Managing the processes of a company is somewhat like an athletic competition, except that the stakes are so much higher. In a game, if you write the rules that everyone must play by, you have a great deal of control over the outcome of things. In business, individual processes are the way things like production or order fulfillment or reverse logistics get done. If you manage these processes, to a great extent you can control the outcome of things, such as increased productivity, greater efficiencies and lower costs. In business process management, 'Control the process' could well be the watchword. "Those companies that easily adapt and change the rules of their playing field will be more successful," says Janelle Hill, vice president and research practice lead for BPM at Meta Group.

No doubt, many companies have been aware of the benefits of business process management, or BPM, for years now. They may even have migrated to BPM from business process reengineering initiatives 10 or more years old. But many in management are considering BPM for the first time, and the reasons are clear, according to analysts, software developers and systems integrators: Pressures from competitors, Wall Street and an unforgiving economy have mandated that expenses be shaved wherever possible.

But like early adopters, newbies to BPM are learning that process management is not a one-time effort that optimizes a company form top to bottom, or a simple implementation of a plug-and-play piece of software; it's a never-ending quest for improvement across company departments and divisions. And they see in some cases that all company processes need to be examined, though experts recommend that such analysis and "what-if" modeling be done one process at a time.

Moreover, it has to be realized that processes that were considered optimal years ago might have been superseded by events, especially if a company alters its business model, strategy or markets in some way.

So where do you start? Opinions vary on whether you need outside help in process scrutiny. This view holds that, who knows your business and its processes better than you do? But many feel the sophisticated nature of process analysis may be over the heads of many company managers, especially when it comes to assessing the technology and solutions that may bring the hoped-for improvements.

In any event, a good starting point is to define a process's lifecycle by recognizing where it begins and ends, whether it has multiple functions or touches several departments or companies. If it crosses several functional boundaries, the process usually crosses a lot of software boundaries as well.

Can you better manage a process by throwing labor at it? Probably not. Aside from the obvious undesirable of labor-added cost-so-called human capital is error-prone. The likelihood of "variability" in the process is increased. The goal is to employ a methodology and rigor that removes or at least lessens the deviation.

The evil in variability is in what Eric Austvold, research director of AMR Research, calls "margin leakage." The greater the variability in the process, the greater the opportunity to erode margins, he says. "When a customer places an order, your organization's ability to fulfill that order without any deviations from the original plan means you had an accurate understanding of what the customer truly wanted and the ability to manage the resources at your disposal to meet that customer's expectations. And the likelihood of your increasing that has a lot to do with removing variability in processes."

'Own' The Process
Business process management starts at home because it involves processes that are internal to a company, that it "owns." In the financial services industry, for instance, banks may look to improve their loan origination process. That service, depending on how well it is performed, may make that institution more attractive to potential customers than a competitor bank down the street, but the service itself is largely commoditized. In essence, the service, or "product" as banks call it, is the same from one institution to another: loans are loans. The way it is performed, internally, is the differentiator. The same is true in the insurance industry, which also has been an early adopter of BPM. Both industries are highly focused on the way they deliver customer service.

BPM doesn't necessarily end at home. Dell's direct-ship-to-customer process, for example, is anything but internal. It intimately involves trading partners, and customer anger falls directly on Dell if one of those partners fails to deliver a laptop within the promised timeframe. Consequently, Dell uses BPM technologies to manage that relationship, and that of "distressed" shipments-the returns process.

"In the leading organizations, you start to see more inter-company and cross-company boundary collaboration," Austvold confirms.

But you don't have to be at the helm of a major financial institution or computer company to adopt BPM. There seems to be no reason why any company, regardless of size or industry vertical, shouldn't re-examine its business processes, says Hill. "Overall we find almost every industry is really taking a closer look at how they actually conduct business with an eye toward streamlining and improving their operational execution."

Driving Initiatives
The impetus can be due to regulation in a given industry, cost pressure or changing competitive landscape. "Globalization and opening up of markets in other parts of the world are contributing to businesses looking at how they do business, where they do business and what their business practices and processes are."

As outsourcing has gained prominence, a highly distributed global business challenge has arisen. Processes embedded in software that was state-of-the-art years ago may have been superseded and no longer optimal for dealing with far-flung operations. Austvold says they may need to be "functionally decomposed and reorchestrated or managed in a different relationship because in a lot of cases, they need to be managed across geographical boundaries."

Realizing that business is global and never stops is key to successful business process management, and is in part what distinguishes BPM from its predecessor, business process reengineering, Hill says.

"Now there's recognition that business is global, it's running 24 hours a day, that business cycles are shorter and constantly accelerating. There is no one best way of doing things that's going to be really durable. There is more focus now on continuously changing and improving as opposed to a one-time wholesale reengineering; you know-'If we just get it right this one time, it will hold us for about 20 years.' It's more a matter of the ability to constantly adapt. How you do business will become the real source of competitive differentiation."

	"It's the ability to constantly adapt. How you do business will become the real source of competitive differentiation." - Janelle Hill of the Meta Group

Clearly, having the right tools affects how one does business. But much can be done in-house, and even by small and mid-sized businesses, Hill says. Rather than buying software packages with applications designed to have soup-to-nuts functionality, many companies are shifting to vendors whose component sets are meant to be configured and assembled by the end user. "They are not meant to deliver 100 percent of what you need out of a box," Hill says. Meta Group calls these packaged business processes Business Services Frameworks. "The more we get those available, the more that will enable smaller companies without a lot of skills to participate as well."

The ability to view data via a scorecard or dashboard interface is very much at the heart of BPM. The data involved is generally the same that flows in a closed-loop through applications that are used in budgeting, planning, forecasting and operations. With real-time visibility, budgets and forecasts can be altered as business results change.

Analysts see continued growth in the BPM enterprise software market for several more years, not least because of the need to comply with the financial auditing and reporting regulations of the Sarbanes-Oxley Act. As surely every C-level manager must know by now, Sarbanes-Oxley places a huge personal burden on company heads to institute internal controls to govern and document information that ends up in financial statements.

"You've got to make sure that what you have to become compliant with Sarbanes is there on a regular basis and that management can see what is happening," says Kathy Killingsworth, senior vice president of consulting services at CommerceQuest, a BPM solutions provider based in Tampa. "So many people get ready for an audit by doing just enough to get things finished, but with something like Sarbanes-Oxley that's not good enough."

So, should you bring in IT consultants to launch a BPM project? Not necessarily, says Meta Group. Its principals feel that pinpointing the flexibility needed to better serve customers-and make or save money-is often more of a business decision. If consultants are needed, they should be business management consultants, not IT experts. It isn't that there is no IT component involved; obviously, quite often there is. But the process analysis may require benchmarking a company against its peer set in its industry and putting its operations under a microscope in an effort to locate deficiencies. That kind of examination requires business consultants.

Hill points to the high-tech industry and its focus on the interdependencies of members in the supply chain to deliver products timely. "They know their ability to work very closely with their partners in the supply and demand chains is really key to their ability to capitalize on market opportunities as they become apparent," she says. Many companies in that vertical have launched aggressive vendor-managed inventory initiatives, for example. "What they do is look at all their processes related to inventory management and product delivery and fulfillment. Those are the areas they look to really create greater flexibility in. That's a business decision."

More Than Technology
Key performance indicators are another example of in-house expertise. KPI sets are fairly well known within a given industry, and companies can usually adopt them on their own to measure their efficiency in a given process.

In fact, it seems clear that BPM is as much about organization and cultural change as it is about technology. Initiative leaders have a huge task in bringing desired behavioral changes about (often through performance metrics to "encourage" things) because many companies are still hierarchical in organizational structure. The "parochial" view of a given unit or department has to be dealt with.

Executive support is key to success, says Killingsworth.

"If you do a project and it doesn't have the right kind of support, you're going to do it one time and it's going to go on a shelf just like a lot of software you hear about. There needs to be executive sponsorship to make sure this gets done."

Nevertheless, people aren't the sole hurdles to overcome. Often the many discrete functions in companies are problematic because business processes cross a lot of them. Workflow-how work progresses from start to finish-also crosses multiple boundaries: departmental or functional, and sometimes inter-enterprise as well.

"It's those boundary conditions that you really have to manage," according to Hill.

That doesn't necessarily mean eliminating manual tasks or actions. Rather, it means instituting controls so managers can have visibility into work: how much work there is, who's working on what, routing work, and locating bottlenecks.

Killingsworth says reluctance to go along with BPM projects isn't always attributable to stubbornness or turf protection. In many ways BPM is a lineal descendant of business process reengineering, and many people associate the former with job cuts, she says. "In the past, BPR was attached with downsizing, and people really feared consultants coming in and taking their job." BPM is quite different, she says. "I think the focus in BPM is in taking an overall process with a strong emphasis on the people and figuring out where the efficiencies are."

That's important because of a company's linkage to one or more supply chains. Clearly, increased competitiveness turns on streamlining not only the appropriate processes but on improving them in the correct manner.

'Shrink Timelines'
Business process analysis tools may model the current state of a company's processes and suggest changes. The goal, says Killingsworth, is to figure out how to "shrink timelines or shrink dollars."

Using CommerceQuest's EnterpriseBPM product, a typical scenario involving a high-tech customer needing to pump products out faster, cheaper and better might go like this:

"If you have something you want to get out more quickly on your assembly line, we would come in and do an 'as-is' [model] of the current process if it's not already documented and find out what efficiencies you are trying to gain. We would do a 'to-be' [model] in the process, so once you plot the as-is with the resources and plug your cost in, you can actually simulate the bottlenecks. The tool actually shows you different places to do improvements."

Austvold says another such tool is BizFlow 9 from HandySoft. It contains what the Vienna, Va.-based developer calls a Process Simulator. It's designed to create "what-if" scenarios by adjusting market parameters, such as inputs, deadlines, constraints and resources. It also lets users set performance targets, and the simulator reportedly will suggest "ideal parameters" to achieve it.

Cost reduction is one reason to tweak processes in the first place, so it's fair to ask what a BPM initiative will run you. Killingsworth estimates that $100,000 to $150,000 would suffice for "normal-sized" issues, which one can "cost-benefit" up front to see if the investment will pay for itself timely.

For some of the BPM software alone that is on the market today, Austvold says a layout of $10,000 may suffice, depending on the sophistication required by an organization.

Regardless of cost, companies really are advised to get off the dime, says Jim Errington, manager of business development at Glovia International, a Fujitsu company based in El Segundo, Calif., that provides enterprise resource planning and other systems. He says the markets most companies are in are changing faster than they can control. Clients in automotive, for example, are being pushed harder and harder by the OEMs to either do more or respond faster. "By do more, I mean take on responsibility for building a complete subassembly where before they just supplied components."

Gaining Flexibility
A typical sort of pressure in the automotive sector is having to move from a 30-day stock environment to one of five days' worth. "Whereas before they always had at least 30 days' stock usage coverage, that's costing them too much money. Now they are forced into a situation where they have to reduce their inventory holdings, and to do that they need to change their business processes entirely," Errington says.

Obviously, more and more companies are moving production offshore for cost reasons. But the decision is usually prompted internally. One of Glovia's clients has outsourced its production because its own powerful customer has mandated it do so.

One of the things Glovia is doing for it is expanding the functionality of the Glovia application it implemented. It now has the global visibility it needs rather than only a view into local business.

Whether the impetus for change comes from inside or externally, no business stands still, Errington says. "You still have the need to expand or acquire." In either event, you must be flexible, but the acquisitive company has a special need for pliable business processes. "If you now go from single-site to multi-site, how do you consolidate the other business? Will your software be able to support that consolidation without the need to reimplement?"

That's crucial, he says, because any change to internal business processes may not be possible with current technology. "That's the biggest question. It's great to say we're going to daily planning, but if so, can your system support it? Is it fast enough to respond to change?"

Errington thinks a selective BPM approach is best. A company may have several potential starting points, but company officials should identify the greatest pain points first. "It's like the lean initiative you see in manufacturing: where is the best place to get a fair return for our investment rather than, well, let's just implement this huge, monolithic system and take it from there. It's ongoing, a small slice at a time. Let's just change one piece, and not the whole business, because that's where you can fail."

Following that advice himself, Errington says his normal approach is to spend a day or two learning about a client's business processes and needs: the problems as the client sees them, where it spends time firefighting, what workarounds, if any, it has devised. Most Glovia clients are in discrete industries-automotive, electronics and telecommunications, though it has done some work for pharmaceuticals customers and others as well. Regardless of the business, he says, some clients really don't know what their problems are. In that case, the perspective of an outside firm clearly can be useful.

Clients of John Galt Solutions, which is active in the forecasting and planning space, may know that what they need is "straight-out, plain old" efficiency but often aren't sure how to arrive at it. Kai Trepte, cofounder and vice president of sales and services for Chicago-based John Galt, says it's important to have not only documented, repeatable processes that people can follow but the understanding that they must "embrace" the processes as well.

"Business process management by itself will not make your company more competitive or efficient," says Trepte. "The Six Sigma process is a good example. If you have something like that in place and people embrace it, follow it and make it part of the fundamental way of how they think, you will see a very significant improvement in performance. But if people are secretly going through the motions but don't embrace it, then you are not going to see all the benefits."

In John Galt's arena, planning and forecasting, "Companies can set up a plan of what they want to sell, and what they want to produce," Trepte says. "That's great, but then if people don't follow that plan, then you don't get the benefit. What we see is that companies that do follow the process, actually get the commitment and buy-in-they get tremendous benefits-things like reducing inventory. If you think about that from a cash-flow perspective, that is really significant."

In the end, it is important to realize that business process management is not about a goal that you achieve one time and move on. It is about continuity: making somebody responsible for a continuing process that delivers sustaining value to the organization so that it doesn't remain static.

"Everyone is in business to satisfy customers," says Austvold. "So what we're talking about is your ability to compete, even if you already are a market leader in your space. That position may be fleeting and time-dependent, so if you're not worried about what your competitors are doing, you may get subsumed or passed by.

"I think when you look at [BPM] technology, it's the opportunity to invest in new insightful, innovative ways to delight customers. There should be a lot of dialog around that."