Value-driven business process design (BPD) starts with a focus on value: how to create it and how to measure it. Before we design a business process, we need to identify the business metrics we intend to improve, what behaviors impact each metric, and the desired target values. This is easier said than done.
The first step is to identify the business objectives, why a given business exists. The business objectives are the business goals, what the business is trying to achieve. To determine how the business is doing, how well it’s meeting its objectives, these goals must be expressed in a quantifiable manner and consistently measured and tracked. These measures are business metrics.
Business Metric: a quantifiable measure used to track and assess the performance of a specific area or activity.
These measures, the business metrics, include concepts like Late Orders, On Time In Full (OTIF), Return On Investment (ROI), Cost of Goods Sold (COGS), Inventory Turns, etc.
Once the business objectives are clearly defined, we need to identify the key behaviors which impact these metrics, in particular those behaviors which drive metric trends toward optimality. Once we do so, we can define how business roles must behave in order to drive business value.
It’s easy to skip over this basic step of identifying and carefully defining the key business metrics to be impacted by BPD, and assume they are clearly understood and will be met. Yet this lack of explicit focus on business value can easily result in inefficiency, an inability to realize the ultimate benefit desired from the BPD, so it is a very good place to begin.
Starting a BPD engagement by identifying the key business metrics that are expected to be impacted by the BPD, defining them clearly and designing each business process in the context of optimizing them, and benchmarking these business metrics at the point where the new BPD is enabled, is key to effective business process design.
In our next post, in order to drive optimal business value, we’ll define a key term, business requirement, in what might appear to be a non-intuitive way.