It’s a matter or course that a company – midsize or global – has a business strategy. A balanced scorecard often displays the strategy. Every executive board regularly asks itself where the company is at a given time and the direction in which it should develop. The use of IT is also part of the normal operations of a progressive organization. And of course, computer systems manage and analyze internal company data and data beyond the confines of the firm. The goal here is to operate business transactions automatically to make them more efficient.
Both the business strategy and IT operations therefore have solid and good foundations, which means that they are all too often considered in isolation. And it gets worse. Companies fail to recognize the need to link their business strategy with their IT operations. The reason for this failure is a failure to look at the underlying processes. Business processes are the decisive link between a company’s strategic direction and the IT solutions it has implemented.
During the transition from a business strategy to IT, companies run the risk of losing valuable information. In this situation, the goal is to build bridges – and do so with the aid of two approaches: using a methodical procedure and using technology. The goal of the first approach is to ensure that processes within a company (and those that operate in the context of the company’s vendors and customers) reflect the business strategy defined by management. The second approach requires IT solutions that are tuned to business processes. And the IT solutions must be operated in a way that does not undermine the effectiveness that has already been achieved.
Making the Connection Between Strategy and Process Visible
Companies often fail to recognize even the connection between business strategy and processes. But a top-level strategy should lead to concrete objectives at various levels in an organization – from a strategic business unit to individual employees. To do so, changes to a company’s organizational and procedural organization are not only natural, but also required. And these target processes are the actual prerequisite of improved process architecture.
Here’s a concrete example. Management sets a strategic goal of becoming the market leader in the company’s industry. One of its overall objectives is improved efficiency in sales. The company decides to improve sales by having its sales staff visit only specific groups of customers. A call center will contact the remaining customers in the future. New responsibilities, transactions, and control mechanisms result. And day-to-day activities also change when, at the other end of the value chain, the company converts its collaboration with its vendors to an Internet-based order system.
Transparency, Integration, and Efficiency
The first bridge means that as an abstract, strategic instrument, a balanced scorecard must result in an integrated and tangible process model that can then be used like a map to detail all levels of the hierarchy – from the uppermost node to the operating level. The process model shows the concrete flows and objectives that reach the strategic goal. It therefore clarifies who works with specific IT systems to processes specific information and perform specific actions. This procedure guarantees the transparency of all the newly designed processes. It also guarantees an opportunity for automated controlling of the key figures that are normally defined in the balanced scorecard.
Because enterprise resource planning (ERP) applications and other IT solutions support a significant portion of the strategic processes, the second bridge, integration, must guarantee equivalent coverage of both areas. It is vitally important that IT be oriented to the business processes. So far, ERP solutions have sometimes proven too inflexible and standardized. Integration platforms like SAP NetWeaver resolve this conflict. In addition, ERP software has recently added software elements for process management. Application platforms that contain integrated software for process modeling and analysis offer a decided advantage.
The ideal processes derived from the individual business strategy directly underlie configuration of the IT systems. Products like SAP NetWeaver working with ARIS make the second bridge the cutting edge. For the example of sales efficiency, this approach means that the changes made at the strategic level and their effects on processes (at the level of a sales approach, for example) also directly affect the customer relationship management (CRM) solution that the company has implemented.
Magic Words: “Comprehensive Process Management”
Finally, the last bridge must enable the operation of IT solutions that support process efficiency. Business process outsourcing offers an option here because (staying with the example of sales efficiency) it surpasses simple hosting of CRM software. In any event, only knowledge of the processes enables anyone to determine with accuracy if, for example, call center processes have been sufficiently standardized to outsource the entire area.
Comprehensive linkage of strategy, processes, IT, and IT operations can minimize losses from friction caused by the interaction of these elements. Business process management is an appropriate instrument to solve problems – especially at business bottlenecks – because it focuses on processes close to customers, such as order processing, customer support, and sales.
The Business Process Report 2005, a study undertaken by Softselect at the request of IDS Scheer proves the significance of such a focus. About half of the companies interviewed stated that investment in specific process brought the expected benefits or even more benefits. Only 11 per cent of the respondents stated that investment in business processes optimization was not worth the cost.
Only one-tenth of the IT decision makers surveyed did not intend to deal with process management at all, which shows that companies have recognized the potential for process optimization. Comprehensive process management is the actual source of creating value in a company. Companies must become aware of its importance before they can actually start to build bridges.