Description
Managing Business & Process Innovation
Business Process Innovation
Module Discussion Plan Business Process Innovation: What, Why and When?
What is innovation? Business process innovation? Managing process innovation (MPI)? Business strategy versus business process strategy? Process innovation as strategy for extreme competition?
EXL clients
Competing in BPO sector MPI as competitive strategy for EXL Possible MPI scenarios for EXL
2
Innovation
• Innovations are improvements that improve the economic success of a company on the market (a) through changes in product or service offerings, or (b) that change some of the internal processes of the company. • Innovations are those „inventions? that are successfully introduced into the market or that can be applied. • Innovations are consequently associated with added value for the customers or internal processes by aligning innovation with utility, price and cost positions.
3
What is a business process?
• A business process is a set of functions (activities) in a certain sequence that delivers at the end a value for an internal or external client. • Its start is also clearly defined by an external event.
F3
External Event Starting the Process
F1
F2 F4
F5
Results of value for External/ Internal Customers
4
Customer Orientation of a Business Process
• Every process is a defined subset of an overall organization. • Each organizational unit is assigned a responsible person, who is generally called the “process owner”. • Because the process delivers a value for a customer, its performance can always be measured on the basis of this value. • The result is a customer-oriented organization because the customer basically sets the metrics by which the process performance is measured.
5
Business Process Elements
Process
3Ps of a Business Process
Procedure (activity sequence) Purpose (perceived value)
Performance (value contribution)
6
Business Process Types
• Mega business trends • Legal requirements • Technology developments • Shareholder expectations
Business environment
...
Governance processes
Rules and guidelines for business success
• Business strategy and policies
Executives
Management processes
Ensure efficient and effective operation processes
• Service level agreements (SLAs)
Managers
Operational processes
• Business level agreements (BLAs)
Get the operations performed
• Key performance indicators
Operation staff
7
Stakeholders of a Business Process
Process Sponsor
Process Purpose Process Resources
Governance process
Management process Process Owner
Process Performance Change Management
Process Procedure Process Productivity
Process operation
8
Process Actors
Stakeholders of a Business Process
• Process sponsor or champion who sponsors resources (financial, human, material, equipment, etc.) for process operations, and is accountable for realisation of process goal or purpose. • Process owner who has the pivotal role of maintaining oversight of the process across the enterprise, and is accountable for its performance. • Process actors who are from functional areas and business units that actually perform process operations.
9
What is Business Process Management (BPM)?
• A management discipline that provides governance for a process-oriented organization with the goal of agility and operational performance. • It uses methods, policies, metrics, management practices and software tools to manage and continuously improve an organization?s business processes. • The goal of BPM is to manage business processes in a way that enables the entire organization (company) to achieve high performance.
10
Managing a Business Process
Changes in Goals & Plans Process Planning
Set goals and expectations. Establish plans and budget. Provide resources and staff. Implement process.
Process Control
Goals/Measures
Monitor process. Reinforce success. Diagnose deviations. Take necessary action.
Expectations, Plans and Resources
Feedback
Data about results
Process Execution Inputs
Results (outputs & outcome)
11
What has Innovation to Do with Business Processes?
• Today, more and more companies are having growth built on the principles of process innovation. • Dell?s new supply chain process is innovation as it brought more flexibility and control to the customer. • Amazon.com introduced an innovative process of buying books online with a large choice of books and simple process. • e-Bay?s online, easy-to-use processes increased the popularity of e-auction.
12
Business Process Innovation
Innovation has two major directions: • Business model innovation, which includes a new or modified value proposition, new business processes (especially in the supply chain), or new target customers and markets. • Technology innovation, which includes offerings, including products and services, process technologies, and enabling technologies.
– New product technologies (e.g. SMS on mobiles) are some of the most obvious forms of innovation. – Process technologies support efficient and effective business processes. – Supporting technologies improve either product or process technologies.
13
Levers of Innovation & the Relation to Processes
Business Model Technology
Indirectly Process Related Value Proposition Offerings (Products & services)
Directly Process Related Processes (Supply Chain) Process Technologies
Indirectly Process Related
Target Customers Enabling Technologies
14
Examples of Innovative Technologies
• Internet (e-business processes) • Data warehouse/data mining (business intelligence, analytics) • Mobile phones/messaging
(direct one-to-one marketing, R=G, N=1)
• Social media (Web 2.0, enterprise 2.0)
(viral marketing, customer-driven business, wisdom of crowds, …) [shashi-tharoorology]
15
Core Competencies of Web 2.0 Companies
• Use of services (procured through the web) with costeffective scalability (in place of packaged software). • Control over unique, hard-to-recreate data sources, which get richer as more and more people use these resources. • Trusting users as co-developers. • Harnessing collective intelligence. • Customer self-service. • Software above the level of single devices. • Lightweight user interfaces, development models, and business models. • Application continuously improves results and usefulness as more people utilise it.
16
Innovation of Service Processes
• A service as rendered by a consulting company, financial services company etc., is also a process. Thus the “product” they deliver to the market is a “business process”. • Thus, the innovation of the offering (the service) must be process innovation – which is directly consumed by the customer.
17
Sustaining & Disruptive Innovation
Current offerings insufficient
Sustaining Innovation
Improve existing solutions
Undershot Customers
Innovation
Not interested in expensive features
Disruptive Innovation
“New solutions”
Overshot Customers
New Markets
18
Managing Innovation Process
• The management of innovation within an organization is a business process in and of itself. • This process must be defined, implemented, executed, and controlled just like any other business process. • It goes through the same process life cycle and can be managed using the MPI (management of process innovation) approach.
19
Example of an Innovation Process
Preparation
Identify Mega Trends
Innovation Manager
Idea Finding
Internal Network Employees
Execution
Select Relevant Innovation Projects
Innovation Team
Identify Relevant Innovation Areas
Innovation Change
Produce Ideas for Innovation Projects
Execute Innovation Projects
Project Team
Define Innovation Focus
Innovation Team
External Network
Decide about Introduction
Innovation Team
20
Idea – Finding Process
• Key to anticipate the customers? future interests and needs (you should even know these interests and needs before the customers themselves are aware of them) • Include external partners in the innovation process to broaden the input. • Examples of such partners:
– – – – – Key customers Important suppliers Additional market partners (e.g. banks) Research institutions Academic institutions/ universities
21
Rules to Support and Manage Innovation Process
• Implement strong leadership regarding innovation strategy and portfolio. • Integrate innovation into day-to-day business. • Align amount and type of innovation with the specific business situation. • Manage tension between creativity and daily business requirements (achieve numbers, etc.). • Control the resistance to innovation and change. • Form an innovation network consisting of internal and external members. • Define and manage the appropriate metrics and rewards.
22
In today’s business environment of “extreme competition”, is BPM alone enough for an organization to be successful?
Need for Managing Process Innovation
• Continuous changing customer and market requirements have become a dominating factor in today?s global business environment. • To be successful, companies have to adapt quickly to new opportunities and threats. They have to take smart decisions and execute fast to move effectively from business strategy to business operations. • Innovations and agility have become key success factors for organizations aspiring to become highperformance businesses. • Management of Process Innovation (MPI) has become the key enabler of ‘high-performance business’.
24
What is MPI?
• MPI takes a holistic BPM approach and focuses it on achieving the key goals innovation and agility. • MPI applies the newest developments in methods, approaches, and IT, and uses them in a consistently business-driven manner. • MPI targets the transfer of strategy into operational performance delivering innovation and agility, which can lead to revenue and profit growth, cost reduction or in general to additional shareholder value.
25
Managing Process Innovation
Process Strategy
Innovation & Agility
Information Technology
People
26
Managing Process Excellence in EXL
Process Strategy
Innovation & Agility
Information Technology
People
27
What is Business Process Strategy of an Organization?
• Business process strategy of an organization transfers the overall business strategy into appropriate process structures, as follows:
1. The main business processes of a company are identified. 2. Innovations and their general process impacts are defined, delivering the basis for the definition of the business process structure and the related process goals. 3. As a result, it gives a process map identifying a company?s end-to-end processes. Innovation areas as well as processes and sub-processes that are especially important to achieve competitive advantage are defined using this process map.
28
Process Goals Examples
• Increased flexibility
– Cycle time reduction (e.g. order-to-cash cycle) – Quantity changes (e.g. production quantities) – Product changes (e.g. introducing a new product line)
• Increased quality
– Product quality – Support service quality – Information quality etc.
• Cost reduction
– Human resource cost – Equipment cost – Material cost
• Increased revenue
– Product-related revenue – Support-related revenue
• • •
Transparency Reduced risk Environmental goals (reduced CO2 emissions) [green processes].
29
Business Processes as Organisational Capabilities
• Since a process results in a product or service, it may be considered as an embodiment of the organisation?s capabilities. Distribution process: Capability to distribute organisation?s products or services. • Thus business process innovation leads to innovation of an organisation’s capabilities.
30
Strategic Potential of a Business Process
• If a process provides a unique capability to an organisation, the organisation is differentiated from its competitors in terms of that capability. • This differentiation can be exploited strategically by the organisation to gain competitive advantage. [e.g. 1-800FLOWERS.com]
• On the contrary, if an organisation?s process provides the same capability as the processes of other organisations, the process is like a commodity, and may not provide any competitive advantage to that organisation!
31
Innovation as a Key Challenge in Today?s Economy
• Globalisation of the sales markets and financial markets, the intensification of competition and increased technology usage seems available to all the competitors of a company. • Sustained innovation in capabilities (business processes) serves as a differentiation strategy to sustain business performance in competitive markets where innovative solutions are copied too easily and frequently.
32
Exploiting Innovation to Optimise Customer Experience
Perceived Value Addition
Pr oc es In no vat io n Process Excellence
Customer Suspense Customer Surprise Customer (Need) Sacrifice Customer Satisfaction
33
Why today organizations outsource their business processes to BPO service-providers?
• To provide customer value through cost reduction/ performance improvement. • Business transformation. To provide exceptional customer value through business solutions
– BPO to solve customer?s complex business problems – BPO to enable exploitation of new business opportunities – BPO to provide access to special expertise or resources or both
34
BPO Client Side Trends
• Perception changing from „process as work’ to „process as organizational capability? for implementing organization?s business strategy. • BPO management becoming „process portfolio management? (ABN-AMRO bank, Barclay bank, Elsevier,
Cedant Corp. etc.)
Global Capability Sourcing multiple processes, multiple service providers
35
Process Portfolio Management
SP 1 Process 1
SP 2
Process 2
SP 3
Process 3
36
Outsourcing – Business Process versus Business Transformation
• Business Process Outsourcing (BPO) targets reducing a client?s costs and investment in business processes while improving efficiency and customer satisfaction. • Business Transformation Outsourcing (BTO) targets improving business results through continuous transformation and operation of the client?s business processes and support systems – measured against business results.
37
Stakeholders of an Outsourced Business Process
Outsourcer Sponsor Service Provider Sponsor
Client’s Customers
Service Provider Owner
Outsourcer Owner
BPO/BTO
Outsourcer Actors
Service Provider Actors
Process Outsourcer (Client)
Process Service Provider
38
Customer Value Equation
• To ensure acceptance of a new service innovation, the design process should take a customer-centric view (and not merely a client-centric view) of what is important. • The value of a service from a customer?s perspective can be captured by the following equation:
Results produced for the customer + Process innovation Value =----------------------------------------------------------------------------Price to the customer + costs of acquiring service
39
EXL?s Lines of Business & Innovation Strategy
• • • • Process consulting Analytics Process Excellence Current Innovation Projects at EXL are roughly 5% of all projects.
How can EXL exploit Process Innovation capability as a differentiating strategy? What are likely to be the challenges? Can you suggest a Change Management plan?
40
doc_761279421.ppt
Managing Business & Process Innovation
Business Process Innovation
Module Discussion Plan Business Process Innovation: What, Why and When?
What is innovation? Business process innovation? Managing process innovation (MPI)? Business strategy versus business process strategy? Process innovation as strategy for extreme competition?
EXL clients
Competing in BPO sector MPI as competitive strategy for EXL Possible MPI scenarios for EXL
2
Innovation
• Innovations are improvements that improve the economic success of a company on the market (a) through changes in product or service offerings, or (b) that change some of the internal processes of the company. • Innovations are those „inventions? that are successfully introduced into the market or that can be applied. • Innovations are consequently associated with added value for the customers or internal processes by aligning innovation with utility, price and cost positions.
3
What is a business process?
• A business process is a set of functions (activities) in a certain sequence that delivers at the end a value for an internal or external client. • Its start is also clearly defined by an external event.
F3
External Event Starting the Process
F1
F2 F4
F5
Results of value for External/ Internal Customers
4
Customer Orientation of a Business Process
• Every process is a defined subset of an overall organization. • Each organizational unit is assigned a responsible person, who is generally called the “process owner”. • Because the process delivers a value for a customer, its performance can always be measured on the basis of this value. • The result is a customer-oriented organization because the customer basically sets the metrics by which the process performance is measured.
5
Business Process Elements
Process
3Ps of a Business Process
Procedure (activity sequence) Purpose (perceived value)
Performance (value contribution)
6
Business Process Types
• Mega business trends • Legal requirements • Technology developments • Shareholder expectations
Business environment
...
Governance processes
Rules and guidelines for business success
• Business strategy and policies
Executives
Management processes
Ensure efficient and effective operation processes
• Service level agreements (SLAs)
Managers
Operational processes
• Business level agreements (BLAs)
Get the operations performed
• Key performance indicators
Operation staff
7
Stakeholders of a Business Process
Process Sponsor
Process Purpose Process Resources
Governance process
Management process Process Owner
Process Performance Change Management
Process Procedure Process Productivity
Process operation
8
Process Actors
Stakeholders of a Business Process
• Process sponsor or champion who sponsors resources (financial, human, material, equipment, etc.) for process operations, and is accountable for realisation of process goal or purpose. • Process owner who has the pivotal role of maintaining oversight of the process across the enterprise, and is accountable for its performance. • Process actors who are from functional areas and business units that actually perform process operations.
9
What is Business Process Management (BPM)?
• A management discipline that provides governance for a process-oriented organization with the goal of agility and operational performance. • It uses methods, policies, metrics, management practices and software tools to manage and continuously improve an organization?s business processes. • The goal of BPM is to manage business processes in a way that enables the entire organization (company) to achieve high performance.
10
Managing a Business Process
Changes in Goals & Plans Process Planning
Set goals and expectations. Establish plans and budget. Provide resources and staff. Implement process.
Process Control
Goals/Measures
Monitor process. Reinforce success. Diagnose deviations. Take necessary action.
Expectations, Plans and Resources
Feedback
Data about results
Process Execution Inputs
Results (outputs & outcome)
11
What has Innovation to Do with Business Processes?
• Today, more and more companies are having growth built on the principles of process innovation. • Dell?s new supply chain process is innovation as it brought more flexibility and control to the customer. • Amazon.com introduced an innovative process of buying books online with a large choice of books and simple process. • e-Bay?s online, easy-to-use processes increased the popularity of e-auction.
12
Business Process Innovation
Innovation has two major directions: • Business model innovation, which includes a new or modified value proposition, new business processes (especially in the supply chain), or new target customers and markets. • Technology innovation, which includes offerings, including products and services, process technologies, and enabling technologies.
– New product technologies (e.g. SMS on mobiles) are some of the most obvious forms of innovation. – Process technologies support efficient and effective business processes. – Supporting technologies improve either product or process technologies.
13
Levers of Innovation & the Relation to Processes
Business Model Technology
Indirectly Process Related Value Proposition Offerings (Products & services)
Directly Process Related Processes (Supply Chain) Process Technologies
Indirectly Process Related
Target Customers Enabling Technologies
14
Examples of Innovative Technologies
• Internet (e-business processes) • Data warehouse/data mining (business intelligence, analytics) • Mobile phones/messaging
(direct one-to-one marketing, R=G, N=1)
• Social media (Web 2.0, enterprise 2.0)
(viral marketing, customer-driven business, wisdom of crowds, …) [shashi-tharoorology]
15
Core Competencies of Web 2.0 Companies
• Use of services (procured through the web) with costeffective scalability (in place of packaged software). • Control over unique, hard-to-recreate data sources, which get richer as more and more people use these resources. • Trusting users as co-developers. • Harnessing collective intelligence. • Customer self-service. • Software above the level of single devices. • Lightweight user interfaces, development models, and business models. • Application continuously improves results and usefulness as more people utilise it.
16
Innovation of Service Processes
• A service as rendered by a consulting company, financial services company etc., is also a process. Thus the “product” they deliver to the market is a “business process”. • Thus, the innovation of the offering (the service) must be process innovation – which is directly consumed by the customer.
17
Sustaining & Disruptive Innovation
Current offerings insufficient
Sustaining Innovation
Improve existing solutions
Undershot Customers
Innovation
Not interested in expensive features
Disruptive Innovation
“New solutions”
Overshot Customers
New Markets
18
Managing Innovation Process
• The management of innovation within an organization is a business process in and of itself. • This process must be defined, implemented, executed, and controlled just like any other business process. • It goes through the same process life cycle and can be managed using the MPI (management of process innovation) approach.
19
Example of an Innovation Process
Preparation
Identify Mega Trends
Innovation Manager
Idea Finding
Internal Network Employees
Execution
Select Relevant Innovation Projects
Innovation Team
Identify Relevant Innovation Areas
Innovation Change
Produce Ideas for Innovation Projects
Execute Innovation Projects
Project Team
Define Innovation Focus
Innovation Team
External Network
Decide about Introduction
Innovation Team
20
Idea – Finding Process
• Key to anticipate the customers? future interests and needs (you should even know these interests and needs before the customers themselves are aware of them) • Include external partners in the innovation process to broaden the input. • Examples of such partners:
– – – – – Key customers Important suppliers Additional market partners (e.g. banks) Research institutions Academic institutions/ universities
21
Rules to Support and Manage Innovation Process
• Implement strong leadership regarding innovation strategy and portfolio. • Integrate innovation into day-to-day business. • Align amount and type of innovation with the specific business situation. • Manage tension between creativity and daily business requirements (achieve numbers, etc.). • Control the resistance to innovation and change. • Form an innovation network consisting of internal and external members. • Define and manage the appropriate metrics and rewards.
22
In today’s business environment of “extreme competition”, is BPM alone enough for an organization to be successful?
Need for Managing Process Innovation
• Continuous changing customer and market requirements have become a dominating factor in today?s global business environment. • To be successful, companies have to adapt quickly to new opportunities and threats. They have to take smart decisions and execute fast to move effectively from business strategy to business operations. • Innovations and agility have become key success factors for organizations aspiring to become highperformance businesses. • Management of Process Innovation (MPI) has become the key enabler of ‘high-performance business’.
24
What is MPI?
• MPI takes a holistic BPM approach and focuses it on achieving the key goals innovation and agility. • MPI applies the newest developments in methods, approaches, and IT, and uses them in a consistently business-driven manner. • MPI targets the transfer of strategy into operational performance delivering innovation and agility, which can lead to revenue and profit growth, cost reduction or in general to additional shareholder value.
25
Managing Process Innovation
Process Strategy
Innovation & Agility
Information Technology
People
26
Managing Process Excellence in EXL
Process Strategy
Innovation & Agility
Information Technology
People
27
What is Business Process Strategy of an Organization?
• Business process strategy of an organization transfers the overall business strategy into appropriate process structures, as follows:
1. The main business processes of a company are identified. 2. Innovations and their general process impacts are defined, delivering the basis for the definition of the business process structure and the related process goals. 3. As a result, it gives a process map identifying a company?s end-to-end processes. Innovation areas as well as processes and sub-processes that are especially important to achieve competitive advantage are defined using this process map.
28
Process Goals Examples
• Increased flexibility
– Cycle time reduction (e.g. order-to-cash cycle) – Quantity changes (e.g. production quantities) – Product changes (e.g. introducing a new product line)
• Increased quality
– Product quality – Support service quality – Information quality etc.
• Cost reduction
– Human resource cost – Equipment cost – Material cost
• Increased revenue
– Product-related revenue – Support-related revenue
• • •
Transparency Reduced risk Environmental goals (reduced CO2 emissions) [green processes].
29
Business Processes as Organisational Capabilities
• Since a process results in a product or service, it may be considered as an embodiment of the organisation?s capabilities. Distribution process: Capability to distribute organisation?s products or services. • Thus business process innovation leads to innovation of an organisation’s capabilities.
30
Strategic Potential of a Business Process
• If a process provides a unique capability to an organisation, the organisation is differentiated from its competitors in terms of that capability. • This differentiation can be exploited strategically by the organisation to gain competitive advantage. [e.g. 1-800FLOWERS.com]
• On the contrary, if an organisation?s process provides the same capability as the processes of other organisations, the process is like a commodity, and may not provide any competitive advantage to that organisation!
31
Innovation as a Key Challenge in Today?s Economy
• Globalisation of the sales markets and financial markets, the intensification of competition and increased technology usage seems available to all the competitors of a company. • Sustained innovation in capabilities (business processes) serves as a differentiation strategy to sustain business performance in competitive markets where innovative solutions are copied too easily and frequently.
32
Exploiting Innovation to Optimise Customer Experience
Perceived Value Addition
Pr oc es In no vat io n Process Excellence
Customer Suspense Customer Surprise Customer (Need) Sacrifice Customer Satisfaction
33
Why today organizations outsource their business processes to BPO service-providers?
• To provide customer value through cost reduction/ performance improvement. • Business transformation. To provide exceptional customer value through business solutions
– BPO to solve customer?s complex business problems – BPO to enable exploitation of new business opportunities – BPO to provide access to special expertise or resources or both
34
BPO Client Side Trends
• Perception changing from „process as work’ to „process as organizational capability? for implementing organization?s business strategy. • BPO management becoming „process portfolio management? (ABN-AMRO bank, Barclay bank, Elsevier,
Cedant Corp. etc.)
Global Capability Sourcing multiple processes, multiple service providers
35
Process Portfolio Management
SP 1 Process 1
SP 2
Process 2
SP 3
Process 3
36
Outsourcing – Business Process versus Business Transformation
• Business Process Outsourcing (BPO) targets reducing a client?s costs and investment in business processes while improving efficiency and customer satisfaction. • Business Transformation Outsourcing (BTO) targets improving business results through continuous transformation and operation of the client?s business processes and support systems – measured against business results.
37
Stakeholders of an Outsourced Business Process
Outsourcer Sponsor Service Provider Sponsor
Client’s Customers
Service Provider Owner
Outsourcer Owner
BPO/BTO
Outsourcer Actors
Service Provider Actors
Process Outsourcer (Client)
Process Service Provider
38
Customer Value Equation
• To ensure acceptance of a new service innovation, the design process should take a customer-centric view (and not merely a client-centric view) of what is important. • The value of a service from a customer?s perspective can be captured by the following equation:
Results produced for the customer + Process innovation Value =----------------------------------------------------------------------------Price to the customer + costs of acquiring service
39
EXL?s Lines of Business & Innovation Strategy
• • • • Process consulting Analytics Process Excellence Current Innovation Projects at EXL are roughly 5% of all projects.
How can EXL exploit Process Innovation capability as a differentiating strategy? What are likely to be the challenges? Can you suggest a Change Management plan?
40
doc_761279421.ppt