high performance enterprise
DESCRIPTION
Systems of ManagementTRANSCRIPT
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1
Theory and Systems of Management
The High Performance EnterprisePresented by:Walter Kruz
Module 2: Business Process Improvement
Momari
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Momari 2
We will learn...
Forces driving process improvement Industry report: BPI projects from
around the worldBasic business process conceptsProcess mapping and analysis
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3
Business Process Improvement Overview
Segment 1
Momari
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Momari 4
Forces driving business change
BusinessChange
Economy
Social/Political
Customers
TechnologyIndustry/Competition
Work Force
Environment
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Momari 5
Business Process Improvement (BPI)
Business process improvement is the optimization of business processes and the associated systems and organizational structures to achieve significant improvement in business performance
Changes in business processes leading to the creation of value for the enterprise
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Momari 6
Two approaches
Fundamental and radical change Fundamental rethinking and radical
redesign of business processes to bring about dramatic improvements in performance (M. Hammer)
Continuous Process Improvement Small and measurable refinements to
an organization's current processes and systems
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Momari 7
Elements of Business Processes
Organization Functional teams that produce product or
service Processes
Activities to deliver product or service Technology
Technical input to create product or service People
All stakeholders Culture
“Personality” of an organization
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Momari 8
Incremental Improvement versus
Extreme Business Reengineering
Cultural/StructuralCulturalType of Change
Information TechnologyStatistical ControlPrimary Enabler
HighModerateRisk
Broad, Cross-FunctionalNarrow, FunctionalTypical Scope
Top-DownBottom-UpParticipation
ShortLongTime Required
One-timeOne-time /ContinuousFrequency
Clean SlateExisting ProcessStarting Point
RadicalIncrementalLevel of Change
ExtremeContinuous
Source: Davenport
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Momari 9
Few Companies Adjust Processes Before Implementation
27%
29%
44%
Implement and change process simultaneously
Implement first, adjust process if necessary
Assess & adjust process before
implementation
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Momari 10
BPI Methodology
Ensure PerformanceContinuous ImprovementControl
Validate BenefitsProcess ImplementationImprove
Evaluate OptionsProcess AnalysisAnalyze
Quantification of IssueProcess DocumentationMeasure
Prioritize Critical IssuesProcess IdentificationDefine
GoalBPISix Sigma
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Momari 11
BPI drivers
Cost reduction Higher efficiencies lead to cost reductions
Improved customer satisfaction Improved understanding of customer
interfaceTime to market
Faster product development cycle Risk reduction
Faster prototyping improves product quality
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Momari 12
BPI - Key Success factors
Top Management Sponsorship strong and consistent management
involvement is required. Without it chances of success are reduced
Strategic Alignment with company strategic direction; that is, in
agreement with financial performance, customer service, and the organization’s vision
Compelling Business Case for Change Communicate clearly the benefits and
importance of change
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Momari 13
BPI - Key Success factors (cont)
Proven Methodology that includes a vision process, meets the needs of
the project and one that the team understands and supports
Effective Change Management deals with cultural transformation and is the
discipline of managing change as a process
Line Ownership match ownership with accountability. Front line
workers do the day-to-day process execution BPI Team Composition
must contain breadth and knowledge
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Momari 14
Discussion-The Pepsi Case Study
State the problems associated with the Pepsi distribution model
What technology and approach was used to overcome these problems
How did these changes affect revenue and effectiveness of the distribution model?
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15
A report from industry
The Prosci 2002 BPR Report
Segment 2
Momari
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Momari 16
Prosci’s 2002 BPR Report
Third study in a series conducted over a five- year period
327 organizations from 53 countries participated in the study
Results provide a comprehensive view of business process reengineering projects from around the world
Source: http://www.prosci.com/bprbestpractices.htm
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Momari 17
Exercise
Analyze the pros and cons of the Prosci report
How could you use this knowledge to improve your organization?
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18
Basic Business Process concepts
Segment 3
Momari
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Momari 19
Defining Processes
A set of logically related tasks performed to achieve a defined business outcome
Davenport and Short
The logical organization of people, materials, energy, equipment, and procedures into work activities designed to produce a specified end result
Whilst Pall
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Momari 20
Typical processes in manufacturing
OPERATIONAL Product
development Customer
acquisition Logistics Order management Post-sales service
MANAGEMENT Performance
monitoring Information
management Asset management Human resources
management Planning and
resource allocation
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Momari 21
4 types of business processes
Core processes Central to business functions; relate directly to
external customers. Primary activities of value chain
Support processes Have internal customers; back up core processes
Business network processes Exist beyond boundaries of enterprise, Include
suppliers, customers, partners Management processes
Used to plan, organize, control resources
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Momari 22
The role of IT in BPR
IT is an essential enabler Hammer and Champy say that IT can
be used to break the old rules (Disruptive technology)
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Momari 23
3 IT opportunities in BPR
1. Computing Reduce cost of production
Automating data dependent tasksDisintermediating information processesEliminating activities
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Momari 24
3 IT opportunities in BPR
2. Communications Reduce costs of coordination
Collapsing time and spaceIntegrating tasks and processesDistributing and collecting data/information
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Momari 25
3 IT opportunities in BPR
3. Databases and systems Reduce cost of information
Monitoring processes and tasksAnalyzing information and supporting
decisionsArchiving and making sense of experience
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Momari 26
Relationship between IT capabilities and BPR
BPR ITcapabilities
How can business processes be transformed by IT?
How can IT support business processes?
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Momari 27
Value-adding capabilities of IT
SUPPLIER VALUECHAIN
COMPANY VALUE CHAIN
END-USERVALUE CHAINS
CHANNELVALUE CHAINS
UPSTREAM COMPANY DOWNSTREAM
COMPETITIVE ADVANTAGE ARISES BY OPTIMIZINGVALUE CHAIN LINKAGES; INFORMATION TECHNOLOGY ACTS AS ADDED VALUE
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Momari 28
People factors in BPR
Human resources are a strategic resource; people play a vital role in the enterprise Empowerment
Increased participation, less hierarchical organization, fewer layers of management
Increased use of cross-functional teamsFacilitate communications and complex
activitiesMotivational effect
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Momari 29
Two approaches for reengineering
Davenport Identify process Identify change
levers Develop process
vision Understand existing
process Design and
implement new processes
Hammer and Champy Choose process Understand process Undertake re-
design session Implement new
process
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Momari 30
Identifying process for redesign
Enumerate major processes Identify major processes of interest
Determine process boundaries Scope processes; determine boundaries
Assess strategic relevance Target processes to innovate
Render high level judgement on process health Identify problematic processes
Qualify the culture and politics of processes Measure selected processes cultural, political
climate
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Momari 31
The visioning process
Initial visionstatement
Key processcharacteristics
Performancemeasures and
objectives
Critical successfactors
Potentialimplementation
barrier
How can we do things different?
How will it work?
How well will it work?
What things have to go right?
Why might not go right?
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Momari 32
Understanding existing processes
Models and documentation facilitates communication among participants
Documentation provides the means to migrate to a new process
Recognizing problems in existing process helps in preventing them in new process
Understanding current process provides measure of value of proposed redesign
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Momari 33
Redesigning new process
Brainstorm design alternative Use workshops to surface creative
designsAssess feasibility, risk, and benefits
Evaluate relative benefits, costs, risks of alternative
Prototype new process design Develop prototype to simulate and test
the operation of the new process
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Momari 34
Skills needed for BPI
Business analysisStrategy analysisData modelingComputer simulation Industrial engineeringFinancial analysis………..
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Momari 35
Exercise
Discuss the value add of a specific information technology on an industry or business. For example, wireless communications and the supply chain; or online learning and education.
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36
Process Mapping
Segment 4
Momari
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Momari 37
Process Concepts
Processes All activities that create and deliver the
product or service An activity that
Takes an inputAdd value to itProduce an output for a customer
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Momari 38
The process environment
Input/supplier
Output/customer
Feedback system
Process characteristics (Measurements)
Requirements Requirements
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Momari 39
Characteristics of the process(Attributes we want to improve)
External Customer
complaints Defective rates Warranty claims Response time
Internal Customer
complaints Cost Number of steps Number of sign-offs Travel time Inventory levels
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Momari 40
Preparing a monthly financial report
Info Systems:VolumesInventory costLabor costFinancial Planning:Overhead ratesPracticesManagement:Review scheduleSpecial requirements
Process
Characteristics/MeasurementsAccuracy (# redo’s)
Customer satisfaction (# complaints)Timeliness (Complete on time)Efficiency (Hrs paid overtime)
Supplier input
Financial mgmt:ReportsExplanationsConcernsSite mgmt:ReportsReviewsTax accounting:Cost infoDeductions
Customer output
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Momari 41
Exercise
Prepare an income tax return for a customer
Use the model described earlier and show: Title Supplier/input Customer/output Characteristics/measurements
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Momari 42
Process mapping definition
A graphical description of an existing or proposed process which uses symbols, connecting lines, and descriptive words to display the activities, sequence, and relationships within the process
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Momari 43
Insurance claim process
Client Claims processing
Insurance agent
Car repair shop
1. Notify agent
2. Instructions
3. Request quote
4. Provide quote
9. Fix and pay
5. File claim
6. File claim
7. Request additional info
8. Pay
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Momari 44
Process Owner Initiates study Gets buy-in Provides resources
Manager with stake in theprocess
Team Leader Responsible for output Plans activities Interfaces with other
managers
Working level or managerwithin the process
Facilitator Responsible for“teaming process”
Tools expertise Team dynamics
Process/team specialist
Team member Ideas and expertise Work on assignments Interface to their
organizations
Working level within theprocess
Support personnel Technical expertise Administrative/logistics
supportLine managers Provide members and
time Support work of team
Role Responsibilities Source
Team Roles
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Momari 45
Process mapping methodology
Bounding the process & setting objectives
Developing the data gathering plan
Interviewing the process participants
Generating the process map
Analyzing and using the map
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Momari 46
Bounding and target setting
Bounding Put wall around area to be studied
Setting objectives Understanding the customer
perceptions Setting improvement targets based on
these perceptions
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Momari 47
Bounding the process
Objectives Identifies what is
included and what is not
Clearly describes what will be mapped
Identifies Inputs/suppliers Outputs/customers
Purpose Eliminates overlaps
and gaps Provides basis for
agreement on scope owner, team, mgmt
Helps teams focus on problems
Helps teams focus on customer needs
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Momari 48
Setting improvement objectives
Determine Which customer perceptions do you want
to change? Which process outputs will change those
perceptions? Which process characteristics must be
changed? How much must they be changed?
Process changes are based on the expected impacts to the customer
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Momari 49
Who are the customers?
Who are they? Anyone affected by a change to the
outputs of the process, including:external customers, business strategies,
internal customers, other processes
How do you know what they want? Complaints and compliments,
surveys, interviews, focus groups, market research studies
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Momari 50
Exercise
Fill out Process bounding worksheet for the insurance claim process There is 60% variation in cost of similar
claims Customer complaints: It takes a month to
get check Set objective: timely and fair payment Input: Policy #, car model, damage Output: instructions, claim quotes, check
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Momari 51
Process Bounding Worksheet
Title: Owner:
Mission:
The Process Begins with: The Process Ends with:
Input:
Item Source / Vendor Comments
Output
Item Customer Perceptions
Characteristics / Measurements
Characteristic Data Available? Current Value Target value
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Momari 52
Developing the data gathering plan
Bounding the process & objectivesDeveloping the data gathering plan
Interviewing the participantsGenerating process map
Analyzing and using the map
What data is needed to create a process map?Who do we need to talk to?
What should we ask?
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Momari 53
Plan generation process
Outputs
•Concept flowchart
•Final process boundary
•Information plan•What needed•from whom•by when
Inputs
•Bounding worksheets
•Owner’s expectations
•Restrictions
•Available data
Team Planningmeeting
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Momari 54
Concept flowchart
Objectives Provide enough detail to identify all
activities and departments involved Leads to agreement among team
members on the major components and boundaries
Allows process mapping work to be split up logically
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Momari 55
Concept flowchart-Insurance Co.
client agentclaims center shop
1. Notify agent 2. instructions
3. Quote request
4. Provide quote
…and so on
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Momari 56
Interviewing the process participants Bounding the process & objectives
Developing the data gathering planInterviewing the participants
Generating process mapAnalyzing and using the map
Setting up and conducting info gathering interviewsCreating sub-process maps during the interview
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Momari 57
Interviews
Purpose: Gather enough information to create
accurate process map that can used for improvement
Gather suggestions for improvement from employees directly involved in its execution
Gain buy-in by involving process participants in the process analysis
Mechanics: 2 team members per interview One interviewee at a time
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Momari 58
Interview Process Flow
Is this the last
step
Facts
1. What is the first(next) next step you perform
3. What supportdo you need?Who supplies
2. What are the outputs?Customers?
3. What are the inputs?Suppliers?
4. What are the characteristics
values?Task time, cost?
No
YES Review input with participant
1. Is customer satisfied
with inputs
2. How do you measure your
progress?
3.What are roadblocks to quality,
productivity?
4. How would you change the
process?
Opinions
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Momari 59
Generating the process map
Bounding the process & objectivesDeveloping the data gathering plan
Interviewing the participantsGenerating process map
Analyzing and using the map
The conventions and symbols used in process mapping
The details of process mappingVariations and when they are used
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Momari 60
Process mapping symbolsBasic
Ops: Process, activity
Decision:Triage, classification
Terminal: Start and end process
Ops: Process, activity
Inspection: Approval
Delay: Waiting
Manufacturing
Storage:controlled
Assemble
Accept/reject?
Start batch
Finished goods to warehouse
Quality control
In process inventory
Raw materials, Finished goods
Services
Sales call. Med exam
Audit? Make or buy?
Cust orders lunch
Fax order to vendor
Sign-off P.O.
Computer install waiting for S/W
Records Vault
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Momari 61
A simple process map
Start Step 1
Step 2 Step 3
Step 4
?
End
No
Yes
Organization x Org y Org z
Time scale
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Momari 62
Exercise
Construct simplified processes for: Semiconductor device Financial audit Real Estate construction project
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Momari 63
Analyzing and using the map
Bounding the process & objectivesDeveloping the data gathering plan
Interviewing the participantsGenerating process map
Analyzing and using the map
Analysis:Concepts of value added activity
Basic tools of process analysisProcess analysis check list
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Momari 64
Value added assessment
Process step
Necessary to produce
output?
Customer value added
Businessvalue added
Novalue added
Contribute tocustomer
requirement?
Contribute to business function?
Yes
No
No
NoYes
Yes
Record orderType policyResearch dataRecord claim
Record date receivedOrder formsUpdate personnel recordsPrepare financial reportPay taxes
Review & approveReworkMovementStorage
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Momari 65
Analyzing and using the map (cont)
Bounding the process & objectivesDeveloping the data gathering plan
Interviewing the participantsGenerating process map
Analyzing and using the map
Using the map:Process improvement programsTarget setting
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Momari 66
The basis for improvement
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tImprovement
Process mapping
Process Analysis tools
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Target setting
Targets drive methodology
Characteristic: Fast mail delivery
Time
Baseline (current level) 1 business day
Capability 1.5 hrs
Industry benchmark 35 min
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Process improvement enablers
E-mail Voice systems Imaging systems Workflow tools Document
management
E-commerce Wireless
communication Broadband Simulation tools Multimedia
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We learned
Forces driving process improvement Industry report: BPI projects from
around the worldBasic business process conceptsProcess mapping and analysis