What is process innovation, and why companies need it? And why now?
Today’s CIO has an imperative to innovate. It’s critical to innovate to be on the leading edge.
A changing environment characterized by developments such as the deregulation of competition, the globalization of markets, increasing customer requirements, and potentials in the field of technology requires a process-oriented organization with the customer as the focus of a company’s activities. Digitalization has become an integral part of modern-day life, and business administration is no exception. There are wide-ranging fields of application, and process-oriented companies stand to benefit long term from digitalization and the implementation of process innovations.
Process innovation is used to support companies in aligning their processes in a customer-oriented manner to help ensure business success in the long term. The redesign of processes is supported by market-related (market-pull) and technology-related (technology push) implications with company-specific fields of action to generate an overall picture.
In addition to the redesign of processes and strategies, a special emphasis on technology is needed which makes change possible in the first place. The objective of this approach is to meet future customer needs through leading market technologies and new technologies play a fundamental role in enabling the development of new services.
What are the differences between function and process-oriented organization?
“Business in reality is a constant process, a continuous value-creating chain.”
Organizations can be developed in a function-oriented or process-oriented manner. A function-oriented organization divides similar tasks into functions (e.g. research and development, purchasing), which then perform these tasks.
A process-oriented organization forms key processes, which take place within an organization or between different organizational units. Unlike a function-oriented organization, a process-oriented organization structures a company according to continuous processes connected by a flow of deliverables. The processes are designed to be oriented towards customers (internally/externally). The advantages of a process-oriented organization are that companies can adapt more quickly to changes in the business environment
What are the two perspectives on processes, and how to identify the differences between them?
In order to clarify the process concept, different perspectives on processes need to be explained from production theory and system-oriented organization theory. In production theory, the focus is on the transformation function of a process. A process is triggered by an event; this event serves as an indicator for the occurrence of a defined state. Within a process, an object (input of the process) is subject to different activities. These activities make changes to the object, thus changing the original state. The changed object leaves the process and defines the output of the process
The system-oriented organizational theory allows a more differentiated consideration of the relationships between the elements of the organization and between the organization and the organizational environment and four elements of an organization are derived: tasks, task managers, material resources and information. These four elements are connected via the following three relationships:
- Deliverables relationships – include the assignment of tasks to task managers and material resources
- Sequence relationships – include the division of labor and the resulting dependencies between tasks
- Information and communication relationships – are developed based on management and sequence relationships. They connect tasks, i.e. task managers, and machines via information
What are the definitions for process, process management, and process innovation?
A process contains tasks that must be completed in a predefined sequence (process flow); tasks are supported or enabled by technologies. Process deliverables represent the added value of a process and are delivered to internal or external customers; The process management controls and designs the process based on the corporate strategy. Process management consists of critical success factors, performance indicators, and target values; a process manager is responsible for managing processes.
To put succinctly, Business process management is a concept for the model-based design, coordination, and execution of business processes. It focuses on the connection between the tool-based model (on the type level) and operational information system components (standard software, individual software, legacy systems) as well as application services (electronic mail, information servers/databases, etc.).
The three listed functions of process management (design, control, development).
Process design has the task of defining the organization of the processing system and thus determining the segmentation and structuring of processes. The starting point is the company’s strategy, from which processes are derived. The design of individual processes should give way to radical and new solutions, which are implemented by the usage of new technologies.
Process control determines the objectives of the processes, checks the goal achievement of the process using key performance indicators, and initiates appropriate measures in the event of deviations. Process control thus comprises the planning, execution, and monitoring of processes and represents a continuous function of process management
Process development includes the identification and evaluation of the process potentials of a process. The implementation of process development is carried out within the framework of process design and control. The use of the identified potentials is measured via the comparison of performance indicator target values. By means of the three functions, it is possible to gain a holistic view of the process management
Process administration includes developing incentive systems, agreeing on objectives, and identifying measures in case of deviations from the objectives. Process organization includes e.g. identifying decisive competitive processes, process-oriented design of the company organization, defining roles, and structuring the sequence of individual processes.
Process controlling determines e.g. process success factors, derives process objectives, and checks their implementation. Process optimization derives measures for the optimization of the process management and individual processes
The central aspect in the context of process management is customer orientation. This customer orientation is implemented within the process management via the following four approaches
- Customer satisfaction: Identifying and satisfying customer needs using process deliverables
- Quality: Ensuring the process quality (nature of the process deliverables) by means of constant measurements (comparison of target vs. current values) and derivation of measures.
- Time management: Reduction of throughput times (an event that triggers the process up to the availability of the process deliverables for process customers).
- Process costs: Planning of overall costs/cost rates of processes and tasks as well as the derivation of efficiency-enhancing measures
These approaches are considered in the context of process management in order to implement the required customer orientation.
How does technology enable process innovation?
In addition to the definition of processes and process management, we also need to review the definition of process innovation. The concept of innovation is characterized by a result-oriented or process-oriented perspective
In the context of a result-oriented approach, innovations define qualitative innovations introduced on the market or internally within the company with the objective of improving one’s own economic success. A more detailed differentiation of the result-oriented approach is based on the innovation object, the level of innovation, and the reference unit for determining the novelty property.
The list of product or process innovations (technical or administrative) as innovation objects:
- Deliverable innovations: Deliverable innovations comprise the demand-driven renewal or improvement of goods or services.
- Process innovations: Process innovations comprise the efficient manufacturing of products.
- Market innovations: Market innovations comprise the identification of new markets and the development of existing markets.
- Social innovations: Social innovations comprise changes in the fields of human resources, organization or law.
We define process innovation as follows:
Process innovation is performed based on a structured approach with a sequence of tasks and decisions that are in a logical and temporal relationship to one another. The tasks serve the development and implementation of processes.
The innovation objects in the context of the process innovation are the individual elements of processes (e.g. tasks, deliverables) or the entire process. The innovation level concerns both the incremental (minor) and the radical (fundamental) development of processes. The primary reference unit to determine the novelty level is the customer; it may however also involve the competition, the industry, and one’s own company.
What are the different types of processes, and how to identify these types?
Each process can be assigned to one of the following types: Value-creating processes, Support processes, Management processes.
Value-creating processes (core processes, primary business processes or execution processes) serve to create and merchandise goods and services. As their main characteristics, value-creating processes exchange deliverables with external customers or are directly involved in creating value for external customers. Value-creating processes can be differentiated into production-related value-creating processes (tangible deliverables), and service-related value-creating processes (intangible deliverables).
Examples of value-creating processes include: Distribution process Order processing, After-sales process
Support processes (secondary processes) provide the resources and infrastructure for the value-creating processes; their deliverables are usually provided to the value-creating processes of the company (internal customers).
Examples of support processes include: Staff recruitment, Internal logistic, IT provisioning
Management processes are responsible for general planning, management, and control. Management processes exchange deliverables with the value-creating and support processes within one’s own company.
- Strategic planning
What are the characteristics of process deliverables, and how are they different from market deliverables?
Elements of Processes
Processes consist of the following four elements: process deliverables, process flow, process management, and technologies. These four elements are central to process management; Process deliverables are the result of a process for internal or external customers. A process is both, a deliverable supplier and a deliverable customer.
We define the process flow as follows
- The process flow includes individual tasks, their sequence, and their assignment to task managers. A task represents an operational activity and has a defined result. The process flow describes the temporal dependencies between two tasks and arises from the interdependencies of deliverables and resources between the tasks.
- Process management plans, designs, and observes the process. It determines critical success factors, which are operationalized by performance indicators. Target values are determined for performance indicators, which are used to derive improvement measures via a comparison of target vs. current values.
How does technology enable process innovation?
Technologies are opportunities to support a process or even make it possible in the first place. Technologies are enablers for processes. In this context, we also include information systems as technologies. Information systems are the totality of all applications and data collections and support the execution of tasks. A generally accepted definition for the digital transformation has not yet been established. However, many definitions agree that the digital transformation requires comprehensive networking of societal and operational areas into a digital ecosystem. In the business environment, the digital transformation generally refers to the use of new technologies to increase the performance as well as the reach of operating processes, business models, and customer interaction
Relationship between strategy, business model, process, and technology
The relationship between processes and technologies can be extended to include the relationship between strategy and business models. A company’s strategy considers the developments within the environment of a company (e.g. external influencing factors/competitors) and aligns the company accordingly. Formulating the strategy, therefore, includes e.g. determining the markets (as a combination of customer segments, channels, deliverables, and regions), the business areas, and the strategic goals of a company. Furthermore, the strategy level also influences the process level, e.g. by defining a process map, which is used to implement a strategy.
The strategy is characterized by interfaces with the business model. These interfaces are the potential key deliverables, industry trends, and the stakeholder map. In addition, the potential key deliverables serve to tap into customer needs that have not been articulated yet. The trends within the industry also serve to shape a business model. The stakeholder map contains all the stakeholders in an industry and allows the identification of potential partners and potential customers of the business model.
The process level implements the objectives of the strategy and the business model within the scope of the value-creating, management, and support processes and can stimulate changes within the strategy and in the business model by providing information (e.g. new distribution channels)
The process level defines processes that are described, for example, by means of deliverables and tasks. In addition, the process level provides requirements for the technology level, e.g. to make technologies available for use in processes.
The technology level implements the technological requirements based on the technological drivers; the level thus provides e.g. technologies that can be used in processes.
Insights from process implementation
The key to achieving digital transformation lies in establishing what we call the ‘automation first’ mindset. Most organizations recognize the potential of automation and are in serious scaling mode, but many are unsure about the next steps to leverage RPA to transform their entire organization.
Transformation calls for a shift in priorities and plans. Remaking the enterprise requires three primary automation strategies:
- Build awareness and excitement to support growth
- Extend automation to every person
- Introduce and facilitate both a top-down and bottom-up automation first mindset
To build the bridge between Robotic Process Automation (RPA) growth and transformation, automation needs to become the first principle, and then you can improve digital processes with that capacity in mind.
How KGiSL can help clients in RPA implementation and how clients can reach out to KGiSL?
Mature companies who have already started using automation to accelerate digital transformation have started seeing results in their core business processes areas and new business intake. As a result, they’re improving the customer and channel experiences while achieving operational efficiency.
For 2020, savvy CIOs are investing further in intelligent automation and bringing more partners into the ecosystem to digitally transform processes across the enterprise.
Are you ready for the future of Systems of Intelligence? Get in touch with us today! Together let’s make a CHANGE!
Vice President & Country Manager, Singapore.