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Gartner’s Pattern-Based Strategies: The Emperor has no Clothes! Part II

In my previous post on this topic I listed the flaws I see in PBS at a high level. In this post I dig deeper into one components of PBS postulated by Gartner and analyze it. In my analysis I have used publicly available information about PBS as I assume that most of my readers will not have access to Gartner web site. My sources are listed at the end of this post.

Gartner has defined four disciplines that make up a Pattern-Bases Strategy:

1. Pattern Seeking
2. Optemo Advantage
3. Performance-driven culture
4. Transparency

I will first focus on Pattern Seeking which is one of the core disciplines of PBS.  According to Gartner Pattern Seeking  “comprises focusing on the competencies, activities, technologies and resources that expose signals which may lead to a pattern that will have a positive or negative impact on strategy or operations–focusing on those areas of vulnerability or risk and innovation/opportunity for the business. Seeking patterns can mean looking inside or outside the organization, and involves exploiting the new power of the collective–i.e., exploiting collective knowledge with creative activities, and exploiting collective activities as an unexplored source of patterns.”

It is clear that Pattern Seeking is the core discipline for PBS, hence the word “Pattern-based” in the name of this initiative. Gartner’s message is that organizations should proactively use technology and resources to seek weak signals in the environment that may lead to a pattern. If the patterns are discovered early enough the organization may be able to take offensive or defensive actions to exploit whatever opportunities the pattern may point to. Gartner goes on to say that the patterns may be inside or outside the organization, and that the emergence of social networking technologies provides a new opportunity for organizations to quickly identify patterns. According to Gartner Fellow Tom Austin “The collective is not new, but technology has made it more powerful–and enabled change to happen more rapidly. The explosion of social software, for example, has enabled groups and individuals to rapidly form and rally to a cause, often resulting in significant societal changes.”

On first blush this all sounds very logical and significant. If one can use technology and resources to identify patterns early enough that can have a major impact on the business, then business leaders can take actions in anticipation of the trends which could be of great competitive advantage to the business. This is the Holy Grail that all businesses are looking for. And the social networks do provide an enormous amount of untapped data that could be mined for useful information that is pertinent and in real-time. However, is this practical for most businesses out there? Most grand concepts like this fail the test of practicality and PBS is no exception. Here are some obvious things that jump out for me:

1. Gartner emphasizes seeking signals that may lead to patterns. There is no guarantee that any patterns will be discerned; the organization will be banking on the hope that there may be some out there, and that they will be the correct ones to bank on and base the company’s strategy on. Clearly such speculative initiatives cannot be passed on to IT which is looking for specificity.
2. Since patterns and signals may be inside or outside the organization the scope is very broad. The scope spans technology, competitors, economics, politics and social behavior, etc. The cost of seeking patterns across all these domains is prohibitive for most organizations.
3. Gartner seems to be banking a lot on social networking technologies. Most businesses are struggling with the challenges posed by social networking. But more importantly, social networking is mass behavior and the dynamics of social networking cannot be controlled or even guided by one organization. In fact the tools used for social networking may change rapidly. Gartner seems to be suggesting some sort of “information mining” and deriving business intelligence from the vast amount of data that is potentially available in social networking technologies. However the information in the social networks is generally private and not accessible to any organization. Therefore the question of mining patterns from these networks is mute.

Prominent in the news these days is a colossal example of a failed Pattern Seeking effort that embarrassed the President of the most powerful nation on the earth and its intelligence agencies. The US has invested untold billions in the technologies and resources for gathering and analyzing information to identify terror threats. It has access to the most sophisticated technologies, the best human resources and the legal freedom and means to intercept all international communications. The US intelligence agencies are seeking only one pattern which the threat of terrorism. Yet, on Christmas Day 2009, all that effort failed despite the fact that the signals and patterns were there and the enemy was known and identified!

The question I have for Gartner is that if the US government with its vast resources was unable to see through the patterns in the one specific area of terrorist threats, then how does an ordinary business with only a fraction of resources identify meaningful patterns from the myriad of signals out there? The only honest answer is they cannot because they do not have the resources, the technology, and the legal freedom to do so. The most one can expect a business to do is to try to identify patterns in their own business domain, and if that can be done effectively it would be a great achievement. Anything beyond that is a nirvana that businesses cannot achieve and the only beneficiaries will be the armies of consultants and technology vendors who feed on the wild goose chase.

My sources of this post are:

1. Pattern-Based Strategy  including video and audio presentation here
2. Gartner Identifies Four Disciplines of Pattern-Based Strategy
3. Pattern-Based Strategy

Gartner’s Pattern-Based Strategies: The Emperor has no Clothes! Part I

For the last week I have been trying very hard to understand Gartner’s much-touted Pattern-Based Strategies. I have read their pitches, listened to their analysts trying to explain it (see video and audios at http://www.gartner.com/technology/research/reports/pattern-based-strategy.jsp ), and read many documents in search for the pearls of wisdom, insight and logic about PBS that I expect form one of the most reputable analyst firms. I was interested in finding out how BPM can support PBS since Gartner has claimed that BPM will play an important role in the execution of the latter (see How BPM will deal with Pattern Based Strategies?  ). However after much reading, listening, and thinking I am left with a lot of meaningless descriptions laced with buzzwords, financial crisis-driven scare tactics (If you don’t adopt to PBS you will not see the next crisis! Your competitors will outpace you!), simplistic examples that supposedly demonstrate the benefits of PBS and no clear sense of what the fuss is all about. Where is the beef?

Sorry, but with all due respect to Gartner, I have concluded that the emperor has no clothes.

At the basic level, Gartner defines PBS as the practice of “seeking, modeling and adapting to” the leading indicators of change. Gartner says that these leading indicators are weak signal, and one of their analyst even called them “gut feelings”. The weak signals could either be inside the organization or outside. A Pattern-Based Strategy, according to Gartner, is the practice of identifying the leading indicators, modeling their impact on the business, and then adapting the business based on the results of this exercise. Gartner believes that PBS as they define it is relevant to all organizations in the public as well as private sector. Indeed they claim that the success of your business depends on it (see the Gartner audios referenced above) and if you do not adopt PBS your competitors who do adopt it will leave you behind.

This is all hunky dory in the world of analysts. In the real world there are numerous practical problems with it.

First, businesses generally cannot be managed on weak signals. Yes, leaders sometimes make strategic choices based on gut feelings but these feelings are based on a deep understanding of the situation surrounding their business which is rife with strong signals. It is easy to see signals in the proximity of the business. It is not easy to see weak signals that are outside the domain of the business. Gartner uses the example of the current financial crisis and posits that if businesses had sensed the weak signals of the sub-prime driven financial crisis, they would have been better prepared to handle the financial crisis. That is true in hindsight, but the fact of the matter is that the financial instruments were so complex that even the financial geniuses running large financial institutions did not see the crisis coming. Then how can one expect the leaders of other non-financial organizations  –which are most of the businesses! — to sense the weak signals and model their behavior accordingly?

Secondly, if one starts seeking weak signals and gut feelings, one can literally find tens or perhaps hundreds of them. The question then will be which one of these are the real signals and which are simply noise and how does one go about making the distinction. OK, we could use technology such as BI to help filter the real signals from the noise. However someone has to make an a priori decision about which trends to measure. When you make an a priori decision you have already made a decision and see only those things that you have decided to look at. The next crisis is likely to blindside you even more just when you are feeling comfortable that you have all the bases covered.

Third, it is difficult enough to identify and instrument trends and leading indicators that are inside the business. It is well neigh impossible to identify, instrument and capture trends that are outside one’s own business. These outside trends are the one likely to impact the future of the business in a profound way. Which business, other than a few large financial institutions, could instrument the number of sub-prime mortgages that were being written worldwide to create weak signals for the financial crisis? And even that would not have been enough because without understanding the trends in the real estate value, and without grasping how the complex credit default swap instruments worked, knowing only the number of sub-prime mortgages would have been meaningless.

Fourth, in 20/20 hindsight it is easy to identify leading indicators and weak signals that cause problems or create opportunities. However, crisis like the financial crisis of 2008/2009 occur through a conflagration of events that no one anticipates. Since no one is anticipating no one is looking for these trends, and the result is that no one bothers to instrument these unique indicators. Even if an organization has great collective foresight, it would take months to properly instrument, measure and make sense of the trends especially if IT is involved. By that time it is too late to be of practical value in all likelihood.

Finally, while Gartner talks about PBS as an overarching strategy that is vital to the success of all businesses, the examples of PBS that they use are simplistic. One example they point to is the Amazon Recommendation Engine and the other is the Fraud Detection System used by credit card companies. Both these systems are based on past buying activities of users, and in both cases the purpose is to identify what types of transaction the user is likely to make in light of the previous activities. What is being instrumented is known, i.e the buying activity. Based on this information one can create a reasonable model and make probabilistic decisions. If an incorrect decision is made it does not have a major consequence, even though I personally was so ticked off by the Fraud detection system of one major credit company that I refuse to use the card again. However even in my case the credit card company lost one good customer out of millions, and perhaps that is not as significant. Leading indicators that impact businesses are far more complex and unpredictable than the previous buying pattern of individuals, and they are not known a priori in many cases. If the wrong decisions are made on the observation of wrong leading indicators the consequence for a business could be far worse than the loss of one customer or a buyer not buying a recommended item!

This is a long and controversial topic and I do not expect to do justice to all of it in one post. In my next post I will discuss the components of PBS according to Gartner, and share my thoughts about why these also are hollow.

However, if you think that this emperor does indeed have clothes which I cannot see, I would like to hear from you.

Thoughts on IBM’s Acquisition of Lombardi

This week IBM acquired Lombardi and BPM blogs are full of discussions about the merits and demerits of the acquisition. I also commented about it in my post on an eBizQ Forum that I did not see any major changes in the dynamics of the industry based on this acquisition or its aftermaths. Lombardi is just too small to have a major impact on IBM. This is a tactical acquisition on the part of IBM rather than a strategic acquisition which will have major implications. It seems to me that IBM bought some technology it needed to round-out its BPM offerings which were already pretty substantial.

In another recent post titled What BPM can Learn from Robotics I talked about my belief that the BPM industry is up for grabs by a new generation of vendors who will leverage the scale of social networking technologies and offer a simpler, collaborative and people-oriented solution that will be used by very large number of users. If my predictions are correct, then the IBM acquisition of Lombardi does not appear to provide strategic value to IBM because of the following reasons:

1. Lombardi is more of the same for IBM: a large, complex BPM solutions with many inter-related modules.  Indeed the integration of Lombardi with the other BPM offerings in the IBM inventory will make the products even more complex; and if IBM chooses not to go for tight integration then customers will be confused by the array of choices it offers.
2. Lombardi does not offer much to IBM in the area of SaaS with the exception of Lombardi Blueprint which is a hosted modeling environment. As I noted in another post (What it will take to Deliver BPM as SaaS  ), modeling is one components of BPM which can be offered in a hosted environment relatively easily. Furthermore, the emergence of social networking technologies will greatly change the nature of collaboration which will have a direct bearing on collaborative modeling.
3. If the future of BPM is about simpler, high volume social networking and collaboration technologies such as Google Wave about which I have written in another post,  Lombardi and its legacy product is likely to become an anchor for IBM rather than a catalyst for simplification and change that will enable it to capture the future trends in BPM

My guess is that IBM acquired Lombardi for $50 Million or less. This is pure speculation on my part and I do not have any inside knowledge of this acquisition. I base this speculation on several factors. First, I think Lombardi’s revenue is in the $40 Million range with services accounting for at least a third of this revenue. Second, Lombardi raised about $50 million in its initial rounds of venture capital investment in the 2000-2001 timeframe. Venture capital funds typically have a investment horizon of 5-7 years at most after which they like to exit. With Lombardi they were close to or beyond their investment horizon. The investors have been trying to sell the company for the last several years but were unable to line a buyer until now. In this economic climate, and the increasing competitive nature of the BPM market, Lombardi investors would be happy to make an exit that gets their money back. Third, IBM is a public company which is closely watched. They have to disclose the price of any acquisition that is material. In this case the disclosed acquisition price is an “undisclosed amount”, which means that the price was not material. My guess is that for a company the size of IBM, $50M is the largest amount one can reasonably claim to be “not material.”

So let’s say that IBM acquired Lombardi for $50M and got 300 customers and a leading BPM vendor in return. Many of the 300 customers are probably already IBM customers. The question is what else could IBM have done with $50M that could have changed the dynamics of the BPM industry and made IBM a leading player? With proper vision and understanding of the trends in the industry, which surely IBM must have, I think a lot could be done for that sum of money.

BPM: Jack of All Trades… but Master of None?

I have often wondered why BPM has not gained as much traction as everyone predicts that it should. If one pays attention to the announcements of vendors and the forecasts of analysts, one would conclude that BPM is a huge and growing industry. Combine this with the fact that business processes are in very industry vertical and in every country, resulting in a very large market opportunity.

Yet I cannot think of a single company, large or small, that has had great financial success in the industry.

I think that the problem with BPM is its very broad definition and scope. Processes are in every industry and there are a large number of applications that have, or should have, embedded processes. Beyond that, BPM is defined to include modeling, optimization, reporting and other related activities that fall under the broad scope of BPM. The consequences of this broad scope are:

1. The market, defined as the sum total of all the things BPM can address, is very large.
2. No single vendor or product can address the entire market. And if they try to do so the product becomes bulky, expensive and hard to maintain or upgrade.
3. Customers have a very hard time discerning what BPM solution is best suited for their needs. And if there is one product that will suit their needs, it is unlikely to meet some other needs in the same organization.
4. Vendors are unable to say no to opportunities that potential customers define as BPM but do not fit in the profile of what the vendor can deliver. BPM products always have recourse to customization via programming which theoretically can be made to do anything, albeit at the cost of agility. So vendors pursue opportunities that may not make sense.

Contrast this with other software industries such as CRM, EDMS, CAD, ERP and accounting where the nature of the product and its scope is better defined. Companies in these industries have had far more financial success than BPM companies.

I think what BPM and BPM vendors need is a narrow definition of BPM. Instead of trying to do everything they need to focus on very specific problems. I am not suggesting that they should focus on vertical BPM solutions. Rather, they should focus on specific, horizontal, BPM functions that can be applied to vertical solutions. Examples of these functions are: workflow automation, modeling, simulation/optimization, process BAM/BI, and BRMS, etc. This approach will be successful if they define and truly commit to interoperability standards between the various functions. The concept of “Modular BPM” will enable vendors to offer “best-of-breed” BPM modules that interoperate. Customers and vertical solution providers can then select modular components to build solutions that best fit their needs.

Focusing on a narrow set of problems will be a far better way to success than trying  to become the Swiss Army Knife of BPM that is the jack of all trades but master of none.

What BPM can Learn from Robotics

In a previous business in the mid-Eighties I developed a commercial system using lab robots, and that experience gave me an understanding of the dynamics of the robotics industry. Robots were invented in the US. The first company to market commercial robots was Unimation of Danbury, Connecticut. Its leader, Joseph Engleberer, is considered the “father of robotics”.  However the US robotics industry was soon taken over by visions of grandeur and large scale, highly sophisticated systems. Driven by large infusion of venture money, a number of companies in the CAD/CAM area emerged with the vision of fully automated factories where raw material would enter on one side and finished products exit from the other, with barely a human inside.  Companies like GE, GM, Ford, Chrysler and Westinghouse, along with numerous smaller ones, invested billions in such grand schemes. The majority of these projects failed. 

In the same era the Japanese borrowed the idea of robots. They started by making simple, “pick and place” robots to do very simple things, but they made them in very large numbers. They learnt from this experience and benefited from the resulting productivity improvements. Then they made more sophisticated robots to do more complex tasks. And they did this on a large scale, soon starting to export these robots. Then came the third wave of even more sophisticated robots and the Japanese companies either bought the US robotic companies or started partnerships with them to create the likes of GE-FANUC. 

Today Japanese companies are leaders of industrial robots. Not only that, but it seems that all the ultra-sophisticated robotic dogs, robotic pets, robotic personal assistants and robotic soccer players are made in Japan. Japanese companies learnt from the practical implementation of robotics on a large scale to attain the leadership mantle. 

The BPM industry has evolved in the US along similar lines. Workflow automation was invented in the US and Action Technologies of California was probably the first company to commercialize it. It was followed by a number of new companies in the mid-Nineties. Those years were the heydays of CRM and ERP. Success was equated with large, multi-million dollar deployments. Investors wanted workflow companies to grow faster, which meant selling larger complex solutions and services in the footsteps of ERP and CRM. Industry analysts and consultants pushed the envelope by projecting a large, more comprehensive grand vision without themselves having to face the practical challenges of automation and real world deployments. Under these pressures, workflow automation gave way to BPM and advanced, infrequently used and misunderstood features such as simulations and “round tripping” at a time when the vast majority of the simple processes in the world were not even modeled, let alone automated. 

So what is the state of the BPM industry today? Here are some revealing facts: 

• No pure-play BPM vendor is big enough or strong enough financially to go public, though several continue to threaten for several years now that they will soon. It does not happen, even while every year the analysts continue to forecast rapid growth in the industry and among the leaders. 
• We keep hearing every other year that the big players such Oracle, Microsoft and SAP will make major inroads in to the BPM market, but that also has not happened. 
• Gartner, after having pushed BPM, simulations, “round-tripping”, and SOA,  is now on to a new gig called “Pattern Based Strategies” to further confuse their already confused customers, which is always good for their business. (see  http://blogs.gartner.com/jim_sinur/2009/11/18/how-will-bpm-deal-with-pattern-based-strategies-pbs/  ) 
• All this while Gartner admits that the most important “hot questions” their clients ask are basic BPM 101 questions such as “1. What are the benefits of BPM?” and “2. How should I get started?” (see  http://blogs.gartner.com/jim_sinur/2009/10/26/what-are-the-hot-questions-in-bpm/   ) Makes one wonder why companies are paying Gartner money for answering such basic questions, unless they are totally confused! 
• There is no slowdown in the number of new entrants to the BPM market, which indicates that the market is still largely open with no strong leaders, and no sign of consolidation, contrary to all predictions. 

The conclusion I draw is that the BPM industry is up for grabs. Most of the current leaders have complex BPMS which have been unable to get traction necessary for industry leadership. Their complexity makes them vulnerable to being undermined by simple but truly agile solutions, similar to how the Japanese robotics industry made an end-run and dominated the robotics industry through their experience and volume of doing simpler things.

While Japanese BPM companies are not a threat, I think the real threat to the BPM industry lurking out there is companies that leverage social networking technologies to deliver simple, easily-changeable and adaptive workflow automation solutions in very large numbers. The world will first learn how to do a large number of simple workflows. When the world has mastered that, then it will evolve to more sophisticated workflows and BPM which will be based on practical experience rather than the needs of BPM vendors to grow faster or the  prognostications of analysts.

Social Networking and BPM of the Future

A couple of months ago, I saw an online video by Google about their upcoming Google Wave platform for social networking. As I watched it, my mind raced back to the early 1990s when Lotus was the rising star and was introducing Lotus Notes as a revolutionary new groupware platform. Lotus was a pioneer and coined the term “groupware” to define Lotus Notes as it was a new paradigm in those days and could not be defined using the IT lingo of the day. Lotus defined “groupware” as a solution that empowers teams of people to work together by giving them three capabilities in a unified package, namely communications, collaboration, and coordination. Lotus called these “the 3 Cs of groupware.”  In those days, the hot technologies were primarily email for communication, document management for collaboration, and workflow for coordination. Notes provided a single platform for all three of these capabilities, which was its key strategic differentiator.

 As I watched the Google Wave introduction, I was intrigued by Google’s definition of Google Wave as a platform for real-time communication and collaboration. The fact that Google Wave offers very impressive communication and collaboration capabilities in real-time over the Internet was impressive enough. However, what was even more impressive and intriguing to me was the fact that Google Wave is offering two of the “3 Cs of groupware.”  What is missing from Google Wave is “coordination,” or workflow. If one could add coordination, it could become a true and rich groupware platform. Indeed the vision of the early pioneers of workflow/BPM, such as Ultimus, which I was starting at that time, was to provide this third capability for coordination, and complete the groupware offering. Digging deeper into the technical details of Google Wave, I found that it has an interesting feature called “Robots,” which are essentially “automation agents” that participate like individuals in Google Wave. Again, I was intrigued by the similarity in name and functionality to the Ultimus feature called “Flobots,” or workflow robots, which we developed in the early 90s and introduced with the Ultimus version 1 in 1995. Google Robots, like Ultimus Flobots, can do many automated things without human involvement. Certainly one of the things a Robot could be developed to provide would be “coordination,” or workflow capabilities. Google is not doing this, but there is nothing stopping someone else from doing it by using the capabilities provided by Google Wave.  This will result in a workflow/BPM solution built on Google Wave that leverages the full power of Google Wave.

 Social networking has become one of the most dynamic phenomena and technology in recent years, and the Internet provides a cost-effective and far-reaching network to facilitate it. While it started as a consumer phenomenon, social networking is now making inroads into the business world as corporations recognize its power for sharing information and enabling people to work together. Working in a modern organization is also “social” in nature, especially for knowledge workers who have to share information and ideas, and build value in a collaborative and iterative way. The increasing sophistication of social networking tools, as exemplified by applications such as Google Wave, certainly makes this even more attractive as a business solution.

 Participation in a business process, too, is “social” in nature. The participants of the process are members of a team who often want to discuss and collaborate with each other and want to know what other participants are thinking. In many case they want the ability to use the thoughts and feedback of others to change and improve their own actions in a process. Today, most BPM solutions provide a structured way of doing work, using a factory automation metaphor. But knowledge workers who participate in processes are not automatons working on a factory floor. Instead they are humans with the need to learn and to satisfy emotional needs.  They find too much structure imposed by rigid BPM solutions to be an impediment rather than a facilitator. When the process becomes an impediment, these knowledge workers will find ways to bypass the rigidity of structured BPM and work around it. This defeats the whole purpose of BPM.

 It is for this reason that we find more and more social networking type capabilities creeping into BPM offerings of different vendors. This includes the integration of instant messaging, Wikis, discussion forums, and collaboration. However, these are all patchwork; at their core most BPM offerings are highly structured in nature. These ad hoc collaborative capabilities are added on top of a structured solution to leverage some of the benefits. At the core, they remain rigid solutions that are difficult to change.

 I believe that in the near future we will see a new generation of BPM solutions that are built on top of social networking platforms such as Google Wave. These solutions will have some unique characteristics:

•  Rich, real-time communication and collaboration among participants will be a given, instead of something that is added on as an afterthought. 
• The solutions will be dynamic in nature in the sense that the process will define itself as it is being used. It will adjust and adapt to changing needs. Since the process will define itself, it will be continuously tested in real-life situations. 
• The solutions will use integrated BI capabilities to express the flow or map of the process and extract key performance indicators. The structure and the key performance indicators can be used to model and optimize the process, thus providing the ingredients necessary for BPM. 
• Since Google Wave and other similar products are cloud-based, these BPM solutions will be cloud-based. 

I am convinced that such solutions will be the predominant paradigm for BPM of the future.

 Note: This post is adapted from my columns in VP Trends (www.bptrends.com ) of the same name.

The Hype about Simulation and Optimization

Simulation and optimization are often touted as major benefits of BPM by vendors as well as industry analysts. The idea is that BPM systems (BPMS) with these capabilities enable business analysts to simulate the performance of the process through the computing power of software, identify bottlenecks, and optimize the process to best achieve the goals of the company. Even more appealing is a feature called “round-trip optimization”, which simply means that a BPMS can capture operational metrics from actual process incidents that have been completed, and then allow business analysts to use these real metrics, instead of merely good assumptions, for the simulation and optimization of the process. It is common for industrial engineers to do time-motion studies on the factory production line to improve the efficiency of work. Round-trip optimization, often simply called “round-tripping”, is the equivalent of BPMS doing time-motion studies automatically and making the metrics available for use in simulations. And then the simulation capability enables the analysts to optimize the process.

 

It is not surprising that analysts and some prospects are so hot on simulation, optimization and round-tripping. These are huge benefits that appear to be waiting at the finger-tips of the BPMS users.  For example, in a recent blog, Jim Sinur, the leading BPM analyst at Gartner, writes as follows:

 

“Most people think that simulation is hard and is for those gifted with deep math skills. Today nothing could be farther from the truth. Simulation is nicely embedded in process modeling and BPM engines and pretty easy to use even for business folks. Another big fallacy is that you have to set up lots of test data to make simulation work. Most of the simulators, today, will generate appropriate instances of process based on arrival rates.”

 

In my humble opinion and with due respect to Jim Sinur and Gartner, this is a big overstatement.  Yes, BPMS can do simulation. However the results of simulation will depend entirely on the assumptions the business analyst makes about a large number of parameters. For example the business analyst has to make assumptions about the following for each step in the process:

 

• The Task Time, which is the time to actually do the task at the step
• Number of resources: How many people are available to do the task, and are they dedicated or shared with other tasks
• The cost of each resource
• The probability that the step will be activated, in case it is conditional
• The probability that the user will send the case backwards, because in real life things often go backwards instead of always going forward as planned.

 

These assumptions have to be made for all the steps in the process. So if there are 30 steps, there are at least 150 assumptions! That is no small task that “business folks” will engage in lightly.

 

If that is not enough, the business analyst has to make some assumptions about the overall process. For example:

 

• What is the rate at which new cases or incidents are being started? It is unlikely to be a constant rate. What is the distribution of the incoming rate? And what is the best way to statistically describe this distribution?

 

• What state of the process do we want to optimize? Most real-world processes have working gaps. People typically work during certain time periods, such as 9 to 5. When they start working, there is likely to be a backlog from cases coming in overnight. This is the “ramp-up” phase which occurs every day for most processes. Then there is the time in the middle of the day when workers have caught up and, hopefully, things are in a steady state. Optimization is totally different at the ramp-up phase as opposed to the steady state. Which state do you want to optimize?

 

• What is the goal of the optimization? To reduce cost? To increase throughput? To meet some service level within specific cost constraints?

 

The results of the simulation will depend entirely on the quality of these assumptions. As the saying goes, “Garbage in, garbage out”. If the assumptions are erroneous, then, while one might feel good that one has optimized the process, in reality the process is sub-optimal. Making all these assumptions with reasonable accuracy is not easy, and not something that ordinary “business folks” do. It is a lot of work and requires a deep understanding of the process. And yes, some expertise in math and statistics is required.

 

There is another important reason why simulation and optimization is not easy and cannot be done easily by “business folks.” We know that many business processes cut across departments and each department has its own goals, requirements and cost structure. In fact the cross-departmental nature of BPM is one of its major benefits. So if you have a process that runs across departments, then it cannot be simulated and optimized by the business manager of just one department. The manager will have to collaborate with other departments, and his or her vision of the optimized process may be very different from that of the heads of the other departments. Alternatively, the manager of all the departments may engage in the simulation and optimization, but he or she will need a lot of complex input from all the departments. In all the companies that I know, this simply does not happen. Business folks delegate simulation and optimization to business analysts.

 

Finally, optimizing a process from a true business perspective is not simply about a lot of number crunching and discovering the optimal deployment of resources. This is a small but important part. The real requirement of optimization is sound business judgment and making choices based on what is important for the success of the business. In many cases, this requires value judgments, and software is blind to value judgments. For example, if the conclusion of the optimization exercise is that resources should be removed from particular tasks in order to reduce cost, someone has to make a value judgment about what to do with the redundant resources. Or if the response time to customers is decreased because of optimization of cost, what is the impact of that outcome on customer satisfaction and sales? Maybe it is significant and maybe it is not. The BPMS will not tell you that! Therefore, simply by doing a simulation and optimization exercise using BPMS will not produce the best outcome for companies. Simulation and optimization is at best one input to the business optimization effort.

 

Now let’s talk about round-trip optimization. Some will claim that I am wrong about the number of assumptions that have to be made in order to run a proper simulation. They will argue that modern day BPM systems are equipped with the capability to automatically measure these metrics from actual process data and quickly make them available for the simulation/optimization exercise. Not only that, these metrics are not assumptions; they are actual, measured results, which is even better.

 

I have a very simple answer as to why this is wishful thinking but devoid of reality. The most important parameter for simulation and optimization is Task Time, which is the actual time required to perform a task. One has to know the actual Task Time in order to run any kind of simulation.  However, there is no BPM software that I know of that measures Task Time, because it is simply not possible to do it. Consider the challenge. Most user steps in a process use some type of electronic form. If the software has to measure how much time the user took to complete the task, what does it measure? It cannot simply measure the time the form was open, because the user could have the form open and be having a conversation with her colleague. Or the user could open the form, understand the task, close the form and be thinking or researching the task with the form closed. There is no accurate way to measure Task Time. Therefore BPM systems simply do not measure Task Time because they cannot!

 

Most BPM systems that tout round-tripping capabilities measure one or two parameters and feed them back in to the simulation. They have accomplished “round-tripping”, but it is far from complete. And they have not measured Task Time.

 

My bottom line on all of this is as follows:

• Simulation and optimization can be very useful if done properly
• It is not easy, especially if your processes are complex which they generally tend to be
• You need an experienced business analyst to do it. It cannot be done by ordinary “business folks”
• The business analyst will have to closely coordinate with business folks for their judgment and priorities
• Buyers beware of the hype about round-trip optimization.

 

In the comments of a subsequent blog Jim Sinur claims that 25% of clients are using simulation and optimization, up from 5% a few years ago. I think that number is way too high. The true number is probably still less than 5%. I dare to say that the true number of customers using round-tripping is closer to zero.  I have not come across any in my many years in the industry. However, if any of you knows of such customer, I would like to hear about them and be proven wrong.

 

To illustrate how overly enthusiastic some analysts are about simulation, I quote again from Jim Sinur’ subsequent blog where he extols the benefits of simulation and writes:

 

For instance, Arizona was forced to cut 1.2 billion dollars out of its state budget. These kinds of cuts are also mandated in the private sector, but are hidden from public view. Quite often the cuts are made arbitrarily based on large numbers and what seem to be discretionary spends. Some of these cuts have downstream effects that are never considered or underestimated. Simulation can be used to try different options of cost cutting and resource deployment to minimize long term damage thus encouraging intelligent cuts without randomness.

 

This is indeed a noble thought. But I have to ask Jim, how does one go about making a socio-economic-political model of the State of Arizona and its budgets, priorities, goals and commitments to the citizens? Surely, without such a model, one cannot do simulations. What will be the cost of making such a model, and how long will it take to develop and make sure it is accurate? And which software in the world makes such models of complex entities like an entire state with millions of people? I do not know, but I can tell you that even making a model of a small company is no simple task.

 

 

Note: This blog is adapted from my recent column in BP Trends (www.bptrends.com )

 

 

 

 

 

 

 

The BPM Industry is not Counter-Cyclical!

 

 After the global financial crisis started dominating the news in the Fall of 2008 I have read several press releases, blogs and statements from BPM vendors that the BPM industry is counter-cyclical. They claim that when times are tough and companies are forced to streamline or cutback their operations, the demand for BPM increases–or at least does not fall as dramatically as the rest of the market– because companies see BPM as a way to help reduce cost and become more efficient.

 

On the surface this optimistic argument appears to make sense. Tough economic times demand that companies cut cost while continuing to deliver adequate amounts of goods or services. BPM provide the means for companies to optimize their processes that can help achieve this goal. Beyond optimization, BPM also provides the means to automate processes that can greatly reduce cost while at the same time making the processes more efficient. It can enable companies to do more with less, which is exactly the medicine the companies need during tough economic times.

 

 

However nothing is ever as simple as it appears on the surface. The economic crisis that the world faces is going to impact the BPM industry negatively and the BPM vendors are not immune to the severe pain that the rest of the market is going through. There are several reasons for my pessimistic view that the BPM industry, especially in its current state of development, is not counter-cyclical.

 

First, BPM is not simply a technology that can be purchased and deployed, and suddenly companies can start reaping its benefits. Instead, BPM is a discipline – a way of conducting business and a cultural mindset. Technology is only a part of BPM, albeit an important part. Success with BPM is not the quick short-term fix that companies are seeking at times of economic crisis. BPM requires cultural change which takes time. Facing crisis, management generally does not have the luxury of time needed for BPM initiatives to bear fruit. Indeed, in a period of economic crisis, when employees are concerned about job security and their personal well-being, BPM is more likely to be perceived as a threat rather than an opportunity. This perception is not conducive to the kind of cultural change that BPM needs in order to thrive. Therefore, faced with the need for immediate action and reduced demand for goods and services, management is unlikely to invest in BPM which has a long term promise. BPM projects that are already well in progress are likely to be continued if their results are visible and significant. Mediocre projects are more likely to be canned, and new projects are less likely to be funded.

 

Second, BPM projects still rely heavily on professional services for the discovery, design, development, testing and deployment of processes. Because of this reliance on professional services, the deployment time for meaningful BPM projects ranges from two months to over a year depending on the complexity of processes and the amount of integration that is needed. This lag between making a decision to invest in a BPM project and when results can be ascertained, is another reason why management, facing the dire need to reduce cost today in the face of dramatically reduced demand, is less inclined to invest in new BPM projects whose payoff is months away.

 

Third, most organization have complex processes. They all look simple on the surface, but as one starts peeling the layers one finds the ever-present exceptions. The number of exceptions is generally proportional to the size of the organization. These exceptions are what make seemingly simple processes complex. And in many cases the processes are interlinked with each other. Simply automating one or two processes is unlikely to produce a major impact on the bottom line of a company. For tangible bottom line impact a company has to automate many processes which takes a lot of time. And management simply does not have the time or the patience when facing dire financial crises like the one we face today.

 

BPM cannot be rushed for the three reasons that I have listed. The financial crisis that the world is experiencing today will force management to make decisions that have a quick and short term impact. This does not bode well for increased investment in BPM and the prospects for the industry. Equally troublesome is the current state of the pure-play BPM vendors who are the driving force for innovation in the industry. Most of the pure-play BPM vendors are relatively small companies who do not have the deep pockets to survive a major downturn. In almost all cases, these companies have raised a substantial amount of venture capital investment with plans to either go public or be acquired by larger software companies seeking a slice of the BPM market. Prior to the current financial crisis Metastorm had already filed with the SEC, and Lombardi and Savvion have made noises in the past of going public. Most of these companies have already tried the M&A route and have been unable to find suitable acquirers willing to pay what they expect. Now with the state of the capital markets, the prospects of a public offering are nill. The pure-play BPM vendors will face tough times in 2009 with reduced demand for the reasons stated above, no prospects of going public and reduced prospects of acquisitions. Like many other companies, the BPM vendors will also have to take drastic actions to reduce cost and survive. Innovation will be impacted and there will be further pressure for consolidation on unfavorable terms. The larger software vendors eyeing the BPM space who have the financial wherewithal to ride the crisis will become even more dominant. While some may argue that consolidation is probably good for the industry, I have doubts about what it will do to innovation and agility for the industry.

 

 

Note: This blog is adapted from my recent column in BP Trends (www.bptrends.com )

Business Process Management needs Business Process Analysts rather than Chief Process Officer

About four years ago when the importance of BPM and process management spread to a wider group companies seeking process excellence, the role of the Chief Process Officer (CPO) emerged as an important senior position in organizations. I was among the many proponents of this new role. The rational was simple. Processes are key to the performance of organizations. BPM enables companies to capture the best practices for processes and use the power of software to execute them consistently while at the same time providing transparency, accountability and visibility. However BPM technology is still relatively complex, there are cultural changes that accompany its adoption which can have a major impact on its success or failure, and this change needs to be marshaled from a high level in the organization. The position of the CPO reporting to the CEO was designed to accomplish this.

At first blush the role of a CPO looks like a good idea. However some further thinking, evaluating my own experiences and recent discussions with BPM customers has made me rethink this approach.  My thinking has evolved because of the following considerations:

i.                     If BPM is as important to an organization the top management of the company including the CEO and functional managers must take the lead and become champions and true believers in a process-focused organization. This important responsibility should be delegated to a new role of a CPO.

 

ii.                   Functional managers must become owners of processes in their departments. Their performance and the performance of their department must be measured by the effectiveness of their processes. Functional managers have the most domain expertise in their area and are in the best position to know the business process requirements that will lead to success.

 

iii.                  If a new role of a CPO is created it will add another department in the organization. This will not only add additional cost, but there is a strong probability that friction will develop between the office of the CPO and other departments in the organization. While the CPO owns processes, or facilitates the development of processes, the BPM system (BPMS) still relies on the IT infrastructure that is owned by IT, and much of the technical expertise to make the BPMS technically successful also most likely resides in IT. Likewise, functional managers have the responsibility for processes in their areas and also the domain expertise to make these processes effective. It does not make sense to make the office of the CPO responsible for processes in different functional areas, and yet have management of the functional areas be measured and rewarded by processes which they do not fully control.

For these reasons I believe that functional managers must own the processes in their departments and must be evaluated and rewarded based on the effectiveness of these processes as measured by KPIs that the organization agrees upon. However, while BPM systems are becoming more powerful, their underlying technology is also becoming more complex.  Functional managers need help from IT to cope with the technical complexity. IT on the other hand does not have the business knowledge necessary to understand the complexities of business. So what the organization needs is a new breed of business analysts who also have sufficient process analysis skills. Let’s call them Business Process Analysts, or BPAs. The BPAs should have the following skills and attributes:

1.         BPAs should belong to the IT organization and report to the CIO, but they should be    assigned to work with specific functional managers for automating business processes that are vital to the latter’s department.

 

ii.                   BPAs must become the bridge between business (functional mangers) and IT. They should know enough about business that they can understand and empathize with the process requirements of the functional areas they are assigned to. They must also have strong knowledge of IT insofar as their ability to understand the benefits and drawbacks of various technological choices. Empowered with the knowledge of business as well as IT, the BPAs become facilitators of business processes owned by the functional managers. They should be rewarded for the success and effectiveness of the processes they facilitate

 

iii.                  The BPAs serve as the bridge between the functional process owners and IT. As the bridge, they must diplomatically play the role of champions of each side and the developers of compromise in case of conflict between the two.

 

iv.                 BPAs must be trained not only in the modeling of business processes, which is really the activity for documenting business requirements, but also working with the functional managers to optimize resource allocation and the more complex art of process optimization using modern BPM tools.

 

The Business Process Analyst will become a vital role in an organization and in the success of BPM. An educational background that combines business and IT skills will provide an excellent foundation for Business Process Analysts to be successful.

Don't Forget the BPM Ecosystem- Part II

In this post I want to address some address the points raised by Mr. Ismael Ghalimi  in his latest post “Developing a True BPM Ecosystem” in response to my post “Don’t Forget the BPM Ecosystem”. Mr. Ghalimi apparently has serious differences with me and I understand where he is coming from. However, I think it is important to address his misconceptions and apparent belief that standards must be applied universally for the success of the BPM industry.

Mr. Ghalimi major contention is that I was looking too macroscopically when I used the example of the transportation industry. He argues that a more sensible approach would be to look at sectors within the transportation, such as autos and airplanes. He claims that if we do that we will find much more standardization and similarities across the sector, and he gives several examples of that in his post.

While I do not agree with his argument, for the simple reason that the term BPM is very broadly used for everything that has the semblance of a process, let us say for the sake of the argument that he is right and look at individual sectors such as autos or airplanes. While Mr. Ghalimi sees similarities and standardization, I see great diversity and lack of standards in these sectors which are much more mature and larger than BPM. For example:

i.              There is no “standard” that I know for the design of the cockpit of an airplane or the dashboard/controls of a car. The cockpit of a Boeing 777 is totally different than that of a Cessna. The pilot’s “user interfaces” are all are different!

 

ii.            There is no standard that I know for the engine of an airplane or a car. Yes they sometimes look similar, but they are different from each other. You cannot take the engine of one car and drop it into another car. There is no “portability” of the engine. For airplanes of different sizes (a Cessna versus a Boeing 777) even the technologies used are radically different, even though they have many similarities (wings, rudder, landing gear, tail, etc.). The “engines” are all different!

 

 

iii.           Mr. Ghalimi mentioned the FAA in his post. I am sure the FAA uses very different standards to determine the air worthiness of a Boeing 777 versus a Cessna. So the quality and inspection standards are also different!

 

iv.           You cannot take a pilot of small plane and put him in the cockpit of a Boeing 777 without a lot of training. The training is different!

Surely Mr. Ghalimi is not arguing that the aerospace industry would be much better off if it had one set of standards across the industry for all types of airplanes! Doing so is not only unthinkable, but even if someone succeeded in imposing standards by diktat the industry would be stifled as compared to what it is today. The same is true for the BPM industry. One set of standards for cannot be applied across all types of BPM systems that are very different from each other in terms of their goals, transaction volume, criticality, cost and numerous other characteristics.

I do not want to leave the impression that I am opposed to standards. Far from that, I believe that standards are necessary for all industries to be successful. However, standards must be used judiciously where they make sense. Otherwise they lose their value and the market rejects them by never adopting them to begin with. The two guidelines that come to mind for the judicious use of standards in general, and BPM specifically, are:

1.    Standards make sense when they apply to specific products that do very similar things. The more specific the product the higher the chances of adoption and success of standards. For example, in the airline industry one can have one set of standards for jetliners, and another set for commuter planes, and yet another set for small planes. Likewise, in BPM, one set of standards across the BPM industry will not suffice and will not be successful. However, one could have standards for different categories of BPM such as human-centric, system-centric, etc.

 

2.     Standards make sense when they are applied to “components” and “user interfaces” but not “systems”.  Batteries, screws, tires, parking space size, fuel, street signs are all components and user interfaces. The design of the car itself and the engine is a “system”. BPMN is a “user interface” and that is why it is more successful than any other standard in BPM.

I would like to note that the BPM industry does use a large number of standards for components and use interfaces. These include relational databases, Web Services, the Internet browser, e-mail, portals, AJAX/Web 2.0 and numerous others.

Finally I note that markets (consumers and vendors) adopt standards when their value becomes self-evident to a sizable segment of the market. This implies that the standards have to be relatively simple otherwise the value will not be self-evident. That is why it is more likely to have standards for simpler components rather than complex systems, and BPM falls into the category of complex systems. The BPM industry will be better off if it were to focus its energy on standards for  “interfaces” and “components”, many of which can be adopted from standards widely used in the broader software industry.

 

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