One of the common areas of focus that we help clients with in their digital transformation is business process improvement. Without effective business process improvement, your digital transformation isn't likely to succeed or deliver the business value that you expect, but what exactly is a business process improvement?
Business process improvement, at its core, is a practice of taking a step back to analyze how your business runs and identify areas where improvements can be made. This could involve anything from streamlining steps within the process to implementing new technology to help with accuracy or efficiency.
Now, if you are undergoing any sort of business process improvement initiative, there are several terms and definitions that you need to understand to help you navigate your transformation.
This refers to mapping out your existing business processes: what do you do today, who does what, how the information flows across the organization, and the steps taken within any given segment of your operations.
Why is it important to focus on as-is business processes? Simply because you need to understand where you are today to understand where you're going in the future. It's critical, but don’t overthink the details. If you do, you might get caught in analysis paralysis and never get to the actual business process improvements that move the needle. The key is to find the right balance between understanding the current state and moving forward.
This is where we take the current state, build on it and revise it as needed to arrive at our vision for the future. A lot of this will tie back to the greater business strategy. If your goal as an enterprise is to be the best in the industry when it comes to shipping times, then your focus needs to be on the existing ordering and fulfillment processes that need adjustments to curb delivery lead times. We must understand and map out what it will take to be the fastest fulfillment service, and find a way to bridge the gap from today to tomorrow.
We must analyze where the breakdowns and inefficiencies are happening, as well as the manual processes, data silos, and the organizational handoff issues that might exist. Once we have a grasp of what needs to change in order for us to reach our goals, we start attacking those problems to create a future state of a business process flow that gives us a clear vision of how we want the organization to operate in the future.
To-be business processes are like a blueprint of how you’ll deploy process changes, as well as potential technologies and/or organizational improvements, to help enable your future state business process flow.
When we're looking at our current state and our future state business processes, it's important that we do so from the lens of start to finish. This means that we will not look at business processes just from an accounts payable, inventory management, sales, or customer service perspective. Rather, we look at the end-to-end process flow to understand all the different touchpoints and handoffs, and where the breakdowns might happen along the way. This ensures that we have optimized our business process improvement and that we have a full picture of what our future state business processes will look like.
This is a common term used throughout the industry and, while it's similar to process improvements, process reengineering focuses on rethinking how our business processes work. We must think about how we can improve efficiency and effectiveness, remove bottlenecks, make people’s jobs easier, automate via the use of technologies, restructure our organization, or make any sort of improvement that will move the business forward.
There are different sources of process engineering that we can insert into our analysis of what should be reengineered. The first and more understandable step is to look at what isn't working today, and where are the breakdowns and inefficiencies that we can attack through business process reengineering. You can also look into what kind of technologies we can bring to the table to take advantage of outside best practices and help streamline and automate those processes that might be inefficient.
Another step is to benchmark it and look to your peers and other organizations within or outside your industry to understand what it is that they do to improve their processes and to be more effective. That’s where consulting firms like Third Stage can help provide value during your business process reengineering effort.
This is essentially a point in a process where the workflow slows down or gets stuck. A bottleneck can occur for multiple reasons. Either you don't have enough capacity to address the process, you don't have the automation in place, or there are process breakdowns and confusion happening during that specific step.
A common example of a process bottleneck might be if a manufacturing shop floor has only one machine doing a specific step in the process that's critical to every production order. They might have multiple other machines or points on the shop floor that are feeding into this one that doesn’t have enough capacity, so it ends up becoming a bottleneck and slowing down production.
This is not related just to physical machines, it's also applicable to humans. You may not have enough people, or maybe they don't have the tools they need at their disposal so they're not efficient enough to be able to improve the throughput to break through bottlenecks. Therefore, it's important to identify, address and mitigate bottlenecks during a business process improvement initiative.
These essentially are metrics, performance measures, or numbers that quantify how your processes are working either in terms of efficiency or effectiveness. Every process has a different kind of measure by which it’s evaluated, for example, it could be revenue, quality, effectiveness, or efficiency-based.
As part of a business process improvement, it’s important to understand what the measures are that you're measuring today and understand what you want your target measures to be in the future so that your business process improvements ultimately deliver real business value to your organization.
This is a very quantitative, quality-focused view of business processes and it's a way to instill a constant focus on improving the results of your business processes. It became popular in the 80s and 90s as companies like Motorola and General Electric incorporated Six Sigma into their day-to-day management operations, but it continues to be an important, statistical-based, and rigorous methodology used in business process improvement.
This software is a common tool used in effective business process improvement. It's a relatively new type of technology that has proved to be highly effective in going into your current systems and understanding what is happening in terms of your business processes.
The process mining software can crawl into different technologies you're using in your organization to understand and quantify how long processes are taking, what the different variations of the step-by-step process are, and where the breakdowns and bottlenecks happen. It's a great way to augment your qualitative understanding of your day-to-day operations with quantitative data from your actual business processes.
Gap analysis has a couple of different meanings or use cases in the context of business process improvement. The first gap analysis is typically between your current state and your future state business processes and focuses on cataloging and identifying where all the improvements and changes in your processes will happen. This is important because it helps you articulate, prioritize, and communicate what those changes to the business processes are.
The second type of gap analysis is more technology or software-focused. It looks at your future state business processes to identify what you need from your operations and compare it to potential software options.
Similar to gap analysis, measuring change impact will allow you to craft a strong organizational change management strategy to help your employees adjust to the new normal with ease. Change impact analysis gets into the granularity of the differences between your as-is state and you're to-be state. It helps you dissect and understand who's impacted by the change in processes, what roles and responsibilities are going to change, and what parts of people's jobs will now be automated if you choose to implement new technology.
Business process improvement initiatives have become increasingly popular in recent years, as more businesses strive to streamline their operations and make the business run more smoothly and effectively, freeing up time and resources that can be better used elsewhere. It surely sounds attractive, but before making major overhauls or even small tweaks, make sure to understand these terms and what happens during a business process improvement, as it will be crucial for the success of your digital transformation.
If your organization is looking for ways to improve your processes and build the bridge between today and tomorrow, don't hesitate to reach out to me directly. I'm always happy to be an informal sounding board when it comes to your corporate and digital strategy.