OverviewBy CIOinsight | Posted 08-13-2002
Business Process Management 2002
The philosophy of continuous process change is taking hold in American businesses, yet the more radical approach, business process reengineering, is alive as well. The majority of the 727 respondents to our August survey said many departments frequently change their business processes, but the methods for achieving such change aren't well defined. Also, IT execs believe that department heads are generally satisfied with IT's support for their business processes despite less than effective software support.
About seven out of 10 respondents say their companies are definitely committed to continuous process improvement, yet little more than a third say their methods for achieving it are well-defined. Also, nearly two thirds say their companies are reengineering in some way every two years or less, indicating companies take both ongoing and "big bang" approaches to improving the way they do things.
Business processes within the various departments seem to be well-defined, with IT, customer service and finance all reported as being the most explicit. And IT is deeply involved in supporting many of them, especially processes that influence the way services are delivered to customers, such as doctors in a hospital. However, the software IT is providing doesn't seem to be up to the task, since no single application offers great value, according to more than half of our respondents.
It was Valentine's Day, and Barry Hobbs was in trouble. No, he hadn't forgotten, but he was nowhere near his home in North Carolina to deliver flowers.
Instead, the CIO of S&D Coffee Inc. was in Miami riding in a truck delivering coffee to hotels, fast-food outlets and other institutional customers. Hobbs had big ideas for streamlining the processes through which the company's 400 field reps service customers, but he wasn't going to do a thing until he fully understood what those people needed and wanted. "We didn't go out and say, 'This is what you're getting,'" Hobbs says. "We spent days riding the trucks, showing them hardware and finding out, face to face, how they worked."
Follow-up conversations with several of the 727 technology executives who took our survey pointed out clearly that understanding how work really gets doneand the concerns of the people who do itmatters more than technical prowess when it comes to IT support for business process change. Whether it's a salesman or an office worker, people's livelihoods are affected when processes change. Moreover, process change today is more likely to involve multiple departments, creating a more complex political environment for the CIO.
Of all the departments in their organizations, our survey respondents said that the sales department was the most difficult to work with in changing processes. This doesn't surprise Don Schulman, a partner at consultancy PricewaterhouseCoopers in charge of its financial management technologies. "CRM technology now allows call center folk to screen potential customers before sending expensive salesmen out to pursue them," he says. "Salesmen worry that someone isn't going to screen orders properly. It can be very threatening."
It's easy to overwhelm salespeople with systems and information they can't readily integrate into the simple but successful routines they've honed over the years, says Paul Bascobert, executive vice president of the New York office of Braun Consulting, a Chicago-based strategy and technology consultancy. "Look in the passenger seat of a salesperson's car. There's usually a clipboard with four or five key pieces of information that dictate their day, names and account information. If you can make that easier, you've got something of value."
Doing exactly that at S&D Coffee, Hobbs settled on handheld PCs with wireless capability, which should significantly change the process of handling a customer order. Previously, salespeople entered data on the touch screen of a larger handheld device that printed out a three-part invoice. The salesperson then mailed one copy to headquarters, where a whole department was dedicated to scanning invoices from the firm's 65,000 customers. In turn, headquarters mailed out sales reports to salespeople in the field. Now all of this will occur electronically.
Projected savings as he rolls out the new devices this summer: more than $3 million annually in hardware and labor costs for the company, which has an estimated $170 million in revenues. The real payoff is that each field rep will have an extra three hours a day that had been spent fiddling with paper. "They're excited," Hobbs says. "We've got regions begging to be the first on the rollout."
One other key factor in such a change, Hobbs says, is winning the confidence of the sales managers, and that meant a lot of upfront communication. To win them over, says Bascobert, CIOs should consider their particular information needs, such as tracking top performing customers and products. "Management can be supportive if treated properly," he says.
Our survey also showed that, among all corporate functions, process change is occurring most frequently in customer service. "Companies need new business processes to make sure new technology, such as CRM software, is used properly," Bascobert says. And these processes are more likely to extend across departments. "Sales handled acquisition, and customer service handled retention," Bascobert says. "But with the analytical tools available now, acquisition needs to look at expected churn, and retention needs to look at acquisition: Who is the more valuable customer?"
At the Centex Construction Group, a big commercial builder based in Plantation, Fla., "any business process change these days affects multiple departments," CIO Jeffrey Neyland says. A new client relationship management system is a good example. Eighty percent of the company's work comes from repeat clients, but nurturing those relationships in the years between major projects had not been systematic. "Today we have people who have a relationship with the client but don't know that three other people do, too," Neyland says. "What we can do, instead of annoying the client with three different people, is coordinate our activities." With the new system, any employee, no matter their department, can record the details of conversations with a client. The new process will help Centex management understand a client's concerns and future plans, and plot a strategy to strengthen their relationship.
Las Vegas' CIO Joseph Marcella is working on many initiatives that will cut waiting time for area residents, including a new workflow system that will dramatically improve the process of getting approvals for home improvements. Right now, a homeowner who wants to build a deck can spend up to four hours waiting for his paper file to be moved from one desk to the next as engineers or zoning officials check it out. The new system automatically passes an electronic file to the next official, sending it to an alternate person if the first is unavailable, and even makes a number of decisions itself, freeing up people for more intelligent work. The city may get 200 requests on the same kind of water heater in one day, for example, and the system already knows the equipment's specifications. Marcella says the time required to process an approval will drop to 15 minutes.
Like the majority of our respondents, Marcella is motivated by cost concerns. Las Vegas adds 4,000 to 6,000 new residents a month, but with technology, Marcella is able to hold the line on the cost of providing services to them. In fact, he says, the cost of IT services in Las Vegas is only $16 per citizen per year. Nationally, that figure ranges from $22 to $24. When the changes he has initiated affect jobs or multiple departments are involved in a process change, Marcella's task of winning adoption is made easier because every project is managed by the city manager's office, not IT.
And as for Barry Hobbs' more immediate problem at home? On his way back from delivering coffee, he turned on the charm, picked up a bouquet of flowers and managed to avoid a Valentine's Day massacre.Terry A. Kirkpatrick
The results are available in Adobe Acrobat PDF format. To download the free Adobe Acrobat Reader plug-in, click here.
Business Process Management (PDF Format)
- Business Process Management (MS Powerpoint)
Conclusion 01: Frequent, but Gradual Change
Radical process change isn't that common, but frequent, gradual change is a constant, and companies are often committed to continuous process improvement. Yet it turns out that even successful companies aren't likely to follow well-defined methods for supporting ongoing business process change. One surprise: Business process reengineering, though widely demonized, appears to be alive and well.
Companies say they're focused on continuous process change, with 69% saying they're definitely committed to what's often called kaizen. But are companies really following through? Only 36% of respondents say their firm has clearly defined methods for achieving continuous process change. Even companies that are devoted to continuous process change have well-defined methods just 48% of the time.
The death of Reengineering has apparently been greatly exaggerated, with about two thirds (65%) saying they do it every two years or less. While it's not clear whether respondents mean it's an end-to-end revamping of a company's business processes or just any important change, it does indicate that IT departments must be ready to tackle significant, and even disruptive, change.
Forty-eight percent of respondents say their companies are satisfied with its approach toward business process change. But just 23% say they're using software to simulate new business processes before committing to them.
Conclusion 02: Disappointment With Tech Tools
IT departments are actively involved in supporting business process change, and IT execs believe business users like the job IT is doing. But IT execs take a more critical view of the technologies they're using to support business processes. While enterprise application integration tools are proving somewhat useful, others provide little value or aren't being used at all. That suggests that the greatest value IT provides may be in advising departments rather than installing technology.
Seventy-six percent of IT execs believe top business unit managers are satisfied with IT's work in supporting business processes. But IT is harder on itself, with only 62% satisfied with the job IT is doing.
Enterprise Application Integration tools (44%), enterprise applications (44%), collaboration software (41%) and two new technologiesXML and Web services (41%)are the most frequently rated as being used and providing value. In a separate question, 55% of IT execs said ERP systems are clearly improving their company's ability to support business processes.
Workflow systems get little respect, according to 26% of survey respondents. Just 21% say they are providing great value.
When it comes to managing and organizing business processes, business units and IT work as partners at 57% of respondents' firms, and the business units go it alone at 39%. IT is involved in supporting business processes at individual departments, ranging from 53% for marketing departments to 84% for customer service.
Conclusion 03: Departmental Resistance
Customer service and customer-facing departments, the ones whose processes are undergoing the most change, are the ones receiving the most attention from IT. But the sales and marketing departments, despite technical advances and the promise of increased revenue, are the most resistant to IT-enabled business process change. That may mean companies won't be able to reap the full benefit of increasing customer loyalty. As for which department is undergoing the most change, IT execs say that distinction goes to their own department.
IT DEPARTMENT: IT execs see their department as the one whose business processes are the best defined (80%), change the most regularly (about 92% saw frequent or occasional change in the past two years), change the most dramatically (radically or greatly, 71%), and are the most highly automated (extremely automated or automated, 77%). Why do IT execs place IT so highly? Possible explanations are the pressure to deliver value, cope with rapid technological change and help other functions changealong with parochialism.
CUSTOMER SERVICE: Customer service is one of the departments with which IT is most heavily involved, due perhaps to the rise of customer relationship management software. After IT, it's also the department whose processes change the most frequently, but its processes have changed radically or greatly in the past 24 months at only 45% of respondents' firms. Customer service is automated in just 49% of responding companiesthis despite IT's heavy focus on the departmentbut this may be due to the fact that CRM is a relative newcomer.
CONSULTING/SERVICES DELIVERY: This function includes the people who touch the customer, whether it's hospital medical staff or high-powered consultants. This department has also received much attention from ITthird out of all departmentsand its processes change the third most regularly, changing frequently or occasionally at 70% of respondents' companies.
MARKETING: The least automated department in the organization, and the one with the least involvement by IT, marketing could be seen as IT's problem child. But this may not be much of a surprise, since it's only recently that marketing automation offerings have appeared. Marketing is also rated as the second most difficult to support.
SALES: Despite the rise of sales automation and mobile technologies, sales ranks third from last in IT involvement, at 58%, and it's the second least automated department. Sales is also the most difficult department for IT to support. The two standout reasons that both sales and marketing rate so low: These departments' business processes aren't well-defined, and they've been uncooperative with IT.
FINANCE: Behind the IT department, finance has the most-automated processes of any department. Finance is also far more likely to be automated in successful companies71% versus 47% in less successful firms.
HUMAN RESOURCES: Despite the long-time availability of Human Resources Information Systems, HR nearly tied for last place in terms of IT's involvement, at 58%. Its business processes also change less frequently than any other department, at 55%.
Conclusion 04: Success Correlates With Commitment
Successful companies don't treat process change the same way as less successful firms. The best firms are more likely to genuinely commit to continuous process improvement, and treat IT and business managers as partners in business process change. Less successful companies focus more on costs to determine the effectiveness of their processes.
More successful firms are firmly committed to continuous process improvement, 76% versus 53%, and they are more likely to have well-defined methods for achieving it, 43% versus 20%.
When it comes to coordinating business processes between departments, 59% of more successful companies do this well, versus only 31% at less successful firms. IT and business units are more likely to work as partners at more successful firms, 61% versus 47%. In less successful companies, the business units go it alone, 51% versus 34%.
What are the most important issues driving change in successful companies? More successful companies tend to have a balanced view, with the need to reduce costs (26%), im-prove productivity (23%) and increase revenue (23%) clustering at the top of the list. Less successful companies emphasize cost reduction much more highly, at 45%.
More successful companies rank customer satisfaction as the best indicator of the effectiveness of business processes (24%), while less successful companies point to costs (24%).
IT has won enough confidence to be treated as partners in business process change at most companies. But the lack of clear value from the software used to support business processes is disconcerting, as is the troublesome relationship with the sales and marketing departmentsthe two departments most responsible for generating revenues. IT execs must realize that business process engineering is alive and well, meaning they need to be prepared for the strain and stress of supporting large-scale change.
How the survey was done: CIO Insight designed the business process survey together with Advantage Business Research Inc. (www.advantageresearch.com), a Lake Success, N.Y.-based supplier of custom research services. CIOs, chief technology officers, and vice presidents of information technology and services gathered from a number of sources, including third-party lists and other Ziff Davis Media publications, were invited to participate in the study by e-mail. The questions were posted on a password-protected Web site, and 727 qualified respondents replied from May 22 to May 29, 2002. All qualified respondents described themselves as knowledgeable or very knowledgeable about their company's business processes.