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Value-Driven Digital Transformation- Business Process Management, The Key Enabler

Dr. Mathias Kirchmer, Managing Director and Co-CEO, BPM-D; Affiliated Faculty, University of Pennsylvania Peter Franz, Managing Director and Co-CEO, BPM-D
Dr. Mathias Kirchmer, Managing Director and Co-CEO, BPM-D; Affiliated Faculty, University of Pennsylvania Peter Franz, Managing Director and Co-CEO, BPM-D

Dr. Mathias Kirchmer, Managing Director and Co-CEO, BPM-D; Affiliated Faculty, University of Pennsylvania Peter Franz, Managing Director and Co-CEO, BPM-D

1 Value-Driven Digital Transformation: Why you need it - Now

Global research shows: over 75% of organizations have started their digital transformation journey [1]. They expect to increase their performance drastically. However, the study also shows that most businesses are struggling meeting high expectations through their digitalization initiatives.

Digital Transformation is about the systematic integration of physical products, people and processes through the internet of things (IoT) and related information technology (IT) [2][3]. This definition is visualized in figure 1.

Figure 1:Illustrating the Definition of Digital Transformation

Many organizations struggle to transform their processes appropriately [4]: according to an analyst study, only 1% of organizations have their processes sufficiently under control to realize the full business potential of their digital transformation. If a company sells compressors and connects to them through the internet, nothing really changes. Only if it establishes processes that leverage this connection, for example for preventive maintenance or the realization of a new business model to sell compressed air as a service, the digitalization provides its full value.

Value-driven Digital Transformation (VDT) enables significant performance improvements by leveraging the power of process management. VDT identifies the processes that matter most for an organization. Then it transforms them holistically applying the right digitalization approach in an end-to-end process context. Finally, VDT sustains achieved results by governing processes appropriately.

2 Identifying the Transformation Focus – High Impact Low Maturity Processes

Companies only compete through 15-20% of their processes [5]. The other 80%+ are commodity processes that are necessary, but their performance can be at industry average. For high impact processes, elaborate transformation and innovation approaches are justified and often required. Related projects have a higher priority. High impact processes that have, compared to other organizations, a lower maturity level, are the best improvement targets. However, many businesses don’t know what their high impact processes are.

High impact processes can be identified systematically through an assessment of the impact of each process on the business strategy, represented through appropriate value-drivers [6]. Value-drivers describe what an organization needs to get the right to make its goals happen. Since the business environment and the strategy of an organization changes more and more frequently, it is necessary to adjust a process impact assessment accordingly. Figure 2 shows a process impact assessment matrix linking processes to value-drivers [7][8]. Adjusting the weights of value-drivers or adding or removing drivers allow for the comparison of different scenarios reflecting different business situations and strategies. Transformation projects are defined and prioritized based on the processes they target.

3 Transform wisely – Consider Expected Value and Process Context

The scope of the process transformation is identified by examining the process from its customer point of view. These process-customers can be external clients but also suppliers, employees or other stakeholders. A formalized customer journey map identifies touch points with the organization and helps to understand current and desired customer experience and with that the overall dimension of the transformation. The improvement in customer experience also gives hints regarding the best suited digital technologies: Artificial Intelligence (AI), face-recognition or analytics approaches help, for example, to achieve a higher personalization of the interaction with clients or robotic process automation (RPA) enables higher efficiency, e.g. to pay for valid insurance claims faster.

A detailed analysis of the underlying business processes identifies specific improvement potentials, delivering the baseline for the business case of an initiative. To accelerate this analysis process modelling and mining tools play an increasingly important role [9] [11].

The to-be design reflects the capabilities of digital technologies as well as their alignment with people involved in the process. Process reference models reflecting the business impact of digital technologies can be used as a starting point and powerful accelerator [11]. The digital to-be process model is basis for the technology implementation as well as people change management. It guides detailed selection and configuration of the digital tools.

4 Sustain Transformation Results – The Journey goes on

A digital transformation journey never ends. To sustain transformation results and keep the related business processes on track, a process governance approach is required. This defines how the performance of a process and the success of a digital transformation is measured and managed after projects have concluded [5][11]. It ensures the value-realization. Process-owners, for example, have to initiate new transformation initiatives or correction activities when appropriate. Process stewards provide the arms and legs for the owners to enable the execution of activities. Process sponsors and governance bodies set the direction and resolve conflicts.

Business process management is established as the over arching management discipline [12]organizing process governance and integrating it with the organization. Thus BPM-Discipline becomes the value-switch for the digital transformation journey.

References

[1] Kirchmer, M., Franz, P., Lotterer, A., Antonucci, Y., Laengle, S.: The Value-Switch for Digitalisation Initiatives: Business Process Management. BPM-D Whitepaper,Philadelphia – London, 2016.

[2] McDonald:.Digital Strategy does not equal IT Strategy. Harvard Business Review, November 19, 2012

[3] Scheer, A.-W.: Industry 4.0: From Vision to Implementation. Whitepaper Number 5, August-Wilhelm Scheer Institute for Digital Products and Processes, Scheer GMBH, Saarbruecken, Germany, 2015.

[4] Cantara, M:.Start up your Business Process Competency Center. In: Documentation of The Gartner Business Process Management Summit, National Harbor, 2015.

[5] Franz, P., Kirchmer, M.: Value-Driven Business Process Management: The Value-Switch for Lasting Competitive Advantage. 1st ed., McGraw-Hill, New York 2012.

[6] Kirchmer, M.:The Process of Process Management – Mastering the New Normal in a Digital World. In: Proceedings of the Fifth International Symposium on Business Modelling and Software Design, Milano, 2015.

[7] Kirchmer, M., Franz, P., Gusain, R.: Digitalization of the Process of Process management – The BPM-D Application. In: Proceedings of the Seventh International Symposium on Business Modelling and Software Design, Barcelona, 03-05 July 2017.

[8] Kirchmer, M., Franz, P., Gusain, R.: From Strategy to Process Improvement Portfolios and Value Realization:

A Digital Approach to the Discipline of Business Process Management. In: Proceedings of the Eighth International Symposium on Business Modelling and Software Design, Vienna, 02-04 July 2018.

[9] Scheer, A.-W.: Unternehmung 4.0 – Vom disruptiven Geschaeftsmodell zur Automatisierung der Geschaeftsprozesse. Saarbruecken 2018.

[10] Kirchmer, M.: Robotic Process Automation (RPA) – Pragmatic Solution or Dangerous Illusion. 10/17, http://insights. btoes.com/risks-robotic-process-automation-pragmatic-solution-or-dangerous-illusion.

[11] Kirchmer, M.: High Performance through Business Process Management –Strategy Execution in a Digital World. Springer, 3rdedition, New York, Berlin, e.a. 2017.

[12] Kirchmer, M., Franz, P.: The Process of Process Management – Strategy Execution in a Digital World. BPM-D Publications, Philadelphia, London, July 2015.

[13] Abolhassan, F. (ed.): The drivers of Digital Transformation – Why there is no way around the cloud. Springer, New York, Berlin, e.a. 2016.

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