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Closing the Business Process Management Execution Gap

by Russell Keziere
Growing up alongside enabling technologies such as enterprise resource planning, BPM focuses on streamlining internal and customer-facing processes so companies can match the pace of market changes with changes to their own processes.

Business process management (BPM) is widely acknowledged as strategy that suits the nature and pace of today’s markets. Growing up alongside enabling technologies such as enterprise resource planning, BPM focuses on streamlining internal and customer-facing processes so companies can match the pace of market changes with changes to their own processes.

A critical element is an executive’s ability to view strategic metrics in near real time and effect front-line change. Over the last three to five years, the information systems that feed performance metrics dashboards have steadily improved, to the point where most companies have accurate, timely depictions of their companies’ operations. What they still lack, for the most art, is the second element of the equation: the ability to execute on that knowledge. This “execution gap” hobbles a company’s ability to respond to the market. Without an intense focus on closing the execution gap, BPM is destined to join the ranks of good ideas that never amounted to valuable action.

Understanding the Disconnect

We’re long past the point where any manager or executive would argue about the value of collecting, measuring against, and acting on data gathered from every corner of the enterprise. Performance management dashboards fed by operational data are becoming the norm as the pace of business outstrips traditional management models.

Business process management (BPM) and related systems (such as the balanced scorecard) are widely accepted as the right ways to plot sound corporate strategies.Although BPM’s philosophical base is secure, its mechanics are still evolving. To bend another metaphor, the BPM spirit is strong but the operational flesh remains weak. Companies see BPM and BAM (business activity monitoring) influencing balanced scorecard dashboards as a pathway to growth, stronger customer loyalty, and higher employee productivity. Acting on the intelligence that BPM systems yield, however, has proven a greater challenge and seems no easier than it was before BPM existed as a coherent vision.

The disconnect between BPM as vision and BPM as action is the very “execution gap” that has curbed its growth. Two major factors contribute to most of the distance in the execution gap: the ever-faster pace of business driven by unplanned change, and the “blindness” of corporate business systems to external data and events from sources such as partners, suppliers, and customers.

Technology systems are a major factor in surmounting these obstacles, closing the execution gap, and making BPM a practical as well as theoretical success. Today’s software vendors offer products that:

  • provide higher orders of reporting and analysis of internal processes and external events

  • create a synoptic view of all these events

  • offer an assumption that business can use as a measurement baseline

BPM technology provides enterprise information integration (EII), activity-based cost accounting, business analytics, opportunistic data aggregation, and dashboards that provide constantly updated strategic views of the enterprise. This technology comprises a major part of a larger BPM strategy that transforms intelligence and insight into concrete, revenue-producing activity at every level of the enterprise.

This article discusses the obstacles to BPM’s success as both a business philosophy and a change mechanism, and a potential solution to those obstacles.

Planning for Unplanned Change

Today’s business is done in hours and days, not the weeks and months of just five years ago. The Internet’s growth as a service-delivery channel makes customers and partners expect instant responses, be it in terms of new service offerings, completed transactions, or getting answers to their questions. These dynamics create unplanned changes—those forced on companies by factors outside their control by the market or regulators.

Among the factors that contribute to today’s greater unplanned change are industry consolidation, globalization, and government regulation. Consolidation in industries such as financial services, healthcare, and telecommunications continues unabated. Mergers and acquisitions make internal processes more complicated as the scale of everything multiplies, from product portfolios to supporting systems.

Globalization has made a tremendous impact on the rate of change, as many organizations have turned to overseas outsourcing to remain or become competitive. These far-flung supply chains are subject to unplanned changes that require an agile response. Finally, compliance with government-imposed reporting requirements, such as the Sarbanes-Oxley Act of 2002, adds another layer of unplanned change as regulators create and modify reporting rules.

Planning for unplanned change, while it may sound like an oxymoron, is imperative for organizations that want to keep pace with shifting market conditions and customer demands. Companies must have a mechanism for managing unplanned change, or prepare to see their market positions erode as competitors become more agile. Products, policies, and processes must be built with change management in mind, and so must the technology systems that automate them. The foundation for building such systems will grow from an unlikely source: compliance.

Compliance, although a font of unplanned change itself, also holds the key to managing unplanned change. It is a great leveler because it requires every company in themarket to re-engineer its reporting machinery at the same time, so the playing field is perfectly level. Compliance is a boon to BPM efforts because it creates mechanisms for effecting change quickly and efficiently. While compliance is undeniably a costly burden, the long-term result will promote BPM adoption. Forcing management into a cycle of continually revising its goals and objectives is the basis for a results-oriented change management infrastructure. As companies build the cross-functional, process-centric systems they need to comply with regulations, they’re building a BPM infrastructure.

That theory is being tested on the front lines of business. A senior database application manager at a global aerospace manufacturing company confides that the project management and change requests his company built to improve compliance procedures improved change management processes across the board by obliging business sponsors to justify and show strategic alignment for new projects. IT wastes much less time on poorly thought-out, dead-end projects.

The signal-to-noise ratio has improved, so they spend more time working on more projects that have greater impact on the business, with prospects for longer shelf lives. This is a good example of accountability at work; higher productivity because governance requirements have given the business a default baseline of processes to work and measure against.

Sense and Respond

The second major challenge curbing BPM adoption is the need to broaden its purview. BPM systems must include unstructured and complex event data within the enterprise BI dashboard. The balanced scorecard becomes imbalanced quickly if the measurement criteria exclude changing events and discernible patterns found in both internal and external enterprise events. Event, causality, time, and event abstraction are our new data attributes.

Wal-Mart provides a case in point. The company depends on Chinese manufacturers for 70 percent of its low-priced consumer goods. Wal-Mart is considering electronic product code (EPC) identifiers embedded in RFID (radio frequency ID) chips to track individual items through the supply chain. EPC codes are next-generation bar codes that identify what kind of product has the tag as well as the specific unit. Wal-Mart, and the retailers and manufacturers who will inevitably follow it, will be swimming in an ocean of data as products are removed from store shelves and inventory fill orders are handled dynamically. How many event patterns will this new universe of data yield? How will companies be able to best take advantage of it?

The BPM systems that do this kind of analysis must be able to detect patterns in the data and, if warranted, take action. Consider the Barings Bank fiasco. Rogue trader Nick Leeson traded derivatives on multiple exchanges to hedge his hedges. If he had been working within a rulesbased BPM system that enforced corporate policies at the front lines—or that at least detected patterns of questionable activity—it could have suspended his trading privileges until a manager could review his transactions.

Such a sense-and-response capability supplements performance management by listening for, detecting, and correlating patterns. Sense-and-response capabilities can work on the plus side of the ledger, too. Think of the potential of the data in those soon-to-be-ubiquitous RFID chips, if companies can exploit it. If Wal-Mart can import $12–$20 billion worth of goods a year from China, how much more efficient could they be in the future with RFID-enabled supply chain?

The ability to process such complex external datasets and events is still emerging. It is now included in the referencearchitectures and roadmaps from major IT vendors such as Oracle and IBM. Business performance managers and management technologies that remain blind to this larger world of event data will continue to be surprised by change.

Bridging the Execution Gap

Combine unplanned change with relative blindness to external events and you have the execution gap. Technology systems are a key part of closing the execution gap. To do that, however, they must overcome one of their own limitations—the oft-mentioned silos that deny companies a holistic view of their customers, suppliers, partners, and markets. Several IT “flavors of the month” have emerged over the years to end the silo problem. None of them has proven to be the answer.

Web services were supposed to crack the silo barrier by using XML to transcend the barriers between enterprise applications. Instead, Web services gave companies a confounding miasma of conflicting standards and no inherent ability to police their own data integrity. The enterprise service bus (ESB) turned out to be a similar Trojan horse, at least regarding unrealized expectations. There are now many flavors of ESBs, from multiple vendors, and this proliferation requires yet another layer of translation. We must now navigate across ESBs with their various dialects in the same way we convert one variant of SQL to another to help transform data between databases.

Web services’ and ESB’s shortcomings leave us to face the familiar problem of executing informed business processes and effectively messaging real-time operational changes. Without those capabilities, businesses cannot perform against their own balanced scorecards. Business processes span applications and trading partners, but procedures and practices are discrete, specific, and situational. In short, process management needs to incorporate rules-driven business models.

Process management is rooted in workflow, but inspired by the change imperative. Performance management leads to declarative objectives, goals that are necessarily insensitive to the impact they have on process. The tension between process and performance management in technology has strong parallels in business. The declarative programming world (as seen in languages such as Prolog and LISP) resembles executive management in that it does not care how specific goals are achieved so long as they are achieved. The procedural world, however, cares very much how steps are arranged.

Rules-driven BPM has become the place where these two worlds collide. In this context, the strong declarative heritage of rules engine and rules management technologies warrant a closer look and should now be regarded as a missing part of the puzzle.

Rules were born in the early 1980s during the declarative programming movement. Healthcare, financial services, and insurance organizations used them to handle large volumes of complex claims and exception processing. In the years since, rules have grown into the business mainstream. The industry analyst firm Gartner claims that the number of business applications that make use of rules engines to handle variable business rules will in fact triple to 30–35 percent by 2007. (Sinur, 2004)

Rules lend themselves to the situation-specific requirements for executing business decisions. Once these rules, and the precise, specific responses they produce, can be managed easily without egregious coding, rendered visible,and easily maintained in real time, their importance to BPM as a whole will be even greater and we will find an effective means to help close the gap between goals and execution.

The Reign of Rules

ave never been worth much without execution, and in the current business environment they’re worthless. The highest-profile example of the execution gap’s toll occurred in 2004 when Hewlett- Packard, whose share price has remained flat since 2001, asked CEO Carly Fiorina to step down, citing a pressing need to execute the strategy she put in place for transforming the company.

Increased vision and insight, without the ability to exercise effective change, widens the execution gap. BPM cannot be a theoretical exercise. It must be immediately actionable to accommodate the fierce rate of change in business as well as the growing burden of compliance.

Industry analysts who cover BPM want it to be “agile,” to be part of the “real-time” enterprise, to create “a business nervous system,” and to help foster an “adaptive enterprise.” These word choices are revealing; they point not just to the technology or business philosophy, but also to the people who use and deploy it. Technology alone is not a magic pill that will create this adaptive business nervous system that allows you to work in real time.

These adjectives (“agile,” “adaptive,” and “nervous”) describe the future of BPM as outward-facing, current, and mapped to the strategic thinking of the enterprise. Businesses must take a much more holistic and cohesive approach that can build for change by including process management and the immediate execution of new business rules and policies. When that happens, our performance-metrics dashboards—useful for knowing where we are going and how fast and how much fuel we have left—will finally be extended with an accelerator pedal, a brake, a turn signal, and a steering wheel.

REFERENCES

Sinur, J. “Architecting Agility With Business Rules,” Gartner Report, May 14, 2004.

Russell Keziere -

Russell Keziere is Vice President of BPM at Pegasystems Inc.