Business process management

Business Process Management -
Meaning and Important Concepts
The Wealth of Nations by Adam Smith is perhaps one of the most influential books on
Economics in all history. However, not many people know that it is in this book that the idea of
improving processes to increase productivity and therefore profit was born.
Although Adam Smith called it “division of labor” and not business process management, he
was referring to the same idea. The concept is illustrated with the help of a pin factory example
as follows:
The Pin Factory Example
Adam Smith spoke about an old pin factory where each laborer would produce the whole pin i.e.
from raw material to finished product himself. Smith realized that a lot of time of such a laborer
was spent in moving from one job to another and switching tools required for different jobs. This
time, he concluded, was being spent in an unproductive manner.
He then saw that in the same factory, when different people were doing different activities i.e.
one man was drawing the wire, the second was shaping it, the third making only pin heads and
the fourth assembling the pin to complete the product, this time was being used much more
effectively. Productivity went through the roof and costs were cut into a fraction of what they
were. The concept of process was born and was taking the developed western world by storm.
Adam Smith also realized that such simplification of individual tasks made it possible for the
workers to increase their dexterity. The productivity increased even more as workers went faster
up the learning curve. Lastly as the jobs were being reduced to simple tasks, it gave an impetus
to mechanization. It is much simpler to make a machine to do one part of the process, rather than
to make a machine to do the entire process.
Corporations Adapt the Business Process Paradigm
The above example by Adam Smith showed that it was possible to increase the productivity by a
factor of 10 or more if processes were efficient enough. Corporations of the day realized this
revolutionary idea and soon it became the bedrock of the industrial revolution. All business
endeavors today try to compete with each other by building more efficient processes to
meet the needs of their customers. Every Fortune 500 companies today claim to be process
driven. The study of processes has today become a separate science which we call Business
Process Management (BPM).
The idea of processes might be old, but it is still very much valid. Almost all business
organizations that have become big have adopted the process paradigm. Some of the famous
names are as follows:

 Ford Motors: Henry Ford’s idea of assembly line is a text book representation of an
efficient process. It is no wonder than Henry Ford could therefore pay his employees more
wages than his competitors and still make more profits. This was a large scale proof of the
ideas propounded by Adam Smith in his 1776 seminal.
 Wal-Mart: Wal-Mart turned the tables on some of the big retailers of their day with
process improvement. Wal-Mart’s use of RFID chips which help in automating the
purchasing process and saving a lot of clerical effort, inefficiency and costs is a case study
every student of business must go through. This too can be traced back to Adam Smith’s
idea of mechanization. In today’s world we call it automation, but the basics remain the
same.
 Dell: The story of Michael Dell’s innovation is well known today. Instead of producing and
then hoping to sell, Dell’s model would initiate production only after the order was
received. This helped them cut a lot of inventory and storage costs which don’t add any
value. With a better process a newcomer like Dell could beat behemoths like Hewlett
Packard, IBM and Compaq.
These examples show how some entrepreneurs learned the power of processes and later
unleashed them to create history. Each of these entrepreneurs is a first generation entrepreneur
but was able to amass far more wealth than many rich families had done over the period of many
years. Process management and improvement therefore remains an important tool and
organizations of all sizes pay attention to maintain and improve it. They know it can make or
break their future.
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Business Process Management
 Business Process Management
 Fredrick Taylor View on Process
 Japanese View on BPM
 Hammer & Champy’s View on Process
 Different Levels of a Process
 Operational / Transactional Processes
 Control based Processes
 Strategic Processes
 Aligning all Processes
 DMADV Methodology
 SIPOC Methodology
 RACI Matrix
 Documenting a Process
 Business Process Re-Engineering
 Tacit Knowledge and Skills
 Continuous Improvement & BPR
 Balanced Scorecards
 Key Performance Indicator (KPI)
 BPM Notations - Gateways and Events
 The Problem with IT as a Solution
 Urge to Solve Problems with Technology

 Complexity Created by Technology Needs to be Managed
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5. People Driven Organizations
People Driven Organizations
When organizations were first formed they were largely people driven. Before we delve any
further, it would be useful to first understand what being people driven really means. An
organization basically required four types of inputs to function successfully viz -
1. Land
2. Labor
3. Capital
4. Enterprise
A people driven organization is dependant on specific people for these inputs. For instance if
only specific laborers have the skill to perform certain activities hat are required by a business,
then those laborers are bound to team up and use the bargaining power to increase their wages.
An organization will be people dependant always i.e., it will need people to provide it with the
inputs required. However, the idea is to create an organization that is not dependant on specific
people. This means that if a laborer or a group of laborers decide to leave the organization, the
organization should still be able to continue its normal operations without too much of a setback.
Also being people driven imposes certain limitations on the organizations which have been
listed below:

 Limitations of Time: Specific people have only a certain amount of time to devote to the
organization. Being people dependant, therefore places a cap on the total amount of time
that is available with the organization to utilize to achieve its objectives. For instance there
are certain strategic decisions (activity) that can only been taken by the entrepreneur
(specific individual), it limits the amount of decisions that can be made by the time that the
entrepreneur has. A process driven organization would try to map out the mental model of
the entrepreneur and create a set of rules. Then other people and systems can be used to
ensure adherence to these rules. This will enable the number of decisions to increase
without the quality of decisions take the slightest hit. Only exceptions will reach the
entrepreneur. Over time, the process will be strong enough to ensure that there are no
exceptions at all and that all decisions can be handled by the process itself.
 Limitations Of Skill: In the previous example we have assumed that the entrepreneur has
the requisite skill to make the decisions. In reality this is not always the case. The
entrepreneur may not have enough skill or knowledge about all the areas in business like
HR, Finance, Supply Chain, Operations, Marketing, Sales etc. A people driven organization
will function on the basis of incomplete knowledge that the entrepreneur has. This is
because the knowledge is nested in people who have limited ability to learn. A process
driven organization on the other hand will hire the best consultants in this regard, map their
mental model and create an set of rules which regular employees can follow. This
organization will use average employees as inputs to create above average results because
of the process approach.
 Heavily Dependant On Factor Markets: The people driven model assumes the
availability of people with requisite time and skills. There is an underlying assumption that
the company will be able to procure them within the allocated costs in the factor markets
(labor markets). However, historically it has been shown that labor is mobile across
industries. For example, the prospects of more wages in IT industry could mar the hiring
plans of a manufacturing company because they just cannot hire more.
 Agent-Principal Conflict: The last problem with a people driven organization is that of
moral conduct. If the organization relies on the good faith of its employees to execute its
operations, it is an inherently unstable structure. A few immoral employees acting in their
interest rather than the organization’s interest could cause the company to collapse.
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5. What is a Process ?
What is a Process ?
If you speak to a small business owner about their capability to manage a grocery store, you will
constantly find that they feel that they have a shortage of time. It is not uncommon for them to
erroneously omit certain activities. This negligence in turn causes bad customer service or
increased costs to customers. On the other hand there are global organizations such as Unilever
and McDonalds who are successfully able to replicate their operations at every place they go and
maintain the same premium standards of customer service each day. The difference between
these two types of operations, which have staggeringly different scales of business and even
more diverse efficiency, is the fact that one of them is people driven while the other is process
driven. To understand what the power of processes is and how it can be harnessed by a business,
let’s define the term process.

Definition of a Process
Wikipedia defines process as “A business process or business method is a collection of
related, structured activities or tasks that produce a specific service or product (serve a
particular goal) for a particular customer or customers”.
At first instance this may seem like too much jargon to understand at one shot, but the fact is that
it is really simple. To understand processes better, understand the meaning of some keywords in
the above definition.
The first keyword to understand is activities or tasks. Work is always done through tasks. Let’s
say you need to get a soda from your refrigerator. There are many small tasks involved such as
getting up from your sofa, walking to the refrigerator, opening the refrigerator, identifying the
soda, picking it up, closing the refrigerator and going back to your sofa. Each step described
above is called a task in BPM language.
The next important thing to understand is that these tasks are related. The output from one is the
input for another. You cannot pick up the soda before you open the refrigerator! Hence sequence
is of prime importance. The wrong sequence can not only cause inconvenience and chaos, it can
send your cost spiraling upwards. Also a bottleneck somewhere in the process can disrupt all
activities succeeding it.
Now, we know that a process is a set of related activities (broken down to the smallest level)
which transforms inputs into outputs. The process should always be written down explicitly,
leaving no room for assumptions and/or ambiguity. If an employee operating the process has
choices regarding the way they can perform work, the process is not well defined.
How Do Processes Help ?
Now, one may say that creating a process is not that difficult. In fact it also seems unnecessary to
some. They feel going to such details is unnecessary. However this is not true. A good process is
independent of people. It is a series of steps which when followed diligently give the same result,
irrespective of who performs them. It is like a recipe for conducting business operations. A
manager can therefore find out the best practice to achieve a certain business goal and then create
a process wherein it is replicated throughout the organization.
It is these well laid processes that enable Unilever and McDonalds to deliver quality service
worldwide. A process is the real unsung hero behind McDonald’s seamless operations, which is
operated by a set of part time school going workers globally and still provides world class
service globally.

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5. Process Driven Organizations
Process Driven Organizations
Process driven organizations are the exact opposite of a people driven organization. It
relies on the principles of Corporate Law which states that any organization is a separate

entity which has come into existence. Its existence is different from and not dependant on the
existence of its promoters. It is an artificial person created by law.
The very idea of thinking about organizations as an abstract creature brings to mind exciting
ideas. It is about creating an organization which has perpetual succession (Never ending life) and
is not bound by constraints of time, skill and morality of its members.
Any multinational corporation that you see is the embodiment of this process approach. It is
because they are not bound by human limitations that they can operate in many continents across
the globe simultaneously. These organizations grow in terms of knowledge, scale of operations
and efficiency irrespective of the contribution of its members.
It must be understood that the organization is not completely independent of people. Otherwise
Unilever would be a mega robot, not a mega corporation! These organizations require
contribution from labourers in the form of energy to get work done as well as the basic mental
acumen to follow the series of instructions tabled as the “best practice”. This can be done by
every other person therefore the reduction in dependency on specific people.
Here are some of the principles of process driven organization:
1. Institutionalized Knowledge: The knowledge of a process driven organization lies not in
its people but in the system. The organization scans the environment to update its best
practices with regards to every activity that needs to be performed. This procedure is than
explicitly documented. Any literate person with basic domain knowledge can read and
follow the series of steps. In recent years even computers have been programmed to do so
and automation of tasks has become possible.
2. No Limits On Time: A process driven organization has virtually unlimited time. Since
there is a mechanism created to transfer the skill from the system to any person as and when
required, the system can expand almost endlessly. This means that if a process driven
organization finds constraints on its labor hours, it can simply hire new people and train
them as opposed to people driven organizations which would have to forego the
opportunity.
3. Self Governing Mechanism: A process driven organization exercises control through
various actors and systems in the organization. Data regarding various activities is compiled
and measured on a regular basis to prevent any immoral acts. Behavior of the system is
governed by a set of pre-determined rules and policies.
4. Easy Replication: The best feature of a process driven organization is that it can be easily
replicated. Hence if an organization wanted to replicate its operations in another continent,
it could take the same system and implement it with minor modifications. This gives the
organizations an edge. Scalability is an important characteristic for the organization to grow
and function in the long run.

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5. Going From People Driven To Process Driven

Going From People Driven To Process
Driven
A process driven organization has certain obvious advantages over a people driven organization.
Many old fashioned entrepreneurs still prefer to be people driven for the fear of losing control
over their organization. However a large majority still aims as process oriented as the ultimate
way to create an organization. Many have tried and failed because they have not truly understood
what the concept means. Below is an explanation of the same:
Documenting Processes Does Not Make You Process Driven
Many corporations believe that if they explicitly document their process and provide it to their
employees as a reference manual than they are being process driven. There are certain flaws with
this approach which are as follows:
Firstly the processes which are generally documented are operating processes. This means that
they are just processes which transforms inputs to outputs in the normal course of business.
Higher order processes such as control operations which ensure processes are being followed as
intended as well as processes which need to exchange information with the external environment
and make decisions still largely people driven. This means that laborer’s job has been
streamlined, all decisions are still constrained by the people approach. A truly process driven
organization is a learning organization. The description of such an organization is mentioned
below:
Learning Organization: The Real Test
 Ability to Scan The Environment: A process driven organization will have a process to
regularly scan the environment. They will take the ability of the experts to scan the
environment and map it into a mental model. This model will then become a series of steps
which can be implemented as a process for environment scan.
 Ability to Identify Opportunities And Threats: There must be processes set up which lay
down best practices to help ensure that you document the moves of the competitor and the
changes in the technology as well as demographics in the marketplace. Once again the
challenge is to create a mental model of an expert and use average people to get above
average results.
 Ability to Adapt: The organization must then be able to provide the necessary signals to
the required departments to adapt. The process of adoption must be quick and non
disruptive. Consider for example, had Ford Motors seen the Toyota inventory management
process in time and streamlined itself to compete, the Japanese legend would not have born.
A large number of business upsets are because of the arrogance and ignorance of the mega
businesses. This is because the process of environment scan and adoption is people driven.
To standardize it is one of the biggest challenges facing business today.
 Ability to Manage Complexity Arising Out Of Growth: While it has been said that
systems can be easily replicated, it is easier said than done. As businesses grow larger, the

number of rules increase and many of these become self-contradictory or self defeating.
Siloization takes places and business is divided into functions. Hence processes also have to
ensure that they effectively manage such complexity to actually make a company less
people driven and more process driven.
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5. Components of a Process
Components of a Process
1. Events: Events are the conditions which must exist for the process to be performed. It is
something that happens as opposed to something that is done on purpose. It can think of as
the effect which occurs after sufficient cause is provided. Each process starts and ends with
an event.
2. Tasks: A task is the smallest unit into which the activity can be broken down. Breaking it
down is not feasible for the purpose at hand. The business process describes the different
activities as well as the interrelationship between them. It is important to note that inter-
relationships are more important than the tasks. In any structure, the whole is greater than
the sum of its parts. While conducting BPM exercises, one must therefore have a synergistic
view.
The number one problem with BPM today is that most of the practitioners are unable to
understand the system viewpoint. The employees of the same business have conflicting
objectives. Therefore a human resource professional may end up optimizing their process,
but may have an adverse effect on the functioning of a marketing department. Thus
problems are merely being shifted than actually being resolved. A good understanding of
how the process connects to other activities and processes will help solve this problem and
achieve sustainable progress.
3. Decisions: There might be certain decisions which may have to be taken as the part of a
process. Leaving the decisions up to the people involved has undesirable consequences. It is
likely that in the absence of clear guidelines, the decisions taken by different people will be
different. This will create inconsistent experiences for the customers and bring down
quality.
As an example consider a leave granting process in any big organization. There are explicit
rules which define the number of leaves that a person can take as well as the procedure to
get them approved. Thus although it may look like the manager is taking the decisions with
regards to granting leave, all they are doing is following a pre-defined procedure. Thus no
matter who the manager is, the decisions will always remain consistent because they are
taken on the basis of rules rather than on the basis of who is involved. Such rules are
usually laid down as if, then and else conditions in the process.
4. Inputs: Until gives inputs, a process cannot function. The correct inputs are like the correct
food for the process. Just like eating unhealthy food makes us unhealthy, giving wrong
inputs makes the process unhealthy and inefficient. Here are some common inputs required
by a process.

People: Processes require people with the correct aptitude and attitude. This is why
breaking down of tasks is so important. In a process driven organization, you can arrange
for an unskilled person to do the mundane jobs while a skilled person can be deployed to do
the important jobs. Matching skills with task requirements brings down costs and increases
efficiency.
Raw Material: Raw materials need to be made available in a timely manner and at least
costs. There are companies which have built procurement processes as their core
competencies.
Information: The correct information needs to be made available to all the entities in the
process. The worker must have the skill and must be well versed with the procedure. The
manager must get continuous feedback to ensure that the production is on target and as
planned.
5. Outputs: The outputs from the process must be continuously monitored. This will help in
measuring the effectiveness and efficiency of the process and suggesting changes as and
when required.
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5. Fredrick Taylor View on Processes
Fredrick Taylor View on Processes
Fredrick Taylor was one of the earliest thinkers in the field of business process management and
also one of the most controversial figures. Some regard him as the guru who gave the world a
new paradigm called scientific management while others (especially labor unions) regard him as
the mastermind who created conditions suitable for the exploitation of labor. However these are
views on how gains which result from increased productivity be shared between the capitalist
owner and the laborers. Regardless of who gets the benefit, Fredrick Taylor can be credited with
showing the world a pathway to increase productivity i.e. obtain more and more outputs from the
same inputs.
Here are some of the salient features of his theory known as “Theory of Scientific
Management”
 Knowledge Transfer: Taylor looked at businesses from the process point of view. He soon
realized that various inputs required by the process were held by different people and
conflicts amongst those people were creating inefficiencies. He therefore looked at the
contribution of laborers to the business and analyzed that they were contributing two things
to the processes viz. energy (physical labor) and specialized knowledge that they had
acquired while working. He realized that physical labor was available in the factor markets
and was not expensive to hire.
However at the same time knowledge was both rare and expensive. His theory therefore
advocated that knowledge from various workers be captured into a system. Thus the
organization would become knowledgeable and not individual workers. This skill set should

be managed in such a way that it can be transferred to another employee when required
thereby reducing the bargaining power of laborers and reducing disruption of effective
functioning of business. In his own words he wanted to transform craft production into
mass production.
 Reducing Complexity of Tasks: Taylor advocated time and motion studies to ensure that
each hour of labor be spent in the best possible manner. His method advocated observation
and documentation of each activity performed. The next step was to break the activities
amongst different set of people capitalizing on the principles of division of labor proposed
by Adam Smith.
 Applying Best Practices: Taylor believed that processes adhere the principles of
equifinality. This means that there are multiple ways of transforming the inputs into
outputs. For instance if you wanted to go from point A to point B you could use a boat, an
airplane, a car, a train etc. However given certain constraints one way will be better than the
others. For instance, if you want to go fastest the airplane is the best choice. Similarly he
believed that it was the management’s task to find out the best procedure to be followed and
create a best practice. The worker was then supposed to diligently follow it to obtain the
best possible results.
 Increase in Labor Productivity: Taylors methods were known to bring about a revolution
in the field of labor productivity. This is because time and motion studies ensured
optimization of labor as an input. Also the loafing time was reduced.
Protests against Taylor’s method call it the “machine model”. They think that this model reduces
labor to a mindless task and stalls the mental development of human beings. Laborers are like the
parts in a machine that perform the same task repetitively without thinking. Slightest deviation
from adopted best practices are discouraged by negative incentives that have been imposed on
them.
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5. Japanese View on Business Process Management
Japanese View on Business Process
Management
While Fredrick Taylor’s scientific management had help create huge American corporations that
were quick to adopt the viewpoint, the 1970’s saw the emergence of Japanese corporations.
These corporations were very small at the end of World War-2 when Japan had been
economically devastated. However within two decades, a group of Japanese companies
completely turned the tables on the Americans. The most notable examples being companies like
Toyota, Suzuki, Nissan and Honda. They had defeated the American giants of Ford Motors,
General Motors and Chrysler on home turf.
The sales of Japanese imported cars were outstripping the number of local cars sold even though
there were high import duties to act as trade barriers. This brought the Japanese philosophy of
process to the world’s knowledge. Since it had exploited loopholes in the hitherto invincible

“Scientific Management” theory, it became even more popular. Here are the concepts laid in the
Japanese viewpoint.
The Flaw in Fredrick Taylor’s Philosophy
Fredrick Taylor had created an immaculate system to create a process at a given point of time.
However, he forgot to take into account the dimension of time. Simply put Taylors methods were
good in their heyday, however the world was a dynamic place. New and new technologies were
being introduced every day. These new technologies were capable of changing the best practices
of many businesses. Organizations like Ford Motors did not realize that their best practices were
no longer the best practices at all. One particular example is about the falling prices of
information technology and computing and the consequent utilization of these technologies by
Japanese in monitoring their inventory real time cutting significant costs. Hence the Japanese
viewpoint teaches the world that processes are not static and should not be considered that way.
There are changes which affect the price and availability of inputs like labor, technology and raw
material. An effective process keeps a good watch on the changes and continuously improves to
be abreast with the market. The focus here is not only on creating best processes but ensuring
that the best processes remain best over an extended period of time.
Principles of Japanese Way of Business Process Management
Some of the principles of the Japanese way have been mentioned below. However it is essential
to understand that they are mere tools and not bigger that the concept itself. The tools are as
follows:
 Lean: Japanese believe that quality is that which is right for the purpose. Anything less
brings dissatisfaction, anything more increases costs and makes products unaffordable. The
rethink the whole process and each activity from the point of view of the customer. They
consider the amount of value added at each stage vis-a-vis, the costs generated at each
stage. Activities of questionable value are either eliminated or modified.
 Kaizen: The Japanese built the concept of small improvement in their business. They made
it the responsibility of the workers in the organization to suggest better ways and the use of
newer technologies that could add more value to the process. Since technologies were
adopted as and when they became available, the businesses never lost track.
 Six-Sigma: The focus here was on doing things right. The Japanese created an immaculate
methodology to create a system in which only 3.14 defects per million were tolerable.
The philosophy enabled Japanese companies to do the right things and do things rightly enabling
them to compete and outmaneuver American giants.

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5. Hammer and Champy’s View on Process
Hammer and Champy’s View on
Process

After the Japanese wave of business process management came the concept of Business Process
Re-engineering which rocked the world of BPM. The idea of BPM and the resultant benefits
have been mentioned below:
What about Those Companies That Did Not Change
As said earlier, the Japanese companies were able to understand the dimension of time and
changing technologies and defeat the American behemoths at their own home turf. One must
understand the quantum of small improvements that these companies would have made
overtime. Assuming that this continued for five more years, it would be reasonable to conclude
that the Japanese process would have become far more superior than that of Ford or General
Motors.
Incremental Changes Had Made A Big Difference
This did happen in reality. Companies that were diligently following kaizen and six sigma had
reached a level of efficiency which looked out of reach of the competitor organizations. These
organizations therefore had to take a quantum leap to ensure that they are on the same page and
are competing. Therefore there had to be a method which would help them cover the miles of
distance that the Japanese companies had covered in years in an instance. They wanted to do
something radical and jump the Grand Canyon of slow and incremental changes. Thus was born
the idea of Business Process Re-Engineering.
A Methodology for Radical Changes
The BPR philosophy propounded by Hammer and Champy advocated a fundamental rethinking
and redesign in the business process. This was implemented when the business found itself in a
state when their processes were no longer relevant to the environment that they were in. The
methodology was the same. For instance each activity would be looked at for its business value.
The whole process will be redesigned from the customer point of view and new technologies will
be implemented. However, the changes were so radical that change management programs had
to be run to ensure that the workforce is able to keep abreast with the changed methods of
execution. It was ideally meant for organizations that for some reason had stayed behind in the
continuous improvement race.
Not Only For The Obsolete
Innovative uses of the BPR methodology had also been sought. Instead of taking the quantum
leap of technology to cover lost ground, many companies have used BPR methods to take the
leap forward, thus creating a methodology which rendered the competitors obsolete.

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5. Different Levels of a Process - Viable System Model
Different Levels of a Process - Viable
System Model

An organization can be viewed as a collection of processes. At the grass root level, an
organization is nothing but an arrangement of humans and technologies in a specific manner to
achieve pre-determined objectives. However, work is divided amongst various processes to
increase efficiency and effectiveness. However the functions of all processes are not the same.
There is considerable ambiguity with regards to how many types of processes actually exist to
make an organization viable and independent.
One such paradigm has been offered by Prof. Stafford Beer, wherein he talks about at least 5
different levels on which processes need to function to make the organization viable. The model
is taken from the analogy of human mind which directs the body at different levels. The model is
called the Viable System Model and has 5 levels of processes namely S1, S2, S3, S4 and S5.
Although a detailed description of each of these levels is beyond our scope, here is a basic
introduction to create a basis for further discussion.
Viable System Model: Process Levels
 S1: This level is comprised of the basic activities that the organization needs to do. A better
way to understand this would be to consider it the operations department of an organization.
It assumes that all inputs have been provided as and when required and is concerned with
efficient processing of those inputs and their conversion into the desired outputs.
 S2: This level is composed of all the supporting functions like HR, Finance, and Marketing
etc. The objective of this level is to ensure that S1 gets all the inputs like men, money and
materials as and when required. Any delays or bottlenecks at this level have their effect on
the efficiency of S1 activities. These groups of activities are also called “Support
Functions” in contemporary management jargon.
 S3: This level is concerned with oversight and control over S1 and S2 activities. Their
primary function is control over the operations of the organization. This is the most
important part of the internal organization of any firm. If the control procedures are not
efficient enough, the principal-agency problem rears its ugly head. Simply put this means
that moral issues arise and working for the best interest of the organization may not be the
best choice for an employee. Therefore control systems are required to prevent this from
happening by keeping a vigilant watch.
 S4: This is the beginning of higher order systems. The focus here is more focuses towards
the environment. The existence of any organization is contingent upon an environment. For
instance there must be a certain level of demand to consume the output of the firm, certain
level of materials and men to provide input for the firm and so on. Any changes in the
factors have consequences on the organization. Therefore, S4 processes are meant to keep a
watch on the environment and provide information so that necessary changes and
alterations can be made. This is usually the middle management of an organization
 S5: This level looks at the internal and external situation of an organization and tries to
align both of them. These processes are usually called “strategic” in nature and are under
the direct oversight of senior management. The primary activity here is decision making
and effects are seen throughout the organization and its environment.
This is a very comprehensive level of detail covering all aspects of the structure and arrangement
of processes. Usually a simpler approach is followed which divides the processes into three
groups:

 S1 and S2 form the operational group
 S3 forms the control structure
 S4 and S5 are called strategic in nature.
They have been further explained in subsequent sections.
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5. Operational / Transactional Processes
Operational / Transactional Processes
Perhaps the most frequently used and the most important type of processes in any company are
the operational processes. These are processes which define the primary activities that a
company needs to perform in order to successfully execute its business.
It is very important to understand the concept of value stream and map the same before
beginning to develop operational processes. After all the process ought to be designed from the
point of view of the customer. They are the ones that are going to finance the entire organization.
As we know that processes can be defined with the help of inputs, outputs, sequential activity
and an objective, let’s see how to put the pieces of the puzzle together to manage and improve
business processes.
The Role of Inputs: Inputs are required by every process to perform work. Inputs may be in the
form of men, money, material, machinery, knowledge and information. It is important to
understand that some inputs like men, money and material are approximately proportional to
their usage. This means that the more you use of them the more it costs you. Hence the objective
of any operational process is to ensure that resources are utilized in the most conservative
manner possible. At the same time other inputs like knowledge and information have little cost
and can improve the efficiency of the process drastically as we shall see later. The objective is to
use them to reduce the amount of inputs required thereby bringing down the cost.
Search for the Best Practice: It is important to understand that processes follow the principle of
equifinality. This means that the same process can be designed in “n” number of ways.
Considering your objective in mind, all the possible alternative ways must be explored.
Break free from the traditional mindset and use some lateral thinking to develop alternatives
before a choice is made. The idea is to choose one best practice which will meet the company’s
objectives best. However it is important to understand that even after the choice regarding the
best practice has been made, a company must be constantly on the vigil to ensure it doesn’t
become obsolete. Technologies keep on evolving over time and along with them, best practices
have to evolve too or else one stands the risk of being rendered obsolete by a well informed
competitor.
Standard Operating Procedure: Once the process is decided it must be documented and
created as a manual. This manual must then be given to all employees during their training. One
must ensure that the process is built in such a way that only the best practice can be followed. If
the employee has choices between alternative courses of action, the design is faulty. What is the
point of studying alternatives and coming up with the best one, if the employees are not going to

follow it in a standardized manner? This standardization creates uniform levels of service and
standardized quality no matter where the service or product is delivered.
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5. Control Based Processes
Control Based Processes
To function efficiently any organization has to achieve “homeostasis”. This word is used to
describe the state of affairs wherein an organization adapts to its environment and continues its
normal operational activities. At a human level, our ability to adapt to hot or cold weather and
continue living is an example of “homeostasis”. At an organization level, IBM’s move from the
worlds leading computer hardware manufacturer to software consulting firm can be an example
of homeostasis. IBM changed to the changers in environment. Control processes strive to bring
about this condition of homeostasis in the following manner:
The Principle of Feedback
All control procedures in the world are based on the simple principle of feedback. This means
that the processes constantly engage in a two-way communication. As and when the
communication signifies a deviation from a pre-established norm, corrective mechanisms are
activated.
A good example would be how thermostats work to control temperature. A thermostat is
designed to maintain a given temperature, let’s say 18 degree Celsius. The thermostat therefore
continually measures the result of its own actions. If the temperature goes above or below the
defined temperature (18 degrees Celsius), corrective action is initiated and homeostasis is
maintained.
Deciding the Metrics
In case of a thermostat, defining metrics is a lot easier. However organizational processes are
complex and need more sophisticated metrics to understand the state of affairs. Consider a call
centre operation for instance. The objectives are many and varied, sometimes even conflicting.
The objective in call centers is to ensure that calls are taken at the maximum speed to ensure
agents and infrastructure is fully utilized. Also customer service and quality parameters have to
be maintained. How would a single metric define the state of affairs in such a case? It cannot,
therefore composite metrics are composed. However the principles remain the same. These
numbers are monitored and corrective processes initiated just like the thermostat example.
Avoiding Conflict Metrics
Although it may seem obvious that one must ensure that the metrics must not conflict. Or else it
will lead to ambiguity and disorganization. But when organizations grow into MNC’s and have
operations spread across various continents, this does not remain very obvious. There must be a
separate process to ensure that all divisions of the organization are aligned towards achieving
their goal.

Removing Human Bias
Another important issue is to ensure that the feedback is unbiased and a true representation of the
actual state of affairs. For instance, if a manager reports what his/her subordinated performance
is, there is chance that the manager may misrepresent the case and the whole control process
becomes pointless. If a manager can rig the metrics, they can rig the whole control process.
Take the case of Nick Lesson of Barings Bank Singapore who was hiding his own losses in a
Suspense Account and finally brought down the whole bank because of the failure of the process
to ensure automated control.
Reducing Time Lag
The idea of the feedback process is to ensure preventive measures. It is for this reason, that the
feedback time be as small as possible. Nowadays real time systems are available that enable
managers to keep a watch on the metrics and initiate corrective action as and when things
happen. This minimizes the damage possible.
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5. Strategic Processes - Meaning and its Features
Strategic Processes - Meaning and its
Features
These are the top level processes that an organization is exposed to. These include tasks that
need a high level of intellectual capability and will have wide spread effects in the structure and
functioning of the organization. The nature of these processes can be compared to those that the
human brain performs.
Here are some of the characteristic features of these processes and what makes them so
challenging and interesting.
Multiple Sources of Data
A strategic process is concerned with making decisions. Decisions are made only after data from
various sources is received. This data is received from both within the organization as well as
from the environment outside the organization. To add to this, it is the job of the management to
ensure that the data is relevant and credible. Hence strategic processes face a data overload and
also a possibility that the data may be incorrect. It is this decision making in the face of
uncertainty that makes designing a strategic process challenging.
Converting Data to Information
It is quite possible that an organization may have all the data related to the decision at hand, but
it may not have the expertise to make sense of the data. For instance, in hindsight everyone sees

the Sub-prime mortgage crisis as inevitable, but some of the brightest managers in the world
could not see it coming despite the obvious signals in the data.
Strategic processes therefore must also ensure that the relevant skills are present in the system in
the form of human or artificial intelligence that will help convert data into actionable
information. A big leap forward in this regard is the idea of business intelligence systems.
Taking Decisions
Even when actionable information is available in front of the management in the form of
alternatives, the payoffs are unknown and uncertain. This is what makes it difficult to create a
science of decision making which is right now an art.
Is It Possible To Create Standard Operating Procedures In Strategic
Processes ?
There are some who believe that strategic processes cannot be dehumanized. Although they are
processes, they still are dependant on people and their intellectual capability. A standard
operating procedure in this regard is only as possible as the standard operating procedure to
attain greatness or nirvana!
Proponents of this theory believe that a skillful team is required at least at the top. This is
justified as the reason behind outrageous executive compensations. However there are others in
the field of artificial intelligence who are trying to find a mental model that can replicate the
intelligence of these great business leaders and make it process oriented.
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5. Aligning all Processes - Importance and Challenges
Aligning all Processes - Importance
and Challenges
Now, since we know about the different types of processes that an organization has, it is essential
that we understand that these are just the pieces of the puzzle. How these pieces fit together is
what creates a masterpiece or an average organization. However, understanding the components
has given us a clear idea of what an excellent organization ought to do:
 Manage its day to day affairs effectively and efficiently
 Have control over its internal workings driven by constant feedback
 Be responsive and proactive to changes in the outside environment.
But achieving these tasks consistently in the best possible manner is contingent upon the ability
to design impeccable processes and put them together in a seamless system. Here are some of
the challenges that one expects to face in this endeavor:
Processes Fit No Fixed Pattern
Although we have succeeded in figuring out the component processes, there is no fixed formula
for putting them together. It is very similar to the study of the human brain, the functioning of

which continues to be mysterious and illusive. This is where the skill of the entrepreneur comes
into action.
Idea of Complex Systems
What makes it so difficult to assemble the component processes into a system is the idea of
complexity. Complexity means that all the processes are inter-related and have many interaction
points. Hence a small change can have a cascading effect throughout the organization. Also
information is being constantly produced in the organization. It is difficult to aggregate them and
make sense of them so that feedback can be used to initiate corrective action. Complexity is a
very large number of inter-actions happening at any instance within the system.
Idea of Dynamic Systems
To add to complexity, systems are dynamic. This means that they exchange energy and
information with the environment on a real time basis. Systems are never in equilibrium but
rather always searching for equilibrium. For instance consider the recent sub-prime mortgage
crisis. With the collapse of Lehman Brothers many companies had to write off huge sums,
Lehmann owed them. The speed at which a highly rated company went bankrupt shows the idea
of dynamicity. A few months earlier anyone would have given credit to Lehmann Brothers. But
at that time, it would have been sheer folly to be associated with Lehmann in any way. This
shows that there are no rules in a dynamic system as everything is susceptible to change.
Concept of Variety
The complexity and dynamic nature of an organization combine with variety to produce an
incomprehensible system. Variety is the idea of possible changes in the environment. The idea is
to forecast the possible states an environment can take and be prepared with a plan for each of
these states. This is known as Ashby’s law of Requisite Variety. It states that only variety can
combat variety. Hence to ensure that an organization maintains homeostasis, the variety of
corrective actions must be greater than the variety of the environment.
Managing A Complex, Dynamic System Exposed To Variety
Organizations all over the world are researching ways and means to successfully manage
complex dynamic and variable systems. However at the moment, it is a game of imperfections.
The organizations with the less imperfections i.e. relatively stronger systems is a better system.
As a summary, here is what makes it difficult:
 The number of scenarios that an organization can be exposed to is very large and
unpredictable. (Variety)
 These scenarios can go on changing very fast (Dynamic systems)
 The effects these scenarios have on the organization are difficult to understand and manage
(Complexity)

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5. DMADV Methodology - Meaning and Rules for Implementing DMADV

DMADV Methodology - Meaning and
Rules for Implementing DMADV
DMADV is a six sigma methodology. It is used to design new processes or products where none
exist and get it right in the first time.
This is a part of the DFSS “Design For Six Sigma” concepts which place focus on creating
processes right the first time.
The focus of DMADV is on quantifying the customer needs in terms of specifications before
trying to improve them. This reduces the ambiguity as well as provides a measurable basis for
measurement of the improvements.
Purpose: The purpose of DMADV exercise is to build a new process or to re-engineer a process
completely. It required a constant eye on the needs of the customer and finding the best solution
to fulfill them.
The steps involved in the DMADV methodology have been outlined below:
Rules for Implementing the DMADV
Define Customer Needs: The DMADV begins by helping define the customer needs better. The
difference is not trivial. While methodologies like DMAIC begin by defining the process
requirements, DMADV is customer focused. The orientation is towards studying the implicit and
explicit needs of a customer. Customer need not be a person or even an organization. The
process that uses your output as its input can also be your customer. Hence the emphasis is on
backward induction. One starts be thinking how they want things to be and work backwards.
Measure Specifications: At this stage, consumer needs are translated into metrics that can be
measured. This is because unless something is measurable, it is difficult to objectively state
whether any improvement has taken place. Specifications of the way needs are being met and
they way they ought to be met give the BPM analysts an objective measure.
Analyze the Problem: At this stage the problem is analyzed on a deeper level. The behavior of
each activity in the process as well as the value it adds is observed. Finally the problem point is
found out and/or better ways of organizing the process are looked at.
Designto Meet Customer Needs Better: At this stage, many alternative processes are designed.
These processes are then looked upon as alternative solutions and the one that meets the
customer requirements best are chosen.
Simulate to Verify: The DMADV methodology uses objective statements to verify whether
consumer needs are being met better. Simulations are run after the new process is deployed. The
measurements are then compared with the previous measurements to ensure that improvement
has taken place and in the right direction.

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5. SIPOC Methodology - A High-Level Process Map
SIPOC Methodology - A High-Level
Process Map
The SIPOC methodology is one of the most useful concepts in the hand of a BPM expert. The
idea behind the SIPOC methodology is to view each process as a different organization in
itself. Each process therefore has its own suppliers, inputs and corresponding customers
and outputs. The aggregation of all these processes is the system. This helps define each process
with clarity. It also helps find what exactly is going wrong where. For instance, if there is a
system outage, then the process is not to blame. Corrective action must be taken to ensure that
the infrastructure suppliers perform better. Here are some of the salient features of the SIPOC
methodology.
High Level Process Map: A SIPOC methodology is in-effect a high level process map. It does
not have details regarding who is supposed to be doing what. Rather it defines the working
relationships between the various stakeholders. Some steps are required to effectively implement
the SIPOC methodology. They are as follows:
Acquaint Suppliers: A large number of issues arise in the process because the suppliers are not
well versed with the requirements. The suppliers could be internal or external to the organization
but that is not the point of contention. The idea is orient the suppliers and make them aware of
the rules, policies and procedures set for them. The Service Level Agreements must be explicitly
stated to ensure that the suppliers know exactly what is expected of them.
Scheduling Inputs: Based on the negotiations and inputs from suppliers, one must carefully
schedule inputs. Inputs can be in the form of men, money, material, machinery or information.
The inputs must be provided to the process in the most optimum manner. There are many
operations research techniques which can b e used in this regard to lower the cost levels and
increase the service levels.
Process:
The SIPOC provided an effective methodology to get an in detail look at the process. Some
things that are usually defined as the part of SIPOC are as follows:
 Boundaries: The process boundaries must be explicitly stated. Blurred boundaries lead to
ambiguity which further leads to non performance of tasks.
 Sub Processes: The intermediate processes and inputs and outputs must be clearly defined
as a part of the process definition.
 Process Owner: One person must be made accountable to see end to end execution of the
process. This person will take care of any intermediate challenges that come in the way.
Outputs: Outputs must be expresses in terms of deliverables which can be verified. Therefore
having outputs such as customer satisfaction is not correct. This can be the purpose of the

process, however the output will be something like the best possible service (define using SLA)
provided in the least possible time (Specify time in minutes). It is important to keep the outputs
quantifiable because what cannot be measured cannot be managed.
Customer: The customer’s job is to consume the outputs of the process as well as provide
feedback. The feedback could be related to the current performance of the process. It could also
be regarding the future changes expected in the outputs of the process. For instance, the sales
department is the customer of operations. They should communicate to operations if they see a
period of slow sales so that production can be adjusted accordingly.
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5. What is RACI Matrix - Rules for Using the Matrix
What is RACI Matrix - Rules for Using
the Matrix
A RACI matrix is a very important tool that can help in the implementation and correct
functioning of a process. The RACI matrix is mostly used to align the human elements in
the process. Usually there are many different people involved in any process and they have
differing responsibilities. A RACI matrix makes an explicit documentation of this and keeps as a
ready reference to be used at different stages in the process. Here is how the RACI matrix can be
utilized.
Responsible: This is the class of people who are ultimately responsible for getting the work
done. This may refer to the individual workers that perform the given task or it could refer to the
system in case the task is automated.
Accountable: This is the class of people that are accountable to oversee that the work gets done.
This usually means the immediate manager overseeing the work.
Consulted: These may be subject matter exerts who need to be consulted at the time of an
exception. There is a possibility that am unanticipated scenario arises in a process. These are the
people who will do the thinking and suggest any deviations from the Standard Operating
Procedure (SOP).
Informed: This is the class of people who have some interest in the performance of a given task.
This may be a manager trying to control the execution of the task at hand. Also this could be an
input signal to the other process.
Rules for using RACI Matrix
 Only One Responsible and Accountable Person: It is essential that only one person be
assigned the R/A roles. Having more than one person responsible for the same task
increases ambiguity and the chances of the work not being performed. It could also lead to
duplication of work and wastage of efforts and costs.
Having more than one accountable person again leads to the same problem. However,
having only one person accountable also leads to a problem. If the assigned person is

incompetent, the whole process may go for a toss. It is for this reason that there is often a
hierarchy of accountable people in place.
 Responsible-Accountable is Mandatory: The consult or inform roles are not mandatory
for every activity. It is possible that some activities may not require them at all. But the
responsible accountable roles must be assigned. Even if the system is performing the tasks
automatically, someone must be made accountable to see that it does get done.
 Communication with the Consultant: There must be a two way channel of
communication with the consultant. This communication is itself a task and must be
explicitly listed having its own responsible accountable persons. The important aspect is
that the communication should be two-way. Hence one has to ensure that adequate follow-
up is done and there is minimum time lag to complete the communication.
 Inform the Required Stakeholders: This is a one way channel of communication. It is
usually meant to be a signal for some other process to begin or as a control metric to ensure
smooth functioning of the same process. Usually this is automated but needs accountability
like other automated tasks.
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5. Documenting a Process - Importance and Its Benefits
Documenting a Process - Importance
and Its Benefits
While improving business processes, it is essential that one document the process as well as any
improvements made to it. Most consultants will document both the “As-Is Process” as well as the
“To-Be Process”. While many think about it as customary and do it for the same reasons, there
are other important reasons to document the process. Documenting helps the organization gain
long term primary and secondary benefits which have been listed below:
Why Is It Important?
The following are the primary benefits that any organization seeks to gain by explicitly
documenting their processes:
 No Operational Ambiguity: The first and foremost reason for documenting any process is
the fact that it reduces operational ambiguity. The next time there is a confusion regarding
who is supposed to do what or what are the best practises following which a task needs to
be performed, one can look at the detailer documentation and the dispute can be resolved.
These documents act as the store of collective organizational knowledge regarding the
processes and can be accessed by anyone in times of need.
 Training Material: The documentation also acts as training material to help new resources
move up the learning curve faster. Instead of making resources join on the job and learn
tacitly, the documentation can be used to give new resources classroom lessons about the

tasks that need to be performed. The documentation acts as the training manual and covers
the syllabus as well as provides notes to educate the resources. This can be supplemented
with on the job hands on floor visits for better and faster creation of efficient resources.
 Marketing Use: Documentation can also be used by the marketing and sales department to
truly understand what the capabilities of the organization are. This knowledge helps them to
truly determine what they can promise the customer and what can be fulfilled. With the
process knowledge, the marketing department will be able to make promises that the
organization can deliver. There will be no need for over and/or under promising which
causes heartburn and turmoil amongst the customers at a later stage.
Secondary Benefits
Apart from the apparent primary benefits which directly aid in the day to day operations of the
firm, there are certain secondary benefits which help the firm analyse and improve its process
continuously. Here is how documentation aids in this:
Available For Analysis:When process changes are documented in a detailed manner, they are
available for analysis as and when required. This helps the management in understanding the
knowledge that was used in designing the best practises that are currently followed. This also
helps the management decide whether the best practises followed are indeed relevant in the
environment they are operating in and saves them from expensive requirement gathering by
consultants where they are billed for by the hour.
Can Be Compared Version To Version:With detailed documentation in place, process
improvements can be tracked version to version. This means that the management will have the
previous 3 to 4 processes and their performance along with the current process and performance.
They can thus see them together and see what changes are producing what results. This will tell
them what they are successful at and they can continue doing so.
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5. Business Process Re-Engineering - Meaning, its Need and Technology
Business Process Re-Engineering -
Meaning, its Need and Technology
Hammer and Champy’s concept of Business Process Re-Engineering depends on harnessing
technology to optimize processes as its main driver. To understand why technology is imperative
for BPR, let’s first review what BPR does.
What is BPR ?
“BPR is the fundamental rethinking and radical redesign of business processes to achieve
dramatic improvements in critical contemporary measures of performance, such as cost, quality,
service, and speed.” Instead of starting with an activity flowchart, corporations are advised to
start with a clean slate. They are then told to look into why they perform the tasks the way they

do. A Process Engineer will look at the activities to be performed and how they can be
engineered to invest minimum resources and get maximum returns.
To illustrate the point, let us consider the example of Apple iPod. Apple rethought the way music
ought to be made available to the consumers. The changes it brought were:
 Radical: While all other music labels were selling music via brick and mortar stores, Apple
developed its iTunes software to sell music digitally. (Napster had made digital music
available through a P2P platform earlier, but was sued by music labels for copyright
violation)
 Fundamental: Apple sold single tracks as opposed to whole albums being sold at brick and
mortar shops.
Apple just kept in mind the end need of the consumer and reconsidered whether conventions
were required.
Why Re-Engineering the Corporation ?
Business process re-engineering is required in two cases:
1. The organization has discovered some breakthrough methodology which will revolutionize
its processes to give it more productivity and efficiency and therefore the entire process
needs to be changes.
2. The organization has failed to keep up to date with the changing technologies. Since it did
not continuously innovate, it is now faced with a “change or die” situation and business
process re-engineering which helps integrate latest best practices into the processes are the
only way to save the business.
How to Re-Engineer the Corporation ?
Information Availability: To fundamentally redesign a process, one must know the details
involved. Details from internal and external sources must be captured and provided to the
relevant people in the required time duration. This helps them to identify the bottlenecks and
work around better ways of reaching the desired end.
Information Sharing: A BPR project is usually facilitated by a cross functional team. Most of
the times, teams are spread across different geographic locations. Information needs to be
successfully shared amongst various people to ensure the reengineering goes as planned and
without hiccups.
Technology as the Solution: The new processes that are developed as a result of BPR initiatives
deploy the latest technology to achieve the desired end results. Usually it is e-Commerce,
automation or another technology driven solution that is implemented.
Business Process Re-engineering has become a very important buzzword in the BPM lexicon.
Many corporations who were late in realizing the power and importance of BPM have to
undergo re-engineering initiatives to ensure that they are still relevant to the marketplace. Re-

engineering initiatives are however expensive and may require certain downtime. This is the
reason they are resented by many corporations.
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5. BPM - Tacit Knowledge and Skills
BPM - Tacit Knowledge and Skills
The way tacit knowledge functions and the way IT functions make it inherently incompatible.
They are two fundamentally different techniques. One relies on gut feel and intuition whereas
other relies on explicit detail, logic and rationality.
To further understand why tacit knowledge is difficult to implement using IT, let’s look at the
details:
The Way IT Functions: IT is nothing but efficient and fast storage and transfer of information.
However to store anything in a computer as well as to get it to analyse, the instructions have to
be comprehensive and explicit. In case they are not, the program starts behaving in unexpected
ways and is said to have a “bug”. Computers function only on explicit detail once the method for
their analysis has been clearly specified.
The Way Tacit Knowledge Functions: Tacit knowledge on the other hand refers to knowledge
gained by an individual through education and experience that they are not explicitly aware of.
Consider the case of a manager, who can recognise the motivation of people and can speak to
them in a way that makes the worker feel that his/her goals are being achieved along with
achievement of organization goals. The manager inherently knows what kind of person he is
speaking to. But if you ask them to document what makes them come to the conclusion, they will
not be able to. Neither can they draw an exhaustive list of the types of people that are possible to
come across. In fact, no one can draw out such a list!
Incompatibility: Now, this makes the incompatibility quite clear. One relies on detail, the other
does not have any detail. It is like a black box. But organizations cannot continue to turn a blind
eye to tacit knowledge. In many cases, it is this tacit knowledge that is providing them with the
competitive edge. This is why the whole domain of knowledge management across organizations
have come into picture. Companies are losing billions of dollars annually for the failure to
effectively harness knowledge and make it a part of organizational knowledge.
The Solution: The solution that knowledge management has proposed is to have trained
individuals who will shadow the personnel with tacit knowledge. They will interview them and
observe them in action. They will they draw out a detailed mental map of the way these
personnel perform tasks. This can then be used by IT. The bottom line is that tacit knowledge
will be converted to explicit knowledge before it is used by IT.
The Problem with the Solution: The problems with this are manifold:
Firstly the entire solution depends on the expertise of the mind mapping individual. If he is not
skilful enough (and we have no way to verify), the whole exercise becomes futile. This is against
the basic principles of being process driven as opposed to being people driven.

Secondly there are cases where personnel deliberately withhold information and expertise. They
then use such information and expertise to gain bargaining power in the organization. How can
such knowledge be made explicit when attempts will be made to withhold it ?
These and many more questions need answering. Although IT has achieved a lot, it is still very
much incapable of dealing with tacit knowledge. Significant research is required in this field
to create a breakthrough solution.
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5. Continuous Improvement and Business Process Re-Engineering
Continuous Improvement and
Business Process Re-Engineering
Polar opposite to the concept of Business Process Re-Engineering is the concept of continuous
improvement. It was developed by the Japanese after World War-2. Whilst BPR relies on radical
change, lean management relies on small incremental change. It stems from Japanese term called
“Kaizen” which means small improvement.
The concept relies on successive small improvements to bring about a big change over a period
of time. Instead of changing the process completely, only minor modifications are made to the
process and over time they accumulate to provide big benefits.
Corporations such as Toyota and Sony have dominated global markets with the help of this
concept. Even Wal-Mart has deployed it to make its supply chain powerful enough to offer
EDLP (Every Day Low Prices). Here are some examples of continuous improvement and how
information technology contributes:
Inventory Management: Toyota Inc realized that it was occurring costs of over 26% per annum
for maintaining inventory. So were all the other car manufacturers. This inventory was
maintained because the process was aiming at local optimization instead of total optimization.
The inventory department was trying to minimize its own costs rather than total costs and so
were all the other departments. Toyota used technology to build an impressive forecasting
system. Then it streamlined its supply chain to ensure that inventory arrived Just in Time (JIT).
This cut all the storage, administration and interest expenses. Toyota could price better and still
reap higher profits. Toyota used continuous improvements in its forecasting, inventory
management and warehousing processes to gain a cost advantage over the others.
Logistics: Wal-Mart used processes to its advantage when it built a world class inventory
tracking system. It cut administrative costs and supply shortages as it built information systems
to share information with the suppliers. P&G could see when the inventory had fallen below a
certain level and could replenish it without Wal-Mart making any effort. The use of RFID chips
and barcodes enabled the Wal-Mart to track its customer behavior better and develop
relationships with them. Thus a small change like introduction of RFID coupled with other small
changes like automated ordering brought down the clerical costs of the purchase department and
also increased efficiency manifold.

Push v/s Pull Supply Chain: While most PC manufacturers in the US were reeling from falling
prices and rising inventory, Dell Inc found a way to use processes to turn the situation in its
favor. Dell used technology to sell its computers as opposed to brick and mortar stores saving on
overheads. But this is just a small part in the strategy. Dell’s masterstroke was to change the
supply chain from push to pull strategy. Dell would manufacture only when ordered. It used
information systems to ensure that when an order was placed, all its suppliers got it
simultaneously. They would then keep the order ready and Dell would assemble all the parts and
use a high-tech assembly line to build and deliver the PC in no time. The customer didn’t mind
waiting 4-5 days if Dell took 20% off. Even at this low price Dell was earning superior profits
thanks to the power of technology
Processes can also be used to solve a major problem called the Bullwhip effect in the supply
chain. It means that minor changes in demand are amplified as they move upwards in the supply
chain. The manufacturers anticipate larger demand, produce more and end up with excess
inventory. This problem has been curbed by using processes to develop a real time sales
monitoring system.
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5. Measuring Process through Balanced Scorecards
Measuring Process through Balanced
Scorecards
The Harvard Business Review in 1992 took the business world by storm when Kaplan and
Norton introduced the idea of balanced scorecard. They argued that even though strategic
management was being pursued as an organization wide goal in companies worldwide, in effect
they were doing a post-mortem of the business situation at hand.
Measurement was done only on the basis of financial information. Financial information
reflected past performance. There were no indicators of future performance as well as the
strategic resources of human capital, intellectual capital as well as streamlined resources that
were included in the measurement.
The move from cure to prevention
Citing this as the detrimental cause, Kaplan and Norton outlined a framework wherein
performance will be measured on multiple dimensions. The weights given to financial
parameters be proportional to their importance. The combined share of factors that predict the
future state of business had a greater weight than past performance. This move was critical as
managers would now have to ensure that they do not follow short sighted behavior to make their
performance look better. The number game had been changed to include qualitative aspects as
well.

Kaplan and Norton realized that processes were the way that a company performs its
operations. The superiority of a company is therefore directly related to the sustainable
competitive advantage that its process help it to gain over its competitors. Hence, not
monitoring or measuring the processes would discourage companies to place a continuous focus
on improving the processes. The balanced scorecard therefore recommends that processes get
equal importance (if not more) as compared to the financial indicators.
This recommendation by Kaplan and Norton and its worldwide adoption by the Fortune 500
companies gave a thrust to the practice of Business Process Management. Since every manager’s
variable pay would, to some extent, depend upon the improvement they bring in the process,
everyone in the organization started looking for ways and means to improve the process. BPM
was no longer the impetus of a handful of managers and executives located in remote locations.
BPM became the prerogative of each employee. The suggestion boxes that are seen in canteens
worldwide are a symbol of this movement wherein the management solicits BPM ideas from all
its employees and rewards those ideas which are found good enough to be adopted.
Measuring Process through Balanced Scorecards
Real time Data: First and foremost is the fact that information becomes available to
management when it is most required. A dynamic dashboard can be prepared which is updated
real time and managers can immediately identify any discrepancy and work to correct it.
Technology facilitates this real time transfer of data and arranges it in a particular format to
create actionable information for the management.
Adding dimensions to the scorecard: A balanced scorecard will not give undue importance to
any characteristic of a process. It recognizes that different processes can be measured by
different metrics. For instance, grievance redressal must be fast, even if it is a bit expensive.
Hence measuring this process on costs will lead it in the wrong direction. Most often, the
measurement is done based on a combination of metrics designed each process and given
weights. Instead of giving weights arbitrarily, technology is harnessed and Analytic Hierarchy
programming (AHP) is used to come up with appropriate weights that will ensure that no one
factor gets undue emphasis and tilts the organizations focus.
The Balanced Scorecard therefore brings the concept of BPM to the strategic level. Also it
provides a good mechanism to measure whether the process improvements are taking the
organization in the correct direction.
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5. Definition of Key Performance Indicator (KPI)
Definition of Key Performance
Indicator (KPI)
A KPI is a great tool to measure and control the performance of any given process. In
management jargon, there is a famous saying which says “That which cannot be measured
cannot be managed”. The whole process of control, therefore relies on real time measurement

and transfer of information from the site where the task is actually being performed to the control
room i.e. the management.
Definition of KPI: The KPI can therefore be thought of as a measurement that tells that
management the precise state of operations at any given point of time.
There are 4 components to any KPI.
1. What is being measured ?
2. Who is measuring it ?
3. At What Interval is it Being Measured ?
4. How frequently is the Information being transmitted to the Control Room ?
It is important that these 4 parameters are carefully defined keeping in mind the operational and
technical capabilities. Measuring the wrong KPI or measuring the right KPI in the wrong manner
can cause more harm than good to the organization that is measuring it.
The Relationship between KPI and SLA
While a KPI is a measure of performance, the Service Level Agreement or SLA is the ideal state
of those measurements. For instance our body temperature is a KPI for our health, while 98.3
degrees Fahrenheit is the SLA i.e. the ideal state of affairs.
Hence, if we were to control our health, we would create a mechanism in which our temperature
is being automatically measured. When the KPI deviates from the desired SLA i.e. temperature
deviates from 98.3 degrees Fahrenheit, it must send some sort of a message to the management
that management interference is required.
The beauty of KPI’s and SLA’s is that it provides required solutions in required time. Hence
management can take preventive action instead of having to cure the problems.
Algedonics: While BPM solutions have built in functionalities to report any and every deviation
from the SLA, it would not be in the best interest of the management. It is impossible for any
process to function at uniform speed, if it is being performed by humans. Even mechanised
processes do not function at absolutely uniform speed. Some level of tolerance, therefore needs
to be built in the control mechanism. The KPI’s and SLA’s should therefore allow for +/- 10%
changes. Anything which goes above this is serious enough to require management attention.
The 10% is a ballpark figure and may be different depending on the degree of automation and
criticality of the process. But the idea is clear, some tolerance level needs to be built in this
system or else the managements mailboxes will be flooded with deviation messages which do
not even represent an operational problem.

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5. BPM Notations - Gateways and Events
BPM Notations - Gateways and Events
Using Gateways

Gateways can split your processes into multiple paths. This is because the path which the process
will take at execution is based on conditions at execution. It cannot be defined while designing.
Gateways thus model all the options that the process has i.e. all the possible paths that can be
taken by a process at execution. Here are the types of gateways and when to use them:
Gateway
Name
Symbol Implication
AND
Gateway
An AND gateway, helps to execute parallel tasks. It diverts the workflow on all
pathways that meet into or it or come out of it. For instance consider the making
of a car. There are certain tasks which can be executed in parallel and this will
save time. Use an AND gateway to model such tasks in your Process model
OR
Gateway
An OR gateway will allow one or more routings based on certain pre-defined
criteria. For instance, if your customer is taking the car along with the service
contract, then the OR gateway will make both paths active.
But if the customer is taking only the service warranty or only the car, only one
of the process paths will become active.
Use the OR split when you are not sure about how many paths the process will
need to take from the gateway when it is executed.
XOR
Gateway
An XOR gateway is one which allows the process to take one and only one of the
paths that come in it or go out of it. This should be done when the process will
move along one of the many paths based on certain conditions.
For instance, a candidate appearing for an interview can be selected or rejected
but not both. Hence use the XOR gateway and define both selection and rejection
paths. Based on the input selected or rejected, the process-flow will be diverted
to one but not all of the relevant paths.
BPM Notations - Events
Event Symbol Implication
Start Event The start event signals a process to start. Each process can have one
and only one start event. It can be manual, automatic (timer based) or
message based.

End Event An end event completes the process. A process can have multiple
end events. This is denoted with a start event having a shading along
its circumference.
Intermediate
Event
An intermediate event is any event that takes place between the start
and end of the process
Message
Event
Message events are meant to increase the co-ordination between
different processes. A message event starts a series of steps in the
current process based on a message it has received from outside the
process.
For instance, the purchasing process should be started after it
receives a message from the store. In this case, the store is supposed
to pass on information to begin a process.
The messages can be automated to ensure that the execution takes
place on time and as desired.
Timer Event Timer events are useful control procedures. They initiate a series of
steps automatically based on the time which has elapsed after an
activity has been performed/ not performed.
The primary use of these events is to provide the customer with
service levels i.e. customer can expect a repair mechanic to reach
them within 24 hours.
They then notify the management is there has been no preparation to
send the mechanic after let’s say 16 hours.
A single timer event can have multiple escalation paths. For
example:
16-18 hours: Project Manager
18-20 hours: Delivery Manager
20-22 hours: Service Delivery Lead
Hence the escalation goes on till higher and higher levels till it gets
executed. There are therefore no chances of material information
being withheld since a program has been written to escalate it
automatically.

Ad-Hoc
Event
Ad-hoc events are events which have no defined time. These are
initiated by users with requisite level of access at any time within the
execution of a process. Termination of a customer order is one such
process. If the customer wants to cancel an order, the process must
be capable of handling these events.
An ad-hoc event is initiated by an authorised user in the middle of
the process to trigger a series of actions that replace the original flow
of process. For instance a termination of an order starts the
cancellation formalities and refund process and stops the processing
of an order.
Ad-hoc events may have defined users or a group of users. This is
usually the management or the supervisory level of users.
Ad-hoc events can be based on internal needs, for instance ad-hoc
reports or external needs such as the one mentioned above.
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5. BPM - The Problem with IT as a Solution
BPM - The Problem with IT as a
Solution
Although IT has been touted by the experts as being the bedrock of next generation of business
in which large organizations encompassing several thousand employees will seamlessly operate
in a global environment, there are a good number of issues to be resolved. However, as we have
already seen the merits of using IT solutions as BPM tools. The following issues need to be
confronted.
 Expensive to Implement: IT systems have traditionally been expensive to implement.
Although they streamline the processes and the return on investment is quite high, but a
significant outlay is required upfront. This puts them out of the league of small and medium
enterprises. It is only the big corporations that can afford them.
However the recent introduction of cloud computing has the capabilities to face the
challenge. Advances in technology are now helping smaller companies use software like we
use e-mail. One just needs to have an internet connection, no set-up, no servers, no
infrastructure required.
One good example of the same is salesforce.com, which charges customers on a per user
basis. Thus even small companies can have the benefit of good quality software irrespective
of their size.

 Long Deployment Time: IT systems have also been traditionally plagued with long
deployment times. Building a solution often takes months or years. However, the next wave
of BPM tools has reduced the time by at least 70%. Instead of building the whole system
from the beginning, one can combine pre-existing modules and tweak them to one’s own
needs. Cloud computing is another viable alternative with almost negligible time lag in
implementation.
 Inflexible Solution: Most companies have not built their IT systems all at once. It has been
built at different times, by different people and using different platforms and technologies.
The result is a series of applications that perform well within themselves but do not
communicate with any external application.
Since business functions in an integrated manner, it needs applications which do the same
as well. But integrating different applications to support a synchronized process has become
a difficult task. The IT companies are touting Service Oriented Architecture (SOA) as the
solution. A discussion about what SOA really is, is beyond our scope. However, it must be
noted that it is at a nascent stage and holds tremendous promise to make all system related
woes disappear.
 Dynamic Environment: The last issue is the fact that environment keeps constantly
changing. The system needs to be flexible too. IT systems need to live up to the challenge.
Till now IT systems do not have an answer to this issue.
The two biggest buzzwords in IT, SOA and Cloud Computing are most likely to resolve the
issues.
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5. The Urge to Solve Problems with Technology and How it is Often Wrong
The Urge to Solve Problems with
Technology and How it is Often Wrong
Technology and the Urge to Solve All Problems
The urge to create a perfect world has been there throughout the ages. However, whereas earlier
attempts at doing so were guided by people with hands on effort and intimate contact with the on
the ground realities, the present move towards using technology is often misplaced as it focuses
on using tools like social media without actually getting down to the nuts and bolts of on the
ground action. In other words, the problems being faced by the world need concerted action that
is bottom up and which involves action from those working directly with the victims instead of
top down approaches using social media that are out of tune with the ground realities. Of course,
this does not mean to say that technology cannot solve any problem, as there are many examples
of using technology as a means of spreading awareness and knowledge. The point here is that
technology requires human action in concert with each other and not necessarily one without the
other.
Limitations of the Internet

The other aspect of trying to solve all problems using technology is that the internet can do only
that much and not more. This means that while the internet is good for bringing together people
and as can be seen in the positive impact that it had on building better lives for many, it is indeed
an agent of change. However, the urge to fix everything using the internet alone must be resisted
solely because it has its limitations in that geographical considerations and the need to have on
the ground presence are factors that the internet cannot solve. Further, there is the added aspect
of the digital divide, which means that the majority of the citizens in the world do not have
access to the internet, and hence, the limits to what technology can accomplish are made plainly
evident here.
The Urge to Perfectionism
The third aspect is that the proponents of the lets fix everything using technology aspire for a
utopian situation that resembles absolute perfectionism. What these well meaning advocates
forget is that complexity and ambiguity as well as opacity and imperfection are built into the
world and hence, aspiring to social good must take into account all these factors. In other words,
the human condition can be improved only through sustained and concerted effort that takes time
and not the kind of instant solution based model that is proposed. Apart from this, the fact that
technology is value neutral means that it can be used for good as well as for bad. Hence, the
temptation to advance technological solutions for all problems might backfire because of the
same technology falling into the wrong hands to create havoc.
Final Thoughts
Finally, we must make it clear that this article is not a pessimistic one which dismisses
technology altogether. Just that we would like to make it clear that striving to use technology to
solve all problems must be based on realistic assumptions and as the subsequent articles detail,
the internet can indeed be used to deliver infinite progress provided some of the conditions
discussed here are met.
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5. Complexity Created by Technology Needs to be Managed
Complexity Created by Technology
Needs to be Managed
Incompatibility Creates Problems
Developments in IT have created more problems than solutions because of the “incompatibility”
among the various parts of the supply chain. Information becomes knowledge only when the
means to process it is in place and the process does not “distort” the message.
Like garbled voices coming over crackling phones in yesteryears, unless the heaps of data that
technology spews out is processed in a meaningful manner, the “zero point” potential of
information as useful knowledge is hardly realized.
For this to happen, the “gatekeepers” of the information, the regulators of the medium of
exchange and finally the consumers of this process all need to understand each other and “talk”

to each other much the same way conversations between groups of people result in dialogue only
when there is a bottom-line consensus as to the topic.
Marshall McLuhan famously said that “The Medium is the Message”. Hence, the next part of the
“connection” is in determining how well the medium is regulated with common protocols and
standards that service the medium. Finally, the end users or the consumers need to be aware of
their own potential as both purveyors or producers and consumers of content leading to what
Alvin Toffler calls “Prosumers” who produce and consume content at the same time.
Need for Synchronous Exchange of Information
With this background, it becomes apparent that unless all the parts of the grid are in sync with
each other there is progress and hence developments in IT have created problems of each part
being “out of sync” with the other.
Hence, the issues of internet censorship, controlling access to information and finally, the
ignorance of the users themselves create a potent and lethal cocktail where the promise of IT is
subsumed by the perils of each part being out of sync with the other. It is the position here that
there is no single entity that is responsible for the “noise”.
Rather, the issue here is one of “multiplicity” creating complexity and when one adds the “death
of distance” (with the medium being geography independent) to the brew, what one gets is a
virtual “tower of Babel” where the message is lost. Since there is no understanding as of yet
among all the IT companies on how to interact to produce synergies and with the regulators
maintaining neutrality without stepping in, the resultant problems have made it worse for
everybody concerned.
As happened in the case of Telecom with “Ma Bell” and with Big Pharma where size and
consolidation through mergers and acquisitions was the norm to control the market, IT
companies realised quite early on that unless they controlled all aspects of the supply chain in a
vertical as well as horizontal manner, they were unlikely to capture the hearts and minds of
consumers.
Openness versus Control
However, this was easier said than done since the whole edifice of IT is built around “openness”
where unless one part of the supply chain knows what the other one is doing in a transparent
manner, they cannot work together. Thus, even though Microsoft tried to own all the parts of the
supply chain, it found that nimble competitors like Google undercut its domination by offering
technologically advanced and user friendly software.
Hence, the point to be remembered about IT is that it is like a jungle with no one dominant
figure and since technology evolves according to Moore’s law as well as in leaps and bounds,
the dizzying pace of change means that there is always room for newer companies and newer
offerings that provide cutting edge solutions.
What this means is that without a clear understanding on what makes the structure and what
supports it, the old parable of blind men and the elephant is an apt metaphor where the various

actors are groping in the dark trying to understand the beast called IT with no single player being
in a position to “call it” correctly.
Though the solution to this might be found in monopolies like Microsoft that offer seamless
connectivity between different parts of the supply chain, as mentioned earlier, IT by its very
nature is not suited to the “big is beautiful” mantra and since IT is like a complex adaptive
system that has a life of its own and evolves according to the dynamics of system theory, any
attempt to “force” monopolies in IT is likely to fail.
Dumbing Down of People
Added to this is the shortened attention span that bedevils most users, options like using multiple
search engines to enhance the quality of web searching are unlikely to take hold since the minds
of the users are becoming “shallower” because of the fragmented way in which we think due to
the widespread use of IT.
The point here is that the original intent of IT was to encourage depth but with the profusion of
devices and gadgets and media (internet, games, multi-media) the end result has been the
“Dumbing down” of the average user. This has led to a situation where instead of harnessing IT
for meaningful purposes, we find ourselves getting lost in the deluge of information without
processing it into knowledge. Further, unless consumers understand the nuances of production of
content by themselves, the interaction between the aspects of producing content and at the same
time consuming content is likely to be a rocky one.
Conclusion
The need of the hour is a concerted effort by all stakeholders to evolve meaningful steps for
cooperation and understanding. Any media or technology that evolves over time needs a healthy
balance between all the components with enough regulatory oversight. Given the fact that many
judges do not understand the nuances of IT, the problem gets compounded as litigations take
time to resolve.
As Thomas Friedman points out, the “great sorting out” of the issues arising from who owns the
content, grey areas between giving free access and capturing user data as well as the
overwhelming desire of many governments to curb the independence of the medium have all
come together in a “perfect storm” that has grown beyond a menace to a full scale problem.
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