1 PROCESS HARMONIZATION: A MULTI-INDUSTRY VIEW Rosa Elleni Vargas Brito
2 Author s Disclaimer The following presentation contains a comparison of three (3) business profiles and their approach to process harmonization. The analysis portrays solely the author s professional experience and opinions, only for knowledge sharing purposes in professional networks. The presentation is not presented on behalf of any of these companies, therefore the anonymity in the profiles.
The World as We Know It 3 Economic Crisis Continues To Limit Boundaries For Entrepreneurial Activity Business models are in constant evolution Increasing Globalization and Consolidation Of Industries Shorter product life cycles The capacity for innovation has become a key driver of growth Speed & agility are critical to stay ahead of the competition
Motivation for Multi-Industry Comparison 4 Firms Facing Challenges in Achieving & Sustaining Competitive Advantage Years of Growth Through Mergers & Acquisitions The Need to Scale & Optimize Global Manufacturing Footprints Process Harmonization Approaches & the Role of Contextual Factors Business strategies & operating models Maturity level of processes & enterprise architectures Different methodologies for process improvement
Logic for the Comparison 5 BEFORE AMBITION Operating Model Operating Model = Company Profile Results Lessons Learned Process Maturity Level Contextual Factors Process Maturity Level
Key Terms 6 Operating Model Enterprise Architecture Represents how a firm operates across processes, organization & technology domains in order to accomplish its function Organization of business process & IT infrastructure capabilities reflecting the integration & standardization requirements of the firm s operating model Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business
Ambition 7 Future state of the business or process transformation process Desired level of business process integration & business process standardization for delivering goods and services to customers
Operating Models 8 Source: Enterprise Architecture as Strategy: Creating a Foundation for Business Execution, J. Ross, P. Weill, and D. Robertson, Harvard Business School Press,
Business Process Maturity Stages 9 Source: The Business Process Maturity Model: A Practical Approach for Identifying Opportunities for Optimization, D. Fisher, BearingPoint Inc., BPTrends
Business Process Maturity Siloed Tactically Integrated Process Driven Optimized Enterprise Intelligent Operating Network Strategy 10 Reactive to market conditions within 1-2 years, typically chasing a competitor Integration within functions Driven by cost and efficiency Adaptat/react to market conditions within 12 months Some cross-functional integration to solve problems Initial into point-to-point integration with partners Adapt/react to market dynamics within 3-6 months Enterprise-wide process leadership established The business process is the foundational element of the enterprise Adaptive to market dynamics within weeks Enterprise organized completely around processes Optimized processes + execution yield competitive advantage Predictive capabilities & continuously adaptive to market dynamics in near realtime Enterprise & partners organized around processes Competitive advantage is driven & shared by partners Controls Local and functional level authority / autonomy No enterprise-wide standards or governance No formal value measurement program Hierarchical mgmt. structure Independent functional department decisions Limited enterprise-wide standards or governance Formal process leadership establishes priorities Business cases drive projects Process metrics tied to individual and team performance Process teams responsible for overall performance Relevant process metrics institutionalized as main performance measures Inter-enterprise process teams own performance Relevant process metrics are used to measure bi-directional partner performance Process Static business processes Functional silos Geographic silos Department focused Informal communications within departments Limited process reengineering and crossfunctional/process coordination (often manual, one- time efforts) Systems drive baseline process definitions Fully transitioned from functional to process focus, including management structure, execution teams, and performance evaluation Targeted BPO Total process integration across the enterprise Commitment to continuous process improvement program Outsource non-core business processes (reduce cost & increase quality) Total process integration across the ecosystem Key processes flow seamlessly across firewalls People Subject matter experts Culture is adversarial, mutual distrust No formal change management procedures I ll do my job, you do yours Cross-functional/process team members (usually led by IT) Limited understanding of cross- departmental process needs and dependencies Process leaders define, deploy, enhance, and maintain core processes Functional teams focus on high quality execution Lean organization focused on optimizing process definitions and execution Ongoing process training for employees Partner selection includes process & cultural attributes Ongoing process training for employees and partners IT Independent systems Islands of automation Integration only within functions Legacy enterprise system(s) Leverage ERP systems for cross- functional integration Point-to-point partner integration IT leads cross-functional initiatives (systems focused) IT supports process leadership team in initiatives System and instance consolidation to streamline processes and info mgmt. Utilize Business Process Management (BPM) solutions to automate process execution, monitoring, and control across the Enterprise Utilize Business Process Management (BPM) solutions to automate and monitor process execution throughout the ecosystem Source: The Business Process Maturity Model: A Practical Approach for Identifying Opportunities for Optimization, D. Fisher, BearingPoint Inc., BPTrends (www.bptrends.com),
Selected Companies Similarities 11 Global Manufacturing Companies Publicly Traded Adopted Some Sort of One Manufacturer Approach Quality & Cost have been key business drivers Corporate-wide Decision to Improve & Harmonize Processes
Company Profiles *2013 Figures - Source: Yahoo! Finance 12 Key Facts Orange Green Blue Established Between 150 and 180 years of History Industry Manufacturing Manufacturing Manufacturing Employees 47,000 67,044 30,400 Sales* USD $11.73B USD $37.8B USD $7.82B Net Income USD $0.67B USD $3.53B USD $2.51B Profit Margin N/A 9.08% 20.56% Operating Margin 10% 14.11% 18.66% Business Areas 5 5 5 M&A Level High Medium Low
13 Orange Company Case
Operating Model Diversification 14 Aggressive growth through Mergers & Acquisitions Independent Businesses with Different Expertise Need of Shared Data: Similar Customers & Suppliers Low Process Standardization & Integration IT Provides Economies of Scale without Limiting Independence
Business Process Maturity Siloed 15 Siloed Business Process Maturity Strategy Controls Processes People IT Reactive to market conditions within 1-2 years, typically chasing a competitor Integration within functions Driven by cost and efficiency Local and functional level authority / autonomy No enterprise-wide standards or governance No formal value measurement program Static business processes Functional silos Geographic silos Department focused Informal communications within departments Subject matter experts Culture is adversarial, mutual distrust No formal change management procedures I ll do my job, you do yours Independent systems Islands of automation Integration only within functions Legacy enterprise system(s)
Ambition Levels 16 Operating Model Ambition Optimize Manufacturing Footprint & Become One Manufacturer (Inprogress*) Become a Process-Driven Organization (In-progress*) Business Process Integration High Low Coordination Diversification Low Unification Replication High Business Process Standardization Business Process Maturity Ambition (* In-progress Move from at the time Silos the analysis to Optimized was conducted) Siloed Optimized Enterprise
* Early stages of implementation at the time the analysis was conducted Implementation Results* 17 Top Management Support Established Business Process Management Function (BPM) Appointed Business Process Directors (Full Time) Established Governance: Process Center of Excellence Leveraged Industry Frameworks (e.g. APQC s PCF) for End-to- End Business Process Development (Core, Supporting & Management Processes) Established Operational Excellence Organization Appointed Lean & Six Sigma subject matter experts Kicked-off One Production System & Lean Journey
18 Lessons Learned
19 Green Company Case
Operating Model Unification 20 Industry Leader Mature One -Manufacturing System Data: Global Processes, Data & Metrics High Process Standardization & High Integration Needed IT: Standard infrastructure & applications, global data access
Business Process Maturity Optimized Enterprise 21 Optimized Enterprise with Tactically Targeted IT Process Maturity Strategy Controls Processes People IT Process Driven Adapt/react to market dynamics within 3-6 months Enterprise-wide process leadership established The business process is the foundational element of the enterprise Intelligent Operating Network Inter-enterprise process teams own performance Relevant process metrics are used to measure bi-directional partner performance Optimized Enterprise Total process integration across the enterprise Commitment to continuous process improvement program. Outsource non-core business processes (reduce cost & increase quality) Optimized Enterprise Organization focused on optimizing process definitions and execution Ongoing process training for employees + - Tactically Targeted Leverage ERP systems for cross- functional integration Point-to-point partner integration IT leads crossfunctional initiatives (systems focused)
22 Ambition Levels Operating Model Ambition Remain as Industry Leader & Grow Maturity of One Manufacturing System Business Process Integration High Low Coordination Diversification Low Unification Replication High Business Process Standardization Business Process Maturity Ambition Process Driven IT IT supports process leadership team in initiatives System and instance consolidation to streamline processes and info mgmt. Move from Tactically Targeted IT to Process Driven IT People: Become Intelligent Operating People (Intelligent Operating Network) Partner selection includes process & cultural attributes Ongoing process training for employees and partners
* Mature One Manufacturing System at the time the analysis was conducted Implementation Results* 23 Before One System Each factory operated autonomously Different approaches on product quality Multiple Quality Management Systems Lack of uniformity in factory appearance After Implementation: Uniform approach to Quality Sharing best practices between units Enterprise Documentation: Quality Manual and high level procedures Visual Management & facility standardization Improved Quality & morale
24 One Manufacturing System Infrastructure One Manufacturing Infrastructure Leadership Quality Operational Planning Employee Engagement Enabling Manufacturing Technology & Processes Structured Operational Process Material Logistics Operational Availability Delivers Guiding Principles Common Processes Common Metrics Shared Best Practices In Core Business Processes Leadership Product Development Order Fulfillment Customer Support
25 One Manufacturing System Implementation Approach Certification Bronze, Silver and Gold Certification goals (maturity levels) Leadership & Change Management Specific criteria for leadership engagement Achieving and improving certification is a key performance goal for factory leadership Internal Assessment Process Methodology Dedicated organization for maintaining and improving the system Success is Measured by Corporate Auditors as well as Performance in Key Metrics 1 to 2 Formal Assessments per Year Appraise Processes with owners & Assess Performance on the Shop Floor Best Practice Sharing - Communities of Practice
Business Process Integration 26 Common Process Enabled by SAP Solutions Concurrent Implementations of SAP & One System Aligned to Industry Standards (APICS)
Lessons Learned 27 Operating Model Business Process Maturity Challenges Difficulty in uniform implementation of Unification Moving from Diversification to Unification involves high level of complexity & risk High Level of Complexity in a Large Scale SAP implementation Process Execution was hindered by applications & data standardization Lessons Learned Unification was achieved at Corporate Functions (Finance, HR) Functional unification achieved by organizing around 5 Business Areas Uniform implementation at functional levels in three (3) Core Processes: Product Development Order Fulfillment Customer Support SAP implementation was executed by business area Additional upgrades to SAP systems were not performed corporate-wide. Some business areas fell behind Plus: master data & applications were easily implemented (plug-and-play) Cons: Centralized master data governance limited flexibility in addressing specific unit needs. Cons: Lack of granularity limited data analysis
28 Blue Company Case
Operating Model Replication 29 Innovation Leader, institutionalized R&D as a key business strategy Independent Businesses with Similar Expertise Data: Similar Customers & Suppliers High Process Standardization & Low Need for Integration IT: standard infrastructure & applications for global efficiencies Focus on Execution & Improvement Operational Excellence through Six Sigma, Lean & Innovation Process
Business Process Maturity Optimized Enterprise 30 Optimized Enterprise with Process Driven IT Process Maturity Strategy Controls Processes People IT Intelligent Operating Network Predictive capabilities & continuously adaptive to market dynamics in near realtime Enterprise & partners organized around processes Competitive advantage is driven & shared by partners Optimized Enterprise Process teams responsible for overall performance Relevant process metrics institutionalized as main performance measures Optimized Enterprise Total process integration across the enterprise Commitment to continuous process improvement program. Outsource non-core business processes (reduce cost & increase quality) Optimized Enterprise Lean organization focused on optimizing process definitions and execution Ongoing process training for employees Process Driven IT supports process leadership team in initiatives System and instance consolidation to streamline processes and info mgmt. +
31 Ambition Level Operating Model Ambition Obtain a balance between replication and coordination Harmonization for improved integration Business Process Integration High Low Coordination Unification Diversification Replication Low High Business Process Standardization Business Process Ambition Optimize execution excellence & improvement by increased Collaboration Optimized Enterprise IT Utilize Business Process Management (BPM) solutions to automate process execution, monitoring, and control across the Enterprise People Inteligent Operating Netlwork Partner selection includes process & cultural attributes Ongoing process training for employees and partners Process Driven IT Optimized Enterprise
Status Before Implementation 32 Relied on quality foundation through historic highs & lows Four stages in the Quality Journey (early 1980 s until early 2000 s) Quality methods & concepts varied from one organization to another Innovation alone was not enough to sustain competitive advantage Market saturated & the quality advantage became outdated
Status After Implementation 33 Went Through A Company-wide Transformation Reinforced values towards execution excellence & improvement Concentrated on cost advantage Ensured Continuous Improvement System Was Best In Class Implemented a Standard for Operational Excellence, which was imbedded in global operations Institutionalized the use of common quality tools (Six Sigma, lean & kaizen)
Approach to Process Improvement 34 Initial concentration on manufacturing processes Use of lean, Six Sigma, DMAIC, and advanced Design for Six Sigma with dramatic results: highquality and low-cost production Commercialization applications 6σ tools applied to sales, marketing & other transactional processes Standardization of Innovation Process
Lessons Learned 1 35 Operating Model Challenges Market saturation & quality were no longer a competitive advantage Innovation alone was not enough to remain competitive Resistance to change Lessons Learned A concentration in cost advantage was needed Breakthrough results required a significant business transformation and total organization engagement Thoughtful planning of the transformation process Extensive executive, sponsor & belt training Communicate quick hit success stories Implement both cost saving & methodology utilization targets at all levels
Lessons Learned 2 36 Busines s Process Maturity Challenges How to balance the need for deep process understanding and deliver quick results The concept of Diminishing Returns, after years of sustained process improvement Lessons Learned An adaptive approach to Six Sigma & Lean, by selective use of the tools according to the problem or opportunity Full-blown Six Sigma projects, adapted DMAIC (medium sized opportunities) and individual DMAIC allowed large & medium size teams (and individuals) improve the processes Cost reduction & improvement goals were increased every year and met, which provided confidence on attainability Before hitting a plateau, moved to transactional & commercial processes.
Lessons Learned 3 37 Busines s Process Maturity Challenges Conflicting priorities of day-to-day work and improvement activities How to leverage lessons learned for increased benefits Lessons Learned Some locations added full time belts & lean organizations Improvement project should guarantee selfsustaining of these roles Implemented communities of practice Established Enterprise Quality Event every 2 years to share success stories, provide specialized training & reward team/individual performance The original operational excellence model evolved, adding another pillar: Collaboration
Lessons Learned 3 38 Operating Model Business Process Maturity Challenges Prolonged economic crisis New footprint required integration Harmonization of processes in the new global organizational setting Lessons Learned The organization needed to optimize & reduce the manufacturing footprint Organization changed from Division orientation towards a Global Enterprise concept Discovered additional needs to Harmonize Global Processes Incorporated the use of Design for Six Sigma in parallel with SAP implementations, in order to define requirements Critical to take in consideration the global and specific needs in order to harmonize new global business processes
39 Final Thoughts & Summary
Standardization & Harmonization 40 Multiple levels can be achieved across Divisions and geographies: Operating Model (strategy) Business Processes Enterprise Architecture When selecting harmonization model consider tradeoffs in: Flexibility Implementation costs Ability to innovate & proper change management
Change Management Remarks 41 Alignment means success Corporate Strategy with: Operating model ambition Business process ambition Enterprise architecture ambition Levers of change alignment Strategy, Process, Controls, People, Technology
Linkage to Strategy 42 Company ambition & strategy must define the harmonization program direction Perform gap analysis (strategy-process ambitionenterprise architecture) The enterprise architecture (EA) needs to be adequate to support the ambitions of the operating model. EA improvement could be implemented parallel with the harmonization efforts Higher complexity & risk in this approach
Operating Model Remarks 43 Unification provides full harmonization, but might not be the ultimate goal. It is possible to take the route through coordination or replication
Harmonization Approach 44 There are several success examples with One M Models An alternative is to use a Business Process Model or Framework: Supply Chain Council s Operational Reference (SCORE) APQC Process Classification Framework APQC: American Productivity & Quality Center
Business Process Models 45 Helps in breaking down top-level business processes and their metrics into more detailed processes Aids in developing templates that offer space for local adaptation and rapid implementation Process harmonization / standardization drives IT standardization, not vice-versa
46 Rosa Elleni Vargas Brito Email: rosaelleni@gmail.com LinkedIn: nl.linkedin.com/in/rosaellenivargasbrito/