A Company’s Change Agent

Feature Article | January 11, 2005 by SAP News

Klaus Mühleck, CIO at Audi, focuses on the tight connection among “company design, processes, and IT” in his work. His counterpart at Siemens VDO Automotive, Klaus Straub, wants to change his company into a “process-oriented organization.” And Dieter Muckelmann, who holds responsibility for group-wide IT strategies at WestLB, even sees himself as a process driver with an effect on profit. He says, “with IT, we improve business processes and enable the bank to earn profits.”

You could find similar statements from other CIOs, but they all substantiate one point: the management of business processes is becoming increasingly important. Companies around the world expect greater efficiency and lower costs from the optimization of their business processes. Above all, they want to make customers the focus of workflows.
An article in the Harvard Business Review last year created a keen discussion and growing interest in the area. In an article titled “IT Doesn’t Matter,” Nicholas G. Carr discusses the productivity of IT investments. His conclusion? These days, companies can no longer achieve competitive advantages by implementing new IT systems. Hardware became an interchangeable commodity in the 1980s, and software is about to go through a similar development. IT is becoming a basic technology – like electricity and the phone. In addition, departments within companies now deal with IT budgets, usually leaving IT managers to complain about empty pockets.
Even if Carr’s remarks are not valid across the board, they do indicate a problem in today’s IT industry. This situation demands a look at the details. In fact, basic IT technologies are becoming less and less important. Operating systems, databases, and middleware for application management will become standard tools in the future, like telephone systems, time-entry systems, or production machines.
But IT that supports business processes looks different – especially for business application systems with process-oriented control systems. This situation involves the interface among business, organization, and IT; the potential for productivity, flexibility, and profitability exists here today.

A Commitment to Processes or Managers Without Power?

IT managers have a future only when they deal with this interface. But doing so assumes that they must reposition themselves within the leadership of a company. Competency with IT alone will no longer provide them with an opportunity to sit on the board of directors. Those times are long past. Once the IT landscape is standardized and consolidated, many of today’s CIOs will become managers without power. IT managers can develop a new perspective developed only when they redefine their roles and their tasks.
CIOs Mühleck, Straub, and Muckelmann have already recognized this situation. And other signs also point to a paradigm shift. That’s why job advertisements increasingly contain terms like “process manager” or “process owner.” For example, a Munich reinsurance company recruited for such a position in its purchasing department, and a TV network did the same for its subscription department. Of course, such positions primarily involve concrete tasks, but the formal job title also plays a role. A business card that carries the title of process manager raises eyebrows. But those who have such as title must also define their areas of responsibility accordingly.

Understanding and Designing Comprehensive Contexts

Task List of the CPO

Task List of the CPO

Unfortunately, business processes can’t be arranged by departments. On the contrary: business processes often traverse an entire company and therefore through several areas of responsibility. Today, each department decides what goes on within its boundaries. The department places orders, it is its own customer, and it monitors quality. The IT department simply realizes requirements with information and technology.
So far, so good – this distribution of tasks will not require any changes in the future. After all, the departments know their own processes best, and they know where the processes must become faster, more efficient, or more oriented toward customers. For its part, the IT department sets IT standards for the company and the corporate group. It also guarantees that IT resources are planned and monitored so that they offer the best possible support to the company’s business goals.

This situation results in a key problem for IT managers. If they want strategic responsibility in a company, they must increasingly address the organization. But they cannot take the responsibility for processes away from departments. Instead, they must develop a cross-area view of business processes, and then they must understand and implement the collaboration of processes and applications. They must understand themselves as process managers who maintain a view of the value chain across various departments and use their knowledge of IT to organize that view. The chief information officer must become a chief process officer – a CPO.
Business process management is becoming more and more important internationally. According to a representative survey of 450 international companies, the Meta Group reported that 85 percent of those surveyed want to start these kinds of initiatives this year. They expect the optimization of business processes to create greater efficiency and to lower costs. But above all, they want their work processes to focus more strongly on customers.
For its Business Process Report 2004, IDS Scheer AG surveyed 145 German companies on business process management. Some 62 percent of the companies that responded support a position like chief process officer with central responsibility and decision-making authority for the management of business processes.
Such a development naturally leads to organizational changes. Departments, such as production or sales, must give up their responsibility for process management because the CPO assumes strategic responsibility for business processes. Upper management in the company and the departments expect the holder of this new position to know all the innovative options of new IT applications and implement them in the firm’s business processes. The competence of the CPO consists of the combination of knowledge of process management and of information technology.

From CIO to CPO

In particular, the organization of business process management still needs improvement in many companies. Companies usually work to optimize their flows by department and fail to consider the comprehensive and horizontal value chain. That approach creates partial solutions that then need to be patched together. Business software is also developing in the direction of processes and in the future will be configured and adjusted based upon organizational models.
A three-level model clarifies the structure and organization of business process management and the classification of the CIO being transformed into a CPO. In the first level of this model, decisions about strategic processes are made at the highest level of an organization. Such decisions primarily involve the key competencies that companies implement in their products. The central responsibilities of a CPO include general process orientation and the design and implementation of methods, tools, and platforms.
The second level executes the business processes integrated with IT. Decentralization determines events at this level. The CPO must ensure that this decentralized knowledge of processes is centrally available to all process owners. Process management thus becomes the task of each employee.
The third level closes the loop. The results of the business processes are captured, evaluated, and formatted for corrective and controlling decisions. It’s here that technological developments emerge, developments that conflate levels two and three and lead to new architectures. These developments bundle familiar techniques, such as workflow systems or EDI, and unites them with executable systems – which is the role of SAP NetWeaver.

Communication, Adding Value, IT Knowledge, and Innovation

The optimization of company processes demands that IT management clearly devotes itself to business concerns. Changes in markets, the demands of competition, and technological developments all lead to a permanent need to restructure processes. And this need demands more competencies than technological responsibility for IT systems. Regardless of the use of the title, the CPO has a clear profile: to become a change agent in the company.
For this role, the CPO must possess excellent communication skills. First, the CPO brings together people from various companies and areas within companies, convinces them to give up their departmental thinking to benefit a greater, common goal, and the motivates them to participate in a process of change beyond their own interests. Second, the CPO must think in complex process chains and understand adding value completely – from the extraction of raw materials to warehousing to customer service. Third, knowledge of IT is part of the CPO’s competence – which platform, which architecture, and which technologies can realize excellent business processes? Finally, the CPO must be happy with innovation. The CPO not only recognizes potential innovations in the organization and in technology, but also evaluates risks and opportunities and ensures that the mood of the company supports additional innovation.

Dr. rer. nat. Wolfram Jost

Dr. rer. nat. Wolfram Jost

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