Business Process Modeling: A Model Student

The goal is to get all the benefits from automation-improved efficiency, reduced costs, greater speed-without becoming inflexible. But how? For some, business process modeling does the trick.

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Automating business processes is essential to keeping a competitive edge, but can make your company inflexible.

In his 2001 book, Jack: Straight from the Gut, former General Electric Co. chief executive Jack Welch wrote, "The most valuable opportunities for establishing competitive differentiation are in how a product or service is created, sold, delivered and supported." Few would disagree. Every effective business has processes that monitor the "how" of creating and getting products and services to market, and the efficiency of those processes can mean success or failure.

The need to manage business processes has been around ever since people began trading bushels of maize for buffalo hides. But it wasnt until the rise of information technologies, and especially enterprise-wide systems such as ERP, CRM and supply-chain management, that the effort to automate these processes began in earnest. And yet, while automation can improve processes, too often the software involved provides little flexibility. "Its a lot like pouring cement," says Eric Austvold, an analyst at AMR Research. "At the time you pour it, its fluid and you can make changes to it. But once it sets, its like concrete, handcuffing companies to specific ways of doing business."

The goal is to reap the benefits of stream-lined IT automation, while remaining open to change. To remain competitive, ones processes must not only be efficient, they must also be capable of dynamic reconfiguration when new events occur—such as the decision to outsource a business function, buy a smaller company or launch a new e-business initiative.

This is where business process modeling comes in. If you havent been inundated with pitches from vendors yet, modeling is a method for diagramming your processes and their related resources, such as people and equipment. These diagrams of end-to-end sequences can be used to record and evaluate how youre doing business today, and to rethink and envision how it might be done tomorrow.

Business process modeling allows companies to build these diagrams in software, letting CIOs, consultants, business analysts and others change the processes around, or automate them, and then simulate their performance. The objective: to design processes that make the most of existing resources, cut the fat from your current functions and speed time to market, but that remain malleable, too.

Take a simple set of steps such as processing an invoice. Person A is supposed to approve the invoice and forward it to Person B, who processes payment and sends notification to Person C. But if a company decides to streamline this process—having A "okay" an automatic payment, notifying C—such a modification could be accomplished by simply tweaking the model, and the application would cut B from the chain. In addition to modeling the new sequence, some software can actually define each step in the new process and present it to the next person in the chain.

At Principal Residential Mortgage Inc., CIO John Ievalts uses a modeling tool from IBM that has allowed the company to reduce, for example, a 14-step loan process to just two steps. "Before, it was paper files," says Ievalts. "To get one function done, a folder had to be routed through any number of people." Ievalts and his team were able to model a new system in which forms and documents would be scanned and distributed digitally, allowing multiple employees to work simultaneously on the same file. By simulating the effect of moving mortgage applications through the new workflow, Ievalts quickly determined how much volume the system could handle before bottlenecks arose. The result? The company cut its labor- and paper-intensive post-closing mortgage process time by an average 53 percent, achieved a 34 percent increase in efficiency and realized an estimated annual savings of $4 million. Ievalts is continuing to model other parts of the mortgage process.

Ask your line managers:

  • How do you document your processes?

Ask your finance department:

  • How much could we save by speeding up workflows?

Tell your executive team:

  • Making our processes more flexible can help us keep our competitive edge.

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Next Page: The strategy of using good modeling and the pitfalls of specialized software.