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Michael Porter is credited with introducing the concept of interoperability across a company’s entire value chain in 1985. This concept is fundamental to EPM. While most firms are structured according to traditional functional departments, EPM demands that the entire value chain involved in providing customers with products and services be defined, improved and managed in an integrated way. This requires a shift in the traditional functional mindset which dominates management thinking in many organizations and the so-called “silo effect” in which each functional unit is only concerned with its processes and coordination is lacking.

Figure 9.1 below illustrates the difference between viewing the firm according to departmental parameters versus in a value chain context.

Figure 6.7 ICH Value Chain White Paper Source: www.ichnet.org

The role of measurement is indispensable to maintaining a customer centric focus and assuring accountability for the performance of the firm’s large cross functional business processes.

In EPM the focus is on measuring what counts to customers – from the customers’ point of view. For most firms this will include metrics of quality, timeliness, completeness, accuracy and responsiveness for the product and services provided.

For example, the Supply Chain Council has defined the concept of ‘perfect orders’ as performance “in delivering: the correct product, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer.”

The fundamental objectives of developing an enterprise view of process management are then to:

• Define the large cross-functional business processes which deliver customer value

• Articulate the organization’s strategy in terms of its cross-functional business processes

• Assign accountability for the improvement and management of the organization’s cross-functional processes

• Define the performance measures which matter to customers

• Define the organization’s level of performance in terms of these customer centric measures

In order to implement the above there are three essential deliverables; a customer centric measurement framework, an enterprise level process schematic, and an enterprise level process improvement and management plan.

9.3.1 Customer Centric Measurement Framework

A customer centric measurement framework will invariably include aspects relating to new product introduction, product/service delivery and service responsiveness. While the details will vary based on the specifics of the business, there are a number of commonalities presented in Table 9.1 Typical components of an enterprise level measurement framework are shown in the table below:

Process Output Metrics Indicator

Develop New

Product or Service Product or service introduction Time to market Variance to promise date TBD Deliver Product or Service Product or service to customer the correct product/service, to the correct place, at the correct time, in the correct condition and packaging, in the correct quantity, with the correct documentation, to the correct customer

TBD

Respond to Customer Inquiry

Solution First time right responsiveness Variance to promise date

TBD

Table 9.1 Typical components of an enterprise level measurement framework 9.3.2 Process Portfolio Management

Process Portfolio Management is an essential component of governance. It recognizes that the establishment of improvement priorities needs to be viewed on a portfolio basis. Accordingly, it ties the enterprise together from a funding priority and integration perspective. It provides a method to evaluate and manage all enterprise processes in a consolidated view. It provides the framework for process governance with respect to the management and evaluation of initiatives.

9.3.3 Enterprise Process Improvement & Management Planning

For some time now, there has been a debate on what’s more important, strategy or execution? More recently, the general view appears to be that ‘execution’ is more important than ‘strategy.’

However, you can’t execute flawlessly in the absence of clear strategy. Nor can you do it in the absence of a process view of the business on an end-to-end basis. That is why the creation of process governance at the enterprise level view of business processes is vital.

In spite of a great deal of attention focused on the essence of strategy and execution, relatively little has been written on the benefits of defining and executing strategy in a process context. Yet, many would agree that it is the set of enterprise business processes which defines how work is done and creates value for customers and shareholders.

The combination of a customer centric enterprise level measurement framework and an enterprise level process schematic permits the leadership of organizations to define the size of the gap between current performance and desired performance for its large cross functional processes. Then it is possible to answer the question “Which of our core processes need to be improved by how much in order to achieve strategic goals?” That’s what enables execution. It is the answer to this question that pays significant dividends in terms of linking strategy to execution.

Of course, aligning processes with business strategies implies that adequate definitions of the organization’s strategies have been developed. This can be problematic.

However, for an organization to take action on the improvement and management of its enterprise level processes it is essential to assign accountability for the performance of these processes. This is a larger challenge than it would seem at first since most companies continue to be structured according to functional or departmental lines.

The two most common methods of establishing process governance via the assignment of accountability for process ownership involve either assigning accountability for the ownership of the process as an additional responsibility to a senior functional manager or creating a staff position as a ‘process owner’ or ‘process steward.’

In both cases, the role of the process owner is to monitor the performance of the enterprise level process and lead efforts in improving and managing the process to deliver value to customers. For many mid-sized and large organizations, the key cross- functional processes are so large that no one executive can have ‘control’ over all the resources involved in delivering value to customers. That is why the establishment of a process governance structure, often involving a ‘panel’ or ‘council’ of executive process owners, tasked with the measurement, improvement and management of the organization’s processes is an effective approach in many organizations.

The process owner needs to carry out an assessment of the process in question in much the same way as was done for the set of processes at the enterprise level. Typically, this would include the activities outlined in Table 9.2 below.

Step #

Activity Description

1 Define the critical few measures of performance from a customer’s point of view

2 Define the triggering events, inputs, key steps, results and critical metrics for the process

3 Assess the firm’s current performance for the process which directly creates value for customers.

4 Determine the level of desired performance for the process by expressing strategic and operating goals in process terms.

5 Assess the size of the performance gap between the firm’s current and desired performance for this large cross-functional business process. 6 Develop an improvement and management plan which clearly indicates

the desired scope of process improvement, the relative priority, and accountability for action.

7 Communicate the plan, engage and inspire people to take action and conduct training on a common approach.

Table 9.2 Process Owner Initial Activities

Process owners or stewards require some leverage in order to carry out their assignments. Some organizations have assigned the IT budget for the introduction of new technology to the process owner as one means of providing this leverage. In other instances, the discretionary component of executives’ and managers’ bonuses has been modified in order to allocate 20-30% of that bonus to measurable success in improving the company’s business processes.

One of the impacts of globalization has been an increase in the incidence of outsourcing. In some instances, organizations may decide to outsource or offshore an entire business process, such as production. In other cases, a set of activities, or a group of people – such as the call center – might be outsourced or taken offshore.