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IT Directions

Keith Harrison-Broninski

Some Processes Cost Money - Others Processes Make Money

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This blog has often made the point that Business Process Management is - or at least, should be - about more than automation. In fact, automation is probably the last place you should be looking, not the first.

My general claim is that the value to be gained from process management lies not just in automating the "mechanistic" processes tackled by current mainstream BPM tools, since these are but the tip of the iceberg. The most interesting and important work carried out in any organization, the body of the iceberg, consists of "human-driven" processes carried out by people collaborating and innovating. It may be simpler to stick with mechanistic processes, since software vendors on all sides are pushing BPMN and BPEL. However, if you want true ROI from BPM, you will need to adopt new ideas and new tools, ideas and tools that are more suited to interactive knowledge work.

Consider, for instance, the interesting analysis of BPM in logistics by Roger Whitehead. The analysis was originally published a couple of years ago (July 2003) in Roger's "Looking Askance" column on the now-defunct BPMG Web site - it is now available here. Roger looked at how money a corporation could expect to save by implementing BPM software, and his conclusion was: in most cases, not much.

The particular example he chose to illustrate this view was of logistics costs, based on the 2003 report on supply chain performance from the Grocery Manufacturers of America. Logistics, as readers of this blog are no doubt aware, is a classic focus area for BPM, since most enterprises hope to automate it as far as possible in imitation of market leaders such as Dell and Wal-Mart. Here is Roger's summary:

I can see perhaps five areas of [logistics] cost that might be amenable to business process automation. They are:
  1. planning, forecasting and scheduling (including inventory management) - 2.5 per cent
  2. information processing (including e-commerce) - 1.8 per cent
  3. customer service - 2.7 per cent
  4. procurement management (or "buying", as we used to call it) - 1.1 per cent
  5. plant warehousing - 7.4 per cent.
I have not included distribution centre costs, since these are mainly to do with goods handling. For some reason, this seems not to be an area where people use BPM much, if at all.

Together, the five areas listed above account for 15.5 per cent of the responding companies' total supply chain costs. That equates to just over 1 per cent of their net sales (15.5 per cent of 7.4 per cent). Since none of these companies is running at a loss, this is 1 per cent or less of their cost of sales.

Many of the activities under these five headings will already have been streamlined and computerised. The scope for cost cutting will therefore be less than in a 'green-field' situation. We could possibly reduce their cost by an average of a tenth, if we're lucky. That is roughly 0.1 per cent of these companies' total costs.

This is not going to cut the mustard. Something that might cut less than 0.1 per cent of a company's costs is not going to head anyone's list of favourite cost-reduction programmes. These companies would be looking to claw back elsewhere in redressing the 12 per cent increase in their costs since 2001.

Some companies are, of course, seeing greater cost savings than this from BPM. However, the general point Roger makes is that many enterprise activities "already have been streamlined and computerised", if only via implementing ERP packages during the 1990s. Proponents of SOA and BPM are currently struggling to convince boards that exposing the functions of these packages as Web services, and then hooking the functions up into new combinations via BPEL, is going to make any significant difference to running costs.

But why is the debate all about cost saving? Neither commercial nor government organizations have it as their mission to spend as little money as possible. What they are there to do is add value for customers. It is in adding value that enterprises have the chance to see true ROI from SOA and BPM, not in cutting costs. So the question becomes: are you more likely to add value by streamlining an existing set of routine activities, or by enhancing the way in which people work together, innovating as necessary, in order to delight your customers?

To help answer this question, let's take an example modern enterprise, a widget manufacturer that deals via the Internet both with suppliers and with customers, and ask: From what does their revenue arise?

Does it arise from their widget assembly operations? From the logistics activities that supply parts to these operations, warehouse the finished products, then deliver them to customers? From the transaction handling of payables and receivables? From the management of after-sales tasks such as returns management and servicing?

In fact, none of these contribute to revenue - they are all costs. For this reason, many organizations are now outsourcing all of the above in order to gain economies of scale. The revenue of the business derives from quite different sources; namely the collaborative, innovative human work required to conceive and design products, investigate markets, open up channels, make deals, resource activities, finance the enterprise, structure the organization, and manage all of this on an ongoing basis.

TAKE AWAY

All this can be summarized by saying that mechanistic processes are about increasing efficiency, while human-driven processes are about adding value. If your organization is commercial, your mechanistic processes are about saving money, while your human-driven processes are about making money.

So where should you be looking, if you want to get ROI from BPM or SOA? At mechanistic processes, with the hope of shaving a small percentage from your running costs? Or at human-driven processes, with the intention of achieving a transformation in the value you offer customers?

If it's the latter, then be careful. On every side, incumbent workflow and BPM vendors are offering re-badged versions of legacy products that claim to handle human-driven work, typically via a superficial integration with office software such as Word and Excel. There are also a few startups throwing hats into the ring, with claims that they can transform your working life by applying a BPMN template to lists of meeting actions. But treating human-driven processes as mechanistic will only damage them, not improve them. People actively dislike and resent being treated as cogs in a machine! Try to make your high-value staff into slaves of a new form of task list, however cleverly packaged, and you will get nothing but workarounds and backlash.

It is very tempting for managers to think that they can organize the interactions of knowledge workers in the same way that they organize the interactions of computer systems. However, attempts to do this will end up costing you very dearly. A task sequence, however described, is far too restrictive for high-value human work: there is no scope for everyday occurrences such as returning to previous versions of a document (or set of figures), revisiting a previous activity (or part of it), starting an activity (or part of it) before all the inputs have been received, and so on. Further, there is much more to knowledge work than can be captured in any task sequence: goals, responsibilities, commitments, and all sorts of other information that is fundamental to the success of the work but has no direct relation to tasks. Just to take one example, many human-driven processes require players whose contribution is not strictly functional - think RACI.

Rather than office applications with workflow lipstick, what you need is a new form of process management, that is based not on task lists, but on the true nature of human-driven work. Only in this way will you realise the true potential of business process management - and help your organization become a leader, rather than yet another follower.

Keith Harrison-Broninski cuts through the hype in his hands-on guide to where enterprise IT is really going

Keith Harrison-Broninski

Keith Harrison-Broninski is a researcher, writer, keynote speaker, software architect and consultant working at the forefront of the IT and business worlds.

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