Business Process Modeling
Introduction
Stefano Angrisano, Consulting IT Specialist December 2007
Streamline or optimize business processes:
a Top Business priority
Streamline or optimize business processes
Boost worker productivity across company Improve customer service Gain better return on IT capital investments
Keep up with change Organize and use customer data
Use IT to achieve compliance Retain skilled staff members Reduce the cost of IT operations
85% 85% 84% 82% 81% 80% 79% 78% 78% Business priorities Business priorities Business priorities
Streamline or optimize business processes
Boost worker productivity across company Improve customer service Gain better return on IT capital investments
Keep up with change Organize and use customer data
Use IT to achieve compliance Retain skilled staff members Reduce the cost of IT operations
85% 85% 84% 82% 81% 80% 79% 78% 78% 85% 85%
What are Business Processes ?
Coordinated chains of activities producing business value and results
Typically consist of:– Human activities (Human Workflow)
– Business system activities (such as ERP, or CRM,…)
– Combinations of human and system activities
Define how the business runs at an operational level
May be hidden or embedded:– In the organization and culture of a company
– In the business systems of a company
Are often poorly understoodWhat is Process Modeling ?
The capturing of an ordered sequence of business activities and supporting information– Business processes describe how a business pursues its objectives
There are different levels of process modeling:– Process Maps – simple flow charts of the activities
– Process Descriptions – flow charts extended with additional information, but not enough to fully define actual performance
– Process Models – flow charts extended with enough information so that the process can be analyzed, simulated, and/or executed
What is Process Mapping / Modeling ?
Provides a graphical
representation of the flow of a business process.
Depicts a set of activities that represent the alternative routes that the flow of execution can take.
The primary purpose of process mapping is to document the process.
Process Mapping can be done with any graphical tool (WBM, MS Visio, MS Powerpoint, etc.)
Business Process Modeling refers to the addition of operational data into the flow of activities.
It includes data such as the
resources required to perform a task and their timetable to work, the task duration and associated direct and indirect costs.
The primary purpose of process modeling is to conduct objective analysis in order to understand the costs, bottlenecks and resources constraints of a process.
Process Modeling can only be performed in more advanced software such as WBM.
What is Process Modeling ?
Business Process Modeling is the activity of representing both thecurrent ("as is") and future ("to be") processes of an enterprise, so that the current process may be analyzed and improved. BPM is typically performed by business analysts and managers who are seeking to improve process efficiency and quality. The process improvements
identified by BPM may or may not require IT involvement, although that is a common driver for the need to model a business process
Modeling language standards that are used for BPM include Business Process Modeling Notation (BPMN), Business Process ExecutionLanguage (BPEL), Unified Modeling Language (UML), Object Process Methodology (OPM), and Web Services Choreography Description Language (WS-CDL). Other technologies related to business process modeling include model-driven architecture and service-oriented
What is BPMN?
BPMN is flow-chart based notation for defining Business Processes
BPMN is an agreement between multiple modeling tools vendors, who had their own notations, to use a single notation for the benefit of end-user understand and training
BPMN provides a mechanism to generate an executable Business Process (BPEL) from the business level notation– A Business Process developed by a business analyst can be directly applied to a BPM engine instead of going through human
interpretations and translations into other languages
Receive Credit Report Approval Approve? Include History of Transactions Yes No Include Standard Text
A BPM Hourglass
Audiences:
Strategy Consultants Business Analysts Process Designers System Architects Software EngineersPurposes:
Modeling ExecutionBusiness Environment
Technology Implementation
BPMN
BP
BPEL
Intersection Point ScopeProcess Models Goals
The goals of a process model are:
To be Descriptive
– Track what actually happens during a process.
– Takes the point of view of an external observer who looks at the way a process has been performed and determines the improvements that have to be made to make it perform more effectively or efficiently.
Prescriptive
– Defines the desired processes and how they should/could/might be performed.
– Lays down rules, guidelines, and behavior patterns which, if followed, would lead to the desired process performance. They can range from strict
enforcement to flexible guidance.
Explanatory
– Provides explanations about the rationale of processes.
– Explore and evaluate the several possible courses of action based on rational arguments.
– Establish an explicit link between processes and the requirements that the model needs to fulfill
Why Modeling Processes ?
Modeling for compliance/documentation
– Document processes for use by a business to understand the business process
– Customers use output for training, collaboration, documentation requirements for compliance regulations (Sarbanes-Oxley and Basel II)
– Linkage to real-time monitoring provides a feedback mechanism for reporting requirements needed for compliance
Modeling for redesign
– Document both the current state and future state business process and the comparison to determine Return on Investment (ROI) analysis
– Six Sigma and Process Improvement are common methodologies
Modeling for execution
– Modeler can create artifacts from the business model and make them available in technology development tools to reduce the overall implementation time of new business processes.
Why is There a Need for Business Modeling and Analysis?
Gap Gap
-Business Domain
Technical Domain
Strategy Consultant LOB Manager
Business Analyst Corporate Developer Data Architect IT Architect Process Specialists Issues
•Inconsistent in information collection •Communication issues with subject matter experts
•Incomplete requirements documentation
•Lack of visibility into the enterprise •No view of complex behaviors
•Limited documentation of processes and procedures
Issues
•Incomplete requirements •Difficult to understand the scope of the business issues and how to solve them
Why Modeling Processes ?
Model to bring business and IT together– Communicate fully with subject matter experts
– Provide visibility into the enterprise
– Create complete
documentation of processes and procedures
– Deliver complete requirements documentation to IT
– Allow IT to understand the scope of the business issues and how to solve
Business Domain Technical Domain LOB Manager Business Analyst Corporate Developer Data Architect IT Architect Process Specialists
Understanding business needs…
“Customers don’t want a quarter-inch drill
– they want a quarter-inch hole.”
Theodore Levitt, Harvard Business Review
IT View
LOB View
Without understanding the nature of
the hole it’s difficult to prescribe a
drill…(maybe they need a punch!)
Value of Process Modeling
Process Modeling enables:
Understanding potential areas for increased value
Assessing the impact of new solutions and quantifying the expected improvement and ROI
Improved logic, robustness of quantification, and unambiguous process maps
Improved compliance with regulatory requirements
Improved communication through increased level of detail
Understanding of current business measures or KPIProcess Model Requirements Business Goals As-Is (Current State) To-Be (Future State) Static and Dynamic
Analysis
Simulation
Business Goals / Requirements
Modeling for redesign / process improvement requires alignment to Business Goals– Reduce max. process duration by 10%
– Increase chance of most favorable path by 25%
Business Goals should be prioritized, as they could impact several processes
Define requirements to achieve Business Goals, but:– Avoid ‘impossible’ requirements
– Align to business strategic initiatives
Prioritization and evaluation matrix
Target area Larger reengineering project Minimize projects in this areaLook for a customer initiative that has momentum and that
can be leveraged over time. Consider
reusable services.
Look for a customer initiative that has momentum and that
can be leveraged over time. Consider
reusable services. Services opportunity Lower effort Lower,
non-strategic value Higher strategic value, linked to key initiative Greater
effort
Payback Use simulation to assist
with the calculation of payback and positioning
Potential shortfalls in IT system capabilities can be identified
Gaps – opportunity to
implement new IT systems where none exist before Deficiencies - the system
lacks key functionality, or is poorly designed
Duplication – multiple systems compete for the same need. Opportunity for consolidation
Over-Extension – a system designed tosupport one component is extended beyond its core capability to help support others Direct Execute Control Business Admi n is tra ti on Ma rk et in g Asset M g m t & Pr o d uct Developm ent Sales & Channel M a nagement Ne w Business Cust o m er Service Cont ra ct Fin a nce Business Admi n is tra ti on Ma rk et in g Asset M g m t & Pr o d uct Developm ent Sales & Channel M a nagement Ne w Business Cust o m er Service Cont ra ct Admi n is tra ti on Operations Planning Service Management Contract & Policy Set-up Channel Management Campaign Management Alliance Management Product Management Manufacturing Planning Distribution Planning Operational Control Financial Control Accounting &Finance Planning Asset & Liability Management Funds Management Trading General Ledger Treasury Claims processing Contact Servicing In-force Processing Check Processing Contract Administration Correspondence Intelligent Routing Contact Repository Customer Profile Fees & Commissions End -customer marketing Campaign Execution Product Development Sales Support Product Profile End -Consumer Sales Conservation Human Resource Business Planning Management Manual Regulatory Reporting Training Council Services Systems & Facilities Helpdesk Advisor/ Intermediary Administration Advisor/ Intermediary Set-up Wholesales gaps gaps gaps duplication over-extension deficiency
Modeling Steps
Model the Current State
Validate Model
Analyze– Static and Dynamic Analysis (requires Simulation)
– Reports
Identify potential improvements
Model the Future State(s)
SimulateModel the Current State
Gather existing documentation (if any)
Interview Process Owner– Don’t just stop there: different people might have different views / scopes
There are several dimension to be considered: hilight what you want to address– Process / Task durations, Exception paths, reworks, unnecessary approval steps
– Resources vs. Roles
– Business Items / Information – do they undergo transformation along the path (i.e. Value added) ?
True Business Understanding Requires Multi-Dimensional Models
Process Model
– Click & Drop to create the graphical view - the visual representation of the process model.
Resource Model
– Define resource types, templates and instances – and associate them to the process
Information Model
– Define the data & its attributes – show how data is used within a business process.
Organization Model
– Define organization units, locations – show roles, resources and other organizational elements in structured diagrams
Analysis Model
– Define and anlayze process elements for their static relationships, as well as their simulated dynamic behavior
Business Measures Model
– Define Key Performance Indicators and Metrics that represent the critical performance characteristics to be Monitored
Collaboration & Team Support
– Publish models for browser based access and commentary & share models in a centralized repository
Output Capabilities - Integration
Process Model Validation
Once models are “Completed”, they must be validated– Review meetings – Reports – Simulation
Validate models – Syntax – Standards – Semantics – SenseAnalyze Current State
Static Analysis is the first step to better understanding how a process is defined with respect to time and cost.– It’s the process of extracting targeted types of information in a model in its static form.
– Analyze relationships between processes and tasks and their
assignments to resources, allocations, schedules, costs and timing.
Dynamic Analysis allows you to perform detailed analysis on the results of simulations to extract information regarding scheduling, costs, output, and other statistics pertaining to a process.
Simulation and Dynamic Analysis allow you to discover behaviors that would be difficult to discover otherwise (bottlenecks, resourceconstraints, wait time).
Compare results of Dynamic Analysis with Real Life: if they match closely, chances are that your model is correct.Identify Potential Areas for Improvement
Once you have the issues isolated, you can begin to consider potential areas of improvement– Consolidate / Eliminate Tasks
– Maximize the use of Parallel paths
– Increase probability of most desirable paths
– Reduce task durations
– Modify resource requirements
– Improve the use of data and information
Probing questions to ask and things to consider
Questions
– If the process breaks, where does it break, when and how often?
– Where is there waste in the process – time, materials?
– Is process documentation followed? How do you know?
– What do the customers want from the process (accuracy, speed, reliability, low risk, low cost)? What do they do when they don’t get it (penalties, risk, go
elsewhere)?
Consider where exceptions occur in the process
– If they are found near the end of the process it’s likely that quality is being inspected in.
– Probe to determine if problems originate earlier in the process
– Consider ways to go around – one of the easiest ways to improve a process: make a change earlier (e.g. data integration, automation) and avoid the
exception. Most transactions then flow around and impact is minimized.
Consider information and data
– Is it missing? Is it re-keyed or recreated?
– Does the process launch without needed information?
Where to look and what to do
(After simulation) look for ways to eliminate unused paths and to bypass or minimize high cost activities using rules, integration, etc.
High cost activities, infrequently executed paths
Document the process – sometimes simply documenting a process delivers benefit Inconsistent output/process results
Create parallel processes that allow different work to be processed at the same time
Sequential processes with built-in wait time; excessive customer wait time
Consider a common process based upon best practices, allowing for planned, local variation as needed
Process duplication across multiple divisions or work units
Use electronic forms and workflow to track the process and capture status information
Paper-driven processes with printed forms and tracking logs
Use simulation to reveal hidden costs and to show how a business case may be made
Automated processes that have not been changed for years (no business case for change)
Replace (management) approvals with rules-based workflow
Processes supported through multiple management approvals and reviews
What to do Where to look
What to look for in the current and future states
Current state process
Bottlenecks and constraints
Rework, errors and exceptions
Missing, incomplete information
Fragmented processes held
together through spreadsheets, re-keying, informal workarounds
Numerous approvals and audits
Sequential activities creating delays
Paper-based processes
Lack of measures, performance indicators (decisions based on feelings vs. facts)
Lack of documentation
Processes that are too slow, too costly to be competitive
Future state process
Improved process
Streamlined with automated workflow
Exception-based including alerts and escalation (out of bounds conditions and time triggered)
Improved access to accurate information through integration
Rules-driven approvals and routing
Use of managed parallel activities
Dashboard monitoring and decision-making based on real-time Key Performance Indicators, results
Improved ability to respond to and implement required regulatory controls
Companies that have implemented Business Process Monitoring systems are seeing results…
“Three-quarters of 160 companies surveyed recently believe they are flying their business processes ‘blind and without instruments.’ This lack of visibility, often due to old application software, is inhibiting all levels of management from seeing bottlenecks
in such critical processes as capital risk management, claims tracking, compliance, inventory management, and customer service.”
An average 9% improvement in revenues
A median 12% decrease in process-related expenses
A 10% return on assets (ROA)
An 18% return on investment (ROI)
94% are moderately or very pleased with the overall improvement Business Process Monitoring has deliveredFive Steps to Continuous Process Improvement
Define and Align Objectives
Assess and Analyze
Model Current State and Gather Data Cycle of
Improvement Model Future State,
Evaluate Options
Implement and Manage
Define improvement objective (e.g. “Reduce process cycle time by…”) Link to core process and/or
key initiative
Model exception paths including required corrective action
Gather and load cost and time (duration) data
Classify activities (value add vs. rework) Develop a simulation test plan
Simulate “As-Is” process to identify bottlenecks and high cost areas Eliminate unnecessary steps,
simplify as much as possible
Look for opportunities to automate (think business services!)
Model alternatives and rank by payback (use a simple matrix) Gather feedback on the proposed Develop pilot and
implementation plans Create measures Assign technical attributes Implement, Monitor performance
Model the Future State
The future state model is focused on achieving the business goals defined at the start of the workshop
Modifications should reflect improvements to the issues isolated during analysis and simulation
Implementing changes to an existing process model is an iterative process– Analysis and Simulation should be conducted after each change to understand the relative impact
Finally, when all the changes made to the current state model have been validated by the customer, it becomes the future state modelPerform Comparison Analysis
Here resource loading is evaluated through simulation and analysis comparing current
vs. unlimited vs. balanced
Here resource loading is evaluated through simulation and analysis comparing current
vs. unlimited vs. balanced allocation.
Dynamic Analysis
Dynamic analysis includes ability to
compare multiple current- and future-state alternatives (both automated and non-automated) from cost, time, throughput perspectives and by exception path and classifier.
Result
Allows high-value/lowest cost improvement targeting and prioritization.
Dynamic Analysis
Dynamic analysis includes ability to
compare multiple current- and future-state alternatives (both automated and non-automated) from cost, time, throughput perspectives and by exception path and classifier.
Result
Allows high-value/lowest cost improvement targeting and prioritization.
Process Improvement
Improvement frameworks and tools overviewImprovement Frameworks – knowing where to focus
Lean – Frequently found in manufacturing. Emphasis is placed on removing waste from a process. Sources of waste are generally known.
Six Sigma – Emphasis is on removing variation (exceptions) from a process with measures-driven new process management and design and iterative
improvement. Sources of variation must be discovered.
Lean Sigma – Combines both with an emphasis on waste removal first and then on elimination of variation. Normally driven by the Six Sigma improvement
method (Define-Measure-Analyze-Improve-Control).
Kaizen – Typically a rapid execution improvement project – 4 to 5 days – used when data and problems are known. Required resources (IT, Management, etc.) are placed on call. Often driven by employee suggestion or idea. Still follows an improvement process/cycle.
Balanced Scorecard – A measurement system that typically seeks to account for and balance four perspectives: financial, customer, business process and
learning and growth.
Additional Frameworks include Malcolm Baldrige Assessment Criteria, ISO 9000, Rummler-Brache, etc.
What’s the big deal about Six Sigma?
Six Sigma means less than 3.4 defects per million opportunities (DPMO)
This means performance/quality that meets customer specifications 99.99966% of the time
Isn’t 99.9% good enough?
During everyday life in the US 99.9% means:
– Unsafe drinking water once per week
– No electricity for nearly one hour per month
– 500 wrong surgical procedures per week
– 2 short or long landings at most airports each week
– 20,000 wrong drug prescriptions per year
– 2,000 lost articles of mail per hour
16 841K .5σ 31 690K 1σ 50 500K 1.5σ 69.20 308K 2σ 84.10 159K 2.5σ 93.30 66,800 3σ 99.40 6210 4σ 99.97 230 5σ 99.99966 3.4 6σ % Defect free DPMO σ From Target
Airline crashes?
Lost luggage?
Graphing Six Sigma – using the bell curve or normal distribution
This process is performing at a Four Sigma level and includes variation that
drives cost up and profit down
Process performance Target Customer Specification 99.9% 1σ 2σ 3σ 4σ 2σ 4σ 6σ Target
This process is performing above Six Sigma levels against current customer
specifications
Customer Specification
Yield
Cost of corrective action, SLA penalties, opportunity cost, customer satisfaction, lost profit,
Defects
No Defects (exceptions) Achieved by eliminating sources
Example of Six Sigma
30
An employee leaves home every day at 8, must be at work at 8:30. He can choose between two routes: a city route, with possible traffic jams, which takes on average 25 mins. – and a suburb route, with less traffic, that takes on average 28 mins.
Which one should he choose ?
City 25 Target 28 Suburb Defects
Focus on Sources of variation /
No Defects (exceptions) Driving Time Pro b ab ilit y
Control charts
Used to monitor process performance and initiate corrective action in Control step
WebSphere Monitor allows Upper and Lower Control Limits to be set…Mean 2σ 3σ
2σ 3σ
upper warning limit
lower warning limit upper control limit
lower control limit
Common-cause variation Special-cause variation
Monitor opportunity!
“Muda”
Muda
(
無駄
) is a Japanese term for
anything that is wasteful and doesn't
add value…
Where Muda (waste) is found
Toyota defined seven categories or types of waste.
– Overproduction (making more than what is needed, or making it earlier than needed)
– Transportation (moving products farther than is minimally required)
– Waiting (products waiting on the next production step, or people waiting for work to do)
– Inventory (having more inventory than is minimally required)
– Motion (people moving or walking more than minimally required)
– Processing itself
– Defects (the effort involved in inspecting for and fixing defects)
Medical device manufacturer Fishbone diagram example
Consider as the basis for probing questions
Consider as the basis for probing questions
Combining Lean and Six Sigma
Process
Step 1 Step 2 Step 3 Step 4
Lean = Balanced flows 6σ = Reduced variation Excess inventory Process waits 1 2 3 When Modeling:
• Focus on wait time, transfer times
• Use Value Add Classifiers
When Modeling:
• Focus on wait time, transfer times
• Use Value Add Classifiers
When Modeling: • Focus on errors,
exceptions
• Use exceptions and error type Classifiers
When Modeling: • Focus on errors,
exceptions
• Use exceptions and error type Classifiers
Don’t forget measures, KPI for
Proven method of organizing both thinking and analysis
In widespread use – Siemens, Microsoft, NTT, FedEx, Ford, IBM, others since 1985…
Enables step-by-step problem solving and speeds analysis activity
Simple and quick-to-learn way of controlling “yes, but…” (negative) personalities
The Hats may or may not be revealed to workshop participants
Proven method of organizing both thinking and analysis
In widespread use – Siemens, Microsoft, NTT, FedEx, Ford, IBM, others since 1985…
Enables step-by-step problem solving and speeds analysis activity
Simple and quick-to-learn way of controlling “yes, but…” (negative) personalities
The Hats may or may not be revealed to workshop participantsUsing the Six Thinking Hats
Just the facts The emotional view
The White Hat
• Neutral and objective • Focus on data, facts
• Use two-tiered approach – tier one are verified facts, tier two are
assumptions-driven “facts”
• May be used when determining activity time estimates (durations) and when exploring KPIs
Say and do:
• Just the facts: how long, how many, how often…?
The White Hat
• Neutral and objective • Focus on data, facts
• Use two-tiered approach – tier one are verified facts, tier two are
assumptions-driven “facts”
• May be used when determining activity time estimates (durations) and when exploring KPIs
Say and do:
• Just the facts: how long, how many, how often…?
The Red Hat
• Focus on emotions and feelings
• Discussion may range from fear and dislike through to opinions
• Linked to the 10-40-50 rule
• May be used when exploring ideas, improvement alternatives, reaching consensus
Say and do:
• “This is how I feel about…” or “How do you feel about…?” or “How will others feel about…?” The Red Hat
• Focus on emotions and feelings
• Discussion may range from fear and dislike through to opinions
• Linked to the 10-40-50 rule
• May be used when exploring ideas, improvement alternatives, reaching consensus
Say and do:
• “This is how I feel about…” or “How do you feel about…?” or “How will others feel about…?” • Limit rationalizations and justification discussion
Worked in pairs
Using the Six Thinking Hats
Just the facts The emotional view
Inhibitors, risks Enablers and benefits
The Black Hat
• Focus on risk, weaknesses • Considers past and future
• High value – allows “can’t be done” attitude to be channeled
• May be abused if the only form of thinking
• May be used when evaluating barriers to and risks associated with the
implementation of the improved process
Say and do:
• What are the barriers, where are the risks…?
The Black Hat
• Focus on risk, weaknesses • Considers past and future
• High value – allows “can’t be done” attitude to be channeled
• May be abused if the only form of thinking
• May be used when evaluating barriers to and risks associated with the
implementation of the improved process Say and do:
• What are the barriers, where are the risks…?
The Yellow Hat
• Positive and constructive
• Used to probe for value and benefit • May be used when exploring benefits
of improvement alternatives
Say and do:
• “Yes, and…” (vs. “Yes, but…”) or “What makes this alternative possible The Yellow Hat
• Positive and constructive
• Used to probe for value and benefit • May be used when exploring benefits
of improvement alternatives Say and do:
• “Yes, and…” (vs. “Yes, but…”) or “What makes this alternative possible (or likely)…?”
Using the Six Thinking Hats
Just the facts The emotional view
Inhibitors, risks Enablers and benefits
The Green Hat
• Focus on creative alternatives
• Used by the facilitator to pause the thinking process (when use of Black Hat thinking becomes excessive) to set a new direction
• May be used when suggesting alternatives (brainstorming)
Say and do:
• Think creatively or “Let’s think outside of the box
• Can use outlandish or wild alternatives to force participants into creative mode The Green Hat
• Focus on creative alternatives
• Used by the facilitator to pause the thinking process (when use of Black Hat thinking becomes excessive) to set a new direction
• May be used when suggesting alternatives (brainstorming) Say and do:
• Think creatively or “Let’s think outside of the box
• Can use outlandish or wild alternatives to force participants into creative mode
The Blue Hat
• Summary and control (often the hat of the facilitator – calls for the use of other hats)
• Used to organize and think step-by-step (think like a computer!)
• Helpful when determining next steps, organizing results
Say and do:
• Use for periodic process checks The Blue Hat
• Summary and control (often the hat of the facilitator – calls for the use of other hats)
• Used to organize and think step-by-step (think like a computer!)
• Helpful when determining next steps, organizing results
Say and do:
