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In this Q&A on APQC with Scott Francis, the question of BPM's focus on ROI comes up. So does BPM, and in particular BPMS, sometimes become too focused on ROI at the expense of other results?
Tuesday, October 29 2013, 09:53 AM
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  • Accepted Answer

    Tuesday, October 29 2013, 10:28 AM - #Permalink
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    No one sets out to change things for the worse so there is an understandable focus on measuring the improvements delivered by the change. Some of those measurements are bound to be financial but many others will measure the intangibles that are much harder to put a monetary value upon. An exclusive focus on ROI suggests that another agenda is at work here: that process automation is a goal to cost cutting and headcount reduction in particular. Whereas just as much value can be created by greater throughput, better customer satisfaction and tighter inventory control. Unfortunately cost reductions are easy to see reflected in the P&L and quick to happen but revenue growth through improved service is so much harder to measure and much slower to happen. Be clear of your charter for your BPM project and ask the tough questions including "Is my job to reduce headcount?"
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  • Accepted Answer

    Tuesday, October 29 2013, 10:32 AM - #Permalink
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    I am not a process expert or consultant, but please allow me to respond with the experience of both my hats - as a BPM customer/afficionado and as a CFO. I have initiated massive BPR projects in my life. I have never ever even attempted to calculate RoI. I believe RoI is just a simple facet of the tremendous benefits that BPM bring. Focusing just on this tells me the organization is really imature in terms of business process adoption. Let me take a step back. From a shareholder standpoint, a business is a vehicle that: 1. captures value from a market; 2. conveys that value to the shareholder. A good business usually innovates the what (step 1) - what product and service should it sell in order to maximize the value captured. A great business usually also innovates the how (step 2) - how to pass that value to the shareholder in a way that minimizes value erosion inside the company. Without going into the nuances of step 1 being also a business process (call it CRM / sales funnel management etc), innovating the how is basically innovating the underlying business processes. To me, this perspective is such a no-brainer in terms of pervasive and massive business benefits that I can't have enough time to go through them. RoI is just that very small, quantifiable part. But accounting for innovation is more than just RoI and even more than value stream mapping. It is about how you trigger a continuous process innovation cycle that is, by itself, a value enhancement vector. And this is so much more than RoI, ABC, muda / mura / muri and all that other measurement memorabilia we guzzle as customers when we are being sold a BPM project. I was preparing a blog post on this, so thanks for the question, it helped me streamline my messy musings :-)
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  • Accepted Answer

    Tuesday, October 29 2013, 10:46 AM - #Permalink
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    Maybe my answer is too simplistic but what comes to my mind is: if you regard ROI as just financial benefits, then yes. The focus, especially in regards to BPMS, is often too much on ROI. However, much in line with the other comments, if you regard ROI in a broader sense such as knowledge, efficiency, effectiveness, organizational maturity, collaboration, continuous improvement capabilities, financial benefits, and even culture. Then I would say no, unfortunately. Too often I see organizations starting BPM (and BPMS) projects without any clear goal and target. Then also the ROI (in the broader sense) is not measured at all with the danger that different stakeholders get different opinions (not fact based) in regards to the success of the initiative. The project may then even be killed for the wrong reasons..
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  • Accepted Answer

    Tuesday, October 29 2013, 11:30 AM - #Permalink
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    Niels Doeleman wrote: Maybe my answer is too simplistic but what comes to my mind is: if you regard ROI as just financial benefits, then yes. The focus, especially in regards to BPMS, is often too much on ROI. However, much in line with the other comments, if you regard ROI in a broader sense such as knowledge, efficiency, effectiveness, organizational maturity, collaboration, continuous improvement capabilities, financial benefits, and even culture. Then I would say no, unfortunately.
    CEO/CFO/COO folks generally have only one definition for ROI :) They have other things they care about, but they don't call it ROI, they call it something else- customer satisfaction, net promoter score, churn, etc. It is hard to escape the hard financial definition of ROI, which is why I just go ahead and talk about ROI, *and other stuff*, rather than trying to expand the definition of ROI.
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  • Accepted Answer

    Tuesday, October 29 2013, 11:33 AM - #Permalink
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    BTW, I don't think it is the BPMS (software) that is too ROI focused, but often the marketing messaging around a BPMS is too ROI-centric - to the exclusion of other benefits. Its easier to focus on hard-cost and objective measurements. So I guess hard to blame them. But the most interesting BPM projects by far have goals beyond ROI - ROI being just one potential benefit on the menu. sustainable competitive advantage being a better one... (of course, i should probably just take the 5th on this topic! )
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  • Accepted Answer

    Tuesday, October 29 2013, 11:43 AM - #Permalink
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    Well said Bogdan summed up the real world very nicely. I would add that the BPM focus with supporting technology that can reflect the dynamic nature of business at the front line is a new journey that will bring many more benefits than a simplistic "ROI" calculation. As ever before you start it is important to understand how the technology works to engage users and remove their fear of change. It should be be the start of a future proof investment that will see constant change over decades which makes conventional ROI rather academic?
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  • Accepted Answer

    Ian Gotts
    Ian Gotts
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    Tuesday, October 29 2013, 11:44 AM - #Permalink
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    It depends. Sometimes the first project needs to be a bit of a leap of faith. How can you build an ROI when you don't know how bad things are? But subsequent projects should be driven around ROI - which may not be financial. It could be driven by a customer experience metric. The latest CX metric, which is a step up from Net Promoter, is "how hard is it to deal with us" . To improve this metric does need a process focus.
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  • Accepted Answer

    Tuesday, October 29 2013, 12:09 PM - #Permalink
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    Interesting question. Encouraging actually. If you are experiencing situations where people are asking about ROI for BPM, that means they have already considered BPM. Kind of like asking if children in a third world country are using ketchup with their fries. I didn't know they had fries or had even seen any. On the one hand, if they are asking about ROI, they have a higher maturity of understanding than seems prevalent. On the other hand, if they really understand BPM, they ought not to be asking what the ROI is for implementing it, they need to be asking the ROI for not implementing it, for that is what most of us are currently doing.
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  • Accepted Answer

    Tuesday, October 29 2013, 01:04 PM - #Permalink
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    As others have suggested, ROI isn't the only game in town. Many of our customers implement solutions primarily for regulatory compliance reasons, for example. While it's no doubt possible to calculate an ROI for such an effort, it's not really necessary to do so--all you need to believe is that the cost of complying is small with respect to the risk associated with non-compliance. Now, pre-BPM disciplines like OpEx were pretty much measured solely on ROI. So if you're detecting an overemphasis on ROI with respect to BPM marketing, I would make the argument that you're seeing a carryover from those times. But what BPM technology has done is to create something with much broader impact than the old process improvement disciplines; with that broader impact comes any number of additional metrics that can be used to gauge success.
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  • Accepted Answer

    Tuesday, October 29 2013, 01:20 PM - #Permalink
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    The main problem is once again the fuzziness if we talk about BPM methodology or implementing flow-charted BPMS. A process mindset that focuses on fulfilling customer service goals is good. Implementing the same with BPMS flows is the worst idea in a long time. Let me point out that after 20 years there still are no vendor independent long-term studies that proof that BPM is good for a business. That truly is a huge leap of faith ... There is too much focus on ROI for most IT related activities. Because other ROI is much harder to quantifiy and measure, the main focus is typically cost and manpower reduction. Quality is in most cases measured as 'process quality' meaning how accurately and quickly the designed process is being executed, disregarding that the process is just an average of what is truly expected by different customers (customer can also be internal). Give me a real world example where a rigidly defined process will truly increase customer satisfaction! Greater throughput and lower staff costs usually means a decrease in customer service and thus satisfaction. I really do not know what the 'pervasive and massive business benefits' are that BPM will bring. Real world examples please. It usually doesn't happen! Where does the claim proven that BPM makes a business 'dynamic'? Have you never seen how long it takes to create and modify a flowcharted process? Customer service is not improved by rigidizing the service process across all customers. Exactly the opposite. It is made worse. Giving the service staff more time and freddom to satisfy a customer, that improves service and satisfaction. And yes, it is initially more expensive, but it turns the business into a customer service focused entity. There is a lot of ROI for not implementing BPM. It saves all the cost of the project that produces nothing of value. All IT projects currently discuss nothing else than ROI. And by that they mean direct cost savings that pay for the project in often incredibly short times. That the ROI can be achieved by increased satisfaction and less churn and more growth is usually not accepted by executives. They look at the numbers for the next quarters and those need to improve before their 3 year CEO contract expires. And: A business is not there for the shareholder! A business is purposeful collaboration towards customer service goals. If that is done well it pays off for the owners. Businesses that focus on the shareholder are usually neither service centric nor innovative. For them ROI achieved by cost counting is the only good thing. A control freak attitude is the norm and BPM fits right in it. More here: http://isismjpucher.wordpress.com/2011/07/21/agile-and-scrum-versus-the-god-complex/
    • Bogdan Nafornita
      more than a month ago
      I appreciate your challenges, Max. Please allow me to comment on some of them:

      "Let me point out that after 20 years there still are no vendor independent long-term studies that proof that BPM is good for a business."
      BPM vendors are, for me, a special example of an industry-wide failure to exploit a thought revolution. That being said, I think we can appreciate the practical difficulties that your suggested study would encounter. One cannot study the live effects of process improvement to a business in caeteris paribus conditions.

      "I really do not know what the 'pervasive and massive business benefits' are that BPM will bring. Real world examples please."
      Increased clarity of process scope, goal congruence throughout the organization, cleaned up transactional universe, preemptive quality control, early waste elimination, deep integration of upstream and downstream roles, faster decision making (hence lower cost of decisions). All real world examples.

      "It usually doesn't happen!"
      I must be the lucky one.

      "Have you never seen how long it takes to create and modify a flowcharted process?"
      It takes me one week from modified flowchart to actual execution in electronic workflow, including:
      - update of the underlying data model
      - update of web-based runtime environment (zero code written)
      - employee training and communication included.
      All this with a dirt-cheap academic solution and with an inexperienced organization (they first heard about business processes 18 months ago, when I joined the company). My company is north of 80 million EUR in turnover, spread throughout 10 locations in an emerging market in the hectic and crisis-stricken automotive retail industry, with an IT headcount of 2 serving 400 employees. Neither of the IT people has any BPM/S experience. Sounds real world enough?

      "Businesses that focus on the shareholder are usually neither service centric nor innovative."
      Totally agree, but I do not see how this relates to the fact that I provided a shareholder perspective. Unless you disagree that there is one. Yes, all businesses serve customers first and foremost. Yet it is only complete business models that survive. A complete business model includes the shareholder perspective as well. I have yet to see a business that is able to exceptionally serve customers without being profitable in the long run.
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  • Accepted Answer

    Tuesday, October 29 2013, 03:42 PM - #Permalink
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    In my short experience I have never found a business process that were not measurable in terms of ROI. BPM and therefore BPMS have numerous advantages associared with process improvement and efficiency, client satisfaction and so on, but in case that this arguments do not convince the board of directors to consider investing in a BPMS (they always care about financial indicators), it is quite easy to calculate the ROI of the process via simulation capablities in BPMS, that can be used strategically as a powerful competitive weapon, that can not be offered by many other software solutions. But of course this demonstration will need a previous field work carried out by specialist consultants, to show the As-Is and the To-Be, capable to obtain fundamental data metrics and to calculate the ROI of the future implementation.
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  • Accepted Answer

    Wednesday, October 30 2013, 12:31 AM - #Permalink
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    It is possible for there to be too much focus on the monetary part an investment, but not the totality of the investment. And that totality is often mis-measured as being only about money. When you consider a migration to a culture of BPM teaching business owner to align with IT and solve critical problem, people starting being hard-headed & empirical about what works and what doesn't enablement of the SMEs. you can't always measure that in straight dollars and cents. And I think that's the heart of Peter's original question. What, exactly, are the non-finanical benefits of a BPMS system? And how do we measure them? That's what I'm really interested in.

    References:

    1. http://www.capbpm.com
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  • Accepted Answer

    Friday, October 09 2015, 08:03 AM - #Permalink
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    In the introduction of BPM it is important to show some metrics and ROI is just one of them. Time-to-market is another one – just estimate that process-centric solutions will be delivered 4 times faster than by the classic development. Other non-financial benefits could be: less stress, higher performance, higher security, less risk, higher predictability of results, better operations, and liberating client’s business potential.

    Also (with a proper architecture):

    • Staff members can concentrate on the unique challenges of their business and not waste time re-inventing the wheel.
    • Armed with actionable process patterns, different staff members will employ similar services to implement similar enterprise capabilities thus increasing the re-usability of these services.
    • Routine activities will be gradually eliminated thus increasing the time for added-value contributions.
    • Modern technologies will be employing in a coordinated and transparent way to streamline evolution and reduce overlapping and omissions.

    Thanks,
    AS

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  • Accepted Answer

    Friday, October 09 2015, 12:19 PM - #Permalink
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    Strange that so many BPM Forum questions have a sales angle. And already we have lots of great answers concerning the value or not of a focus on ROI.

    I suggest that ROI can be seen as an artifact of management perspective. "When all you have is a hammer, then everything looks like a nail" as the cliche goes. And management is always looking for hammer -- any hammer please! Because management is hard and complexity of organization is overwhelming.

    So from a sales orientation, ROI is a question of governance. If you only think of your operational metrics, then you'll probably want to automate to kill jobs -- and to heck with any concern about tacit knowledge or "hollowing out".

    On the other hand, if as a manager you have responsibility for "customer journey" or "customer experience" or "customer value chains", then a narrowly defined ROI isn't so helpful in guiding project investment decisions.

    Normally though, when selling software, governance is a given.

    It would be an unusual situation were the prospect to say "hmmm, ROI really is too narrow, we should take a broader perspective!". I live in hope.

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