Business Process Analysis and Modeling

1. Lian Yu The School of Software and Microelectronics Peking University No.24 Jinyuan RD, Beijing 102600, P.R. China Business Process Analysis and Modeling 2009 教育部-IBM精品课程:面向服务的业务流程管理 Business Process Analysis and Modeling

2. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

3. Business Process Analysis The purpose of Business Process Analysis (BPA) is to enable organizations to model and analyze their business processes. Armed with this information, business analysts can gain insight into complex business problems and begin to make recommendations for how solve them. Here are some typical examples of business problems for which a business process approach is relevant: (Next slide) Business Process Analysis and Modeling

4. Typical Examples Business Process Analysis and Modeling Diagnosing the root cause for a known process problem, such as finding out why the warranty process takes so long. Finding unknown weaknesses and bottlenecks in existing processes, such as the claims process (insurance) or the warranty process (manufacturing) Understanding the interrelations and integration of hundreds of data and document components, such as in the clinical trials process (pharmaceutical industry) Creating standard processes for supply chain interactions (e.g., application of SCOR methodology) Converging multiple parallel processes, performed by different departments, to a single enterprise-side standard process Preparing for package implementation, specifically to perform a gap analysis of the new package relative to current business requirements Generating functional requirements that can be given to developers of a new custom-built system Designing the business logic of a process that will be automated using commercial BPMS products

5. The Role of Business Process Analysis Business process analysis and modeling is an effective tool to help utilities modify their business processes to improve efficiency and to effectively use their information technology. The coordination and alignment of the business processes with the supporting information management technology offers the greatest opportunity for improving the business operations. Business Process Analysis and Modeling

6. The Need to Integrate Business Process with Information Management Technology Business Process Analysis and Modeling Businesses are increasingly becoming aware that simply investing in new technology often does not produce the desired increases in efficiency. There is a growing awareness that the desired increases in efficiency can only be achieved by aligning the business processes with the technology. The business processes and activities must be designed to effectively use the new technology. In addition, the new technology must provide the information in a usable and understandable manner to allow the users to make the needed decisions and to complete the tasks. To achieve the desired increases in efficiency, the business processes must be aligned with the capabilities of the new technology and the skills of the staff.

7. Potential Processes for Changing Business Procedures (1/5) Business Process Analysis and Modeling • Business process reengineering. • Radical changes are defined and implemented to achieve major improvements in business processes or to implement a major redirection of the business processes. • New business goals and missions maybe developed. • Alternative business processes are usually identified and evaluated to identify the recommended new business processes. • Business process modeling is often used to identify and evaluate the strategic choices and to define the new business processes.

8. Potential Processes for Changing Business Procedures (2/5) Business Process Analysis and Modeling • Business process redesign. • A major effort redefinition of the business process and workflow is completed to significantly improve the existing business process performance. • The changes to the business processes often change the sequence of how work is completed and the resources that are required. • However, the goal and mission of the business are not modified. A business process redesign may include the identification, evaluation, selection, acquisition, and implementation of new business information management systems. • Business process modeling is used to evaluate the existing system and to identify opportunities for improving business processes. The business model could also be used to define the requirement for acquiring new information management technology.

9. Potential Processes for Changing Business Procedures (3/5) Business Process Analysis and Modeling • Business process improvements. • Incremental and continuous changes to business processes based on the measurement and monitoring of process performance. • Business processes are tuned or modified to increase performance. The business process modifications are usually small and incremental. • However, the monitoring is continuous and the business process modification should also occur frequently. • Business process modeling may be used in conjunction with process measurements to identify potential process improvements and to define the impacts of proposed modifications.

10. Potential Processes for Changing Business Procedures (3/5) Business Process Analysis and Modeling • Technology transfer. • Existing business processes and data are translated and transferred from the existing business processes environment to a new technology or system. • The business processes are modified to effectively use the capabilities and features of the new technology. • The new technology must be clearly identified and its capabilities and functions known. • This procedure would be used to modify business processes to use a new information management system that resulted from a “Business process reengineering” or a “Business process redesign.”

11. Potential Processes for Changing Business Procedures (5/5) Business Process Analysis and Modeling • Process standardization. • Business processes are defined and standardized to provide consistent, predictable and repeatable performance. • Business processes may be standardized to satisfy legal requirements and to provide documentation for ISO 9000 certification or other certification standards. • Business process modeling can be used to identify standardized processes and to document the standardized business processes.

12. Why to understand business processes? • Clients ask the following questions: • How much does it Cost? • How much Time does it take? • How many & what Resources are required? • How to solve additional Problems? • Remove bottlenecks • Further analysis using root cause techniques • Rate customer satisfaction and overall process quality • Calculate Return on Investment • Increase overall process compliance • Understand and optimize anything else, depending on your special needs Process Owners Process Analysts Business Process Analysis and Modeling Identify and understand business strengths for sustainable competitive advantage Identify process weaknesses and seek for improvements and/or automation See what you do end‐to‐end, and what you do not need to do anymore Gain insights into resource allocations, cost and time behavior of your business operations Simulate business change before running the change Monitor your business processes to optimize corporate business performance

13. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

14. Business Process Discovery vs.Business Process Modeling • Business Process Discovery • Business Process Discovery provides a graphical representation of the flow of a business process. It depicts a set of activities that represent the alternative routes that the flow of execution can take • The primary purpose of BPD is to document the business process. This can be done for the current state in order to satisfy audit requirements or to help educate future operations after major changes have taken place • This can be done manually, or withthe help of tools optimize business processes. • Business Process Modeling • 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 timetables 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 resource constraints of a process. The analysis conducted in turn is used to justify a To‐Be future state of process. • Business process modeling leads into Business Process Analysis to further optimize business processes. Business Process Analysis and Modeling

15. What is a model? Business Process Analysis and Modeling • A model serves as an abstraction of the item being built. • Engineers, architects, and other professionals who build complex structures or systems create models. • Sometimes the models are physical. • Scaled mock-ups of airplanes, houses, or autos • Sometimes the models are less tangible. • Financial models, market trading simulations, electrical circuit diagrams • Business analysts build business process models. • Structure charts, or simple block diagrams with arrows, are often used on whiteboards. • Traditional flow charts are a common method for representing the paths of a process. • Analysis requires additional process details to be added to the process model.

16. When do you use a model? Dog house Not required For documentation (blueprint) For documentation and analysis Business Process Analysis and Modeling • Modeling is the standard approach in engineering to: • Manage complexity • Mitigate risk • Software development is the same as every kind of engineering in this respect. • When do you model, and why?

17. Models support design Business Process Analysis and Modeling • Simple things do not necessarily need a model. • The solution is relatively easy to construct. • Few people collaborate or use the solution (often only one). • The scope of future needs is unlikely to grow substantially. • Certain complex systems must begin with a design or another abstract representation. • Construction of an office building needs architectural plans and a mock-up for visualization. • Modeling provides visualization of the entire system. • Allows assessment of various options • Communicates design risks before actual construction

18. Models are the foundation for complex analysis Business Process Analysis and Modeling • A model serves as an abstraction of the item being built. • Business analysts, engineers, scientists, and other professionals who build complex structures or systems create models. • Sometimes the models are physical. • Scaled mock-ups of airplanes, houses, or autos • Sometimes the models are less tangible. • Financial models, market trading simulations, electrical circuit diagrams • Traditional flow charts are a common method for representing the paths of a process. • Structure charts, or simple block diagrams with arrows, are often used on whiteboards.

19. Today’s business processes require modeling Business Process Analysis and Modeling • One-dimensional flow charts or models miss key attributes. • Business processes have a flow of work items and more. • Organizational and business information are key attributes. • How long does it take? • How much does it cost? • Who provides the service? • What policies, procedures, and business rules apply? • When is the process efficiency optimized? • Process models document the business and assist in communicating organizational change to the enterprise. • Once documented and shared with the organization, the process needs to be monitored and updated to provide optimal performance. • Corporate governance: Implementing controls to help ensure legal compliance with the Sarbanes-Oxley Act for accurate financial forecasting and reporting.

20. Purposes of business process modeling Business Process Analysis and Modeling • Business process models serve many purposes, including: • Documenting existing procedures • Determining requirements for staff, systems, and facilities • Planning changes to existing processes and systems • Testing and analyzing existing and proposed processes • Identifying defects in your processes (bottlenecks, and so forth) • Process model data can support other business applications that rely on this information: • Workflow, policy and procedure documentation, application development • Models visually represent an organization’s current workflow (an as-is model) and allow what-if scenarios for future (to-be) designs. • Effective models need a well designed modeling structure. • To understand what it takes to complete the activities • Ensures consistent and complete representation of information • Including normal operations, alternatives, and exceptions to standards

21. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

22. Business Process Modeling Business Process Analysis and Modeling • Business process modeling is used to identify and evaluate the opportunities for modifying the business processes. • All of the previous procedures for identifying and defining the business processes envision the use of business process modeling. • Business process modeling is the description of how work is accomplished in a business. Business process models use a combination of graphic diagrams and supporting text to describe how work is accomplished. • A number of different diagrams are used to describe the various aspects of the business processes. • No single diagram can effectively describe the business processes. • Most business process models will use a number of different integrated diagrams to describe the business processes.

23. Figure 1 presents a simplified summary of the major diagrams used in a business process model. Business Process Analysis and Modeling

24. The first diagram and The second diagram Business Process Analysis and Modeling The first diagram is an organization chart. The organization chart is used to define who will be doing the various activities or business processes. The second diagram is a process diagram that presents the initial definition of the various business processes or activities. This diagram defines what activities will be completed. The business process models are commonly presented as a hierarchal diagram similar to the organization chart. Business processes are broken down into sub-processes and tasks.

25. The third diagram (1/2) Business Process Analysis and Modeling The third diagram is a workflow diagram that describes how and when the work is accomplished. The most common form of workflow diagram is a “swimlane” or channelized workflow diagram. A swimlane, channel, or workflow lane is assigned for each department or role in the organization chart. Business processes are assigned to the various departments or roles by placing the process symbol in their swimlane. Arrows between the processes describe the outputs from the previous process and the order in which the processes are completed.

26. The third diagram (2/2) Business Process Analysis and Modeling A swimlane or workflow lane is also added for each of the major information management systems that are used to complete the workflow. The databases or data stores, shown as red rectangles, are placed in the system’s swimlane and are used to define the databases that are used or generated by the workflow activities. It should also be noted that the data stores included in the workflow diagram may also include file cabinets and map storage files.

27. The fourth diagram Business Process Analysis and Modeling The fourth diagram is a dataflow diagram of the processes. The dataflow diagram shows a relationship between the processes, the dataflow and the data stores. The data flow diagram is often used to present a generalization of the more detailed workflow and process diagrams.

28. The fifth diagram Business Process Analysis and Modeling The fifth diagram is database design diagram. This diagram is usually a class diagram used to define the various class objects that are included in the database design. One class diagram, or entity relationship diagram, is developed for each database included in the model. The class diagram is also used to identify the attributes and methods that are included in each object class.

29. The workflows Business Process Analysis and Modeling The workflows are initially defined and diagrammed in a series of interactive workshops. The workshop facilitator completes an initial workflow diagram in the workshop based on input received from Utility staff. The workflow diagrams completed in the workshop are rough draft diagrams and require editing and reformatting before the Utility staff can review them.

30. The dataflow diagrams Business Process Analysis and Modeling The dataflow diagrams and revised workflow diagrams are developed by the modelers based on input developed during the initial workshops. Additional workshops are scheduled as needed with selective groups to review the diagrams, to provide clarifications, and to answer questions.

31. The database Business Process Analysis and Modeling The database design or class diagram is the next diagram to be completed and requires a clear definition of the data needs and data stores identified during the workflow definition. The detailed description of the activities is used in the development of the database design and class diagrams.

32. Why Different Diagrams? Business Process Analysis and Modeling The different diagrams are developed during different phases of the project. The definition of the organization chart and a listing of all of the existing systems are usually accomplished at the start of the project before any workshops or interviews are initiated. The initial process diagrammed is often developed prior to the initiation of the workshops and used to schedule the workshops.

33. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

34. Business Analysis and Modeling Approach Business Process Analysis and Modeling • There are a number of different approaches and methodologies for developing business process models and completing business analysis and reorganization. • The different business analysis approaches can be placed into one of two major categories that include: • Top-down Methodology • Bottom-up Methodology

35. Top-down Methodology Business Process Analysis and Modeling The Top-down Methodology, as its name implies, starts with the development of a new vision and definition of the business approach by the business leaders and senior management. The key feature of the Top-down Methodology is the initial involvement of the business leaders and senior management. Senior management provides the leadership and resources needed for development and implementation of the new business processes.

36. Business Process Analysis and Modeling

37. About Figure 2 Business Process Analysis and Modeling • Figure 2 – Top-down Business Process Methodology presents the major activities for a top-down business process methodology. • The top-down approach starts with the business leadership providing the approval and authority for developing and implementing a new business plan. • The business leadership also provides: • New goals and objectives of business, • Definition of a new business concept, • Guidelines for designing and implementing the new business processes, • Metrics for monitoring the new business, and • Selection of business improvement teams and procedures.

38. Bottom-up Methodology Business Process Analysis and Modeling The Bottom-up Methodology, presented in Figure 3 – Bottom-up Business Process Methodology, usually starts with the identification, by the business staff with approval of the management, of opportunities for improving business processes by reviewing the existing business processes. The initiation of the Bottomup Methodology may also be started by the implementation of new information technologies or new regulations or requirements, which may require modifications of the existing business processes. The Bottom-up Methodology must include developing support of senior management for implementing the new business processes. Obtaining senior management support is often a difficult task and will usually require the staff to develop the information and business cases for justifying the implementation new business processes.

39. Business Process Analysis and Modeling

40. Two business process models with BU Business Process Analysis and Modeling • The Bottom-up Methodology usually includes the development of two business process models. • The first model is a definition of the existing business processes and the identification of opportunities for improving the processes. • A second business model is developed to define the new desired business processes and workflows.

41. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

42. Methodology Selection Business Process Analysis and Modeling The selection of the business analysis/modeling approach and methodology is dependent on the goal of the business reorganization and the level of organizational support. The recommended business process methodologies for the different business process changes that were presented earlier are summarized in Table 1. The preferred approach for major changes in business process is clearly the Top-down Methodology due to the built-in support of senior management and the opportunity to institute major business process improvements. The identification of new business processes required for the implementation of new information technology or responding to new regulations may best be accomplished by use of the Bottom-up Methodology as shown in Table 1.

43. Recommended Approach for Achieving Business Process Changes Business Process Analysis and Modeling

44. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling

45. Business Process Performance KPIs Business Process Analysis and Modeling • When to measure Key Performance Indicators (KPI)s for Business Processes, what would we measure? • A Proper Framework approach ensures that we balance Efficiency Metrics with Effectiveness Metrics and also, and make it as comprehensive a set of metrics as possible. • Efficiency Metrics (How well are you doing things?) and Effectiveness Metrics (How well are you doing the Right Things?). Sometimes Efficiency Metrics go hand in hand with Effectiveness Metrics and many times not.

46. In an Insurance Claims Settlement process Business Process Analysis and Modeling • Settling the claim quickly achieves the Turn-Around Time (TAT) Efficiency Metric, customers are also very happy increasing the Customer Satisfaction Index (CSAT) Index, an Effectiveness Metric. • On the other hand, if the business process is Customer Support on the phone, the Efficiency Metric may be Average Handle Time (AHT). • Companies may try to keep this metric within a certain range. However, keeping calls shorter may affect the Customer Satisfaction Index (CSAT) metric the opposite way. • Getting off the phone quickly without resolving the problem fully will only make the customers less happy! • In this case, the Efficiency Metric and Effectiveness metric may be opposed to each other!

47. A framework for determining what metrics It is the framework which changes with each new technology and not just the picture within the frame. - Marshall McLuhan Business Process Analysis and Modeling • Here's a framework for determining what metrics may be of use for any business process. • The framework can be quite comprehensive when considered under three main groups – • People, • Process • Technology • A Framework approach to thinking about Business Process Metrics makes sure that you measure an as comprehensive set of metrics as possible.

48. Business Process Analysis and Modeling

49. Metrics of People, Technology and Process Business Process Analysis and Modeling People Metrics are important, especially in business processes where there is an inordinate proportion of manual activities - Like for example Insurance Underwriting of Commercial Properties for example. People metrics become even more important when business processes are outsourced. Technology Metrics are also important, especially business processes that involve computer systems and application software. When customers can apply for Insurance online or file claims online or pay their annual road tax at the local Department of Motor Vehicles, availability of servers and response time become important metrics that may need to be monitored. Process Metrics are the biggest group - They contain an equal number of Efficiency and Effectiveness Metrics.

50. Agenda • The Roles of Business Process Analysis • Business Process Modeling • Diagrams to Model Business Processes • Business Analysis and Modeling Approaches • Methodology Selection • Business Process Performance KPIs • A framework for determining what metrics • Estimating and demonstrating ROI on BPM • How to Estimate the ROI on BPM • References Business Process Analysis and Modeling