Flash back: I wrote this white paper about 9 years ago when I was working in a start-up that was building a business application management software. The company was later purchased by webMethods which became SoftwareAG. I recently met with an old colleague who tells me the software is still in use. Outdated acronyms aside, it is still a good explanation of Lean Six Sigma and an interesting look back in my business life.
Today’s best competitive weapon is time. A loan company demonstrated that rapid turnaround of auto dealer loan applications, doubled win rate while reducing costs by 20%. Dealer sales representatives almost always referred the first approval to their customers. A mutual fund company found that the best way to grow their customer base was by ensuring their broker representatives were paid commission checks on time. These brokers referred more business to the company that paid them quickly and accurately.
What do these two examples have in common? Both started with measuring the performance of their business processes in real time. Whether your goals are to produce top line growth or bottom line revenue savings, smart business executives are starting with real-time measurement. Called Business Process Optimization (BPO) this approach uses a new class of application called Business Activity Monitoring (BAM) to gain the visibility and analysis to measure, understand and control the variables that affect your business performance. The result is sustainable improved competitiveness. BPO delivers value by:
- Showing in real time how consistently your process is performing, and whether it needs adjustments.
- Identifying where to take action to ensure you meet your customer’s requirements and providing an ongoing, accurate direction for improvement.
- Quickly evaluating results from improvement and creating historical data for on-going improvements.
An insurance company has promised payment terms on commissions to independent brokers within 14 days after they submit a policy. Through sampling, they find that their average payment time is 10 days. While this seems good on the surface, further analysis found that, due largely to exceptions and delays, a full 25% of the commissions were paid after the 14 day terms. In extreme cases, took more than 35 days for payment to be mailed. A graph makes the case understandable.
In order to fully meet the terms of payment, the company focused on understanding and removing the causes of variation. After applying improvements from a Business Process
Thanks to the BPM course students at University of Colorado for an engaging class discussion this week. It is good to know that treating business processes as strategic assets and building agility into them will be ideas driving our future business leaders. A link to my class materials is below. Let me know how else I can help.
The ability to take work on the go is becoming increasingly popular for big and small businesses. And for good reason. Employees are demanding it while at the same time businesses are seeing benefit. With mobile enterprise solutions, workers can speed up daily operations and boost workplace productivity, regardless of their locations. Mobile applications help business promote efficiency to employees around the world. Some recent reports indicate the trend is hear to stay and growing:
- VentureBeat reported that mobile app usage increased 35 percent between 2011 and 2012 and that they plan to invest more in the years to come.
- Morgan Stanley survey of CIOs showed that 72 percent of company leaders purchased tablets for their employees in 2012 – a 19 percent increase from the previous year. Additionally, the percentage of survey respondents who said they would buy tablets for their work teams in the next 12 months increased from 64 to 75 percent between 2011 and 2012.
- Gartner predicts that by 2015, mobile application development projects targeting smartphones and tablets will outnumber native PC projects by a 4-to-1 ratio.
- Strategy Analytics’ Global Mobile Enterprise Business Application Revenue Forecast 2011-2017 showed that revenue associated with mobile workers using enterprise business apps on smartphones and tablets is expected to nearly double between 2012 and 2017. The number of mobile employees using business apps and the number of programs available will also grow rapidly.
“The consumer mobile experience has taught mobile workers to expect, even demand, access to information and applications from anywhere using mobile devices,” Strategy Analytics spokesperson Mark Levitt said. “Mobile workers have moved beyond just mobile email and messaging to include other collaboration apps such as conferencing, productivity apps such as content authoring and business process apps.”
Mobile solutions are changing the way business operates. The trends clearly indicate it is more important than ever to add a mobile component to most business processes.
Not to be outdone by Forrester’s Recent wave of Dynamic Case Management, last week Gartner released their own next-generation evaluation for Intelligent Business Process Management Suite vendors:
According to the new Magic Quadrant report,
Business managers and knowledge workers today … are being asked to make faster and better decisions and to “do more with less” in an ever-changing business context, but cannot do so without improved visibility into their operations and environments. To meet this challenge, leading organizations are seeking to make their business operations more intelligent by integrating analytics into their processes and the applications that enable them. Gartner has identified … a new usage scenario for a business process management suite (BPMS) — a scenario that Gartner calls “intelligent business operations” (IBO; see “The Trend Toward Intelligent Business Operations“). To meet the needs for IBO, a BPMS must be enhanced with new capabilities. Accordingly, Gartner has evolved its definition of the business process management (BPM) market to reflect the IBO usage scenario and to introduce the next generation of BPMSs, which we identify as intelligent business process management suites (iBPMSs).
This is part of a growing trend from multiple fronts to extend BPM technologies beyond their traditional uses. Integrating support for social, analytics, complex event processing, and mobile has allowed these tools to deliver a new level of value creation potential. Whether the trend is labeled “Dynamic,” “Adaptive,” “Intelligent,” or something else, organizations that have captured the majority of the benefits from traditional BPM technologies will see additional value from deploying this newer breed of integrated technologies into their business processes.
Gartner has identified 10 core capabilities of an iBPMS:
- A process orchestration engine to drive the progression of work in structured and
unstructured processes or cases
- A model-driven composition environment for designing processes and their supporting
activities and process artifacts
- Content interaction management to support the progression of work, especially cases, based
on changes in the content itself (such as documents, images and audio)
- Human interaction management to enable people to naturally interact with the processes they are involved in
- Connectivity to link processes to the resources they control, such as people, systems, data,
event streams, goals and key performance indicators (KPIs)
- Active analytics (sometimes called continuous intelligence) for monitoring activity progress, and analyzing activities and changes in and around processes
- On-demand analytics to provide decision support or decision automation using predictive
analytics or optimization technology
- Business rule management to guide and implement process agility and ensure compliance
- Management and administration to monitor and adjust the technical aspects of the iBPMS
- A process component registry/repository for process component leverage and reuse
Or, for the more visually minded, iBPMS features are described in their November report, BPM Suites Evolve Into Intelligent BPM Suites with this figure:
You can find Gartner’s full report at Magic Quadrant for Intelligent Business Process Management Suites. (Login may be required to access reports linked in this post.)
I have not been been blogging much lately, but I am still working hard. This summer has brought an exciting work project helping a BPMS vendor to implement their software to improve internal processes. I love to see their enthusiasm and commitment for the benefits they can generate by implementing their own product.
It has also brought excitement at play. In the Trestle Gravity downhill biking series at Winter Park, I raced to 5 podium finishes including 4 first places to capture the overall series champion for my category. Lots of fun and good comrade. And, some good amount of commitment, focus and fine tuning of skills.
I’ve always believed that success requires dedication. Passion makes the dedication fun. So, I’ve been working hard on both these passions and having fun doing them. Success can only be judged by the results achieved.
What are your passions worth dedication?
I’ve been thinking a lot recently about all the stuff that happens outside of traditional enterprise applications. Enterprise software (ERP, CRM, etc) has become good at solving most of the structured work needs in organizations. But, many business problems today require work outside of enterprise applications. These ‘white space’ activities involve research, analysis , collaboration, applied knowledge, planning, resource allocation, approvals and many other human activities. Often they get managed today using email. This results in a large portion of the work done in organizations being:
- Time Intensive
Alternatively, they are supported with custom development that makes changes and upgrades difficult (often in addition the above issues.)
This need cries out for something that is easy to use like email, but addresses its deficiencies. Adaptive Case Management (ACM) holds out the hope of solving this need, but I’m not sure anyone has yet met the vision and been able to deliver on the promise. I’m not even sure there is agreement on the title (Advanced, Dynamic, or Adaptive) let alone what the promise is. Read more…
This post continues a series of blog posts on Measures by exploring Cycle Time.
Cycle Time is one of my favorite measures. It is at the heart of Lean and forms a basis for improvement that is typically at the center of good customer experience and process agility. In my opinion, any process not tracking this measure cannot be meaningfully improved.
Cycle Time is defined as the total duration for a process to complete. This includes all time from a customer’s perspective to transform inputs to outputs including wait, process, transport, inspect, and other value add and non-value add time.
Cycle Time (CT) is easily measured for any process. You could measure it directly by starting a clock when a work item enters a process and timing until the process is completely finished with an end product. Of course, you’d have to allow for different exception paths that may take longer than the happy path on some repetitions of the process. The neat thing however, is that on average, Cycle Time can be calculated using two other readily available metrics. Cycle time is equal to the work in process (WIP = work that has started the process, but is not yet finished) divided by the capacity (Exits = output of the process over a period of time.) That is:
CT = WIP / Exits.
Consider a bank line. There are 10 people in line in front of you for the teller. You notice that one person is finishing on average every 2 minutes. How long will you wait in line – what is your bank line cycle time? WIP = 10 people in line. Exits = 1 person/2 minutes = 0.5 person /minute.
CT = WIP/Exits = 10 person / (0.5 person/ minutes) = 20 minutes
Want cycle time to improve? Reduce the WIP. If 5 people leave the bank line, you’ll wait half as long. Same process, half the CT. Or, improve the process capacity. With a second teller working, the Exits increase to 1 person/minute and again you wait half the time. Best yet, make the single teller twice as productive. Again, Exits double and CT is cut in half.
These same concepts apply easily to processes improvement. Usually, we can control the WIP in a process. Pull or Kanban systems are set up to do just this. Once the established WIP level is reached, no new inventory enters the process until another item exits. Generally, work should stay in its most unprocessed form until there is demand and capacity for it. Why is this important? When WIP is reduced all kinds of good things happen:
- Reduced Investment. WIP represents an investment that has not yet paid off. Reduce WIP, and you reduce the capital needed to run a process. Or, for service processes, think of reducing the investment in unbillable work “laying” around the office.
- Less Waiting. WIP that is waiting to be worked on is potentially wasted. Specifications and demand can change and WIP can get damaged and decay causing rework, excess and waste. Even for items that don’t need preserved, it is helpful to think of WIP has rotting any time it is in a queue.
- Less Storage. If WIP is not in the process, it does not need to be stored on the floor, in warehouses, or in file cabinets and desks.
- Easier Logistics. Unless you’re a long haul railroad, it is easier to schedule and move smaller loads.
- More Focus. If work gets stuck in the process, it is much easier to find the bottle neck or constraint and take corrective actions.
In general, WIP should be reduced to just enough to cover the bottle neck activity. Consider our 3 step loan approval process of: Capture, Approve, Fund. If Approve can process only 10 loans a day while Capture and Fund can do 20 per day, marketing should generate demand for only 10 loans per day to meet a 1 day cycle time. Any more, and the cycle time will increase to over 1 day. Want to be able to handle more loans each day at the same CT – you’ll need to improve capacity (Exits) at the bottleneck. To process 20 loans at 1 day cycle time, you’ll need to double Approval processors or make them twice as efficient (normally using a Lean technique to focus on value add or Six Sigma technique to reduce errors and variability.) The Capture and Fund processors already have that capacity.
Looking at improvement from another perspective, as cycle times are reduced, capacity (Exits) increases proportionally. That is Exits = WIP/CT. A fifty percent reduction in cycle time at the same load means capacity has doubled.
Measure and focus on Cycle Time improvement to maintain customer satisfaction, reduce costs and improve capacity.