more on value chains)
•http://www.apqc.org/process-classification-framework (APQC PCF website)