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MTAT.03.231 Business Process Management Lecture 2 – Process Identification Marlon Dumas marlon.dumas ät ut . ee 1
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Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Mar 21, 2020

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Page 1: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

MTAT.03.231Business Process Management

Lecture 2 – Process Identification

Marlon Dumas

marlon.dumas ät ut . ee

1

Page 2: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Course structure

Weeks 3-4

Weeks 5-7

Weeks 8-9Weeks 10-11

Weeks 12-14

2

Week 2

Gover-nance

Culture

Strategy

Page 3: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Many years later, as he faced the firing squad, Colonel Aureliano Buendía was to remember that distant afternoon when his father took him to discover ice. At that time Macondo was a village of twenty adobe houses, built on the bank of a river of clear water that ran along a bed of polished stones, which were white and enormous, like

prehistoric eggs. The world was so recent that many things lacked names, and in order to indicate them it was necessary to point to them with the finger.

3

Page 4: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

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

Process identification

Page 5: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

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

PrioritizedProcess

Portfolio

Page 6: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Process Enumeration

“Most businesses have just three core processes:

1. Sell stuff

2. Deliver stuff

3. Making sure you have stuff to sell and deliver”

Geary Rummler

Page 7: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Porter: Types of processes

Core Processes

Management Processes

Su

pplie

rs / P

art

ners

Custo

mers

/ Sta

kehold

ers

Support Processes

After Michael Porter (1985)

Page 8: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Core processes

• Sales (lead-to-quote, quote-to-order, order-to-cash)

• Purchase-to-Pay (direct procurement, e.g. supplies replenishment)

• …

Support processes

• Purchase-to-pay (indirect procurement, e.g. 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 processesWholesaler

Page 9: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Relations between core, support, mgt processes

Page 10: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

StrategicManagement

LogisticsManagement

WarehouseManagement

SuppliersManagement

Management processes

FinanceIndirect

procurementIT HR

Core processes

Support processes

Wholesaler

Example: process architecture

DemandManagement

SalesDirect

procurementDistribution

ServiceMarketing

Process group

Page 11: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

StrategicManagement

CorporateDevelopment

InvestorRelations

Risk Assessment & Management

MarketDevelopment

Management processes

Marketing & Sales

UnderwritingManagement

PolicyServicing

ClaimsManagement

Payments Collection and Disbursement

Assets Management

Finance/Treasury

Legal/Audit

Reinsurance IT HR

Core processes

Support processes

Insurance company

Example: process architecture

Page 12: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

These groups of processes are typically performed at a university. Categorize each process group as core, support or management

Exercise: classify by process type

StrategicManagement

CourseManagement

IPManagement

Additionalservices mgt

Indirectprocurement

IT

HR

Marketing

Marketmanagement

Teachingaward courses

Teaching professional courses

Languagetraining

Sportservices

Admission

Page 13: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Solution: identify process types

Page 14: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

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

Page 15: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

• Chain of 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)

Value chain modeling

Procure-to-service

businessprocess

orderrelation

Page 16: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Guidelines to identify horizontal boundaries in value chains

1. Change of key business object in the process

2. Change of granularity of main business object

3. Change in frequency/time

4. Change in intermediate outcome/resolution/objective

Page 17: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Example: value chainWholesalerCore processes

Page 18: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Typical value chains 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)

Example: ProducerStockedproducts:

MTOproducts:

ETOproducts:

Spe

cialization

s

Page 19: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Example: value chains for service provider

ServiceDeliverSalesMarketDesign

Systems Integration

Outsourcing

Network Services

Enterprise Server Technology

IT service provider

Page 20: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Support processes

HR:

Accounting:

Management processes

Suppliersmanagement:

Riskmanagement:

Example: value chain of non-core processes

Page 21: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

StrategicManagement

WarehouseManagement

SuppliersManagement

LogisticsManagement

Management processes

Procure-to-Service

FinanceIndirect

procurementIT HR

Core processes

Support processes

Wholesaler

Example: process architecture & value chains

DemandManagement

Box:groups

processes/value chains

Chevron:collapsed

value chain

SalesDirect

procurementDistribution

ServiceMarketing

Page 22: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Alternative: process architecture – groups

Management processes

1.1Plan theBusiness

1.2Govern the Business

1.3(Re)designProcesses

1.5Change the Business

1.4Develop Methods

& Standards

Manage Firm

2.1Optimize

Stakeholder Relationships

2.2Develop

Service Offerings

2.3Raise Awareness

of Services

2.12Evaluate Client

Solution Delivery

Relate to Clients

2.4Plan Delivery of

Service to Service Corp.

2.5 Gain Initiative Commitment

2.13Adjust Portfolio

Optimize Portfolio

2.6Deliver

InfrastructureSolutions

2.7Deliver Business System Solutions

2.8Provide

Professional Services

Deliver Solutions

2.9Operate

Infrastructure & Business Systems

2.10Retire Solutions

2.11Support Users

Optimize Solutions

Coreprocesses

3.1Provide Expert

Advice & Knowledge

3.2Provide HRCapabilities

3.3Provide IT Tools

3.5Obtain Financial

Services

3.4Acquire Goods &

Services

Support Firm

3.6Provide Working

Facilities

Supportprocesses

Consultancy Firm

Expandedprocess group

Page 23: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Value chains

Chains of processes. Stay at a high level. Rule of thumb: 3-7 processes

• Procure-to-service, Risk management

(Root/Main) Processes

Build up value chains and affect each other. They are abstract

• Lead-to-quote, Quote-to-order, Order-to-cash

Subprocesses

Build up processes. They are detailed, involve multiple activities and can be layered on different levels of abstraction (i.e. sub-subprocesses)

• Order shipment, invoicing

Process tasks

Build up processes and sub-processes. They are atomic and performed by human beings, IT systems or equipment

• Approve invoice

Typical artifacts for vertical scoping

Typical focus of Process enumeration

Page 24: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Process architecture: hierarchical viewP

rocess h

ierarch

y

Level 1

Process

Landscape

Level 2

MainProcesses

(e.g. BPMN)

Level 3+

Subprocesses, Tasks

(e.g. BPMN)

Page 25: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

How many levels in the process architecture?

25

Page 26: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

StrategicManagement

CorporateDevelopment

InvestorRelations

Risk Assessment & Management

MarketDevelopment

Management processes

Marketing & Sales

UnderwritingManagement

PolicyServicing

ClaimsManagement

Payments Collection and Disbursement

Assets Management

Finance/Treasury

Legal/Audit

Reinsurance IT HR

Core processes

Support processes

Example: hierarchical process architecture

Level 1

Insurance company

Page 27: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

StrategicManagement

Corporatedevelopment

Marketingdevelopment

Investorrelations

Management processes

Definebusiness concept &

long-term vision

Developbusinessstrategy

Design & managecorporate policies

Manageknowledge

Planinvestorrelations

Buildinvestorrelations

Manageinvestorrelations

Communicatewith stakeholders

Managestrategicinitiatives

Define offeringand customer

value proposition

Define pricingstrategy

Define and managechannel strategy

Managechange &

improvement

Managepartners

Manageinvestments &

divestments

Processgroup

Processsubgroup

Level 2

Example: hierarchical process architectureInsurance company

Page 28: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Developbusinessstrategy

Management processes

Evaluate strategicoptions

Selectlong-term business

strategy

Coordinatefunctional and

operational strategies

Develop overallmission statement

Define offeringand customer

value proposition

Develop valueproposition

Validate valueproposition

Developnew branding

Defineoffering andpositioning

Alignfunctional and

operational strategies

Createorganisational

design

Developorganisational

goals

Formulatebusiness unit

strategies

Processsubgroup

Mainprocess

Level 3

Example: hierarchical process architecture

Insurance company

Page 29: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Develop overallmission statement

Management processes

Formulatemission

Communicatemission

Define current business

Mainprocess

Subprocess

Level 4

Example: hierarchical process architectureInsurance company

Page 30: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

A reference model is used as a template to design the process architecture

Examples:

• Information Technology Infrastructure Library (ITIL)

• Supply Chain Operations Reference Model (SCOR)

• Process Classification Framework (PCF)

• Control Objectives for Information Technology (COBIT)

• Value Reference Model (VRM)

• Voluntary Interindustry Commerce Solutions (VICS)

• eTOM Business Process Framework

• Performance Framework

Designation via reference models

Page 31: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

• Industry-neutral enterprise model

• Open standard for benchmarking

• Four levels• Categories

• Process group

• Process

• Activity

Example: APQC Process Classification Framework (PCF)

Page 32: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

APQC PCF Overview

Category

Page 33: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

APQC Classification Framework

Group

Process

Activity

Page 34: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Prioritization (aka Process Selection)

1. Importance

Which processes have greatest impact on the organization‘s strategic objectives?

2. Health (or Dysfunction)

Which processes are in deepest trouble?

3. Feasibility

Which processes are most susceptible to successful process management?

Prioritized process portfolio

Hammer, Champy (1993)

Page 35: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Financial institution

Example: prioritized process portfolio

Health

High

Low

GoodPoor

Short-term action

Rating

Contractpreparation

Loan marketevaluation

Handling ofpayments

Loanapplication

Loanplanning

Loancontrolling

Loandecision

Feasibility

Low

High

Medium

Possible Strategic fit?

Page 36: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Prioritization

1. Importance

Which processes have greatest impact on the organization‘s strategic objectives?

2. Health (or Dysfunction)

Which processes are in deepest trouble?

3. Feasibility

Which processes are most susceptible to successful process management?

Prioritized process portfolio

Hammer, Champy (1993)

Page 37: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Financial institution

Example: prioritized process PICK chart

Health

High

Low

GoodPoor

Short-term action

Rating

Contractpreparation

Loan marketevaluation

Handling ofpayments

Loanapplication

Loanplanning

Loancontrolling

Loandecision

Feasibility

Low

High

Medium

Possible Strategic fit?

Page 38: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

• Fundamentals of Business Process Management

• Chapter 2 – Process Identification

Further Readings & Resources

38

Page 39: Lecture 2 –Process Identification - ut · Example: APQC Process Classification Framework (PCF) APQC PCF Overview Category. APQC Classification Framework Group Process Activity.

Next Week

Process Modeling

39