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Simplify business before deploying IT
by MIKE O'LEARY
One of the things that many information technology (IT) teams are very good at is applying technology to automate an organization's current business process. Unfortunately, it's usually a perfectly flawed business process that gets automated. An organization's business processes are very complex, spanning different departments, offices, and even outside partners' processes. Consider the different boundaries that are crossed in a paper mill's order fulfillment cycle -customer, order entry department or sales company, production planning, operations, shipping, transportation, and invoicing.
The benefit of automating a set of activities can never come close to the benefit of an improved overall business process. Full-blown business process reengineering is not always necessary or possible, but simplification of business processes must always take place before any investment in IT, since IT is only a part of the solution.
PRIORITIES FOR IMPROVING PROCESSES. Before we jump into business processes, let's start with the organization's business strategy. Is the reason for a given organization or functional area clear? Since processes are meant to support an organization's strategies, it is much easier to analyze a process in the context of how it supports its organization's reason for being. What makes this area important to the overall organization? Business processes must be aligned to this strategy. The technology, organization, and policies and procedures can then be designed to support the business processes. The priorities for improvement should be: 1) define organizational strategy; 2) align and simplify the business process; and 3) determine the people and systems to support the process.
A business process represents those distinct activities whose outcomes are designed to meet the business goal of the business process. Each activity has an input and an output. Value is added to each activity's input and passed on to the next activity as an output. Each activity exists to add value to its input and pass the enhanced output to the next activity. This definition encourages each process activity to focus on adding value for its own customer-the next activity. Any activity that appears to pass on its input without adding any value is identified as a non value-added activity.
Business process simplification takes place through the elimination of non value-added activities. Sometimes, there are regulatory reasons or company policies that require certain activities that do not appear to add value to their inputs. However, non value-added activities are generally the fruit to be picked when simplifying a process.
SIMPLIFYING CURRENT BUSINESS PROCESSES. Once you get a handle on the current-or "as is" business process-you can analyze the processes individually in order to simplify them. This requires input from the people who perform the work involved in such activities. The focus here is to gauge the value that is added to each activity's input. Is there really something added to the input before it is passed on to the next activity as output? Or, is the input merely "handled" and passed along without truly adding value?
Once non value-added activities are eliminated, the "to be" business process has been mapped. This streamlined business process map is the blueprint for subsequent IT initiatives.
IMPACTS AND BENEFITS FOR SYSTEMS. Some of the benefits of business simplification include:
- Documented business processes are an absolute prerequisite to addressing IT systems gaps. How can you identify the gap in an IT system if you don't understand enough about the business process it should support?
- Looking at each activity from an input-value-output viewpoint organizes them around their outcomes. Activities are evaluated with their outcomes in mind. What value has been added in each activity?
- Simplifying and defining business processes makes it clear that a functional unit "owns" the entire process, including support of IT systems.
- Knowing what your business processes are provides a springboard for quick change in the event of mergers or acquisitions.
- Well-understood business processes are a good basis for benchmarking.
- Costs can be associated with each activity within defined business processes. This can form the basis of an activity-based accounting exercise.
- Documented business processes map across all the different departments in an organization. Understanding the relationships between different processes highlights inter-departmental and inter-company issues.
Business process reengineering, ISO 9000, and total quality management represent different approaches for improving an organization. They are based upon a firm grasp of the business process, but such formal initiatives aren't required to simplify business processes. Whether you're developing an application from the ground up, implementing an enterprise resource planning system, or integrating "best of breeds," the true benefit of the initiative is improvement of the business process.
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