MODULE 6: BUSINESS Dr.

Tuan Truong
PROCESS IDENTIFICATION
 CONTENT
Identify business goals
Process categories and checklist
Process relationship
Process architecture
Define process landscape
Process measurement and performance
Introduce Business Process Management Notation (BPMN)
DEFINED BUSINESS Financial Customer Internal
Learning and

GOALS USING Perspective Perspective Perspective

Growth
Perspective
BALANCED SCORECARD Product/Service
Attributes
Operations Management
Processes
Improve Cost
Culture
Structure Price Supply Distribution
the balanced scorecard using the Production Risk Mgmt.
Quality
strategy map notation of Kaplan &
Norton Increase Asset Availability Customer Management
Utilization Processes
Selection Leadership
Selection Retention
Functionality Acquisition Growth
Long-Term
Shareholder
Value Innovation
Relationship Processes
Alignment
Service Opportunity Design
Expand Revenue Research Launch
Opportunities Partnership

Regulatory and Social

Processes
Enhance Image Teamwork
Customer Value Environment Employment
Brand Safety/Health Community
 PROCESS
CATEGORIES Management Processes

Core processes cover the essential value Define Vision Develop Strategy Implement Manage Risk
creation of a company, that is the
production of goods and services for which Strategy
customers pay. These include design and
development, manufacturing, marketing
and sales, delivery, after-sales, and direct
procurement (i.e., sourcing required for Core Processes
the making of products or the delivery of
services). Manage
Procure Procure Market Deliver
Support processes enable the execution of Customer
these core processes. These include Materials Products Products Products
Service
indirect procurement (i.e., sourcing of
hardware, furniture, stationery, etc.),
human resource management, information
technology management, accounting, Support Processes
financial management, and legal services.
Management processes provide Manage
directions, rules, and practices for the core Manage Personnel Information Manage Assets
and support processes. These include
strategic planning, budgeting, compliance
and risk management, as well as investors,
suppliers, and partners management.
UNDERSTAND
MANAGEMENT PROCESS
could be made up of four
major subprocesses: plan
work, organize work,
communicate, and control
work.
Each of these subprocesses
in turn includes a variety of
different activities.
 Is it a process at all?
• It must be possible to identify main action, which is applied to a category of cases.
• Name is of form verb + noun.
Can the process be controlled?
• Repetitive series of events and activities to execute individually observable cases.
• Without a clear case notion, process management is not feasible.
• Also, without any sense of repetition, a group of business activities may better
qualify as a project than as a business process.

PROCESS Is the process important enough to manage?

• There is customer who is willing to pay for outcomes,

CHECKLIST • Organization that carries out the process would be willing to pay another party for
taking over, or
• Legal, mandatory framework compels an organization to execute it.
Is the scope of the process not too big?
• 1:1 relation between initial event and activities.

Is the scope of the process not too small?

• Rule of thumb: there should be at least three different actors – excluding the
customer – involved.
• If there are no handoffs between multiple actors or systems, there is little that can be
improved using BPM methods.
 PROCESS
RELATIONSHIP Sequence

Manage
Sequence (horizontal relationship): This Procure Procure Market Deliver
Customer
relationship describes that there is a Materials Products Products Products
Service
logical sequence between two
processes. This means that one process
provides an output that the other Decomposition Specialization
process takes as an input

Decomposition (vertical relationship):

Procure Handle Job
This relationship describes that there is
a decomposition in which one specific Products Application
process is described in more detail in
one or more subprocesses.

Specialization: This relationship

describes that there exist several Handle Job Handle Job
Process Assemble
variants of a generic process. Variants Application Application
Parts Parts
are not only defined for different legal (Austria) (Germany)
contexts, but also for different
categories of products or services and
for different types of customers or
suppliers
 PROCESS ARCHITECTURE Process architecture as defined by
British Telecom in 2005
TOP-DOWN APPROACH

The starting point is the process landscape on Level 1 that shows the value chains of the
company. Meta Model structure, methodology and
modelling standards
Level
Level 2 provides a decomposition for each business process of the value chains. Defines business activities

Operations Levels Process Levels Business Levels

Level A Distinguishes operational customer
oriented processes from management
Business Activities
Level 3 provides a further decomposition down to sub-processes and tasks. and strategic process

Shows groups of related business

Level B Logical functions and standard end-to-end
Process Groupings processes (e.g. Service Streams)
Levels
Level 1 Level C Core processes that combine together to
deliver Service Streams and other end-
Core Processes
Process to-end processes

Landscape Level D Decomposition of core processes into

detailed ‘success model’ business
(incl. Value Chains) Business Process Flows process flows

Detailed operational process flows

Level 2 Level E Physical with error conditions and product and
Operational Process Flows geographical variants (where
Business Processes Levels required).

(e.g. BPMN) Level F Further decomposition of detailed

Detailed Process Flows operational where required
Level 3+
© British Telecommunications (2005)

Sub-processes and Tasks

(e.g. BPMN)
APQC PROCESS
CLASSIFICATION
PROCESS LANDSCAPE MODEL: EXAMPLE OF
VIENNA PUBLIC TRANSPORT
Management Processes

Manage Communicate Manage Manage Manage Risks and Manage

Enterprise in and out Processes Quality Opportunities Innovation

Core Processes
Manage
Contact Manage Foster
Customer
Customer Sales Relationship
Relationship

Operate Plan and Buy Maintain Check

Vehicles Vehicles Vehicles Vehicles

Transport Plan Customer Transport Evaluate

Customer Transport Customer Transport

Provide Plan Build Maintain Evaluate

Infrastructure Infrastructure Infrastructure Infrastructure Infrastructure

Support Processes

Manage Manage Manage Manage Manage Provide Winter

Personnel Financials Information Materials Disruptions Service
EXERCISE 4.1
What are core, support, and management
processes of a university?
Clarify terminology:

• Define key terms.

• Use organizational glossary.
• Use reference models.
• Ensure that stakeholders have a consistent understanding of process landscape model.

Identify end-to-end processes:

• Those processes interface with customers and suppliers.

HOW TO DEFINE
PROCESS
• Goods and services that organization provides are good starting point.
• Properties help to distinguish processes, including: Product type, Service type, Channel,
Customer type.

For each end-to-end process, identify its sequential processes:

• Identify the internal, intermediate outcomes of end-to-end process.

LANDSCAPE
MODEL
• Perspectives help set boundaries: Product lifecycle, Customer relationship, Supply chain,
Transaction stages, Change of business objects, Separation.

For each business process, identify its major management and support processes:

• What is required to execute the previously identified processes.

• Typical support processes are management of personnel, financials, information, and
materials.
• However, these can be core processes if they are integral part of business model.
• Management processes are usually generic.

Slide 12
HOW TO DEFINE PROCESS LANDSCAPE MODEL

Decompose and specialize Compile process profile: Check completeness and

business processes: consistency:
Processes of process landscape should be further Each of the identified processes should be Reference models can be used to check
subdivided into abstract process on Level 2. described using process profile. whether all major processes are included.
Further subdivision until processes can be managed Process profile supports definition of Reference models can help to check
autonomously by single process owner. boundaries, vision performance indicators, consistency of terminology.
Considerations when this subdivision should stop: resources, etc. Check whether all processes can be
Manageability and Impact. associated with functional units of
organization chart and vice versa.

Slide 13
 Name of Process: Procure-to-Pay
Vision: The objective of the procurement process is to secure that the
entire range of external products and services becomes available on time
PROCESS PROFILE OF BUILDIT‘S and is at the required level of quality.

PROCURE-TO-PAY PROCESS Process Owner: Chief Financial Officer (CFO)

Customer of process: Expectation of customer:

• Requesting unit • Timely, economic and complete
provision

Outcome: Delivered products or provided services for the requested unit

Trigger: Need is identified

First activity: Submit Request
..
Last activity: Create Purchase Order
Interfaces inbound: Plan-to-Procure
Interfaces outbound: Construct-to-Complete

Required resources:
• Human resources:
Site Engineer, Clerk, Works Engineer
• Information, documents, know-how:
procurement guidelines, supplier rating, framework contract
• Work environment, materials, infrastructure:
Procurement information system

Process Performance Measures:

• Cycle Time
• Operational Costs
• Error Rate
Slide 14
EXAMPLE OF PROCESS MAP
Management Processes

Develop Vision Develop and Manage Business Market and Sell

and Strategy Manage Services Capabilities Services

Core Processes

Contract
Demand-to-Selection Selection-to-Bid Approval-to-Contract
Acquisition

Contract
Contract-to-Plan Plan-to-Completion Completion-to-Expiry
Execution

Support Processes

Manage Human Manage Financial Manage Risk and Manage External

Capital Manage IT Resources Manage Assets Compliance Relationships

Slide 15
EXAMPLE OF SAP PROCESS MAP
Management Processes

ManageDefine, Operationalize, and Track Strategy Sales, Franchise, and Partner Management
Manage
Enterprise Innovation

Core Processes

Innovate Sell Deliver

Support Processes

Workplace and Corporate Finance Shareholder and

Procure to Pay
Attract, Develop, and Infrastructure and Operational Stakeholder
Retain Workforce Provision Compliance Management

Slide 16
PROCESS SELECTION CRITERIA
Strategic Importance:

• Find out which processes have the greatest impact on the strategic goals.
• Consider profitability, uniqueness, or contribution to competitive advantages.
• Select those processes for process management that relate to strategy.

Health:

• Determine which processes are in deepest trouble.

• These processes may profit the most from BPM initiatives.

Feasibility:

• Determine how susceptible process is to BPM initiatives, incidentally or continuously.

• Culture and politics may be obstacles.
• BPM should focus on those processes where it is reasonable to achieve benefits.

Slide 17
 Example
A restaurant has recently lost many customers due to poor
customer service. The management team has decided to
address this issue first of all by focusing on the delivery of
meals. The team gathered data by asking customers about
how quickly they liked to receive their meals and what they
IDENTIFY considered as an acceptable wait. The data suggested that
half of the customers would prefer their meals to be served
PROCESS in 15 min or less. All customers agreed that a waiting time of
30 min or more is unacceptable.
MEASUREMENTS
 PROCESS PERFORMANCE MEASURES
Performance Objectives
Performance Measures
Formulate performance objectives of the process at a high level, in
➢Time the form of a desirable state that the process should ideally reach,
e.g., customers should be served in less than 30 minutes.
➢Cost For each performance objective, identify the relevant performance
➢Quality dimension(s) and aggregation function(s), and from there, define one
or more performance measures for the objective in question, e.g., the
➢Flexibility percentage of customers served in less than 30 minutes. Let us call
this measure ST(30).
Define a more refined objective based on this performance
measure, such as
ST(30) >99%.

Slide 19
 A travel agency has recently lost several medium-sized and large corporate customers
due to complaints about poor customer service. The management team of the travel
agency decided to appoint a team of analysts to address this problem. The team
gathered data by conducting interviews and surveys with current and past corporate
customers and also by gathering customer feedback data that the travel agency has
recorded over time. About 2% of customers complained about errors that had been
made in their bookings. In one occasion, a customer had requested a change to a flight
booking. The travel agent wrote an email to the customer suggesting that the change

EXERCISE 4.2 - had been made and attached a modified travel itinerary. However, it later turned out
that the modified booking had not been confirmed in the flight reservation system. As a
result, the customer was not allowed to board the flight and this led to a series of

WHICH PROCESS severe inconveniences for the customer. Similar problems had occurred when booking a
flight initially: the customer had asked for certain dates, but the flight tickets had been
issued for different dates. Additionally, customers complained of the long times it took

SHOULD BE to get responses to their requests for quotes and itineraries. In most cases, employees
of the travel agency replied to requests for quotes within 2–4 working hours, but in the
case of some complicated itinerary requests (about 10% of the requests), it took them

IMPROVED? up to 2 days. Finally, about 5% of customers also complained that the travel agents did
not find the best flight connections and prices for them. These customers essentially
stated that they had found better itineraries and prices on the Web by searching by
themselves.

Answering the following question:

1. Which business processes should the travel agency select for improvement?

2. For each of the business processes you identified above, indicate which performance
measure the travel agency should improve
BALANCED
SCORECARDS
WITH
CASCADING
PROCESS
PERFORMANCE
MEASURES
Slide 21
PROCESS PORTFOLIO
High Selection Focus Feasibility
Loan
Rating
Contract
Controlling Prepatation Low
Loan
Decision
Loan Market
Medium
Importance

Evaluation

Handling
High
Payments

Loan
Loan Planning
Application
Low

Poor Health Good

Slide 22
 BUSINESS PROCESS
MANAGEMENT NOTATION
(BPMN)
BPMN FROM 10,000 MILES…
Based on popular graphical flowcharts:
-Core set of notation elements
-Each core element has various subtypes

A BPMN process model is a graph consisting of four types of core elements:

start end
activity event gateway sequence
flow
LET’S START MODELING
Order-to-cash process
A typical order-to-cash process is triggered by the receipt of a purchase order from a
customer. The purchase order has to be checked against the stock regarding the
availability of the item(s) requested. Depending on stock availability the purchase
order may be confirmed or rejected.
If the purchase order is confirmed, an invoice is emitted and the goods requested are
shipped. The process completes by archiving the order or if the order is rejected.
SOLUTION IN BPMN: ORDER-TO-CASH
end
Reject order event
activity Items not in
Order
stock
rejected
Check stock split gateway end
availability
Purchase event
order Items in
received stock Confirm Emit Archive
Ship goods
start order invoice order
Order
event fulfilled

Naming conventions
• Event: noun + past-participle verb (e.g. insurance claim lodged)
• Activity: imperative verb + noun (e.g. assess credit risk)
BPMN CORE ELEMENTS
Activities capture work performed in a process
 Different types of activities

activity

Events represent the process’ triggers (start event)

and outcomes (end event).
 Different types of events
start end
event event

27
BPMN CORE ELEMENTS
Gateways capture forking and joining paths in the control flow.
 Different types of gateways

gateway
Sequence flows represent the order in which activities and events
will be performed.
They can be assigned a condition to distinguish between
sequence alternative branches.
flow  Different types of flows

28
PROCESS MODEL VS PROCESS INSTANCES: THE TOKENS GAME

Order #1
Order #2
Order #3
Reject order
Items not in
Order
stock
rejected
Check stock
availability
Purchase
order Items in
received stock Confirm Emit Archive
Ship goods
order invoice order
Order
fulfilled

29
A LITTLE BIT MORE ON EVENTS…
A start event triggers a new process instance start
by generating a token that traverses the event
sequence flow (“tokens source”)

An end event signals that a process instance has end

completed with a given outcome by consuming event
a token (“tokens sink”)

30
LET’S RECONSIDER OUR ORDER-TO-CASH EXAMPLE
[…] If the purchase order is confirmed, an invoice is emitted and
the goods requested are shipped. The process completes by
archiving the order. […]

Reject order
Items not in
Order
stock
rejected
Check stock
availability
Purchase
order Items in
received stock Confirm Emit Archive
Ship goods
order invoice order
Order
fulfilled

31
SOLUTION: ORDER-TO-CASH

Reject order
Items not in
Order
stock
rejected
Check stock
availability split Emit invoice
Purchase
order Items in
received stock Confirm Emit Archive
Ship goods
order invoice order
Order
fulfilled
split join
Ship goods

32
A LITTLE MORE ON GATEWAYS: XOR GATEWAY
An XOR Gateway captures decision points (XOR-
split) and points where alternative flows are merged
(XOR-join)
condition

XOR-split ➔ takes one outgoing branch

¬ condition

XOR-join ➔ proceeds when one incoming branch has

completed
EXAMPLE: XOR GATEWAY

Invoice checking process

5
 EXERCISE 4.3
Model the following fragment of a business process for assessing loan
applications (loan origination process).

Once a loan application has been approved by the loan provider, an acceptance pack is
prepared and sent to the customer. The acceptance pack includes a repayment schedule
which the customer needs to agree upon by sending the signed documents back to the loan
provider. The latter then verifies the repayment agreement: if the applicant disagreed with
the repayment schedule, the loan provider cancels the application; if the applicant agreed,
the loan provider approves the application. In either case, the process completes with the
loan provider notifying the applicant of the application status.
A LITTLE MORE ON GATEWAYS: AND GATEWAY
An AND Gateway provides a mechanism to
create and synchronize “parallel” flows.

AND-split ➔ takes all outgoing branches

AND-join ➔ proceeds when all incoming

branches have completed
 EXAMPLE: AND GATEWAY
Airport security check
REVISED SOLUTION
Order-to-cash Reject order
Items not in
stock Order
rejected

Check stock
availability XOR-split Send invoice
Purchase
order Items in
received stock
Archive
Confirm order
order
Order
AND-split AND-join fulfilled

Ship goods
EXERCISE 4.4
Model the following fragment of a business process for assessing loan
applications.

A loan application is approved if it passes two checks: i) the applicant’s loan risk
assessment, done automatically by a system, and ii) the appraisal of the property for which
the loan has been asked, carried out by a property appraiser. The risk assessment requires
a credit history check on the applicant, which is performed by a financial officer. Once
both the loan risk assessment and the property appraisal have been performed, a loan
officer can assess the applicant’s eligibility. If the applicant is not eligible, the application is
rejected, otherwise the acceptance pack is prepared and sent to the applicant.
BUSINESS PROCESS MODELING TOOLS
Pen & Paper

Haptic

Standalone
 E.g. Visio, Camunda Modeler

Repository-based
 E.g. ARIS, Signavio, Apromore

40
 XOR / AND ARE NOT ALWAYS WHAT WE NEED...
Order distribution process
A company has two warehouses, one in Amsterdam, the other in Hamburg, that
store different products. When an order is received, it is distributed across these
warehouses: if some of the relevant products are maintained in Amsterdam, a
sub-order is sent there; likewise, if some relevant products are maintained in
Hamburg, a sub-order is sent there. Afterwards, the order is registered and the
process completes.
 SOLUTION 1
Order distribution process

XOR-split XOR-join

AND-split AND-join
 SOLUTION 2
Order distribution process

AND-split AND-join

XOR-split XOR-join
OR GATEWAY
An OR Gateway provides a mechanism to create and
synchronize n out of m parallel flows.

cond1

OR-split ➔ takes one or more branches depending

condn
on conditions

OR-join ➔ proceeds when all active incoming

branches have completed
SOLUTION USING OR GATEWAY
Order distribution process

45
WHAT JOIN TYPE DO WE NEED HERE?

46
 BUSINESS OBJECTS (AKA ARTIFACTS)
Can be:
Physical or digital information artifacts (e.g. an
order on paper, an invoice on PDF)
Physical material (e.g. a box containing the
ordered goods)

47
OUR ORDER-TO-CASH PROCESS, AGAIN
Send
invoice

Confirm Archive
Items in order order
stock Order
fulfilled
Check stock
Ship goods
availability
Purchase
order Items not in
received stock
Reject order
Order
rejected

The purchase order document serves as an input to the stock availability check against the
Warehouse DB. Based on the outcome of this check, the status of the document is updated,
either to “approved” or “rejected”. If the order is approved, an invoice and a shipment notice
are produced. The order is then archived on the Orders DB.

48
BUSINESS OBJECTS IN BPMN
A Data Object captures an artifact required
(input) or produced (output) by an activity.
 Can be physical or electronic
Purchase Invoice
order

Emit
invoice

A Data Store is a place containing data

objects that must be persisted beyond the
Oracle CRM Client info
duration of a process instance.

Retrieve client
It is used by an activity to store (as output)
information
or retrieve (as input) data objects.
49
 SOLUTION Invoice
Purchase
Purchase
Order
Order
[approved]
Purchase Purchase Send [approved]
Order Order invoice
[checked]

Confirm Archive
Items in order order
stock Order
fulfilled
Check stock
Ship goods
availability
Purchase
order Items not in
received stock
Reject order
Order Orders DB
rejected Shipment
notice
Warehouse DB

Purchase
Order
[rejected]

The purchase order document serves as an input to the stock availability check against the Warehouse DB. Based 50
on the outcome of this check, the status of the document is updated, either to “approved” or “rejected”. If the order
is approved, an invoice and a shipment notice are produced. The order is then archived on the Orders DB.
EXERCISE 4.5

Is there any missing data

object or data store in
the example below?
 RECAP
In this chapter, we discussed process identification.
Process architecture definition aims at enumerating major processes of organization.
Process architecture defines relationship between processes.
Seven-step method for definition of process architecture including process landscape model.
Process selection is concerned with prioritizing processes.
Priorities upon importance of processes, health, and feasibility of improvements.
Assessed by process owners or grounded on process performance measures and objectives.
Most common performance dimensions are time, cost, quality, and flexibility.
Process portfolios help in selection of processes for improvement.
Selected processes become subject of remaining phases of BPM lifecycle.

Slide 52