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THE BPM KIT IS A COMPILATION OF ARTICLES ON THE EVOLUTION, USAGE, AND BENEFITS OF BUSINESS PROCESS MANAGEMENT.

What is BPM?
The term BPM has evolved over time: from software tools that automate, integrate, and optimize processes to suite technology that delivers integrated process, knowledge, and analytics functionality to a management system that requires process-centric skills, activities, and tools.

Does BPM create value?

In the short term, BPM helps companies improve profitability by decreasing costs and increasing revenues. In the long run, BPM helps create competitive advantage by improving organizational agility.

Is BPM enough?

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Many companies implementing BPM-based solutions are beginning to realize the limitations of traditional pure-play BPM products. Luckily, even as first-generation BPM reaches its limits, the BPM suite has emerged to address the shortcomings of pure-play BPM software.

Do you need BPM?

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Want greater visibility into your processes? Unable to identify whats causing bottlenecks? Find it difficult to pinpoint the assignment hand-offs in your processes? If your organization has any of these issues, BPM suites provide the logical solution.

Are perfect processes possible?

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While the benefits of Six Sigma are clear, positive results are not always guaranteed. Successful implementation requires an investment in technology, and emerging BPM solutions are enabling Six Sigma organizations to instill a culture of constant process improvement.

Visit BPMbasics.com.
Understand the basics. Explore the concept. Discover the benefits.

BASICS

What is BPM?
In music, its how beats are measured; in business, its how organizations are transformed

BPM.

Originally defined as beats per minute, the acronym first became popular

among DJs during the disco era when beatmixing was common. While the original connotation will continue to live on in dance music, BPM is now making a big comeback in the technology era as business process management and quickly gaining a strong following among IT and business users.
Why the rising popularity? More and more organizational leaders are realizing that business process management creates significant competitive advantage. In fact, in a recent CIO Insight study, BPM was ranked #1 by IT executives as the technology that will make the most significant contribution to carrying out their companys business strategy.1 Ask these executives to explain BPM, however, and the answers will vary across the board. Thats because over the past few years, the term has evolved: from software to suite to system. At its core, it remains the means for aligning IT and business, whether the ultimate objective is cutting costs, improving service, supporting growth, complying with regulations, or achieving a combination of the above.

The software
In its simplest form, BPM is software that automates, executes, and monitors business processes from beginning to end by connecting people to people, applications to applications, and people to applications. By doing this, BPM technology goes beyond its predecessors: workflow management and enterprise application integration (EAI). While traditional workflow management connected people by automating inefficient manual processes within a single application, it was limited because it couldnt connect applications without extensive custom coding. EAI technology, on the other hand, connected these applications by routing information between them so that data was automatically synchronized throughout the organization. However, because it couldnt automate long-running or interactive processes (which required someone to take action or make decisions), it failed to connect people. Connecting people and applications, BPM software brought together and transcended these two technologies. At a minimum, the typical pure-play BPM application includes the following components:

A process is simply a set of activities and transactions that an organization conducts on a regular basis in order to achieve its objectives. It can be simple (i.e. order fulfillment) or complex (i.e. new product development), short-running (i.e. employee on-boarding) or longrunning (i.e. regulatory compliance), function-specific (i.e. proposal management) or industry-specific (i.e. energy procurement). It can exist within a single department (i.e. billing), run throughout the entire enterprise (i.e. strategic sourcing), or extend across the whole value chain (i.e. supply chain management).

Source: 2005 Future of IT Survey conducted by Ziff Davis Media and Equation Research, LLC.

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What is BPM?
Process Designer allows a trained user to analyze and model a process step by step, as well as assign logic to it

Process Engine executes the actual process flow, assigning manual activities to people and automated activities to applications as the process unfolds

Rules Engine manages the flow of information and activities within a process according to the formulas and rules assigned to it

Process Analytics provide continual feedback on the process itself so that improvements can be made in the future

This set of tools allows an organization to actively manage its processes from beginning to end, improving them along the way. But despite this extensive

BPM Software

functionality, pure-play BPM software has actually turned out to be somewhat limited and tactical in nature. Although it works well for simple, transactional processes within departments, BPM doesnt provide the functionality or infrastructure needed to support complex, collaborative processes that extend throughout the enterprise as well as across the value chain.

The suite
To address the shortcomings of pure-play software, the BPM suite has emerged to deliver a variety of process, knowledge, and analytics technologies in a unified package, enabling organizations to quickly and efficiently build composite process applications. A more comprehensive approach to BPM, it provides all of the Process Management capabilities of BPM software discussed above, plus the following functionality: Document Management provides a system for storing and securing electronic documents, images, and other files

A composite process application is an enterprise application that is developed and deployed using a BPM suite platform to solve a particular business problem, such as complying with regulatory standards or managing a companys assets. By integrating existing applications, pulling relevant data, and connecting appropriate people, it overcomes the limitations of traditional enterprise applications, offering more flexibility and scalability as well as better collaboration and integration.

Collaborative Tools remove intra- and interdepartmental communication barriers through discussion forums, dynamic workspaces, and message boards

Business Analytics enable managers to identify business issues, trends, and opportunities with reports and dashboards and react accordingly

Portal gives users a productive, flexible workspace for managing tasks, content, forms, documents, notifications, and reminders

Applications built with BPM suites are also user-friendly (minimizing user training while maximizing user acceptance), personalized (delivering secure, unique content to each user), scalable (expanding to meet the needs of the department, the

BPM Suite

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What is BPM ?
enterprise, or the value chain), and web-based (making them accessible to users anytime, anyplace). By leveraging information, they allow users to make better business decisions and achieve better business outcomes. These applications dont just manage business processes; they solve business problems.

The system
Gartner recently broadened the definition of BPM, recasting it as a management practice that provides for governance of a businesss process environment toward the goal of improving agility and operational performance.2 This more holistic view offers a structured approach for optimizing processes and takes into account the software tools discussed above as well as an organizations methods, policies, metrics, and management practices. According to Gartner, BPM is about becoming a process-managed organization, which requires the following disciplines (in addition to Information Technology): Expertise & Experience focus on process-centric skills, training, education, certification, research, business acumen, and intellectual capital

Organizational Disciplines adoption of new or improved culture, structure, roles, responsibilities, policies, rules, incentives, and procedures

Management & Control Activities improvement of processes by defining, modeling, simulating, deploying, executing, monitoring, analyzing, and optimizing

Partnerships & Services reliance on partners to provide services such as consulting, implementation, and business process outsourcing

Because this approach to BPM allows organizations to abstract business process from technology infrastructure, it goes far beyond automating business processes (software) or solving business problems (suite) it enables business to respond to changing consumer, market, and regulatory demands faster than competitors, thereby creating competitive advantage.

BPM System

Gartner, Michael James Melenovsky, Jim Sinur, Janelle B. Hill, David W. McCoy, Business Process Management: Preparing for the Process-Managed Organization, June 2005.

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What is BPM?
Since its resurgence in the 1990s, the term BPM has evolved: from software tools that automate, integrate, and optimize processes to suite technology that delivers integrated process, knowledge, and analytics functionality to a management system that requires process-centric skills, activities, and tools. Today, BPM is being widely used across all industries a 2003 Delphi Group study found that more than 75% of companies surveyed are currently using, implementing, or evaluating BPM technology.3 By managing processes, integrating applications, and leveraging information, BPM is helping create value and competitive advantage within organizations.

Delphi Group, Nathaniel Palmer, BPM 2003 Marketing Milestone Report, 2003.

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Does BPM create value?

By decreasing costs, increasing revenue, and improving agility, BPM suites provide a solid return on investment

The blacksmith trade is in decline. Cartoon popularity is on the rise. Acme Corporation may be in trouble.
A large, established firm that specializes in the production and sale of manufacturing tools, Acme has experienced a steady decline in revenue and profits over the past five years. The reason? Acmes market is evolving, and the organization is unable to respond to this change.

Acmes most popular product the anvil is being used less and less in metal-working and more and more as a standard prop for animated cartoon gags. To make matters worse, as Acmes market has changed, so has demand for its products. While its old customer base preferred traditional anvils with tails and holes (to accommodate metalworking tools), its new customers want anvils that come in differing shapes, sizes, and colors and have a horn at one end and flat face at the other (to combat pesky roadrunners). Finally, new government regulations now require that all prop anvils have a certain amount of mass (so that they are very hard to push around), but not much weight (so that a character can jump out of a plane with an anvil instead of a parachute and not notice until he is airborne, of course!). To remain profitable, Acme must learn to shift its customer focus, redesign its product base, and comply with government regulations. Unfortunately, its processes are slow, manual, and paper-based. Its systems are obsolete and stovepiped. And its employees are scattered in factories and offices around the globe. In order to respond to these changing market, customer, and regulatory demands, Acmes CIO decides to invest in business process management (BPM) technology. Using a BPM suite, Acme will be able to quickly and efficiently build composite process applications1 in order to address current (and future) business challenges. As a result, Acme will be better equipped to adapt to business environment changes. To understand how BPM will create value for Acme, lets start by discussing the features, functionality, and benefits of BPM suites (as they ultimately translate into value!).

Features
Leading BPM suites deliver a variety of process, knowledge, and analytics capabilities in a unified package (see Table 1). Process management technology will allow Acme to streamline its operations by automating, executing, and monitoring business processes from beginning to end. Knowledge management and collaborative tools will enable it to leverage information by managing its documents and content and facilitating employee interaction in collaborative, knowledge-based communities. Integrated analytics will help increase visibility by delivering extensive reports on key business operations and process execution to managers.

A composite process application is an enterprise application that is developed and deployed using a BPM suite platform to solve a particular business problem, such as complying with regulatory standards or managing a companys assets. By integrating existing applications, pulling relevant data, and connecting appropriate people, it overcomes the limitations of traditional enterprise applications, offering more flexibility and scalability as well as better collaboration and integration.

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Does BPM create value?

TABLE 1

Process Designer Process Process Engine Rules Engine Knowledge Management Knowledge Document Management Collaborative Tools Portal Process Analytics Business Analytics

Allows a trained user to analyze and model a business process, step by step, as well as assign logic to it Executes the actual process flow, assigning manual activities to people and automated activities to applications as the process unfolds Manages the flow of information and activities within a process according to the formulas and rules assigned to it Allows users to share tasks, content, documents, and notifications through knowledge communities Provides a system for storing and securing electronic documents, images, and other files Remove intra- and inter-departmental communication barriers through discussion forums, dynamic workspaces, and message boards Gives users a productive workspace for managing tasks, content, forms, documents, notifications, and reminders Provide continual feedback on the process itself so that the improvements can be made in the future Enable managers to identify business issues, trends, and opportunities with reports and dashboards and react accordingly

Using this comprehensive set of features, Acme can quickly and efficiently build composite process applications in order to solve its business problems. Thus, Acmes marketing department can use BPM technology to track strategic campaigns (including event planning, public relations, and campaign management), R&D can use it to manage the entire product redesign process (from idea inception to prototyping to product delivery), and corporate can use it to adapt to changing regulatory standards (achieving compliance while solidifying corporate governance). Because theyre built using BPM suites, these applications will be:

Analytics

User-friendly minimizing user training while maximizing user acceptance; Personalized delivering secure, unique content to each user; Scalable expanding to meet the needs of the department, the enterprise, or the value chain; and Web-based making them accessible to users anytime, anyplace.

Functionality
By integrating existing applications, pulling relevant data, and connecting appropriate people, composite process applications built with BPM suites tend to overcome the limitations of traditional enterprise systems, ultimately enabling Acme to: Streamline operations. A 100% HTML-based process modeler will let trained business users at Acme automate, execute, and monitor business processes from beginning to end, eliminating redundancy and optimizing resources along the way. Integrate systems. By connecting existing applications (like CRM and ERP), these composite applications will route and automatically synchronize information throughout the organization, freeing Acme employees from having to manually change data in numerous applications while allowing Acme managers to call upon the most relevant content when making decisions. Share knowledge. Using a portal as a central access point, Acme employees will be able to control and reuse vital corporate information, such as domain expertise, intellectual capital, and best practices. Users can identify

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subject matter experts, share information in real time, and build public or private knowledge communities when necessary. Gain visibility. Through secure, web-based reporting dashboards, Acme managers will be able to monitor business performance and analytical information in order to gain awareness of corporate operations, competitive activities, and market dynamics, allowing them to not only identify business issues but also anticipate and correct problems before they materialize. Obtain feedback. With an extensive set of process performance reports, process designers can conduct detailed analysis of successes and failures of specific processes to gain insight into future workflow design, thereby enabling Acme to achieve a continuous, dynamic cycle of enterprise process improvement. Create accountability. Via the portal, Acme managers can delegate work, track deadlines, automate escalations, and monitor performance while enforcing personnel accountability for results through reports and audit trails. Drive policy. Knowledge-centric tools help capture and manage enterprise data and best practices. A sophisticated rules engine will ensure that policies, practices, and regulatory environments are clearly defined, centralized, automated, and tracked so Acme can avoid the risks and costs associated with non-compliance or deviation from best practices. Facilitate change. A sophisticated rules engine will allow Acme to adapt its processes dynamically as its business environment continues to change while the ability to make in-flight process adjustments will permit managers to modify processes and reallocate resources in real time.

Benefits
Having developed and deployed composite process applications using a BPM suite, Acme is better equipped to respond to business change. In the short term, BPM will help Acme improve profitability by decreasing costs and increasing revenues. In the long run, BPM will help create competitive advantage for Acme by improving its organizational agility. Decreased Costs At first glance, BPM seems to deliver the same major benefit as traditional enterprise application technology like ERP: increased workforce productivity (as a result of streamlining business operations and automating repetitive tasks). BPM suites, however, go far beyond creating efficiency. Knowledge sharing capabilities and a collaborative portal help improve decision-making. Process performance reports help optimize workflows. Notifications and triggers help reduce errors and eliminate waste. And an intelligent rules engine helps enforce best practices. Thus, BPM suites not only help organizations increase workforce productivity, but they also improve product quality and reduce corporate risk. The result? Within months of deployment, these improvements will deliver substantial cost savings to Acme (see Figure 1B). Increased Revenue In addition to decreasing costs, BPM suites also help an organization raise its overall revenues by increasing product output, accelerating cycle time, and improving customer service. Straight-through processing helps accelerate delivery times. Dashboards help prioritize business activities by their influence on sales. Process performance reports help identify bottlenecks and reduce hand-offs. Centralized enterprise knowledge helps speed decision-making. And closed-loop customer feedback processes help track performance. Over time, these enhancements result in a faster time-to-market and an improved company image, which will ultimately increase Acmes sales and revenues (see Figure 1C).

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Does BPM create value?

(A)

(B) Figure 1

(C)

Improved Agility While decreased costs and increased revenue are the two most immediate and tangible benefits of business process management, the real value BPM delivers is intangible. In the long run, composite process applications built with BPM suites help organizations become more agile (see Figure 2). Intelligent rules ensure that processes adapt automatically to changes in the business environment. Collaborative tools bridge department boundaries while improving and speeding decision-making. And in-flight process modifications accelerate response to change by dynamically rerouting processes in real time. With these capabilities, Acme will be better equipped to switch gears and respond to its changing business environment faster than its competitors!

Figure 2

Thus, BPM will not only improve profitability, but it will actually help create competitive advantage for Acme. Faced with decreasing revenues and increasing demands, Acme can use BPM suite technology to rapidly develop and deploy composite process applications in order to solve the business problems it is currently facing. Within a few months of implementing BPM technology, Acme will have reallocated its people to address emerging markets, redesigned its product to fulfill customers needs, and refined its processes to meet government regulations. Having become a process-managed organization, Acme will be better equipped to respond to changing market, customer, and regulatory demands. As a result, Acme wont just be better positioned to address its current business challenges; it will better prepared to take advantage of future business opportunities.

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Is BPM enough?
BPM suites emerge to address the shortcomings of pure-play BPM

E veryone knows the value of business

process management (BPM). The benefits are clear better business performance, operational control, and business agility. Used effectively, BPM creates competitive advantage. Thats why a recent Delphi Group study found that more than 75% of companies surveyed are using, implementing, or evaluating BPM technology today.
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centric tools to capture and manage enterprise information. Weak integration capabilities. Lackluster security and identity management. Primitive support for business analytics. Second, pure-play BPM products were designed for deployment with massive customization to solve very tactical, specialized business problems. Their interface designs assume that all users will undergo expensive training. The failure of most BPM products to deliver acceptable levels of usability prevents these solutions from cost effectively extending to support multiple business activities across multiple departments. Finally, pure-play BPM products struggle with architectural limitations. Most were designed a decade ago to support small-scale, departmental applications. In every case, they are partially tied to last-generation, client-server architectures. Many pure-play vendors only support the Microsoft platform, which is cost-effective for a standalone departmental application but extremely limiting in an enterprise environment where a diverse IT infrastructure is generally the rule.

But as companies implement BPM-based solutions, many are beginning to realize the limitations of traditional pure-play BPM products. These limitations become painfully obvious when companies look to leverage the value of BPM by extending it across the enterprise.

The limitations of BPM pure-plays

BPM products are typically used by organizations to build process-driven business applications. These applications are intended to bridge the information gap between individuals and enterprise systems, automating business activities across departmental boundaries and managing the flow of information according to process rules. The harsh reality, however, is that building successful BPM-based applications is often a struggle. The reasons? First, traditional pure-play BPM products do not provide a fullyfeatured framework for business solution development. No collaborative tools to speed business processes. No knowledge1

The value of BPM suites

Luckily, even as first-generation BPM reaches its limits, a new class of BPM technology has emerged the BPM suite. Poised to take advantage of the full promise of process management, BPM suites deliver a comprehensive platform

Delphi Group, Nathaniel Palmer, BPM 2003 Marketing Milestone Report, 2003.

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of functionality. Unlike older pure-play BPM products, suites have been designed and architected from the ground up to speed development of powerful processdriven, context-sensitive business applications. In addition to powerful process management capabilities, BPM suites include a range of other integrated capabilities, such as document management, collaborative tools, knowledge communities, business analytics, personalization, and business activity monitoring. BPM suites leverage flexible portal frameworks that accelerate application development and use emerging standards like JSR 168, UDDI, and WSRP to speed integration. Modular and services-oriented, BPM suite architectures are designed to facilitate rapid application development. The new generation of BPM suites is designed for enterprise scalability. These suites feature elegant, intuitive user interfaces. They make business process tools accessible to every enterprise user. The best include 100% HTML-based process designers that cost 10-20 times less in terms of deployment, training, and support versus older client-server tools. And BPM suites are platform independent, further reducing deployment and integration costs. The result? Process-driven business applications that do more than just automate and are easier to deploy. Context-sensitive applications that

make people more effective by directly delivering relevant information in the right context as processes unfold, so workers dont have to waste time tracking down information and figuring out what to do. User-friendly applications that deliver collaborative tools to accelerate team-driven processes. Intelligent applications that enhance the ability of people and teams to make better decisions as they work, resulting not only in improved process performance but also in better business outcomes. In short, BPM suites allow organizations to start tactically but think strategically. Today, BPM may be needed to support just a few critical processes. Tomorrow, process management will be the glue that brings employees and enterprise systems together to function as a coordinated whole. Tech savvy companies should plan accordingly.

through acquisition or partnership. They can easily become integration and customization nightmares. Look out for vendors that claim they offer a modern suite but are tied to an old BPM engine and client-server architecture developed ten or fifteen years ago. Additionally, platform vendors and EAI vendors who are recent market entrants should be viewed with skepticism. Their products typically reflect a failure to understand the unique challenges of orchestrating complex human-to-human and humanto-system business processes. When considering BPM vendors, look for companies with established size (at least 150 employees and $20 million in revenue), consistent growth, a profitable business model (with no risky external dependency on venture capital), a functionally complete product suite, and long-term commitment and competency in BPM. Set the bar high unless your requirements are short term and tactical, an excellent way to narrow the field of potential vendors is to focus on those that are capable of offering a complete BPM suite.
Narrowing the Field
When it comes to selecting BPM vendors look for companies with: Established size Consistent growth Profitable business model Functionally complete product suite Long-term commitment and competency in BPM

The search for the right BPM vendor

With more than fifty vendors competing today, analysts predict that the BPM market is poised for consolidation. Many struggling pure-play vendors will not survive the shake-up. At the same time, many market entrants will lack the business focus to deliver a functionally complete product offering and may even abandon the market if business conditions change. Even among the BPM suite vendors, not all are created equal. Beware of BPM suites that have been cobbled together

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Do you need BPM? o

If your organization has any of the following issues, BPM suites provide the logical solution

1 2 3 4 5 6 7
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Do your processes involve various disparate, stove-piped IT systems in

BPM suites enable the orchestration of both human and system tasks in a single process. This enables an organization to leverage existing legacy applications in a service-oriented architecture (SOA). For example, the World Banks BPM-powered procurement solution integrates third-party applications like SAP and Lotus Notes into the sourcing process to delegate tasks to requisition, appointment, and evaluation teams.

addition to human tasks?

Do your managers complain about the lack of visibility into their processes,

BPM suites provide intuitive reporting dashboards that combine business activity monitoring (BAM) capabilities, user-defined Key Performance Indicators (KPIs), and real-time and historical process data to deliver secure, quantitative feedback to process owners.

initiatives, and projects? Is there a lack of quantitative feedback?

Do you have trouble identifying who or what is impeding your processes?

BPM suites combine process model simulation, test-scenario tools, and robust analytics capabilities to monitor processes throughout their entire life cycle, from design to completion. For example, the U.S. Marine Corps implemented Appian Enterprise and significantly reduced bottlenecks in their procurement processes, resulting in real cost-savings of $9 million over 12 months.

Do you have process inefficiencies due to a lack of accountability and clear

BPM suites provide secure task management capabilities and process monitoring tools that allow authorized users to identify who is responsible for what, how long assignments have remained unfinished, and what process tasks lie ahead.

ownership of responsibilities?

After an organizational goal is reached, do you have trouble looking back and

BPM suites automatically generate extensive process audit trails that capture detailed information about what happened when. This audit trail is essential for managing compliance-related processes, such as Sarbanes-Oxley and Six Sigma.

figuring out exactly who did what?

Are you worried about employees inconsistently completing assign-

BPM suites encapsulate best practices and enforce management policies using a built-in rules engine, ensuring that standard assignments are handled the same way, every time. BPM suites also offer forms management tools, which help standardize the interface through which employees complete assignments.

ments throughout the organization?

Do you fear that your processes are not adapting to changing business

BPM suites enable in-flight process modifications so that managers can add new work, reroute documents, and adapt underlying business rules to update processes in real-time. Using in-flight process modification tools to enhance process agility is one of the core goals of BPM suites and is quickly becoming a source of sustainable competitive advantage for users.

requirements because this is the way they have always been done?

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Do your processes cross departmental and organizational boundaries,

BPM suites allow users to clearly map out inter-departmental or inter-organizational relationships, using both rules-based and group-based management tools. This facilitates smoother workflow interaction and increases end-user accountability across the extended enterprise.

making assignment hand-offs and ownership responsibilities less clear?

Do you lack clear, measurable metrics for gauging employee

BPM suites provide real-time analytics capabilities for assessing task completion time, optionally aggregated by employee, team, or department. These metrics enable managers to compare and group employee performance across processes, time periods, and departments.

performance?

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Do your processes frequently involve documents and forms as

BPM suites ship with document and forms management capabilities so that modeling processes involving the creation, modification, and approval of an organizations enterprise content is seamless and secure.

well as other structured and unstructured content?

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of service.

Are perfect processes possible?

Six Sigma organizations are using IT innovations to instill a culture of process improvement

Sigma. The 18th letter of the Greek alphabet has come a long way since classical
times. Apply it to business processes today and it becomes a metric, a methodology,

a management system. In statistical terms, it measures how well a process performs and represents the number of defects likely to occur per one million opportunities (see Table 1).1
Table 1 Sigma
One Two Three Four Five Six

To understand the concept of sigma, consider the case of Cable Co., a cable service provider that has received quite a few angry calls from customers lately because technicians have been failing to arrive on time for servicerelated calls. In an effort to increase satisfaction (and retention), Cable Co. decides to launch a new customer initiative. The On Time or Its Free program promises customers that if the technician does not arrive within the scheduled three-hour window, Cable Co. will give them a free month

Opportunities
1,000,000 1,000,000 1,000,000 1,000,000 1,000,000 1,000,000

Defects (#)
690,000 308,537 66,807 6,210 233 3.4

Defects (%)
69% 30.85370% 6.68070% 0.62100% 0.02330% 0.00034%

Reliability (%)
31% 69.1463% 93.3193% 99.3790% 99.976% 99.9997%

At a three sigma level of performance, Cable Co.s technicians would arrive on time approximately 93% of the time, costing as much as $3.5MM per year just in lost revenue. At a four sigma level of performance, Cable Co.s technicians would arrive on time more than 99% of the time. While this sounds good in theory, consider this: it may still cost the company as much as $310,500 per year in lost revenue.

Enter Six Sigma

Motorola, which was dealing with its own quality issues during the 1980s, pioneered Six Sigma (6), a quality improvement program designed to reduce process variations so that there are no more than 3.4 defects per million opportunities or activities. Since then, Six Sigma has transcended statistics and evolved into a management system that ensures customer requirements are being met on a consistent basis. The model most often used by the Six

What does this program mean in terms of sigma? Lets assume Cable Cos average cable package costs $50 per month. If the companys processes are under control,2 and it performs approximately one million service calls a year, it could have the following consequences: At a two sigma level of performance, Cable Co.s technicians would arrive on time for about 69% of calls, costing the company as much as $15.5MM per year in lost revenue alone.

As is evident by this example, a sigma can make a big difference. Even what may seem like a low percentage of failures can actually have a major impact on the bottom line.

Sigma team to solve business problems is the DMAIC methodology: Define, Measure, Analyze, Improve, Control (see Table 2 for further explanation).3 By using this structured, project-based

1 2 3

A defect is defined as anything that fails to meet customer requirements. A process that is in statistical control will exhibit normal, random variation within natural limits. The other model used by Six Sigma organizations is the DMADV methodology (also referred to as DFSS): Define, Measure, Analyze, Design, Verify. DMAIC is used to make incremental improvements to existing processes while DMADV comes into play when incremental improvements are not enough or new processes or products need to be developed.

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approach, companies are able to identify the real cause of a problem and apply the most appropriate solutions. In the case of Cable Co., for example, a number of possible factors could be causing technicians to arrive late at customers homes: too many calls scheduled during a three-hour window, too much time being spent on the road due to rush-hour traffic, or too much distance between call destinations. Based on the information uncovered during the process, Cable Co. can react accordingly, ultimately improving quality while reducing costs. Having achieved a Six Sigma level of performance, Cable Co. can rest assured that its technicians will arrive outside the specified timeframe no more than 3.4 times out of a million, costing the company about $170 per year in lost revenue as a result of the On Time or Its Free program, but increasing customer satisfaction, retention, and subscriptions.

Formula for Success

Of course, achieving 3.4 defects per one million opportunities is no small feat, and Six Sigma demands more than just thinking in terms of quality. It requires changing the way an organization works. Listed below are the key success factors for Six Sigma implementation.

1 2 3

Commitment from management

Six Sigma will fail without a strong commitment from top management. Organizations must therefore motivate leaders to stay

involved, even after the initiative has been launched, by creating accountability for results and aligning incentives to performance. This requires regularly conducting reviews, monitoring results, and tracking performance. Cable Co., for example, can ensure regional VP support for Six Sigma initiatives by clearly defining key measures (i.e. number of late technician arrivals in each region), holding each VP accountable for her regions performance, and ultimately basing her bonus on Six Sigma involvement and success.

Selection and training of the workforce

In addition to senior management sponsorship, successful Six Sigma implementation requires widespread company involvement.

Project leaders, often referred to as Black Belts or Green Belts, are chosen to execute Six Sigma processes, which are overseen by Master Black Belts. The Six Sigma tool kit includes a variety of methods, techniques, and frameworks to help teams understand, measure, and refine processes. For the initiative to be successful, organizations must clearly define roles and responsibilities and train practitioners in everything from teamwork and communication to statistical tools and quantitative methods.

Focus on the customer

Because Six Sigma is ultimately about meeting customer needs, often called CTQs (critical to quality), it should begin and end

with the customer. Most organizations are generally reactive and spend a great deal of their time solving customers problems. Six Sigma, however, helps companies become proactive so they can anticipate problems and prevent them from occurring. This requires understanding customer requirements and expectations and consistently meeting or exceeding them. In the Cable Co. example, an influx of angry calls by customers pinpointed a key customer requirement: on-time arrival for service appointments. Further research may uncover a number of other important requirements: product performance (i.e. reception quality), reliability (i.e. the number of times customers lose reception during storms), customer service (i.e. level of satisfaction after a call), accuracy (i.e. how often customers received an error on their bill), etc. Six Sigma provides the framework for understanding these requirements and developing processes for meeting them on a consistent basis, ultimately increasing customer satisfaction and retention.

Investment in technology
Often referred to as management by fact, Six Sigma is essentially a data-driven approach. It utilizes information and analysis to

develop and implement consistent, repeatable business processes which deliver value to customers. While Six Sigma provides the framework for process improvement, business process management (BPM) suites provide the platform for achieving it. Through process automation and simulation, knowledge and document management, and collaborative and analytical tools, BPM suites deliver the full range of functionality needed to achieve Six Sigma (see Table 2). To ensure successful implementation, more and more organizations are realizing the need to combine Six Sigma methodology with BPM technology.

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Table 2

Six Sigma DMAIC Methodology Step

Define

BPM Suite Technology Tools

Tasks
The project team is identified; a team charter and project plan is developed; customer requirements (CTQs) are defined; a high-level process is mapped.

Knowledge Management. Allows for rapid creation of a knowledge community so Six Sigma team members can share tasks, content, documents, and notifications. Personalization. Delivers a personalized, task-oriented workspace to each member of the team. Collaborative Tools. Remove communication barriers between team members and within the organization through discussion forums, dynamic workspaces, and message boards. Process Modeler. Provides an intuitive 100% HTML-based drag and drop interface so team members can quickly create, share, edit, and reuse processes.

Measure

Metrics are defined; a data collection plan is developed; the measurement system is validated; data is collected; baseline defect measures are calculated.

Integration. Enables incorporation of enterprise data, documents, web content, reports, and identities into the process. Document Management. Allows the team to easily store, secure, search, update, and track all Six Sigma project-related documentation. Process Portal. Gives team members a productive workspace to manage tasks, content, forms, documents, notifications, and reminders.

Analyze

Performance objectives are defined; value and non-value added process steps are identified; sources of variation are determined; root cause(s) of defects are pinpointed

Analytics. Help the team identify business issues and inefficiencies and take corrective action using performance metrics, status channels, exception notifications, and process audit trails. Dashboards. Feature secure, web-based reports for measuring process performance.

Improve

Potential solutions are developed and tested; the final solution is refined and implemented.

Simulation. Helps team members identify where potential bottlenecks and errors might occur with what if scenario modeling. Process Engine. Supports high-volume transactional and long-running production processes with speed and reliability and allows system administrators to manage configuration and ongoing operational function.

Control

An ongoing monitoring and response plan is developed, documented, and implemented; improvements are institutionalized; project responsibilities are transferred to the process owner.

Rules Engine. Ensures that policies, practices, and regulatory environments are clearly defined, centralized, automated, and tracked. Business Activity Monitoring (BAM). Enables monitoring of all transactional behavior associated with the workflow. Process Controller. Allows managers to achieve continuous process improvement through round-trip engineering.

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The Big Payoff

So does striving for near perfection produce a major return on investment? Thousands of companies around the world think so. Since its inception in the 1980s, Six Sigma has been adopted by companies such as General Electric, Johnson & Johnson, American Express, Ford, and Bank of America. By reducing cycle time, eliminating defects, and improving customer satisfaction, Six But while the benefits of Six Sigma are clear, positive results are not always guaranteed. Successful implementation requires not only leadership commitment, workforce training, and customer focus but also an investment in technology. Emerging business process Sigma has been proven to lower costs and increase profits.4 management technologies are enabling Six Sigma organizations to instill a culture of process improvement by providing a framework for modeling and executing business processes, facilitating business interactions between people, data, and enterprise systems, and giving management visibility and control over processes through reports and dashboards.

GE, for example, estimated that Six Sigma saved the company more than $2B in three years.

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BASICS
Visit BPMbasics.com. Understand the basics. Explore the concept. Discover the benefits.

BPM Basics is the first online resource center designed to help IT and business users understand the evolution, usage, and benefits of business process management. Launched by Appian Corporation, the leading provider of BPM software suites, the site features three main sections:

BPM Content: explores what BPM is, how BPM creates value, and where BPM is being used. BPM Tools: gives users access to a BPM glossary, various BPM tests, and the BPM expert. BPM Resources: features links to BPM articles, reports, events, classes, and organizations.

For more information, visit www.bpmbasics.com or email info@bpmbasics.com.

BPM Basics is brought to you by Appian Corporation, the leading provider of BPM software suites. Appian is the first BPM company to combine process, knowledge, and analytics capabilities in a comprehensive suite. Extending the value of existing systems, Appians award-winning software aligns business strategy and execution, delivering greater operational control over strategic business processes. Appians customers include Fortune 500 companies, government agencies, and non-governmental organizations. To learn more, visit www.appian.com, email info@appian.com, or call 703.442.8844.

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