Business Process Management

What Is Business Process Management?

In the new era of business transformation, an increasing number of enterprises are looking at reorienting themselves into process-centric, customer-focused organizations.

Interestingly, this paradigm shift has led to the evolution of business process management (BPM) as a principal management discipline to enable strategic planning of business goals.

The Business Process Management (BPM) refers to the designing, executing and optimizing of business activities that incorporate people, systems and partners.
Business Process Management Suites (BPMS) are integrated tools designed to support BPM efforts.

BPM drives process improvements and innovative applications of technology for greater agility. In order to use BPM effectively, organizations must stop focusing exclusively on data and data management, and adopt a process-oriented approach that makes no distinction between the work done by a human and a computer.

Process management involves planning and administering the activities necessary to achieve a high level of performance in key business processes, identifying opportunities for improving quality and operational performance and ultimately customer satisfaction.

Many companies have business processes that are unique to their business models.

Since these processes tend to evolve over time as the business reacts to market conditions, the BPM solution chosen must be easily adaptable to the new conditions and requirements and continue to be a perfect fit for the company.

Scope of Process Management

BPM is a management discipline and requires an end-to-end organizational view. Management at the operational level is predominantly about the improvement and control of the processes essential to business to achieve the objectives of the organization.

Setting the direction and goals for the business process improvement is a critical step; and one that needs to be addressed by the top management. There are two aspects to the operational management of a business process:

Management of the business process as an integral part of “management.”
Management of business process improvements.

The introduction of technology can be a useful contributor in this. It is far more important to get the processes right before the implementation of technology.

The critical success factors in a BPM project are:

leadership,
BPM-experienced business project manager,
linkage to organization strategy,
process architecture,
people change management,
people and empowerment,
project initiation and completion,
sustainable performance and realizing value.

A business process is any goods or non-goods related cross-functional process of critical importance. Typically, managing such processes requires a process owner and a permanent team. Leading companies identify important business processes throughout the value chain that affect customer satisfaction. These processes typically fall into two categories:

Value creation processes, and
Support processe

Value Creation Processes

Value creation processes, sometimes called core processes, are the most important processes “running the business” and maintaining or achieving a sustainable competitive advantage. They include the processes through which the organization adds greatest value to its products and services.

Value creation processes include the business processes most critical to adding value to business itself, resulting in success and growth; and that drive the creation of products and services which are critical to customer satisfaction and have a major impact on the strategic goals of an organization. Value creation processes typically include design, production/delivery and other critical business processes.

The value creation processes involve the majority of the organization’s employees and produce value for the customers, stockholders and other key stakeholders. Box X-1 discusses the sourcing strategy followed by Tata Steel for value creation.

Box-1 \| Value Creation through Strategic Sourcing at TATA steel
Tata SteelOpens in new window, with an experience of 100 years in steel making, is among the top 10 steel producers in the world. It has an annual crude steel production capacity of 30 million tons per annum. The company has a global presence in over 50 developed European and fast growing Asian markets, and has manufacturing units in 26 countries. The company has successfully created value through strategic sourcing. Strategic sourcing attempts to lower the cost of goods manufactured through reduction in the prices of purchased products and services and reduction in their specific consumption. The supplier value management (SVM) approach followed addresses the internal value chain of Tata Steel and in some cases goes up to the distribution channels of suppliers. According to the SVM philosophy, the value chain of the suppliers and that of Tata Steel is considered as a single entity. There is a strong belief that enhancements/improvements at the suppliers’ end will directly enhance the value delivered to the end consumer. The supply chain used by suppliers is also studied in detail to identify revenue leakages. Tata Steel follows the criteria mentioned below for conducting SVM with suppliers: The supplier should be a manufacturer and Tata Steel must be the key customer for the supplier. The commodity should have a direct impact on Tata Steel’s throughput. The supplier should fit culturally with Tata Steel and should be willing to be a long-term partner. The strategic sourcing strategy followed by the company has delivered savings of more than 80 mission USD over the last five years, and played a key role in making Tata Steel the lowest cost producer of steel.

Box-1 | Value Creation through Strategic Sourcing at TATA steel

Tata Steel, with an experience of 100 years in steel making, is among the top 10 steel producers in the world. It has an annual crude steel production capacity of 30 million tons per annum. The company has a global presence in over 50 developed European and fast growing Asian markets, and has manufacturing units in 26 countries.

The company has successfully created value through strategic sourcing. Strategic sourcing attempts to lower the cost of goods manufactured through reduction in the prices of purchased products and services and reduction in their specific consumption. The supplier value management (SVM) approach followed addresses the internal value chain of Tata Steel and in some cases goes up to the distribution channels of suppliers. According to the SVM philosophy, the value chain of the suppliers and that of Tata Steel is considered as a single entity. There is a strong belief that enhancements/improvements at the suppliers’ end will directly enhance the value delivered to the end consumer. The supply chain used by suppliers is also studied in detail to identify revenue leakages.

Tata Steel follows the criteria mentioned below for conducting SVM with suppliers:

The supplier should be a manufacturer and Tata Steel must be the key customer for the supplier.
The commodity should have a direct impact on Tata Steel’s throughput.
The supplier should fit culturally with Tata Steel and should be willing to be a long-term partner.

The strategic sourcing strategy followed by the company has delivered savings of more than 80 mission USD over the last five years, and played a key role in making Tata Steel the lowest cost producer of steel.

Key value creation processes differ greatly among organizations depending on many factors. These factors include:

the nature of products and services,
how they are produced and delivered,
technology requirements,
customer and supplier relationships and involvement,

outsourcing,
importance of research and development,
role of technology acquisition,
information and knowledge management,
supply chain management,
mergers and acquisitions,
global expansion and
sales and marketing.

In many companies, value creation processes take the form of projects — temporary work strictures that start up, produce products or services and then shut down.

In order to achieve better process performance and reduce variability, organization’s might implement approaches such as the lean enterprise system, Six Sigma methodologyOpens in new window, make use of ISO 9000:2000 standards or other process improvement tools.

Support Processe

Support processes are those that are most important to an organization’s value creation processes, but generally do not add value directly to the product or service.

In general, value creation processes are driven by external customer needs while support processes are driven by internal customer needs.

Because value creation processes do add value to products and services, they require a higher level of attention than support processes. These might include facilities management, finance and accounting, public relations, legal services, human resource services, project management and administration processes.

Evolution of BPM

There was a considerable focus on TQMOpens in new window in the 1980s. Six SigmaOpens in new window was invented in 1986 and created awareness about “processes.” This was followed by business process reengineering (BPR)Opens in new window. BPM has been around for some time and created significant interest and discussion when Smith and Fingar published BPM: The Third Wave wave in 2002.

Smith and Fingar describe how the third “wave” is where automation, business process and quality management come together.

The third wave of BPM is a synthesis of process representation and collaboration technologies that removes the obstacles blocking the execution of management intentions.

BPM can be termed as the convergence of management theory, total quality management, Six Sigma, business engineering and general systems thinking with modern technologies.

The current view of BPM focuses on the merger of three main streams: business process thinking, automation and quality thinking, which have independently evolved over many years. It can now be argued that BPM is the most important topic on the management agenda.

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