Value-based Process Project Portfolio Management

Value-based Process Project

Portfolio Management

University of Bayreuth

Prof. Dr. Maximilian Röglinger

Research Center

Finance & Information Management

Project Group

Business & Information Systems Engineering

of the Fraunhofer FIT

Professorship of Business & Information Systems

Engineering and Value-based Business Process

Management

www.fim-rc.de

www.fit.fraunhofer.de/bise

EBR Conference, Ljubljana,

November 2014

http://www.fim-rc.de/

http://www.fit.fraunhofer.de/bise

2 • Maximilian Röglinger • Value-based Process Project Portfolio Management © FIM Research Center

Agenda

1) Research Group „Value-based Business Process Management“

2) Big Picture: Value-based Process Project Portfolio Management

3) Example: BPM Roadmapping

4) Example: Process Prioritization with the ProcessPageRank

5) Conclusion and Challenges Ahead


Agenda







Believe it or not: There still is a Gap between

Business and Process People!

Business People Process People

Connected

customers in a

digital society

Increase long-

term company

value

Process redesign,

modelling, monitoring,

improvement, and

automation

Cycle time, error

handling, reliability,

automation, …


Value-based Business Process Management at the

Research Center FIM and the Fraunhofer FIT

Industrialisierung

Wertorientierung

Business Process

Management

Flexibility, automation,

standardization, sourcing, and

improvement of processes with

modern information technology

Value-based process decision-

making and analysis of general

relationships that govern

process change

Our objective is to systematically identify and realize potential for process flexibility,

automation, standardization, sourcing, and improvement in line with economic principles and

by harnessing modern information technology.


Agenda







Value-based Process Project Portfolio Management Conceptual Framework

1

AS-IS

I

…

II

III

Process Project Portfolio

Project layer

…II

… I …

III

TRANSFORMATION

2 …

3

Pro

cess

Port

folio

BPM

Process layer

Valuation layer

Company Value

KPI Portfolio

B C

A

…

Valuation layer

Company Value

1‘

2‘ …

3‘

Pro

cess

Port

folio

BPM

Process layer

TO-BE

KPI Portfolio

B C

A

…


Bridging the Gap between Business and Process People

requires an interdisciplinary multi-method Approach!

Value-based management

Multi-criteria decision-analysis

Project portfolio selection

and scheduling

Business process modelling

Value-based Process

Project Portfolio Management

…

Network analysis

Business process simulation

Business process

execution and monitoring

…


Classing Value-based Process Project Portfolio

Management into the Core Elements of BPM

Rosemann und vom Brocke (2010)= Focus of Value-based Process Project Portfolio Management


Agenda







Are you too busy to improve?


Example: BPM Roadmapping

Research question: Which projects should an

organization implement in which order to balance

the development of BPM capabilities with the

improvement of individual business processes?

I

…

II

III


…II

… I …

III

Project layer

Lehnert M., Linhart A., Röglinger M.: Chopping down trees vs. sharpening the axe – Balancing the

Development of BPM Capabilities with Process Improvement. In: Proceedings of the 12th International

Conference on Business Process Management (BPM), Haifa/Eindhoven, September 2014, p. 151-167


How to balance

this over time?

Developing BPM capabilities

(improve dynamic capabilities

through BPM-level projects)

Improving individual processes

(improve operational capabilities

through process-level projects)

Balancing Investments into BPM Capabilities and

Process Improvement


Balancing Investments into BPM Capabilities and Process Improvement

Advantages of Developing BPM Capabilities

Developing BPM capabilities…

…affects all processes of an organization.

…advances an organization’s capabilities to

integrate, build, and re-configure processes.

… facilitates process improvement in the future.

…has a long-term performance impact.


Balancing Investments into BPM Capabilities and Process Improvement

Advantages of Improving individual Processes

Improving individual processes…

…affects a distinct process in terms of

its time, cost, quality, and flexibility.

…has a short-term performance impact.


Considering a Multi-period Planning Horizon

Status quo

t = 0

Assumption: only one project per period

t = 1 t = 2

€

€€

€

€€€

€€

€€

BPM roadmap candidate

with the highest risk-

adjusted expected NPV of

the process cashflows

Contingency Factors:

Demand uncertainty

Customers‘ sensitivity w.r.t.

time, price, and quality

Degeneration effect of

process performance

Investment outflows and

effects of project candidates

…


Agenda








1

BPM

Process layer

AS-IS

I

…

II

III


Project layer Valuation layer

Company Value

1‘

2‘ …

3‘

Pro

cess

Port

folio

BPM

Process layer

TO-BE

KPI Portfolio

B C

A

…

…II

… I …

III

TRANSFORMATION

Valuation layer

Company Value

KPI Portfolio

B C

A

…

2 …

3

Pro

cess

Port

folio


Example:

Process Prioritization with the ProcessPageRank (PPR)

Research question: How can process

prioritization decisions be made in line with

how processes are interconnected?

1

2 …

3

Pro

cess

Port

folio

Lehnert M., Seyfried J., Siegert M., Röglinger M.: ProcessPageRank – A Network-based Approach

to Process Prioritization Decisions. Working paper at the FIM Research Center.


5

Process A

SANII: 0.80

10

Process B

SANII: 0.60

Which Process should be improved?

5

SANII: Stand-alone need for improvement index Є [0; 1]

?10

Process A

SANII: 0.80

18

Process D

SANII: 0.20

25

Process B

SANII: 0.50

18

Process A

SANII: 0.30

18

Process E

SANII: 0.60

18

Process F

SANII: 0.70

?

Process C

SANII: 0.54

25

3

Process G

SANII: 0.40

5

24

3680

3220

11

10

Process B

SANII: 0.60

? ?

??


Adopting and Adapting the Google PageRank to the

ProcessPageRank

Rank Process PPR(i)

1 C 0,37686

2 B 0,27599

3 A 0,19841

4 D 0,14875

SANII: Stand-alone need for improvement, NUI: Number of use instances, d: Dampening Factor

𝑃𝑃𝑅 𝑖 =𝑆𝐴𝑁𝐼𝐼𝑖 𝑗=1𝑛 𝑆𝐴𝑁𝐼𝐼𝑗

∙ 1 − 𝑑 + 𝑑 ∙

𝑗∈𝐼𝑖

𝑃𝑃𝑅 𝑗 ∙𝑁𝑈𝐼𝑗𝑖 ∙ 𝑆𝐴𝑁𝐼𝐼𝑖

𝑘∈𝑂𝑗𝑁𝑈𝐼𝑗𝑘 ∙ 𝑆𝐴𝑁𝐼𝐼𝑘

The PPR ranks processes based on their

network-adjusted need for ImprovementProcess A

SANII: 0.5Process B

SANII: 0.7

2 2

Process C

SANII: 0.4

3

Process D

SANII: 0.2

45 5 5


The PPR as a Fundament of Prioritizing Process-Level

Projects

Process A

SANII

Process B

SANII

Process C

SANIIProcess D

SANII

Process Ranking Multi-dimensional Ranking of

Process-level Projects

How can process-level projects be prioritized in an interconnected process world?

The PPR ranks processes based on their network-adjusted need for improvement.

The SANII maps all performance dimensions of the Devil‘s Quadrangle

(Cost, Time, Flexibility, Quality) into a single performance indicator.

A process-level project may have different

effects on each performance dimension.

The propagation of such effects within the

process network depends on the dimension.

Status Quo: But:

Rank Process PPR(i)

1 C 0,37686

2 B 0,27599

3 A 0,19841

4 D 0,14875


Outlook: How can process-level projects be

prioritized in an interconnected process world?

TimeCost

Flexibility(Inner flexibility)

Quality

Change in the SANII

Project Process C T Q F

Project A Credit admin 0.2 -0.45 -0.6 0.2

Project B Credit admin 0.5 -0.25 -0.1 0.3

Project C Schufa Test 0.2 -0.45 0.3 -0.35

Process-Level Projects (PLP)

Rank processes

before any PLP

Rank processes

after each PLP

Compare the changes

for each dimension

Aggregate the changes

in the valuation functionRank the PLPs

Processes

SchuFa test

Transaction

6

Credit

administration

5

Stock

administration

6

Debit

administration

15

Charging

5

5

4

3

7

6

SchuFa test

Transaction

6

Credit

administration

5

Stock

administration

11

Debit

administration

15

Charging

5

5

4

3

7

6

SchuFa test

Transaction

6

Credit

administration

15

Stock

administration

17

Debit

administration

7

15

Charging

5

5

3

SchuFa test

Transaction

6

Credit

administration

5

Stock

administration

6

Debit

administration

15

Charging

5

5

4

3

7

6

SANII

Process C T Q F

Charging 0.4 0.4 0.4 0.4

Transaction 0.4 0.3 0.4 0.5

Credit admin 0.6 0.7 0.7 0.3

Debit admin 0.5 0.6 0.6 0.7

Schufa Test 0.7 0.6 0.5 0.6

Stock admin 0.3 0.6 0.7 0.5


Agenda








1

BPM

Process layer

AS-IS

I

…

II

III


Project layer Valuation layer

Company Value

1‘

2‘ …

3‘

Pro

cess

Port

folio

BPM

Process layer

TO-BE

KPI Portfolio

B C

A

…

…II

… I …

III

TRANSFORMATION

Valuation layer

Company Value

KPI Portfolio

B C

A

…

2 …

3

Pro

cess

Port

folio


Value-based Process Portfolio Management Central Challenges

Value-based Process Portfolio Management requires…

…considering multiple processes simultaneously!

…accounting for interdependencies among processes!

…considering the effect of BPM on process execution!

…separating the effects of different BPM capabilities!

…conceptualizing process performance as a multi-dimensional construct!

…integrating multiple (partly conflicting) performance dimensions!

…distinguishing multiple process-related project types and their effects!

…accounting for dependencies among process-related projects!

…considering all relevant cashflows, multiple planning periods, and risks!


Prof. Dr. Maximilian Röglinger

Research Center


Project Group

Business & Information Systems Engineering

of the Fraunhofer FIT

Elite Graduate Program


Professorship of Business & Information

Systems Engineering and Value-based Business

Process Management

Contact

Maximilian Röglinger

University of Bayreuth

Friedrich-von-Schiller-Str. 2a, 95444 Bayreuth

Phone: +49 921 55-4710

Email: [email protected]

Web: www.fim-rc.de

www.fit.fraunhofer.de/wi

Research Areas

Value-Based Business Process Management

Customer Relationship Management

Strategic IT Management

Value-based Process Project Portfolio Management

Science

process prioritizationwith

process peoplerequires

process flexibility

process changeour objective

research center fim

business people

bpm roadmapping4example

modern information technology