In this excerpt from the podcast between Mathias Kirchmer, one of the founders of BPM-D and Peter Schooff, Managing Editor of BPM.com, they discuss how to identify and optimize high impact processes.
PETER: Fantastic, now how do you first identify high impact processes in an organization?
MATTHIAS: High impact processes, are those processes that are basically crucial to make the strategy of an organization happen. In order to identify them you need to have a very key idea about what your strategy looks like and you need to structure and operationalize it in a way that you can link strategy and processes. The way to do that is to transform your strategy into a value-driven tree which identifies the key value drivers for your business strategy. Normally these are about six to ten value drivers. Then you identify all your key processes, in general about 150-200 to describe an entire organization. . You get those processes by either knowing your whole organization well or by using reference material that you can find on the market. oOce you have your value drivers and your processes, you define for each process the impact on each of the value drivers. There can be no impact, a low, medium or high impact. After that you can calculate the total impact of every business process . Solid research has shown that an organization only competes with about 15 - 20% of their processes. So by calculating the overall impact, you can identify those 15 - 20% of your processes that you really need to focus because they are really important for the execution of your business strategy.
PETER: Gotcha. So now that we've identified the high impact processes, how do we go about then improving these processes?
MATTHIAS: Those processes are crucial for the success of your organization. So if it's really worth to do a detailed analysis so that you have a very clear idea where are components of the process that are really important for your client, where the client is ready to pay money forThose sub-processes get improved under quality aspects. Then you also identify where there are sub- processes that are more administrative in nature, so no client is really interested in them. Those process components are optimized based on pure efficiency aspects, like time and cost. At the end you create a process that delivers highest quality where it really matters and highest efficiency where that is most important. Those high impact processes are also the perfect target for process innovation. You can use techniques like design thinking to come up with appropriate processes innovation. This means that you look at the process from your client’s point of view so that you have an outside in point of view on these process. You check out other processes or even on other processes in other industries that have similar characteristics so that you can transfer successful practices to your target process and can learn from those other industries., You would implement new innovative ideas in small prototypes so that you get quick results and can learn from them, And you develop your story around that process to pull people into the innovation., hHgh impact processes are perfect targets for process innovation.
PETER: That makes a lot of sense, now what are some of the key mistakes that you've seen companies make when trying to identify which processes to target?
MATTHIAS: Many companies identify their improvement initiatives more or less based on opportunistic criteria: the head of HR really gets that message about process improvement so he provides a bit of budget so that he can improve the payroll process or the procurement department has a bit of money left and they ask to improve the procurement process for office materials. Of course then you can improve those processes, you may even get some good results, but there is nothing that really excites anybody in the company because the processes have no real impact on your overall strategy and competitive situation. So one big mistake is just to follow opportunistically calls from different people in the organization. Another big mistake that a company detects that it has lots of commodity processes that are really performing under industry average., Hence they decide to fix those first. While it's a good move to fix such commodity processes and to get them to industry average, this is something that should be done very efficiently. You just try to copy what other's do and save the major part of your budget for your high impact processes. But companies get so excited about fixing those commodity processes, that there's no more time or budget for any other initiatives – issues with high impact processes don’t get addressed sufficiently.
PETER: That makes sense, so you covered it already, but how do you avoid these misidentifying mistakes with processes?
MATTHIAS: I think it's absolutely key to have an actionable process management agenda in place. An agenda that includes all your high impact processes and points out which of those high impact processes are of low maturity compared to competitorsThose high impact, low maturity processes are the best targets. Here you get most bang for the buck. Then you can add to your BPM agenda what kind of capabilities you need to establish in order to fix those processes. You can do capability assessment in your organization so that you find out where you have capability gaps and then you can use every initiative, not only to fix your high impact, low maturity process, but also to build process management capabilities and close the gaps so that you move your process of process management to the next performance level.