2.4 Business Process Management

Business Process

A business process represents a continuous series of interconnected activities aimed at producing a valuable product or service for an organization, its business partners, and its customers. This process relies on three essential components:

• Inputs: These encompass the materials, services, and information that flow through the process and undergo transformations as a consequence of the activities within the process.
• Resources: People and other resources form the backbone of process activities, performing various tasks to facilitate the progression of the process.
• Outputs: Outputs are the ultimate result of the process, ending in the creation of a specific product or service that is ready to be delivered to the intended recipient.

Consider the design of an information system for booking a COVID-19/flu/RSV test online. As shown in Figure 2.8, this business process includes procedures such as user registration, test availability search, appointment booking, secure payment, test result reporting, and verification. The information system may prioritize data privacy and offer reliable customer support to enhance user experience. Regular updates and maintenance ensure efficiency and compliance with evolving guidelines. In general, efficient and well-designed business processes are crucial for gaining a competitive advantage and ensuring organizational success. Such processes must enable the information system to function innovatively and with enhanced effectiveness and efficiency compared to its competitors. Conversely, poorly designed processes could become liabilities, hindering the information system’s responsiveness and productivity.

Figure 2.8 Consider an example of booking a COVID-19/flu/RSV lab test through a mobile app. The inputs required from users are personal information and preferred testing locations, and the outputs generated are confirmation of booked slot and test details. Additionally, it involves identifying the resources needed, which in this case are testing facilities and health-care personnel, to ensure a smooth and seamless process. (attribution: Copyright Rice University, OpenStax, under CC BY 4.0 license)

Providing an easy-to-use, up-to-date information system that delivers swift responses to user queries is essential for attracting customers and increasing usage. Accuracy in displaying current information related, in this case, to available time slots, testing locations, and pricing is crucial to building trust and reliability among users. Conversely, an information system that fails to offer timely and accurate information or has slow response times can have adverse effects on its success and reputation.

To assess whether the business processes of an information system are well designed, the first step is to document the entire process. By analyzing this process, the organization behind the information system can identify potential areas for improvement to gain competitive advantage, which refers to conditions and circumstances that enable a company to compete more effectively than its rivals in a given market. A competitive advantage helps an organization control a market and accrue profits.

Business Process Reengineering, Improvement, and Management

Table 2.3 identifies fundamental business processes performed in an organization’s functional areas. However, there are several other business processes, such as procurement and fulfillment, that span multiple functional areas. These processes are referred to as cross-functional business processes, where no single functional area solely bears the responsibility for their execution. To ensure the successful completion of a cross-functional process, each functional area involved must execute its specific steps in a well-coordinated and collaborative manner.

Organizations document any business process, and if any inefficiencies or bottlenecks are detected, modifications can be made to optimize the platform’s performance and enhance user experience. In the COVID-19 test booking example, modifications may include streamlining the booking flow, optimizing the database for faster information retrieval, and ensuring the platform’s scalability to handle increased demand during peak times. This is much like the e-ticketing process used in the airline industry. Here are some key measures of excellence when evaluating the execution of a business process:

• User satisfaction: Efficient and well-designed business processes can contribute to a more positive work environment, leading to higher satisfaction and engagement of those using these processes.
• Innovation: Streamlined processes can free up resources and time, allowing organizations to invest more in research and development, leading to greater innovation.
• Flexibility and adaptability: Agile and adaptable business processes enable organizations to respond quickly to changes in the market or industry, enhancing their ability to stay relevant and competitive.
• Cost reduction: By optimizing operational procedures and supplier processes, organizations can achieve cost-cutting objectives, leading to improved financial efficiency.
• Quality: The optimization of design, development, and production processes results in the delivery of superior-quality products or services, which builds a reputation for excellence.
• Differentiation: By optimizing marketing and innovation processes, organizations can create unique and distinctive offerings that set them apart from competitors and help them establish a competitive edge.
• Customer satisfaction: Attaining strong customer contentment is a direct outcome of streamlining and harmonizing business processes to effectively meet the needs and preferences of customers.
• Environmental impact: Optimized processes can lead to reduced waste and resource consumption, positively impacting the organization’s environmental footprint.
• Compliance and governance: Well-structured processes can ensure that the organization complies with relevant regulations and governance standards, thereby reducing its legal and reputational risks.

How does an organization ensure business process excellence? One approach developed in the 1990s is business process reengineering (BPR), which describes the radical rebuilding of core business processes to achieve optimization. This strategic approach strives to expand the productivity and profitability of an organization’s business processes. In essence, BPR requires organizations to scrutinize their business processes through an unprejudiced lens and subsequently determine the optimal means to reconstruct these processes to bolster their business functions. Business process reengineering originates from the capabilities IT offers, including process automation, standardization of several process steps, and error mitigation through improved interdepartmental communication.

Although some enterprises have effectively implemented BPR, a significant number of organizations found this strategy to be excessively intricate and challenging to pursue. After encountering setbacks in BPR implementation, businesses increasingly shifted their focus toward organizing work around business processes rather than individual tasks. This shift led to a less disruptive and more gradual approach known as business process improvement (BPI), which is the valuation of existing business processes to identify areas for improvement. For instance, if a social media marketing platform were to experience a decline in click-through rate (CTR), a metric that measures the effectiveness of an online ad or link, the organization’s BPI team would investigate the root cause behind this issue. Likewise, if there was a broken machine on an assembly line leading to output variations, the BPI team would analyze the process to rectify the problem. The BPI team is composed of individuals with various roles and expertise. It typically includes the process owner, process experts, subject matter experts, data analysts, and cross-functional representatives from different departments. Continuous improvement specialists may also be part of the team, and a project manager or facilitator leads the efforts. Stakeholders, including customers or end users, may also be involved or consulted for their valuable input.

For example, consider a social media marketing platform that developed a campaign promoting a new product launch. The initial CTR was 3.5 percent, and the marketing team aspired to improve this metric. By using the BPI methodology, the team investigated the possible reasons for the low CTR. On analysis, it found that the ads lacked visual appeal and failed to communicate the product’s unique selling points effectively. Additionally, the team discovered that the targeting parameters needed refinement, as the ads were reaching an audience that was not very likely to be interested in the product. Based on these insights, the marketing team implemented the following improvements:

• Ad creative enhancement: The BPI team collaborated with a creative team to design visually captivating and compelling ad content that better communicated the product’s features and benefits.
• Targeting refinement: The team revised the audience targeting parameters, focusing on demographics and interests more closely aligned with the product’s target market.
• A/B testing: To gauge the effectiveness of the changes, the team conducted A/B testing with different versions of the ad, comparing their performances to determine which ones yield better results. An A/B test compares the performance of two versions of content to see which one appeals more to viewers.

In addition to A/B testing, two popular methodologies used in BPI initiatives are design thinking and Agile. As a methodology, design thinking, which is an approach to problem solving that uses creativity and empathy to understand user needs in order to create user-centric products and services, has roots in the field of design and was popularized in the 1990s by companies such as IDEO. The methodology involves empathizing with customers to understand their pain points, defining the problem clearly, generating possible solutions, prototyping and testing these solutions, and finally, implementing the most effective ones. For instance, a financial institution may use design thinking to enhance its customer onboarding process. By integrating the human-centered approach of design thinking, organizations can create processes that resonate with their customers, improve user experience, and drive better business outcomes. The Agile methodology, as you’ve learned, is used in software development and other fields, particularly for projects with rapidly changing requirements and a need for frequent iterations, that emphasize flexibility, iterative development, and collaboration. For example, a software development team working on a mobile application might employ Agile to deliver incremental updates and new features in short development cycles (sprints). This iterative approach allows the team to gather continuous feedback from users and stakeholders, ensuring that the final product meets their evolving needs.

To sustain BPI efforts over time, organizations can adopt business process management (BPM), which is the ongoing review and analysis of processes across an organization to identify opportunities for improvements or reengineering that will optimize core business processes. BPM relies heavily on process modeling to show stakeholders the dependencies between the people, systems, and information that interact to perform tasks successfully. Along with business activity monitoring, this approach strives to make BPI initiatives more congruent through optimization of core business processes.

Business process management begins with process modeling, which is a graphical depiction of all steps in a process. Process modeling helps employees understand the interactions and dependencies among the people involved in a given process, the information systems they rely on, and the information they require to optimally perform their tasks. Business process management involves several key parameters that contribute to the successful digitalization of business process initiatives within an organization:¹⁷

• Strategic alignment: Business process management must be closely aligned with the organization’s overall strategy. This alignment ensures that processes are designed, executed, managed, and measured in accordance with strategic priorities, enabling continuous and effective actions to improve performances of specific business processes. Business models act as the vital connector between the technology strategy and strategic goals of an organization.
• Methods: Business process management methods consist of tools and techniques supporting activities throughout the process life cycle and enterprise-wide BPM initiatives. Examples include process modeling, analysis, and improvement techniques with approaches like design thinking and Six Sigma, a quality management methodology that utilizes statistical analysis to minimize defects and improve process efficiency.
• Culture: A supportive organizational culture enhances BPM values and fosters an environment conducive to BPM success, although culture-related efforts may have a longer time horizon for significant impact compared to other factors.

Information Systems and Business Processes

By capturing and managing data, monitoring performance, and facilitating communication, information systems contribute to improved efficiency, better decision-making, and overall business growth for any business process. Following are the primary areas in which information systems play a vital role:

• Capturing and storing process data: Capturing and storing relevant data generated during business processes is one of the fundamental tasks of an information system. These data can come from various sources such as transactions, customer interactions, and inventory updates. For example, a retail store’s information system records each sales transaction, including the products sold, quantity, and customer information. These data are then stored in a database for further analysis, reporting, and decision-making.
• Monitoring process performance: Information systems are also responsible for monitoring the performance of business processes. This involves tracking key performance indicators and metrics to assess how well a process is functioning and whether it meets the desired objectives. For instance, an e-commerce platform’s information system might track website traffic, conversion rates, and customer satisfaction to evaluate the effectiveness of its online sales process. In some cases, these monitoring tasks are fully automated. For instance, an information system can generate real-time reports and alerts when certain performance thresholds are reached or breached. This automation ensures that the organization can respond promptly to issues and make informed decisions.
• Facilitating communication and coordination: Another important role of information systems is to facilitate communication and coordination among different functional areas within the organization. As businesses grow, the complexity of operations increases, and different departments need to work together seamlessly. Information systems enable smooth information flow, allowing employees from various departments to collaborate effectively. For example, a company’s enterprise resource planning (ERP) system integrates information from different departments, like finance, human resources, and supply chain, ensuring a coherent flow of data and streamlined processes.

It is important to be aware that the level of automation in these roles can vary. Some tasks are fully automated, meaning the information system handles them entirely without human intervention. In contrast, other tasks require human input, where the information system relies on the judgment, expertise, and intuition of managers to make decisions based on the information provided.