Articles

Business Process Innovation through Open BPM

Business Process Innovation is a key success factor for the next generation enterprise. Companies need to nurture an environment that encourages and enables process innovation. Business Process Management (BPM) must become the focal point of innovation initiatives. This mindset is prevalent in the approach of “Open BPM.

“Open BPM” delivers a business process infrastructure that provides optimal flexibility at the lowest cost level through the use of business and technology standards. It enables efficient and effective business process innovation. The main components of Open BPM are holistic Enterprise Architectures (EA) and the supporting software, Service-Oriented Architectures (SOA), effective business process change management focused on the individual process executives, and a comprehensive process monitoring and controlling approach, including called Business Activity Monitoring (BAM).

Organizations that want to engage in this approach must ask the following questions:

• What is business process innovation and why does every organization need it?
• What efforts need to be instituted to experience process innovation?
• Why does the right approach to BPM support creativity and innovation?
• How can you start to prepare for process innovation?
• What organizations are already on the way to prepare systematically for process innovation?

Innovation and Business Processes – a close relationship

Today, more and more companies are built on the principles of process innovation. Dell, for example, did not invent the PC, but created new business processes to bring PCs to market, eliminating unnecessary steps in the supply chain while offering more flexibility and control to the customer. These processes have become Dell’s main differentiator in the competitive marketplace. Amazon.com did not invent the book but it introduced the revolutionary process of buying books online from the comfort of your living room. eBay did not invent the auction but its online, easy-to-use processes transformed e-commerce and the buying and selling products within online auctions. Traditional companies are also focusing on process innovation. For example, enterprises in the machinery industries offer more convenient and reliable service processes. Airlines have simplified the ticketing process to reduce cost and offer better service levels through their online-ticketing. Banks have embraced online banking to reduce costs and improve their levels of customer service.

Business process innovation is clearly of the highest importance for every company. But what does it really mean?

How do “innovation” and “business processes” really fit together? Innovation is defined as the act of introducing something new. Within innovation, there are two major directions:

1. Business Model Innovation
2. Technology Innovation

Business Process Innovation through Open BPM
Business model innovation includes a new or modified value proposition, new business processes (especially in the supply chain), or new target customers and markets. In its PC offerings, Dell’s value proposition centered on the convenient custom configuration and ordering of the products — the supply chain processes eliminated dealer networks and enabled individual configuration by the client, while the target customers remained more or less the same as those of competitors. Sometimes the profit formula is mentioned as an additional component of the business model; however, it may also be seen as part of other elements (e.g., vendor-related aspect of the general value proposition).

Technology innovation has the following levers: offerings, including products and services; process technologies; and enabling technologies. New product technologies (e.g., the introduction of digital cameras) are some of the most obvious forms of innovation. Process technologies support efficient and effective business processes.

Enterprise Resource Planning (ERP) systems, for example, were introduced to make specific processes more efficient and effective. Supporting technologies improve either product or process technologies. For example, the development of efficient relational databases supported the development of integrated application software, especially ERP systems.

Innovation within process-oriented technologies shows the direct link between “process” and “innovation.” But, other forms of innovation also lead to new processes. New value propositions and the expansion into new markets require appropriate processes. A product innovation generally leads to new production or distribution processes, resulting in an indirect link between “business processes” and “innovation.”

Almost any form of innovation requires business process innovation: processes with new structures, more accurate data, new organizational responsibilities, new activities or better deliverables of the process. The management of innovation within an organization is a business process in itself. This process must be defined, implemented, executed and controlled just as any other process. It goes through the same process lifecycle.

The process develops from the preparation of an innovation initiative to the idea-finding and finally to the execution of the innovation idea. Due to the importance of process innovation, the “innovation process” must support that form of innovation effectively to ensure the success of the organization. The biggest challenge is to combine creativity in the generation of ideas with the structure necessary to ensure a systematic innovation activity. In most cases, this involves external organizations that may form an innovation network to be integrated in the processes.

“Collaboration innovation” is an extension of business process innovation. In this case inter-enterprise processes are implemented to support unlikely “innovative” collaborations between organizations. For example, ING is a bank that collaborates with coffee shops. When customers visit an ING location, the branch has the look and feel of a coffeehouse — with some terminals in the back for your banking transactions.

Therefore, the BPM infrastructure has to support this collaboration between organizations. Processes of different organizations must be integrated to deliver value to the final client. Thus, process innovation is again the underlying principle of this new form of collaboration.

Another key form of innovation lies in service processes. A service, as rendered by a consulting company or financial service company, is also a process. Therefore, the innovation of the offering (the service) must be a process innovation — which is consumed directly by the customer. Product innovation in a service company typically translates to process innovation.

It has been established that business process innovation is a topic that every organization should address. How can we provide an environment within the enterprise to support this innovation? This question leads us to the notion of “Open BPM”.

Open BPM enables Business Process Innovation
Open BPM provides a business infrastructure with the necessary flexibility to facilitate innovation, especially business process innovation. In general, it is helpful if an organization can react to change efficiently and effectively. Process innovation is a special driver of such change. Open BPM thrives in a business environment that encourages creative improvements and innovations regarding operational processes by enabling highest process flexibility at a lowest cost level.

The principles of Open BPM
“Open BPM” refers to the consequent use of business and technology standards around the process lifecycle, resulting in an infrastructure that provides optimal process flexibility at the lowest cost level. The use of standards to support process management allows business process changes (e.g., regarding the design of a process) with minimal effort because the information about the change can be seamlessly transferred to all aspects of the process lifecycle (e.g., to ensure the necessary IT support and execution of the new process).

The resulting flexibility is the key enabler for business process innovation. It provides the freedom to test creative ideas, which can then lead to a real process innovation.
Many BPM vendors and organizations that take a “closed” approach to BPM typically use proprietary BPM solutions that don’t support standards. This reduces the flexibility to change, due to missing integration between the phases of a process lifecycle or the approaches to various processes. Therefore, a closed approach does not stimulate innovation.

In order to achieve the greatest number of benefits, the philosophy of Open BPM must be applied in each phase of the process lifecycle. BPM begins on the strategy level of an organization, where the business processes of an organization are identified. Next, planned innovations and their process impacts are defined, delivering the basis for the definition of the business process structure and the related business goals.

The underlying application system architecture is planned accordingly. All aspects combined set the guidelines and strategic direction for a process-centered organization.

This guideline is passed from the strategy layer to the process specification layer, where the business processes are specified in detail. The blueprint for the process-centric organization must be defined using techniques similar to ABC costing in combination with process modeling methods. Processes reflecting next business practices are designed from scratch. The specification of best practice-based processes can be supported by using templates, or so called “business process reference models”. On the specification layer, all necessary business processes must have detailed descriptions, which can be used to drive the process execution. The result is a blueprint consisting of business process models.

Based on these process models, all physical and information processing activities are implemented within an enterprise and across organizational boundaries. Here, processes are either executed using standard application packages, such as ERP, Supply Chain Management (SCM) or Customer Relationship Management (CRM) systems that primarily support best practice processes. Alternatively, processes can be executed based on more flexible application solutions that reflect necessary next practice approaches, or next generation business process automation solutions — based on an SOA.

The actual executed processes are measured and controlled on the controlling level. If there are differences observed between the actual values and the planned key performance indicators (KPIs) that were defined based on the goals identified on the strategy level, action must be taken. Either a continuous improvement process is initiated through the process specification layer or the situation is resolved on a strategic level, if the business environment has changed significantly.

On one hand, all phases of the process lifecycle must be organized from a business point of view — thus the “process of process management” has to be defined. On the other hand, the required methods and software support must be provided. The use of open standards for all business and technology aspects of this business process lifecycle management leads to an Open BPM environment.

 Key components of an Open BPM approach are:

• EA (Enterprise Architecture)
• SOA (Service Oriented Architecture)
• Business Process Change Management
• Process Controlling

Again, each of these areas has a business and a technology dimension. The discussion of BPM is often focused solely on technology aspects. However, creating a technology environment and infrastructure without the appropriate business input will not lead to any significant effects since the technology is not used in a business and strategy-driven approach. Innovation cannot be planned and actively driven; it is only the result of a coincidence. Therefore, the combination of business and technology components is crucial for a successful application of Open BPM.

The EA, especially within the business process architecture, serves as the framework to structure all business process-related information so the descriptions can be easily reused to drive the process execution. The use of EA is supported by the appropriate EA tools. Business standards that can be applied here include the SCOR framework developed by the Supply Chain Council, the ARIS Architecture developed by IDS
Scheer or the Zachman Framework. Processes can be described using modeling standards, like event-driven process chains (EPC).

The execution of processes in an Open BPM environment is best supported by SOA, a highly flexible next generation process automation. The process design information, describing the business situation, can be transferred into technically oriented standards like the Business Process Execution Language (BPEL).

The BPEL (or similar standard-based) process models are loaded into the technical middleware of SOA, which is then configured based on the process information. The application software components, or the “services,” are utilized according to process needs. This leads to truly process-oriented application software.

Change management encompasses the people side of process execution.  The main activities of change management are information, communication and training. These activities can be supported by the same process models stored in the EA, provided that a consistent process modeling standard is used, such as EPC.  These formal process modeling methods can be transferred into process descriptions that are easy-to-understand and use, even by less skilled employees. Maximum flexibility in the technical execution of processes requires equal flexibility from the people working directly or indirectly with those technologies.

Open BPM addresses both aspects.  Process controlling systems can be linked to the SOA (or traditional process automation environments) through standardized adapters in order to monitor and measure the business processes. Information, such as cycle times or execution frequency is monitored. Thus, it becomes more and more important to utilize Open BPM technology standards to provide real-time information about potential process issues, so that appropriate actions can be taken. This is the key goal of business activity monitoring (BAM). The result is the management of business events. In order to measure the appropriate processes or sub-processes, such controlling systems are configured based on the aforementioned process models.

The most important aspect of a functional Open BPM environment is the integration between process design and execution, facilitated by EA with structured process models and the process execution based on SOA. The use of standards in this field enables the integration of process execution solutions (mainly SOA platforms) from various vendors (e.g., those necessary to support mergers and acquisitions). This can be done without the high costs of development and maintenance for software interfaces.

While process design can be optimized for the simple formulation of successful business solutions, the SOA environment can be constructed for the efficient and effective technical execution of the resulting processes.

The information from the process models is transferred to the SOA middleware, which is configured based on those models. Therefore, in the support of every process step, the right application component or “service” is applied. Services can be stored within an enterprise or at a third-party IT environment. In the latter case, they are procured through the Web, thus called Web services. In the future, Web services may be selected from specific Web pages that offer such service components. The services are often described in a “business language,” in the form of process reference models, which can be used as building blocks for the process design.

The consequent use of standards within Open BPM also supports the management of processes across organizations, resulting in the collaboration of enterprises. Therefore, collaboration innovation (e.g., in form of new, more efficient supply chains) is well supported through this approach. Interactive Web-based applications, as they are offered by the “Web 2.0” movement, can be integrated into business processes through EA and SOA and support a collaboration environment within and across the organization effectively.

Open BPM empowers SOA to deliver real business value through the integration of business and technology aspects.

SOA can be built based on products like SAP NetWeaver, Oracle Fusion or Microsoft BizTalk. The process descriptions and EA frameworks are delivered through business-oriented BPM environments, such as IDS Scheer’s ARIS Platform, which is integrated based on open standards with SOA solutions.

An SOA-EA environment can be used as the core to enter a ”Web 2.0” environment. Communities will deliver input for process innovation – on the design, as well as on the execution level. The interactive Web capabilities may also be used to integrate an innovation network in the company, providing systematic innovation. Standards may be identified and procured through the Internet and environmental information (e.g., collected through RFID) can be used as the basis for process innovations. This “Enterprise 2.0” (company that uses Web 2.0 applications for business) environment requires a new approach to business process governance to reflect the new openness and flexibility provided through Web 2.0 and Open BPM. Since the capabilities of Web 2.0 are continuously improved through semantic structures, people are already discussing Web 3.0.
 
The Relationship Between Open BPM and Business Process Innovation
The flexibility delivered by Open BPM enables innovation, especially business process innovation. Directed by the guidelines defined in a business process governance approach, Open BPM facilitates the delivery of desired business results, especially process innovation, defined in process models. Innovation ideas can be evaluated through the flexibility to test new processes in a simulation or prototype model and measure the results. Then, an enterprise can decide if an innovation idea should be implemented and rolled out in form of business model or technology innovation, mainly delivered through the necessary business process innovation.

Technologies that support open standards can be interpreted as innovations themselves (e.g., SOA can be considered an innovative process technology). Sophisticated EA approaches, when combined with governance rules, may be seen as process innovation regarding the BPM processes.

Business-oriented BPM software environments can be used to support and facilitate the innovation process in an Open BPM environment. They enable process innovation definition in the form of process models and evaluation of the initial effects of the innovation, before making larger investments. The integration of design and execution environments, based on previously discussed standards like BPEL, allow for a rapid prototyping of the innovation and an efficient roll-out afterwards.

The process monitoring of Open BPM provides the measurement and controlling of the effects of the process innovation, resulting in a conclusion regarding the innovation’s success. Additional aspects of process innovation (e.g., compatibility with legal requirements) can also be evaluated via Open BPM components.

The design and implementation of an innovation process ensures that innovation becomes part of an organization’s day-to-day business.

Open BPM and process innovation contribute to the management of knowledge-intensive processes that are difficult to define initially and continuously changing. Those processes are often emergent processes, since the process is already executed but further process steps must still be modified or defined. Emergent processes are typically found in R&D environments or large, unique projects (e.g., in the engineering industry).

Those processes focused on knowledge workers have become increasingly important for most industries. Open BPM delivers the necessary infrastructure and flexibility to enable the systematic input of innovation within those processes, including the setup of a collaborative environment for knowledge workers.

While Open BPM provides the necessary flexibility at a low-cost level, there are still entrepreneurial tasks left to define the innovation content that is evaluated and implemented. Market, technology and process developments must be monitored to define which innovation areas to address. For example, a structured formalized market and product description can be very helpful. General strategies, such as the real
time enterprise or the agile organization, or trends like globalization, mobility, etc. may be used to support the definition of an innovation focus.

Process Innovation Through Open BPM in Practice
We have seen that process innovation has become increasingly important for the business success of companies. The support of process innovation through Open BPM has just begun to increase the effectiveness and efficiency of the innovation process. Some important components of Open BPM have only been available in an acceptable maturity level for a relatively short period of time. This is especially true for process execution technologies around SOA and their integration with the process design and EA environment.

Therefore, many companies are currently still in the phase of preparation for a full Open BPM approach.  However, many organizations have already established some Open BPM components to achieve early benefits, gather experience and gain time that can lead to competitive advantages (e.g., through a superior innovation process).

A good starting point in process innovation with Open BPM is the structured design of business processes.

Many organizations, including Nova Chemicals, combine this design with the introduction of an EA framework as a corporate standard. Nova is a producer of commodity chemicals, such as plastic foils. The company defined process innovation as a key corporate initiative and implemented it based on EA and the underlying BPM software. Process innovation ideas are therefore evaluated efficiently and the implementation of the approved innovation is also facilitated. The process models within the EA can also support a potential move towards SOA in the future.

Nova Chemicals focus on business process innovation (BPI) included:

• Develop a culture around process innovation
• Establish an organization that promotes process ownership
• Establish an environment around continuous process improvement
• Establish an environment encouraging the generation of new ideas

Siemens and Intel, both high-tech enterprises, similarly facilitated the innovation of their mutual supply chain management (SCM). The inter-company collaboration processes were defined based on the SCOR standard delivered by the Supply Chain Council.

Innovations included in the supply chain structure enable an efficient rollout of changes and standards across the organizations.

Mitsui, a leading Japanese trading company, went a step further. The company also defined its processes based on an EA approach in order to identify innovation in various locations and implement them across the organization. The process models drive the implementation and management of an SAP ERP system. The process design is already structured to support a move toward SOA, (e.g., based on SAP NetWeaver).
Therefore, the process design can be considered a first step toward next generation process automation.

Change management is also conducted based on the process descriptions, which means that three of the four main components of Open BPM are already used to drive process management and innovation initiatives.
Mitsui can use its existing environment to transfer innovation ideas from one location to another or to measure the effects of such initiatives.

Many organizations have chosen the strategy of process innovation and Open BPM reflected in the Mitsui case -- they begin with process modeling initiatives in an EA environment and prepare systematically for the implementation and rollout of SOA while simultaneously implementing a traditional ERP solution. One such example is the US Navy. Processes are designed within the Department of Defense Architecture
Framework (DoDAF) using the ARIS Platform. From that point, the models can be downloaded into the selected execution environment, including SOA solutions. In addition, those process descriptions are stored in SAP Solution Manager to drive the ERP implementation. Open BPM enables the seamless exchange of data between the ARIS Platform and SAP Solution Manager, resulting in short-term benefits, as well as the preparation for a more comprehensive Open BPM environment supporting the organization’s continuous process innovation needs.

Early adaptors, such as Merrill Lynch are already a step ahead. The company has built an integrated EASOA environment based on Open BPM solutions from various vendors, including the ARIS Platform as the basis for the EA solutions and MS BizTalk as the SOA environment for the integration of self-developed systems and application software packages (e.g., from Oracle).

Business Process Innovation has also found its way into the educational and academic practice. Universities including Widener University in Philadelphia, PA offer certifications or master programs with a focus on business process innovation. This allows enterprises to recruit people who are familiar with the management of innovation in a process environment and can help to put process innovation through Open BPM in practice.

 

About The Author(s)

Dr. Mathias Kirchmer

Dr. Mathias Kirchmer is Chief Innovation and Marketing Officer of IDS Scheer Global. He is an affiliated faculty member of the Center for Organizational Dynamics of the Univers

Contact The Author    IDS Scheer Global