A system is a complex set of components working as a cohesive unit towards a unified set of results. A system is understood in terms of what it produces, whether it is a be wins for a sports team, energy for a nuclear reactor, movement for a car, or products/services for a business. Complex systems are decomposed and componentized into subsystems, with the inputs/outputs of each subsystem, aligned like building blocks into the main system. In their landmark 1995 book, “Improving Performance: How to Manage the White Space in the Organization Chart”, Geary Rummler and Alan Brache bring a groundbreaking view of a business as a value creation processing system. The premise is, that by decomposing the understanding business as a system, it enables us to analyze, improve, and modify it as any other system. Rummler asserted that at a macro level, every business system is the same. It transforms inputs in the form of raw materials and produces valued results (outputs).
From the outside in, the business system is comprised of:
- A Market and Shareholders for which it serves
- Value it produces in terms of products/services and profits
- Inputs in terms of raw materials (both vendor products/services)
- Resources in terms of human resources, equipment, material, capital, etc…
- Environment in terms of regulatory and competitive forces acting upon it
Value Creation
To really understand the business as a system, first we must identify what a business produces. At the core of every business system, is the value it produces for its market – its value proposition. Value to a consumer is anything someone desires, and which they are willing to purchase at a price. Value is much more than a product or service, but it is how that product/service will benefit the consumer. Just like an insurance company produces “security”, a drug company produces “comfort and healing”, and coffee shop produces “great coffee and atmosphere”. Essentially, any organizational system which strives to create value for a market, whether a charity organization, or a government agency, it is nothing but a business system.
The purpose of the business system is to design, align, and manage the business processing system in a way, that it most efficiently and effectively delivers its value proposition to its customers and shareholders. When we approach the business as a processing system, we work backwards from the goal, with all processes aligned to this end in mind.
Process – How work gets done
Inside the business system we find a complex processing system comprised of process, performers, and enabling technologies that form the value creation delivery system.Processes are aligned across the business system in a way that maximizes contributions to support the value proposition. Each process produces a set of business results in terms of outputs. These outputs are inputs of other processes. Understanding how these processes WORK TOGETHER across the business system to support the value proposition of the company, is critical to starting a successful BPM project in order to identify context, scope, and desired results for each process. This is a starting point for identifying good performance metrics.
In addition to this processing paradigm, Rummler and Brache also identify a Resource Management dimension. The resource dimension could be considered as a collection of resource/cost centers across the organization. This is traditionally the predominant view of the company and is represented in organizational charts. This could be thought of as the vertical dimension, while the process view is the horizontal (end-to-end) dimension. Both dimensions need to be managed and aligned. Just as we have department heads to manage budgets, inventory, equipment, and collections of skilled workers, process owners also need to be identified to manage end-to-end, cross-functional processes. This is where a BPM CoE is often established to coordinate change management and process improvement initiatives on an ongoing basis, between processes and across resource dimensions. This is essentially, the group that manages “the whitespace” between processes and resources.
Business Process Architecture
In order for systems to be analyzed, improved, managed, and communicated they must be exposed – they must be visible. A Business Process Architecture (BPA) is a hierarchical representation of the business system, that provides valuable context for analysis and strategic planning. The BPA consists of two dimensions: 1) the process dimension, and 2) the resource dimension.
The process dimension defines the network of interrelated processes that ultimately delivers value to its customers through the transformation of “raw materials” into valued finished products/services. At its center, are the core processes, responsible for directly contributing to the production of products/services. Core processes are supported by support processes, and managed through management processes. The process dimension is organized and managed through a hierarchical process framework, from high level “capabilities” (the “what”) to lower level process models, which details how a capability will be met (task and role), and ultimately develop into executable process models, detailing the specific work interfaces from which the process will be done. It is at this level where system specific documentation is managed.
The resource dimension is organized and managed in a more traditional organizational hierarchy. Resources are allocated into management units (e.g., cost centers, departments, resource centers, etc…) and decomposed into jobs and roles which then assigned into the lower level process models. This intersection, between the process and resource dimension, is where the BPA can produce powerful insight for Human Resource planning and serve as a platform for worker engagement.
A well-managed BPA becomes a living representation of the business as a processing system.
BPA offers a framework to strategically assess, plan, and implement changes in
- Products/Services Offered
- How Products/Services are Offered
- Compliance in changing Regulatory Environment
BPA provides a framework for managing BPM projects
- Prioritization and scoping
- Model driven requirements management
- Process models are captured within a layered architecture versus isolated models
- Process requirements are managed within the BPA versus isolated documents
- Process changes are approved, managed, and captured in the BPA providing control and auditing of all changes to the business system
- Business Rules, Organizational Structures/Role, and Data Structures are all captured as part of the BPA
BPA provides a powerful communication platform engaging the workforce
- Provides a map of the business system for context
- Links workers job/role into processes to which they contribute
- Provides medium to manage training and SOP documentation
- Serves as a medium to capture and analyze feedback from the workforce
We’re sure you have your thoughts about the business being a processing system. Share your thoughts in the comments section below. Follow Princeton Blue on Facebook, LinkedIn, Twitter & Google+ to get focused BPM-specific updates.
