Business Process Management
From Market Consolidation to Process Innovation
Michael zur Muehlen, Ph.D.
Center of Excellenc...
Private university, founded 1870
   ‣ 1800 undergraduate, 2600 graduate students
   ‣ Located in Hoboken, NJ (across the H...
Offers MBA in Technology Management, Master of Science
(IS, Telecom Mgmt, Mgmt, EMTM), Bachelor’s Degree
(Business & Techn...
What this Talk is About
 How has the field of BPM evolved?
 Rules + Processes: The Next Frontier
 Standards: Who needs them...
User Conceptions
   about BPM
    Abstract
    Restrictive
    It’s not Excel
                     5
Too Abstract

 Process thinking requires a lateral view of the
 organization
 Process thinking requires to generalize from...
Too Restrictive

     Try modeling the following:
       Manufacturing can start anytime after the payment
      from the ...
It’s not
 Excel
           8
Types of BPM Projects
 “Let’s model everything” (aka I just learned BPMN)
 “Let’s try this out first” (aka I don’t trust BP...
“Let’s model everything”
 Develop a Process
 Architecture for the
 enterprise
 Maintain comprehensive
 process documentati...
Top-Down Strategy
 Level A
 Business Activities                          Business Activities
                             ...
“Let’s try this out first”
  Chooses a pilot process to gain experience with BPM
  Good: Choose high-value, low-medium risk...
First Generation BPM Case
 Midwestern Life and Health Insurance Company deployed a
 FileNet Image and Workflow system in un...
Now: BPM as Industrialization
    Paper                                               Trading


                         O...
Example: Back Office
                 Search processes using
                 ‣technical and
                 ‣business cri...
Example: Back Office




                      16
“SOA first, let’s figure it out later”
  Establish basic services, ESB
  Try to identify processes that can leverage the ser...
What are you really good at?




                               18
From Core to Commodity

  Treat the process as a service
  Define a standard interface
  Think about creating value outside...
Learn from Outside
 Usage-based Insurance applies Telecom Billing
 Techniques
 Progressive: Autograph Prototype ‘99-’01
 N...
Underwriting On Demand
 Text2Insure: Provide Travel and Car
 Insurance via SMS
 Provides Quote within 60 seconds
 Reply “B...
BPM
Evolution



   Products
   Academia
   Standards
M&A
Staffware	 	    	   	TIBCO
FYI		   	   	   	   	Global360
Proforma 	 	    	   	Metastorm
Filenet		   	   	   	IBM
Carn...
Tool Features
 Modeling          Simulation
  High-End           Basic

  Implementation     Enhanced

 Execution         ...
From Simulation to Optimization




                                  25
Rules + Processes

 Control Flow Decisions
 Assignment Decisions
 Monitoring of Policies and
 Exceptions

                ...
Managing Change
 Claims processing at major US Insurance company
 12 Process Steps
 >5,000 Business Rules


    What do yo...
How many rules exactly?
 >90 product types and their associated product rules
 >700 data edit rules
 >70 claim pending rul...
Control Flow Decisions
 Using Business Rules Engine to make data-based decisions about
 the sequence of processing steps
 ...
Simpler Processes




Loos (2007)
                          30
Multi-Step Decisions




                       31
Decision Rules
 Example Applications
    Customer Contact Scripts
    Validation of data before processing
    Complex dec...
Assignment Decisions
 Use BRMS to route work to the most qualified performer
 From Workflow: Assignment-relevant Data
 From ...
Original System
              1. Application is   2. Data is entered      3. Application is assigned   4. Underwriting
   ...
Sample Rule
                       If channel equals agency,
                         and plan equals mortgage term or who...
Rule Engine Driven Assignment
1. Application is            2. Data is entered into
                                       ...
Cross-Process Policies
 Use BRMS to coordinate across process instances
 Example: During labor action, hold all non-critic...
Actions & Alerts
                                        Rules
                                        Engine




        ...
Moving to Exception Based
 Underwriting                                                                   Underwriter revi...
Standards?


             40
Business
Process
Innovation   Business
Process
Management
                                   Notation
                    ...
The Workflow Reference Model
                                       BPMN
                                                  ...
+ Pool, Lane, Grouping,
           Annotation, Transaction
                Boundary...




Example: BPMN 1.0

            ...
BPMN 1.1


  Mainly cosmetic changes

  New symbol for Multiple Event
  and Gateway (used to be star)

  New Signal Event
...
0
                                            30
                                                 60
                     ...
Design Interchange vs.
Executable Format
           Design         XPDL            Design
           Tool A               ...
Process Design Ecosystem
                                        Modeling         Vendor A
                               ...
Business Process Definition
Metamodel (BPDM)
 Designed to supplement BPMN with a formal metamodel of its
 modeling construc...
Universal Behavioral Happening
                                                                                   Successi...
Behavioral Step 1    predecessor   successor
                                                                         Beha...
Example
 Universal Behavioral Happening                                                                       Universal Be...
SBVR
 Semantics of Business, Vocabulary and Rules
 Formally defined taxonomy to describe elementary business
 operations an...
Example: SBVR Rules

                  53
Users don’t care about
standards per se, but about
  their value proposition

                              54
Your Service Interfaces

                      55
Your Business-level Services

                           56
Your Process Interface

                     57
Thank You – Questions?
Michael zur Muehlen, Ph.D.
Center of Excellence in Business Process Innovation
Howe School of Techn...
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Business Process Management - From Market Consolidation to Process Innovation

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Keynote held at JAX 2007 Conference, November 8th, 2007 - Munich, Germany.

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  • That was fantastic. A very good overview of BPM and it's capabilities. I must say as an earlier experimenter with this technology solution, you have been able to present it in a very visual descriptive and unforgettable way.
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Business Process Management - From Market Consolidation to Process Innovation

  1. 1. Business Process Management From Market Consolidation to Process Innovation Michael zur Muehlen, Ph.D. Center of Excellence in Business Process Innovation Howe School of Technology Management Stevens Institute of Technology Hoboken NJ Michael.zurMuehlen@stevens.edu 1
  2. 2. Private university, founded 1870 ‣ 1800 undergraduate, 2600 graduate students ‣ Located in Hoboken, NJ (across the Hudson from Manhattan) Four Schools ‣ Technology Management ‣ Engineering ‣ Systems and Enterprises ‣ Arts & Sciences Rankings: ‣ Top 5 technology management program, on par with Stanford, MIT, CMU, Babson (Optimize Magazine) ‣ #1 for best distance learning program (Princeton Review) ‣ Top 25 for most connected Campus (Sloan Foundation) http://www.stevens.edu 2
  3. 3. Offers MBA in Technology Management, Master of Science (IS, Telecom Mgmt, Mgmt, EMTM), Bachelor’s Degree (Business & Technology) Programs taught on campus and off-site in corporate locations Clients: ADP, Avaya, BASF, Bristol-Myers Squibb, Chubb, Citigroup, Deutsche Bank, J&J, Lockheed, Merrill Lynch, PaineWebber, Pearson, Prudential, PSE&G, UBS, UPS, Verizon and others Research centers with focus on ‣ Process Management ‣ Project Management ‣ Product Innovation http://howe.stevens.edu 3
  4. 4. What this Talk is About How has the field of BPM evolved? Rules + Processes: The Next Frontier Standards: Who needs them and what do they offer? 4
  5. 5. User Conceptions about BPM Abstract Restrictive It’s not Excel 5
  6. 6. Too Abstract Process thinking requires a lateral view of the organization Process thinking requires to generalize from the day-to-day business Process thinking is expressed in (semi-) formal notation 6
  7. 7. Too Restrictive Try modeling the following: Manufacturing can start anytime after the payment from the customer has been received An inventory check, a credit check, and a regulatory check have to be performed - in any order After quotes from 3/4 of the eligible suppliers have been received, or after three days (whichever is earlier) a selection is made Users tend to think in “If-Then” scenarios g 7
  8. 8. It’s not Excel 8
  9. 9. Types of BPM Projects “Let’s model everything” (aka I just learned BPMN) “Let’s try this out first” (aka I don’t trust BPM) “SOA first, let’s figure BPM out later” (aka I love acronym soup) 9
  10. 10. “Let’s model everything” Develop a Process Architecture for the enterprise Maintain comprehensive process documentation Motivation Compliance Requirements Developing Global Standards Mergers and Acquisitions “We like to model” 10
  11. 11. Top-Down Strategy Level A Business Activities Business Activities Strategy Objectives Scorecard Strategic Process Level B Description Top-Down Project Process Groupings Process Groupings Ownership Services Level C Core Processes Tactical Core processes Delivery Units Products Process Level D Description Business Process Flows Processes Delivery Teams Systems Level E Operational Process Flows Operational Sub Processes Roles System Functions Process Level F Description Detailed Process Flows BPM Application Detailed Processes Detailed Roles Transactions Source: British Telecommunications plc 2006 11
  12. 12. “Let’s try this out first” Chooses a pilot process to gain experience with BPM Good: Choose high-value, low-medium risk business case Example: Onboarding, Claims Processing Bad: Choose no-value, no-risk business case Example: Complaints handling, Expense reimbursement 12
  13. 13. First Generation BPM Case Midwestern Life and Health Insurance Company deployed a FileNet Image and Workflow system in underwriting in 1995 to reduce elapsed time to issue policies reduce costs and empower the underwriting area to make changes in their workflow with minimal I/S involvement The company achieved objectives 1 and 2 but the customer found it too hard to make changes and turned it over to IT. IT relied on Visual Basic since this was the familiar tool to the IT staff and eventually the system became hard to change. (Hardening of the workflow arteries). 13
  14. 14. Now: BPM as Industrialization Paper Trading Order Acct. Mgmt. Phone Management Process Fax Payments E-mail Complaints Production Management Transparency Input Channels Automation, but only if not Job Types too complex / rare other regulatory requirements no economies of scale 14
  15. 15. Example: Back Office Search processes using ‣technical and ‣business criteria Display shows ‣status ‣start time ‣end time ‣instance data Drill Down is possible 15
  16. 16. Example: Back Office 16
  17. 17. “SOA first, let’s figure it out later” Establish basic services, ESB Try to identify processes that can leverage the services Problem: Without processes there is no point of reference for services abstraction, granularity 17
  18. 18. What are you really good at? 18
  19. 19. From Core to Commodity Treat the process as a service Define a standard interface Think about creating value outside and at the front-end 19
  20. 20. Learn from Outside Usage-based Insurance applies Telecom Billing Techniques Progressive: Autograph Prototype ‘99-’01 Norwich Union: Free GPS Rate depends on mileage driven Precondition: Flexible billing process 20
  21. 21. Underwriting On Demand Text2Insure: Provide Travel and Car Insurance via SMS Provides Quote within 60 seconds Reply “BUY” Call from agent within 10 min for payment details Cover2go: Accidental Death Insurance Fees taken from cell phone bill 21
  22. 22. BPM Evolution Products Academia Standards
  23. 23. M&A Staffware TIBCO FYI Global360 Proforma Metastorm Filenet IBM Carnot Sungard ... 23
  24. 24. Tool Features Modeling Simulation High-End Basic Implementation Enhanced Execution Rules Human-Centric BRE Call EAI-Centric Decision Tables 24
  25. 25. From Simulation to Optimization 25
  26. 26. Rules + Processes Control Flow Decisions Assignment Decisions Monitoring of Policies and Exceptions 26
  27. 27. Managing Change Claims processing at major US Insurance company 12 Process Steps >5,000 Business Rules What do you think changes faster? 27
  28. 28. How many rules exactly? >90 product types and their associated product rules >700 data edit rules >70 claim pending rules >200 types of correspondence letters >250 claim processing and payment approval authority rules >70 claim quality review sampling rules >1,000 special client claim handling rules >2,000 federal/state regulatory rules >850 accounting rules >600 published claim processing guidelines 28
  29. 29. Control Flow Decisions Using Business Rules Engine to make data-based decisions about the sequence of processing steps From Workflow: Workflow-relevant data From BRMS: Branching decision Useful if multi-criteria decisions are needed 29
  30. 30. Simpler Processes Loos (2007) 30
  31. 31. Multi-Step Decisions 31
  32. 32. Decision Rules Example Applications Customer Contact Scripts Validation of data before processing Complex decision scenarios Mining of rule criteria from runtime data Model process with high fidelity Run process and record audit trail Apply statistical analysis techniques to uncover correlation between process data and process path 32
  33. 33. Assignment Decisions Use BRMS to route work to the most qualified performer From Workflow: Assignment-relevant Data From BRMS: Identifier of qualified resource(s) Useful if assignment decisions are made based on data of the workflow object 33
  34. 34. Original System 1. Application is 2. Data is entered 3. Application is assigned 4. Underwriting scanned into Into Admin to Underwriter during Begins FileNet. Systems. indexing process. Network FileNet Administrative Workflow Image System Systems 5. Workflow and associated route work through the business process based on the kind of policy. source: Royce (2007) 34
  35. 35. Sample Rule If channel equals agency, and plan equals mortgage term or whole life, and region equals Midwest, and age is greater than 18 and less than or equal to 65, and face amount is more than $250,000 and less than $1,000,000, and policy is a conversion from existing policy Then assign to Midwest Level 1 Underwriter Group. No Channel Region Age Face Amount Conversion? Assignment 250,000 Midwest Level 1 Underwriter 1 Agency Midwest 18<=65 <=1,000,000 no Group East Level 2 Underwriter 2 Brokerage East 18<=65 >=1,000,000 yes Group 3 Agency South 18<=65 <250,000 no Underwriter Assistant Group source: Royce (2007) 35
  36. 36. Rule Engine Driven Assignment 1. Application is 2. Data is entered into 3. Applications are distributed based 4. Underwriting scanned into Admin Systems and on availability and skill level Begins FileNet. used by Rule Engine. and Admin Systems Are Updated. Assignment Engine Network FileNet Workflow, Administrative Image System Rule Engine and Robot Systems source: Royce (2007) 36
  37. 37. Cross-Process Policies Use BRMS to coordinate across process instances Example: During labor action, hold all non-critical orders Requires API for process control at the BPMS level 37
  38. 38. Actions & Alerts Rules Engine KPI Evaluation Process Goals Metrics Thresholds Risk Mitigation Email and Cellphone Actions notification Web Service Call or Execute Script Process Event Action Schedule Triggers Shapiro (2007) 38
  39. 39. Moving to Exception Based Underwriting Underwriter reviews APS’s and some complex cases Rule Engine validates App is Scanned Data Entry Application information and OCR’ed And Validation and Issues some policies 24/7 Issue System Admin System Imaging System Workflow and Rule Engine Expanded Rules with Automatic Interface Producer functionality may include: receives policy Straight-through processing for delivery. Intelligent requirement processing source: Royce (2007) Automated issue Minimized admin system entry Auto Issue of Policies 39 Workload Balancing
  40. 40. Standards? 40
  41. 41. Business
Process
Innovation Business
Process
Management Notation Standard Integration Standards Audit Standards Interaction Standard Standards Metrics Business
Process
Monitoring Business
Process
Automation 41
  42. 42. The Workflow Reference Model BPMN Process Definition Tools XPDL Interface 1 Process Definition Import/ Export Interface 5 Other Workflow Workflow Enactment Service Enactment Service(s) Administration & Monitoring Tools Workflow Wf-XML BPEL Engine(s) Workflow Engine(s) Interface 2 Interface 3 Interface 4 Interoperability SOAP Tool Agent Client Worklist Apps Handler Invoked Typically Applications Web Services see: www.wfmc.org/standards/docs/tc003v11.pdf
  43. 43. + Pool, Lane, Grouping, Annotation, Transaction Boundary... Example: BPMN 1.0 43
  44. 44. BPMN 1.1 Mainly cosmetic changes New symbol for Multiple Event and Gateway (used to be star) New Signal Event Separation of “catching” and “throwing” events 44
  45. 45. 0 30 60 90 120 Normal Flow Task End Event Start Event / Event Pool Data-Based XOR Start Message Message Flow Text Annotation Parallel Fork/Join Gateway Lanes Sub-Process (Collapsed) Association Data Object Intermediate Timer End Terminate Intermediate Message Sub-Process (Expanded) End Link Default Flow Inclusive Decision/Merge Activity Looping 'exception' task End Message Start Link End Exception Complex Decision/Merge Event-Based XOR Group Multiple Instance Intermediate Event Transaction Compensation Conditional Flow Practical Use of BPMN Symbols End Cancel Exception Flow Intermediate Compensation Source: Sample of 120 BPMN models Intermediate Link 45 Start Timer End Compensation
  46. 46. Design Interchange vs. Executable Format Design XPDL Design Tool A Tool B BPEL, BPEL, XPDL, This path XPDL, or some not or some engine X engine specific generally specific format supported format Execution Execution Engine A Engine B 46
  47. 47. Process Design Ecosystem Modeling Vendor A Tools Optimization Simulation Tools Tools Repository Vendor C (XPDL) Design Design Tool Tool BPEL BPEL B or some or some Ven dor engine engine specific specific dor Ven format format D ASAP Execution Execution Engine Wf-XML Engine 47
  48. 48. Business Process Definition Metamodel (BPDM) Designed to supplement BPMN with a formal metamodel of its modeling constructs BPMN 1.0 did not contain a formal metamodel specification OMG mindset of MDA is based on multiple levels of metamodels BPDM replaces efforts to create a UML profile for BPMN BPDM contains more constructs than BPMN 1.0/1.1 Mapping to MOF and XMI Envisioned to become persistency format for BPMN BPMN 2.0 = BPMN + BPDM + possibly other notations There may be a UML profile for BPDM 48
  49. 49. Universal Behavioral Happening Succession between Behavioral Change Part Universal Behavioral Happening End Start Finish Behavioral Change Error Part typed by the “Start” Change Abort The “Universal Behavioral Happening” is in the M1 Library of BPDM is the super type of all processes and choreographies is the default type for all process steps and choreography steps source: modeldriven.org 49
  50. 50. Behavioral Step 1 predecessor successor Behavioral Step 2 Processing Successions between steps can specify The Behavioral Change that originated them The Behavioral Change that they trigger All combinations are then possible End -> Start (the default) Abort -> Start Error -> Start Start -> Start Start -> Abort … source: modeldriven.org 50
  51. 51. Example Universal Behavioral Happening Universal Behavioral Happening End End Start Finish Finish Start Error Error Abort Abort predecessor successor behavioral behavioral change change part part behavioral happening type behavioral happening type Behavioral Step 1 predecessor successor Behavioral Step 2 source: modeldriven.org 51
  52. 52. SBVR Semantics of Business, Vocabulary and Rules Formally defined taxonomy to describe elementary business operations and rules Meta model expressed in UML Business-level specification aims at enterprises to formally express their operations 52
  53. 53. Example: SBVR Rules 53
  54. 54. Users don’t care about standards per se, but about their value proposition 54
  55. 55. Your Service Interfaces 55
  56. 56. Your Business-level Services 56
  57. 57. Your Process Interface 57
  58. 58. Thank You – Questions? Michael zur Muehlen, Ph.D. Center of Excellence in Business Process Innovation Howe School of Technology Management Stevens Institute of Technology Castle Point on the Hudson Hoboken, NJ 07030 Phone: +1 (201) 216-8293 Fax: +1 (201) 216-5385 E-mail: mzurmuehlen@stevens.edu Web: http://www.cebpi.org slides: www.slideshare.net/mzurmuehlen 58

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