ENGG8107: Business Process Management

– Lecture 2 Business Process Architecture

Assoc Prof Vik Kortian
Course structure
Process
identification Week 2

Process Weeks 3-4

discovery

Process
Weeks 10-11 monitoring and
Gover- Process Weeks 5-6
Strategy nance analysis
controlling

Culture

Weeks 8-9 Process Process Weeks 7

implementation redesign

2
Chapter 2: Process Identification

Contents
1. The Context of Process Identification
2. Definition of the Process Architecture
1. Process Categories
2. Relationships Between Processes
3. Reuse of Reference Models
4. Process Landscape Model
5. The Example of SAP’s Process Architecture
3. Process Selection
1. Selection Criteria
2. Process Performance Measures
3. Process Portfolio
4. Recap

SEITE 3
 Process Identification in the BPM Lifecycle

Management Processes

Process Define Vision Develop Strategy Implement

Strategy
Manage Risk

Examples for BPM lifecycle and process mining identification Core Processes

Procure Procure Market Deliver

Manage
Customer
Materials Products Products Products
Service

35h B 30h Support Processes

15h Process architecture Manage Personnel

Manage
Information Manage Assets

A E
D
5m 3m 5m 10m 30m 2h 10m

15m
C
1.5h 10min
Conformance and Process As-is process
performance discovery model
insights

A B C D E

Process Process
monitoring analysis

Executable Insights on
process weaknesses and
model their impact

Process Process
implementation To-be process redesign
model
Chapter Overview

▪ Process identification refers to systematically defining business processes of

organization and establishing criteria to select processes for improvement.
▪ Output is process architecture, which represents processes and interrelations.
▪ Process architecture serves as framework for defining priorities and scope of projects.
▪ First, we discuss the context of process identification.
▪ We present a method based on process architecture definition and process selection.
▪ Definition is concerned with listing initial set of processes and their architecture.
▪ Selection considers criteria for defining priorities of processes using a portfolio.

SLIDE 5
Definition of Business Strategy

Business strategy is an organizational perspective on

setting and meeting business goals. (Mintzberg)

SLIDE 6
Balanced Scorecard (Kaplan & Norton)

Learning and
Financial Customer Internal
Growth
Perspective Perspective Perspective
Perspective
Product/Service Operations Management
Attributes Processes
Improve Cost
Culture
Structure Price Supply Distribution
Production Risk Mgmt.
Quality

Increase Asset Availability Customer Management

Utilization Processes
Selection Leadership
Selection Retention
Functionality Acquisition Growth
Long-Term
Shareholder
Value Innovation
Relationship Processes
Alignment
Service Opportunity Design
Expand Revenue Research Launch
Opportunities Partnership

Regulatory and Social

Processes
Enhance Image Teamwork
Customer Value Environment Employment
Brand Safety/Health Community

SLIDE 7
Enterprise Architecture according to TOGAF*

▪ Organizational perspective:
actors, roles, and organizational structure.
▪ Product perspective:
products and services along with their relationships.
▪ Business process perspective:
process architecture.
▪ Data perspective:
informational entities and their relationships.
▪ Application perspective:
different pieces of software with their dependencies.
▪ Technical infrastructure:
computer hardware and communication networks.

*TOGAF: The Open Group Architecture Framework- the most used framework for enterprise architecture today that
provides an approach for designing, planning, implementing, and governing an enterprise information technology
architecture
SLIDE 8
The Process Checklist

It may not be easy to decide on what to consider as a business process. A chunk of work
that is frequently repeated might not be a business process on its own. To prevent poor
scoping decisions, it is useful to consider the following process checklist:
▪ Is it a process at all? ▪ Is the process important enough to manage?
▪ It must be possible to identify main action, which is ▪ There is customer who is willing to pay for outcomes,
applied to a category of cases. ▪ Organization that carries out the process would be
▪ Name is of form verb + noun. willing to pay another party for taking over, or
▪ Can the process be controlled? ▪ Legal, mandatory framework compels an
▪ Repetitive series of events and activities to organization to execute it.
execute individually observable cases. ▪ Is the scope of the process not too big?
▪ Without a clear case notion, process management ▪ 1:1 relation between initial event and activities.
is not feasible. ▪ Is the scope of the process not too small?
▪ Also, without any sense of repetition, a group of ▪ Rule of thumb: there should be at least three
business activities may better qualify as a project different actors – excluding the customer – involved.
than as a business process.
▪ If there are no handoffs between multiple actors or
systems, there is little that can be improved using
BPM methods.

SLIDE 9
Process identification

What?
1. Identify an organization’s business processes
2. Prioritize their management based on certain criteria

Why?
1. Understand the organization
2. Maximize value of BPM projects
Process identification steps

1. Designation step
Process
Enumerate main processes
Architecture
Determine process scope

2. Prioritization step (aka Process selection)

Prioritize processes based on: Prioritized
Importance Process
Portfolio
Health
Feasibility

After Davenport (1993)

Process Enumeration

“Most businesses have just three core processes:

1. Sell stuff
2. Deliver stuff
3. Making sure you have stuff to sell and deliver”

Geary Rummler
Porter: Types of processes

Management
Processes

Customers / Stakeholders
Suppliers / Partners

Core Processes

Support Processes

After Michael Porter (1985)

Example: core, support and management processes
Wholesaler
Core processes
Sales (lead-to-quote, quote-to-order, order-to-cash)
Direct procurement (supplies replenishment)
…

Support processes
Indirect procurement (parts replenishment, operational resources replenishment…)
HR (policies update, recruitment, induction, probation…)
…

Management processes
Suppliers management (suppliers planning, suppliers acquisition…)
Logistics management (logistics planning, logistics controlling…)
…
Relations between core, support, mgt processes

Management processes Sign

Contracts
provide direction, rules and
practices
Establish
Sourcing Plan
Evaluate
Vendors
Procedure Vendors
Process

Core processes
Fill Order Process
generate value as they
are directly linked to Receive Approve Deliver
Fill Order
external customers Order Order Order

Reorder
Supplies
Support processes provide
Stock Process Order
resources to be used by other Supplies Supplies
processes
Receive
Supplies
Relationships between Processes

Sequence

Manage
Procure Procure Market Deliver
Customer
Materials Products Products Products
Service

Decomposition Specialization

Procure Handle Job

Products Application

Handle Job Handle Job

Process Assemble
Application Application
Parts Parts
(Austria) (Germany)

SLIDE 16
Example: process architecture
Wholesaler

Strategic
Management

Logistics Suppliers
Management Management
Warehouse Demand
Management Management
Process
Management processes group

Direct
Sales Distribution
procurement

Marketing Service
Core processes
Indirect
Finance IT HR
procurement
Support processes
Example: process architecture
Insurance company

Strategic
Management
Corporate Market Investor
Development Development Relations
Management processes

Risk Assessment & Management

Marketing & Sales

Underwriting Policy Claims
Management Servicing Management
Payments Collection and Disbursement
Assets Management
Core processes
Finance/ Legal/
Reinsurance IT HR
Treasury Audit
Support processes
Process Architecture Example

Television New Zealand

Exercise: identify process types
These groups of processes are typically performed at a university. Categorize each
process group as core, support or management
Sport H Indirect
services R procurement

Strategic Teaching
Management award courses

IP
Marketing
Management

Course Additional
Management services mgt

Language Admission IT
training

Market Teaching professional

management courses
Solution: identify process types
How to define Process Landscape Model

1. Clarify terminology:
▪ Define key terms.
▪ Use organizational glossary.
▪ Use reference models.
▪ Ensure that stakeholders have a consistent understanding of process landscape model.
2. Identify end-to-end processes:
▪ Those processes interface with customers and suppliers.
▪ Goods and services that organization provides are good starting point.
▪ Properties help to distinguish processes, including: Product type, Service type, Channel, Customer type.
3. For each end-to-end process, identify its sequential processes:
▪ Identify the internal, intermediate outcomes of end-to-end process.
▪ Perspectives help set boundaries: Product lifecycle, Customer relationship, Supply chain, Transaction
stages, Change of business objects, Separation.
4. For each business process, identify its major management and support processes:
▪ What is required to execute the previously identified processes.
▪ Typical support processes are management of personnel, financials, information, and materials.
▪ However, these can be core processes if they are integral part of business model.
▪ Management processes are usually generic.
SLIDE 22
How to define Process Landscape Model

5. Decompose and specialize business processes:

▪ Processes of process landscape should be further subdivided into abstract process on Level 2.
▪ Further subdivision until processes can be managed autonomously by single process owner.
▪ Considerations when this subdivision should stop: Manageability and Impact.
6. Compile process profile:
▪ Each of the identified processes should be described using process profile.
▪ Process profile supports definition of boundaries, vision performance indicators, resources, etc.
7. Check completeness and consistency:
▪ Reference models can be used to check whether all major processes are included.
▪ Reference models can help to check consistency of terminology.
▪ Check whether all processes can be associated with functional units of organization chart and vice versa.

SLIDE 23
Process scoping

Processes are interdependent → insights into interrelations required

Specialization: general – special product/service
Horizontal: upstream – downstream processes and their value chains
Vertical: main processes – sub-processes

Process architecture
 Value chain modeling
Chain of processes an organization performs to deliver value to customers and stakeholders
More generally, a mechanism to group high-level business processes according to an order
relation (can be applied to core, support and management processes)

business
process
Procure-to-service

order
relation
Guidelines to identify horizontal boundaries
in value chains
1. Change of key business object in the process
2. Change of granularity of main business object
3. Change in frequency/time
4. Change in intermediate outcome/resolution/objective
Example: value chain
Wholesaler
Core processes
Building up a value chain (for core processes)
Think around three main steps:
IMAGINE IT (DESIGN NEW
Example: Producer PRODUCT/SERVICE)
BUILD IT (SOURCE, ASSEMBLE,
DELIVER PRODUCT/SERVICE)
SELL IT (MARKET, SELL, SERVICE
PRODUCT/SERVICE)

Stocked
products:

Specializations
MTO
products:

ETO
products:
Example: value chains for service provider
IT service provider

Design Market Sales Deliver Service

Systems Integration

Outsourcing

Network Services

Enterprise Server Technology

Example: value chain of non-core processes
Support processes

HR:

Accounting:

Management processes

Suppliers
management:

Risk
management:
Example: process architecture & value chains
Wholesaler

Strategic
Management

Warehouse Logistics
Management Management
Suppliers Demand
Management Management
Management processes
Chevron: Direct Box:
Sales Distribution
collapsed procurement
groups
Procure-to-Service
value chain processes/
Marketing Service
Core processes value chains

Indirect
Finance IT HR
procurement
Support processes
Alternative: process architecture – groups
Consultancy Firm
Manage Firm
1.1 1.2 1.3 1.4 1.5
Management Plan the Govern the (Re)design Develop Methods Change the
processes Business Business Processes & Standards Business

Expanded
Relate to Clients
Core 2.1 2.2 2.3 2.12 process
Optimize Develop Raise Awareness Evaluate Client
processes Stakeholder
Relationships
Service Offerings of Services Solution Delivery group

Optimize Portfolio Deliver Solutions

2.4 2.5 2.6 2.7 2.8
Plan Delivery of 2.13 Deliver Provide
Gain Initiative Deliver Business
Service to Service Adjust Portfolio Infrastructure Professional
Commitment System Solutions
Corp. Solutions Services

Optimize Solutions
2.9
Operate 2.10 2.11
Infrastructure & Retire Solutions Support Users
Business Systems

Support Firm
3.1 3.2 3.4 3.6
Support 3.3 3.5
Provide Expert Provide HR Acquire Goods & Provide Working
Provide IT Tools Obtain Financial
processes Advice & Capabilities Services Facilities
Services
Knowledge
 Typical artifacts for vertical scoping

Value chains
Chains of processes. Stay at a high level. Rule of thumb: 3-7 processes
Procure-to-service, Risk management

(Root/Main) Processes
Build up value chains and affect each other. They are abstract
Lead-to-quote, Quote-to-order, Order-to-cash

Subprocesses
Typical focus of Process enumeration
Build up processes. They are detailed, involve multiple activities and can be layered on different levels of
abstraction (i.e. sub-subprocesses)
Order shipment, invoicing

Process tasks
Build up processes and sub-processes. They are atomic and performed by human beings, IT systems or
equipment
Approve invoice
Process architecture: hierarchical view

Level 1
Process
Landscape

Process hierarchy
Level 2
Main
Processes
(e.g. BPMN)

Level 3+
Subprocesses, Tasks
(e.g. BPMN)
How many levels in the process architecture?

35
Example: process hierarchy
Insurance company

Level 1
Strategic
Management
Corporate Market Investor
Development Development Relations
Management processes

Risk Assessment & Management

Marketing & Sales

Underwriting Policy Claims
Management Servicing Management
Payments Collection and Disbursement
Assets Management
Core processes
Finance/ Legal/
Reinsurance IT HR
Treasury Audit
Support processes
Example: process hierarchy
Insurance company
Level 2

Strategic Corporate Marketing Investor

Management development development relations
Process
group
Define Define offering Plan
Design & manage
business concept & and customer investor
corporate policies
long-term vision value proposition relations

Develop
Define pricing
Build Process
Manage
business investor subgroup
knowledge strategy
strategy relations

Manage Manage Manage

Define and manage
strategic change & investor
channel strategy
initiatives improvement relations

Manage Communicate
partners with stakeholders

Manage
investments &
divestments

Management processes
Example: process hierarchy

Develop Define offering

business and customer Process
Insurance company strategy value proposition subgroup
Define
Develop overall
offering and
mission statement
positioning
Main
Evaluate strategic Develop value
options proposition process
Level 3
Select
Validate value
long-term business
proposition
strategy
Coordinate
Develop
functional and
new branding
operational strategies
Align
functional and
operational strategies
Create
organisational
design
Develop
organisational
goals
Formulate
business unit
strategies

Management processes
Example: process hierarchy
Insurance company

Level 4

Develop overall Main

mission statement
process
Define
current business

Formulate Subprocess
mission

Communicate
mission

Management processes
Designation via reference models
A reference model is used as a template to design the process architecture

Examples:
Information Technology Infrastructure Library (ITIL)
Supply Chain Operations Reference Model (SCOR)
Process Classification Framework (PCF)
Control Objectives for Information Technology (COBIT)
Value Reference Model (VRM)
Voluntary Interindustry Commerce Solutions (VICS)
eTOM Business Process Framework
Performance Framework
Example:
APQC Process Classification Framework (PCF)

Industry-neutral enterprise model

Open standard for benchmarking
Four levels
Categories
Process group
Process
Activity
APQC PCF Overview

Category
APQC Classification Framework

Group

Activity

Process
APQC Classification Framework

Available industry sectors:

• Aerospace & Defense
• Automotive
• Banking
• Broadcasting
• Consumer Electronics Just released
• Consumer Products
• Education
• Electric Utilities
• Petroleum Downstream
• Petroleum Upstream
• Pharmaceutical
• Retail
• Telecommunications
Prioritisation (aka Process Selection)
▪ Strategic Importance:
▪ Find out which processes have the greatest impact on the strategic goals.
▪ Consider profitability, uniqueness, or contribution to competitive advantages.
▪ Select those processes for process management that relate to strategy.
▪ Health:
▪ Determine which processes are in deepest trouble.
▪ These processes may profit the most from BPM initiatives.
▪ Feasibility:
▪ Determine how susceptible process is to BPM initiatives, incidentally or continuously.
▪ Culture and politics may be obstacles.
▪ BPM should focus on those processes where it is reasonable to achieve benefits

Prioritised process portfolio

Hammer, Champy (1993)
Example: prioritised process portfolio
Financial institution

Short-term action
High Feasibility
Loan Rating
Low
controlling Contract
preparation Medium
Loan
decision Loan market High
evaluation
Handling of
payments Loan
planning
Loan
application
Low
Poor Health Good
Possible Strategic fit?
Prioritisation
1. Importance
Which processes have greatest impact on the organization‘s strategic objectives?
2. Health (or Dysfunction)
Which processes are in deepest trouble?

3. Feasibility
Which processes are most susceptible to successful process management?

Prioritized process portfolio

Hammer, Champy (1993)

Example: prioritized process PICK chart
Financial institution

Short-term action
High Feasibility
Loan Rating
Low
controlling Contract
preparation Medium
Loan
decision Loan market High
evaluation
Handling of
payments Loan
planning
Loan
application
Low
Poor Health Good
Possible Strategic fit?
Process Performance Measures

Performance Measures Performance Objectives

▪ Time ▪ Formulate performance objectives of the
process at a high level, in the form of a
▪ Cost desirable state that the process should ideally
▪ Quality reach, e.g., customers should be served in
less than 30 minutes.
▪ Flexibility
▪ For each performance objective, identify the
relevant performance dimension(s) and
aggregation function(s), and from there,
define one or more performance measures
for the objective in question, e.g., the
percentage of customers served in less than
30 minutes. Let us call this measure ST(30).
▪ Define a more refined objective based on this
performance measure, such as
ST(30) >99%.

SLIDE 49
Example 2.3: Restaurant

▪ A restaurant has recently lost many customers due ▪ In this scenario, most relevant performance
to poor customer service. The management team dimension is serving time.
has decided to address this issue first of all by ▪ One objective is to completely avoid waiting times
focusing on the delivery of meals. above 30 min.
▪ The team gathered data by asking customers about ▪ Percentage of customers served in less than 30 min
how quickly they liked to receive their meals and should be close to 100%.
what they considered as an acceptable wait.
▪ Thus, the percentage of customers served in less
▪ The data suggested that half of the customers would than 30 minutes is relevant performance measure.
prefer their meals to be served in 15 min or less. All
customers agreed that a waiting time of 30 min or ▪ Threshold mentioned in scenario is 15 min.
more is unacceptable ▪ Choice between two performance measures:
average meal delivery time or percentage of
customers served in 15 min.

SLIDE 50
Balanced scorecards with cascading
process performance measures

SLIDE 51
Process Portfolio

High Selection Focus Feasibility

Loan
Rating
Contract
Controlling Prepatation Low
Loan
Decision
Loan Market
Medium
Importance
Evaluation

Handling
High
Payments

Loan
Loan Planning
Application
Low

Poor Health Good

SLIDE 52
Recap

▪ In this chapter, we discussed process identification.

▪ Process architecture definition aims at enumerating major processes of organization.
▪ Process architecture defines relationship between processes.
▪ Seven-step method for definition of process architecture including process landscape model.
▪ Process selection is concerned with prioritizing processes.
▪ Priorities upon importance of processes, health, and feasibility of improvements.
▪ Assessed by process owners or grounded on process performance measures and objectives.
▪ Most common performance dimensions are time, cost, quality, and flexibility.
▪ Process portfolios help in selection of processes for improvement.
▪ Selected processes become subject of remaining phases of BPM lifecycle.

SLIDE 53
Questions ?