Extreme business-cycle volatility is the norm in today’s economy. The pace of business change has been accelerating over the past few years. Businesses have to deal with an array of business change forces. There is no way to insure a business against change, except to change the business constantly. Here are some real-time examples of business change happening today.

1 Government Policy and Rules & Regulation 
Rules and regulation are changing constantly. Companies serving their multinational customers have to comply with several local, regional and global rules are and regulations. Regulatory compliance consumes precious company resources and time.

2 Customers
There has been a shift in the balance of power away from the companies and towards the customer. Thanks to the internet customers have become more demanding to a point of being ruthless. Changing customer demands and habits are reshaping entire industries. Companies have to adjust their products and services accordingly. Time to market is equally important as cost of product.

3 Technology
Rapid advances in technology is creating new industries and making some industries obsolete. Case in example is RIFD (Radio Frequency Identification) technology. Wal-mart wants its top 100 suppliers to use RFID tags on cases shipped to some of its distribution centers by June 2005. This action has sent suppliers and competitors scrambling to learn about the wireless technology, which enables companies to identify and track items in the supply chain automatically.

4 Globalization
Globalization is happening now at a break neck speed. China has become the world’s production factory. India is becoming the backoffice to the world. Businesses need to continuously adjust their business models to factor in these shifts.

5 Competition
Customers are a click away from the competition. Competition in all industries is cut throat, and with the internet customers have all the information at their finger tips. Many industries are being hit by the commoditization wave, where prices start to decline and making profits becomes difficult. The whole industry experiences a margin squeeze as we saw with the PC industry.

Working in the same business conditions – some companies continue to thrive while others get caught in the tsunami wave of business change and struggle for survival. What differentiates them is the way these companies get the job done- that is the called the business process. A business process is comprised of the people who work, the tools they use, the procedures they follow, the methodology they use and the flows of material and information between the various people, groups, systems and sub-activities. The process is the enterprise. Business process can extend across the enterprise connecting customers, suppliers and partners.

A study was done by MIT Sloan School of Management in a paper titled “Intangible Assets: Computers and Organizational Capital” by Brynjolfsson, Hitt, and Yang to establish a link between these intangible assets (which I collectively refer to as business process), computer assets and market value. Below is the three dimensional graph (published in the above paper) which came out of the survey done by contacting several hundred large firms. The research indicates that in a digital age spending on tangible assets like IT alone is not sufficient to be a market leader. IT spending has to be coupled with spending resources on intangible assets like process orientation, business processes, organization structuring, etc to achieve process excellence.

The paper mentions that “the truly valuable assets were the complementary business processes, work practices, and even culture, all of which were harder to identify and implement. In effect, these constituted an organizational asset with real value, although one not reflected on the firm’s balance sheet.”  The authors found that intangible assets (organization structure, business processes etc) complemented by IT assets increase productivity many times over than just investment in IT (see Figure 1).

The report also mentions that “Firms choose to invest in certain business models, organizational practices, and corporate culture. Later some of these investments turn out to be more productive and profitable than others. The financial markets recognize and reward those models that are well suited for the current technological and business environment. At that point, other firms may try to imitate the winners’ best practices, but the complexity due to explicit and implicit complementarities among each collection of practices makes this difficult. Kmart may wish it could emulate Wal-Mart, and Compaq may try to learn from Dell, but their adjustment costs may prevent this from happening for years, even if they succeed in the end.” It is pretty clear that business processes are the differential factor in today’s dynamic business environment.
    
Most of today’s IT applications and enterprise systems have business process and business rules built into them. Business data has been collected over the years – thanks to RDMS (Relational Database Management Systems). Databases have allowed companies to capture complex and vast amounts of data in a relational fashion. The biggest problem now is deriving any business knowledge out of this vast amount of data. Packaged applications like CRM (Customer Relationship Management), SCM (supply chain management) and ERP (enterprise resource planning) have emerged as good standalone department specific systems. Howard Smith co-chair of Business Process Management Initiative (BPMI.org) says “These packages implemented best-practice processes but did so by ingraining business processes in the software applications that supported them. These solutions had all the flexibility of wet concrete before they were installed and all the flexibility of dry concrete after installation.”
      
Enterprises have created pockets of automation and numerous data repositories. All these applications, automation and data repositories do not deliver an efficient and agile end-to-end business process management solution. Current IT infrastructure does not address the fact that business process will continue to change at a rapid pace. Most organizations today have what I call a rigid and brittle IT infrastructure. The problems (as shown in figure 2) associated with rigid IT architecture are:
- Difficult to improve business processes.
- Cannot easily convert strategy to execution.
- Cannot respond to market changes.
- Implementing change is complex, expensive and time consuming

Organizations need a holistic approach to manage their business processes. Organizations do not need another set of tools or packaged software applications. What organizations need is a set of infrastructure, technologies and methodologies that can help the business manage their business processes. Business managers need more control in terms visibility and manageability over their business processes. These technologies and methodologies should work around the process and not around data or technology. Business managers need the tools and technologies to manage end-to-end business processes in real-time.
    
Necessity is the mother of invention. Business Process Management (BPM) attempts to shrink the business and IT divide. The design goal of BPM (Business Process Management) is to manage change. BPM is about pulling the levers of cost, efficiency, quality, agility and visibility in the most optimized way. BPM lets businesses manage business change before the fact. Unlike today’s IT applications which mitigate business change after the fact. Born from the need to continuously manage business change BPM systems will enable corporations to manage their business processes in real time. BPMS will create actionable business intelligence in real-time not after the fact reports and analysis. BPM enables companies to design, model, deploy and manage business processes for the extended enterprise. Figure 3 indicates a process oriented architecture.
 
The following concepts are the backbone of BPM:

Abstract the “business process” out of the IT applications into a separate layer called the Process Layer: 
- Processes will be abstracted to a process layer. The process will be expressed in a notation which is understood by both business and IT. That way the business can participate in process management. 
- When business process change the process layer will need to change. The array of enterprise applications will not have to be changed as it is done today.
- IT applications will serve the business process and be process centric.

Separate the “business rules” from the business processes:
- Business rules will be managed by the business users in real time.
- Business rules engine (BRE) is used to define and maintain the business rules.

Enterprise Application Integration should be done around the business process and not around data or IT Applications:
- EAI is now process centric –not data centric.
- This includes B2B (business to business) collaboration, interaction and communication.

Collaboration (human to human) should be done around business processes and not around IT Systems:
- Human participants need to collaborate to achieve a common goal. Collaboration should be around the business process in secure and reliable manner using a variety of synchronous and asynchronous methods.

BPM is a business discipline to manage the business process lifecycle. BPM is not a new management theory, but it is a new way of working. BPM includes, but is not limited to supporting Six Sigma, Balanced Scorecard, Total Quality Management, Business process re-engineering, etc. BPM products provide the set of tools and services needed to manage the business process no matter what combination of management theory you use. When a business process is automated and managed using BPM tools the end result is a BPMS (Business Process Management System).

BPMS (Business Process Management Systems) will enable the extended enterprise to manage its business process value chain across enterprise applications, customers, suppliers and partners. The BPM product will provide all the necessary services needed for end-to-end process management. BPMS is the business process management platform that orchestrates the business process with all the human and system participants giving complete visibility and control to the business managers.

Until now we did not have the technology to digitally manage the end-to-end business process in real time. Everything was done via after-the-fact data. We now have the tools needed to manage the end-to-end business processes. BPM is a new capability which will be embedded within the organization culture and within the IT infrastructure to attain process excellence. BPM is the greatest opportunity businesses have to become process-managed enterprises.