Process-led Digital transformation: Value-driven, Data-based and Tool-enabled

Dr. Mathias Kirchmer, Managing Director and Co-CEO, BPM-D
Dr. Mathias Kirchmer, Managing Director and Co-CEO, <a href='https://bpm-d.com/business-process-management-discipline/' rel='nofollow' target='_blank' style='color:blue !important'>BPM-D</a>

Dr. Mathias Kirchmer, Managing Director and Co-CEO, BPM-D

Business Process Management enables the Value from Digital Transformation

Organizations expect to increase their performance drastically by leveraging digital technologies [0][1]. However, many of those businesses struggle to meet those expectations. They often don’t deliver the anticipated value [3].

A successful digital transformation is value-driven and guided through data-based decisions. It works towards a well-defined business case. The value of the transformation is delivered through new or enhanced business processes [2]. Digitalization only delivers its business benefits if you improve what you do or if it helps to do something new that provides additional value.  Appropriate process management helps to identify the right digitalization capabilities as well as to provide the required top-down vision and leadership. Both aspects form the foundation to deliver the business impact through digitalization [12]. To optimize the time-to-value, fast well-informed decisions are required. This is achieved through a data-based approach, delivering the required information about current and future process performance. The definition of digital transformation is illustrated in figure 1.

Figure 1: Business Processes deliver the Value of Digital Transformation

The right approach to digital transformation uses the discipline of process management as a value-switch. The transformation approach is digitalized itself, applying appropriate process management software, such as process modelling, simulation, and mining tools, as accelerators.

Focus - avoid “boiling the ocean”

Companies only compete through 15-20% of their processes [4]. Those processes are their high impact processes. The other 80%+ are commodity processes that are necessary, however, their performance can be at an industry average. High impact processes require in general more elaborate optimization and innovation approaches. Related projects have a higher priority. High impact processes that have a low maturity level are the best improvement targets. Digitalization initiatives in those areas deliver most value for an organization [5].

It is key to identify the high impact low maturity processes to prioritize transformation initiatives appropriately and define the transformation project portfolio. This is achieved through an assessment of the impact of each process on the business strategy, represented through appropriate value-drivers. The maturity of these high impact processes can be pragmatically determined through stakeholder surveys or by using appropriate analytics tools. The process impact assessment helps to focus and avoids “boiling the ocean”. Prioritization and process insight tools as well as project portfolio management applications support this exercise [6]. Figure 2 shows an example of a process impact assessment matrix.

Figure 2: Process Impact Assessment Matrix - Example

Improve data-based in an End-to-End Process Context

Once the processes in scope are identified, an efficient and pragmatic analysis is required – especially for high impact processes. This detects improvement opportunities related to the defined value drivers and serves as input for the identification or confirmation of the digital technologies to be used. The results of the analysis are the foundation for the development of the business case and simplify an effective people change management. To accelerate the analysis, process modelling and in some cases also mining tools have become an increasingly important accelerator [6][7]. Cloud-based process modelling systems allow rapid interactive remote discovery sessions and enable the necessary collaboration.

To avoid fixing one issue while creating new ones in other sub-processes, an integrated end-to-end process view is required. The positioning of processes in the context of the overall operating model helps to identify other process areas and the touch points to those. The operating model of the company helps to work in an end-to-end context while staying focused. An example for such an operating model with identified priority processes is shown in figure 3.

 ‚ÄčA successful digital transformation is value-driven and guided by data-based decisions. It works towards a well-defined business case 

The to-be design of the processes in scope reflects the capabilities of digital technologies and people involved in the process. It describes how the identified improvement opportunities can be realized and allows the finalization of the business case. This design sets the top-down vision and supports the appropriate change leadership. Using techniques like customer journey mapping adds an outside-in view on the process.

Technology-based process reference models reflecting the business impact of digital technologies can be used as a starting point and powerful accelerator for the design [8]. Their use can minimize prior analysis work, especially for commodity processes. They simplify an enterprise-wide rollout and standardization of processes. The use of process reference models for digital transformation is illustrated in figure 4. The use of a process repository tool accelerates the collaborative development and roll-out of to-be processes as well as the efficient use of reference models.

The to-be models are the basis for the technology implementation as well as people change management [8] [11]. They enable a systematic change leadership. 

Figure 4: Operating Model – Example of a global Technology Company

The development and realization of a realistic business case requires quantitative information about the as-is and to-be processes, such as cost, time and scalability information or improved customer experience. Appropriate process management tools help deliver this information fast and reliably. A process modelling and repository tool, for example, allows the simulation of the different processes. At an insurance company, for example, we could show that a to-be process for underwriting reduces over 80% of administrative work, almost half of the process cost and increases scalability by a factor 9.

Figure 4: Process Reference Models accelerate the Digital Transformation

Sustain the achieved Value and keep the Transformation Journey going

A digital transformation journey never ends. An appropriate process governance approach helps to sustain transformation results and keep the related business processes on track. This ensures the value-realization and necessary adjustment over time. Process-owners, for example, initiate new transformation initiatives or corrective actions 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.

Figure 5: Simple digital tool architecture supporting the Business Process Management Discipline

The work of process owners and the entire governance organization is supported through the to-be process models and with that a top-down vision, as well as process intelligence tools, especially process mining, which provide bottom-up information to control process performance and conformance with the design. Hence, the process owners know if the actual processes follow the design and deliver the expected value. They obtain the required information to set appropriate actions. Process governance goes through a digital transformation itself [9]. Figure 4 shows a simple digital tool architecture.

Business process management is established as the overarching management discipline [10][11] for the digital business transformation and the ongoing process governance. The BPM-Discipline is the value-switch for the transformation journey.

References

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

[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] Kirchmer, M.: Value-driven Digital Transformation: Performance through Process. In: IM+io, Best & Next Practices aus Digitalisierung | Management | Wissenschaft, Heft 2, Juni 2019.

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

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

[5] Kirchmer M., Franz, P.: Targeting Value in a Digital World. BPM-D Publications, Philadelphia, London, 2014.

[6] 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.

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

[8] Kirchmer, M., Franz, P.: Process Reference Models: Accelerator for Digital Transformation. In: Shishkov B. (eds) Business Modeling and Software Design. BMSD 2020. Lecture Notes in Business Information Processing, vol 391 (ISBN: 978-3-030-52305-3). Springer, Cham.

[9] Kirchmer, M.: Digital Transformation of Business Process Governance. In: Shishkov B. (eds) Business Modeling and Software Design. BMSD 2021. Lecture Notes in Business Information Processing, vol 422 (ISBN: 978-3-030-79975-5). Springer, Cham.

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

[11] Antonucci, Y., Fortune, A., Kirchmer, M.: An examination of associations between business process management capabilities and the benefits of digitalization: all capabilities are not equal. In: Business Process Management Journal, Vol. ahead-of-print No. ahead-of-print,  http://doi.org/10.1108/BPMJ-02-2020-0079, 2020.

[12] Westermann, G., Bonnet, D., McAfee, A.: Leading Digital – Turning Technology into Business Transformation. Hrward Business Review Press, Boston 2014.