Category: Business Process Design

In our last post we considered the importance of focusing process design on business value by first identifying business metrics, and then identifying the actions required to drive metrics toward optimality. This introduces the concept of a business requirement.

Businesses specify requirements to orient both process and solution designs, but we seldom stop to ensure that we agree on what we mean by this term business requirement. Since this concept is the foundation of solution and process design, let’s define it intelligently.

Again, thinking simply (not simplistically), a business comprises people working together to achieve business goals. Their activities impact business metrics, so each person must act in a particular way to optimize these metrics. These required activities, which people need to perform to achieve the goals of the business, are the true business requirements.

Business Requirement: an action necessary to achieve an objective or optimize a business metric.

This definition is evidently reasonable since it is derived explicitly from the business context, and is designed to enable business goals.

This definition may seem non-intuitive at first, since we often associate the term business requirement with a particular capability required in an enabling automated solution. The problem here is that we confuse the design of a supporting application with the activity that drives business value. The business likely does not understand new enabling technologies well enough to specify configuration and capabilities, called Functional Requirements; it is the job of the application expert, not the business, to identify and validate which capabilities best support required business activities. When the business tries to prescribe the solution design rather than focusing on optimal behaviors and workflows, process and solution designs tend to be sub-optimal.

The ideal structure of a business requirement is thus always: Verb+Noun, an action (verb) performed to produce a given result (noun). For example: Resolve Late Orders, or Generate Production Schedule. Once we define what people need to do to optimize business metrics — in other words, we define the business requirements — then we can define a business process, the steps required to get the right things done in the right way, and see how the terms are related.

In our next post we consider a complimentary concept that also needs to be fleshed out in order to effectively design any business process: the business role.

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.