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The Myth of Process Improvement

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Proving the Value of Information Technology

It’s no secret that information technology has driven enormous productivity gains over the last decade. Many organizations have pumped up performance and profits by allowing people to work more effectively and efficiently. Yet one of the challenges of harnessing technology to maximum advantage is weaving together applications and processes in a seamless manner. Too often, on the front lines of business, the promise of enterprise software and systems becomes little more than a mirage. The bottom line: information technology that does not live up to expectations—or achieve the desired return on investment. When it comes to addressing the problem, it’s not uncommon for business leaders to take a “Big Bang” approach and attempt to resolve an array of problems in one fell swoop by dropping in an enterprise resource planning system (ERP), customer relationship management system (CRM), or a supply chain management system (SCM). These monolithic application are supposed to solve a range of problems and create greater efficiencies. And while there’s no denying that these applications have the potential to ratchet up performance, industry analysts note that between 60 and 70 percent of CRM implementations do not meet expectations or fail outright. Because of these results and unrelenting competition and pressure, many board members and senior executives are tightening the screws on enterprise IT initiatives. One recent survey found that 60 percent of CIOs believe they are under greater pressure to prove ROI on IT investments during the last 12 months. About 84 percent of CIOs make a serious attempt to quantify cost reductions in order to measure the business value of IT spending, and 46 percent of CIOs say they calculate ROI after projects are completed. Adding to the pressure: productivity gains over the last year have begun to lag and are among the least substantial in a decade. The problem is only growing worse as applications become bigger and more complex. Today, installing an enterprise application can take a couple of years and involve tens of millions of dollars. By the time the project is complete, momentum has ebbed, rules have changed, and the process improvement project is rendered obsolete. Savvy organizations are turning to business process management (BPM) as an alternative to the Big Bang approach. BPM can provide a model for automating, managing and optimizing business processes across an enterprise. It provides a way to start small, with a single process or handful of processes, and expand the optimization effort as an organization sees fit. Steering clear of a prolonged development cycle can pay enormous dividends. The Business Project Management Institute reports that an effective BPM strategy can reduce product design time by 50 percent—resulting in faster time to market, more competitive products, and increased revenue. It can also reduce order time by 80 percent, leading to cost savings, improved customer satisfaction and revenue gains. And it can help organizations achieve efficiency gains of 60 percent in call centers, resulting in improved asset management, reduced customer service costs, and improved customer satisfaction. The BPM Difference At the most basic level, business process management can be defined as a method for modeling, automating, managing, and optimizing repeatable business processes according to formalized rules and procedures. Although it uses software and information technology, the focus of BPM starts with the process and then looks at how individual applications can be leveraged by that process. Additionally, BPM examines the way actual work takes place, including process activities that exist outside of applications. The starting point for a business process often falls outside an ERP or CRM system—such as when a customer actually places an order rather then when the order is entered into the system. The end point would be when the product is delivered or when the payment is recorded. Everything that happens in between these two points is part of the process.