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Enterprise Engineering with Processes or In the Footsteps of Monty Python . Michael Hammer ESD Faculty Seminar March 2005. © 2005 Hammer and Company. All rights reserved. MIT ESD.38J-Faculty 3/05. Oil company: filling orders

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slide1
Enterprise Engineering with Processes
  • or
  • In the Footsteps of Monty Python

Michael Hammer

ESD Faculty Seminar

March 2005

© 2005 Hammer and Company. All rights reserved.

MIT ESD.38J-Faculty 3/05

slide2

Oil company: filling orders

  • cycle time reduced by 75%, cost reduced 45%, customer satisfaction increased 100%
  • Trucking firm: sales
  • RFP cycle time reduced 95%, win rate increased 70%
  • Consumer packaged goods: product deployment
  • lead time reduced 50%, inventory reduced 25%, backorders decreased 50%
  • Auto insurer: claims handling
  • cycle time reduced 90%
  • Computer firm: product development
  • time to market reduced 75%, development costs reduced 40%, customer satisfaction increased 25%
  • Electric utility: new connections
  • cycle time reduced 90%, personnel required reduced 70%

Some Interesting Results

What makes them even more interesting

slide3

The Underlying Theme: Process

  • Concept: end-to-end work
  • as opposed to piecemeal work
  • Definition: an organized group of related tasks that work together to create a result of value
  • transformation of inputs into outputs
  • structured purposeful work
  • Some common processes
  • order fulfillment order acquisition
  • procurement demand creation
  • product development plan to produce
  • Themes
  • cross-functional
  • outcome-focused
  • context for activities
  • work, not structure
  • tasks, not people
  • small in number
  • The reality
  • processes are present but unrecognized in every enterprise
  • reversing a 200 year legacy
slide4

The Classical Organization

Designers: Smith, Taylor, Ford

Capabilities: control, planning, scalability

Environment: stability and growth

the old way
The Old Way

CSR

Line tester

Dispatcher

Field service

technician

the old way7
The Old Way

Engineering

Sales

Tooling

Manufacturing

sample development as a process
Sample Development as a Process

Engineering

Sales and

Engineering

Tooling

Manufacturing

slide9

The Process Approach to Performance Improvement

  • Identify the enterprise’s processes
  • a business model in process terms, driven by strategic goals
  • Measure process performance
  • and set design goals
  • Create high-performance process designs
  • specifying precisely how tasks fit together
  • replacing inherited default designs
  • Implement new process designs
  • after suitable testing
  • including supporting training, infrastructure, and technology
  • Improve process performance
  • on an ongoing basis

Improved performance through improved design

slide10

The Process Lifecycle

Understand source

of performance gap

Develop intervention plan

Set performance

target

Improve

design

Improve

execution

Understand

customer needs

and benchmark

competitors

Measure

process

performance

Modify

design

Replace

design

Ensure process compliance

Design, document, and implement process

the dimensions of process design
The Dimensions of Process Design
  • What tasks are to be performed
  • Who performs which tasks
  • When tasks are performed
  • Whether tasks are performed
  • Where tasks are performed
  • What information tasks employ
  • With what precision tasks are performed
slide12

Process Ilities

  • Repeatability
  • formal design
  • Improvability
  • context and process
  • Adaptability
  • a handle for change
  • Accountability
  • ownership
  • Manageability
  • measures and comprehensibility
  • Flexibility
  • separation of work and resources
slide13

Representations of a Process

  • Control flow
  • effective for time-oriented changes
  • Information flow
  • effective for information-based simplification
the old way14
The Old Way

P/O

Purchasing

Vendor

I

P/O

goods

$

Receiving

Payables

the new way
The New Way

P/O

Purchasing

Vendor

goods

$

notification

Receiving

Payables

slide16

Representations of an Enterprise

  • Organization chart
  • who we are
  • P and L statement
  • how much we make
  • Balance sheet
  • what we own
  • Product catalog
  • what we sell
  • Customer list
  • whom we serve
  • Mission statement
  • what we aspire to
slide17

TI Semiconductor Business Process Model

Customer Communication

Concept Formulation

Market

Customer

Product Development

Manufacturing

Customer

Design

and

Support

Product

Development

Order

Fulfillment

Strategy

Development

Enablers

Manufacturing Capability Development

Source: Texas Instruments

(Reprinted with permission)

© 1992 Texas Instruments Inc. All rights reserved.

slide18

Desiderata of a Process Model

  • Simple
  • Customer-centric
  • Natural
  • Holistic
  • Precise
  • Comprehensive and all-encompassing
  • Non-hierarchical and non-organizational
  • Processes, not functions
  • Stable, non-product-dependent
slide19

An Organizational Model (But Not an Organizational Chart)

C

U

S

T

O

M

E

R

S

Owner

Owner

Processes

Owner

Centers of Excellence

Coach

Coach

Coach

Coach

slide20

Aligning with Processes

  • Metrics
  • processed-based performance measures
  • Information systems
  • integrated systems to support process work
  • Facilities
  • work spaces to reinforce team work and process flow
  • Human resource systems
  • job descriptions, career models, and compensation systems designed for process performers
  • Management systems
  • budgeting, planning, and financial systems focused on processes
  • Culture
  • attitudes and values of teamwork, customer concern, and personal responsibility
  • Integration
  • mechanisms for ensuring that processes work together as well as individually
slide21

The Tradeoff

  • System simplicity vs. component complexity
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