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About BPM
Classic definition:
BPM refers to the real time business processes, methodologies,
metrics, and technologies used by enterprises to measure, monitor,
and manage business performance

Also called as CPM ,EPM ,SEM

Three components
Closed loop management and analytical processes
Tools to define and measure strategic goals
Tools to monitor KPIs
A Closed-loop Process to Optimize Business
Process Steps
1. Strategize
2. Plan
3. Monitor/analyze
4. Act/adjust

Each with its own process
Strategic objective
factors (CSF)

Common tasks for the strategic planning process:
1. Conduct a current situation analysis
2. Determine the planning horizon
3. Conduct an environment scan
4. Identify critical success factors
5. Complete a gap analysis: Gap between strategy and
execution exists because of communication,
alignment of rewards and incentives ,Focus
(concentrating on core elements) and Resources.
6. Create a strategic vision
7. Develop a business strategy
8. Identify strategic objectives and goals

To Articulate

Operational plan translates an organizations strategic objectives and
goals into a set of well-defined tactics and initiatives, resources
requirements, and expected results for some future time period (usually
a year).
Tactic-centric (operationally focused)
Budget-centric (financially focused)

Financial planning and budgeting to translate strategic objectives
and key metrics should serve as top-down drivers for the allocation of
an organizations tangible and intangible assets .Budgeting includes
allocating resources carefully ,keeping aligned with the organizations
strategic objective.

What to monitor
Critical success factors
Strategic goals and targets
How to monitor
Diagnostic control system :It has a standard or benchmark against
which to compare the outputs, and a feedback channel to allow
information on variances between the outputs and the standard to be
communicated and acted upon
Pitfalls of variance analysis
When functional groups or departments fail to meet targets , the
analysis focuses on negative variances.Even in case of potential
oppurtunities ,the positive variances are reviewed rarely.
The assumptions underlying the variance patterns are focused
rarely during analysis.

For Success in strategic business things have to be done differently like
new projects, creating new products ,new markets, acquiring new
customers, streamlining some processes.
Harrahs Closed-Loop Marketing Model

Performance Measurement
Performance measurement system
A system that assists managers in tracking the
implementations of business strategy by comparing
actual results against strategic goals and objectives
Comprises systematic comparative methods that indicate
progress (or lack thereof) against goals
Performance Measurement
KPIs and Operational Metrics
Key performance indicator (KPI)
A KPI represents a strategic objective that
measures performance against a goal
Distinguishing features of KPIs
Strategy strategic objective
Targets Achievements/Reduction/Absolute
Ranges performance ranges
Encodings ranges encoded into visual
Time frames often divided into intervals for milestones
Benchmarks baseline (historicals/external)

Performance Measurement
Key performance indicator (KPI)

Operational areas covered by driver KPIs/metrics are:
Customer performance- Satisfaction/issue resolution/retention
Service performance Resolution/renewal rates & SLAs
Sales operations- Leads Generation/New pipeline accounts/Avg call closer time
Sales plan/forecast
Outcome KPIs Driver KPIs

Lagging Indicators Leading indicators
Measures output of past activities
e.g. Revenue
Measure activities that impact outcome KPIs
e.g. Sales Leads
Problems with existing performance measurement
The most popular system in use is some variant of the
balanced scorecard (BSC)
50-90% of all companies implemented BSC
Majority of performance measures are:
Financial in nature
Focused on lagging indicators
Internal rather than external in nature
Just a scorecard to compare actual results with planned results
Performance Measurement
Measurement overload
Measurement parameters keep on increasing
Measurement of obliquity
Management lags direct control over measures ( EPS, ROE,
PAT, Market share etc)
Financial myopia

The drawbacks of using financial data as the
core of a performance measurement:
Financial measures are usually reported by
organizational structures and not by the processes
that produced them
Financial measures are lagging indicators, telling
us what happened, not why it happened or what is
likely to happen in the future
Financial measures are often the product of
allocations that are not related to the underlying
processes that generated them
Financial measures are focused on the short term
Financial myopia
Good performance measures should:
Be focused on key factors.
Be a mix of past, present, and future.
Balance the needs of all stakeholders (shareholders,
employees, partners, suppliers, etc.).
Start at the top and trickle down to the bottom.
Have targets that are based on research and reality
rather than be arbitrary.
Performance Measurement
Performance Measurement
Good performance measures should:
Be focused on key factors.
Be a mix of past, present, and future.
Balance the needs of all stakeholders (shareholders,
employees, partners, suppliers, etc.).
Start at the top and trickle down to the bottom.
Have targets that are based on research and reality
rather than be arbitrary.
Case: Expedia Inc.
Diversified Portfolio including , etc.
Travel Services offer consisting Airline flights , hotel stays, car

Lacked means of measuring customer satisfaction and its impact
on companys profitability

Performance Measurement
Driver KPI
Performance Measurement
Lots of data ,Multiple disparate databases with different
Refined vision to link performance measurement with
Expedias overall goal
1. Measure Satisfaction
Basis for scorecards and KPIs
2. Right performance Targets, short term & long term
3. Tie data to ongoing customer satisfaction projects

Customer Satisfaction
Group assessing real-
time data from DSS
tailored to its
departmental needs
e.g. customer survey
Linked Corporate
objectives to 200 odd
Build scorecards to
identify trends or
Benefits other
business units to
evaluate negotiated
contract performance

Performance Measurement
BPM Methodologies
An effective performance measurement system should
Align top-level strategic objectives and bottom-level initiatives.
Identify opportunities and problems in a timely fashion.
Determine priorities and allocate resources accordingly.
Change measurements when the underlying processes and
strategies change.
Delineate responsibilities, understand actual performance
relative to responsibilities, and reward and recognize
Take action to improve processes and procedures when the
data warrant it.
Plan and forecast in a more reliable and timely fashion.
BPM Methodologies
Balanced scorecard (BSC)
A performance measurement and management methodology that
helps translate an organizations financials, customer, internal
process, and learning and growth objectives and targets into a set
of actionable initiatives
Translates organizations vision & strategy into a set of
interrelated financial & non-financial objectives, measures,
targets & initiatives.
Balanced Scorecard
Financial Increase Net Income Increase
Customer Increase customer
Improve service
Internal Process Improve performance Implement best
Learning & Growth Reduce employee
Performance linked
incentives/training &
BPM Methodologies
In BSC, the term balance arises because the
combined set of measures are supposed to
encompass indicators that are:
Financial and nonfinancial
Leading and lagging
Internal and external
Quantitative and qualitative
Short term and long term
BPM Methodologies
Aligning strategies and actions through a six-step
1. Developing and formulating a strategy
2. Planning the strategy define
3. Aligning the organization align business unit & support
unit strategies with corporate strategy
4. Planning the operations determine changes needed in
operational processes.
5. Monitoring and learning review short term financial &
operational performances
6. Testing and adapting the strategy validation &

BPM Methodologies
Strategy map
A visual display
that delineates
the relationships
among the key
objectives for all
four BSC

Six Sigma Introduction
Used as a process improvement methodology.
Developed at Motorola.
Views a business as a collection of processes that can
affect overall corporate performance, e.g.
Administrative and facility management
Business procedures
Marketing and Sales
Supply Chain Management

Six Sigma contd
In the quality arena, variability corresponds to the
number of defects.
In terms of numbers, companies have typically
accepted between 6,200 to 67,000 defects per
million opportunities (DPMO).
This level of variability corresponds to performance
between 3 and 4 sigma.
To achieve a six sigma level of performance, the
company has to bring down the number of defects to
at most 3.4 DPMO
Thus, six sigma aims to bring down the number of
defects as close to zero as possible.

Six Sigma how?
Six sigma rests on a simple performance improvement model
It is a closed loop model composed of the following:
Define: goals, objectives, and boundaries of the improvement
Measure: Establish quantitative measures that will yield
statistically valid data.
Analyse: the system, to identify ways to remove the gap between the
current performance and the desired goal.
Improve: by acting to remove the gap by finding ways to do things
cheaper, or faster. Use project management and other planning
tools to implement the new approach.
Control: Institutionalize the improved system by modifying
compensation, incentives, policies, procedures, MRP, budgets, etc.

(Lean) Six sigma
In recent years, there has been a focus on combining
six sigma with lean manufacturing.
Both six sigma and lean manufacturing deal with
quality, but in different ways.

Feature Lean Six Sigma
Purpose Remove waste Reduced variation
Focus Flow focused Problem focused
Approach Many small improvements Removing root causes
Reduced flow time Uniform output
Results Less waste with increased
Less variation with
consistent output
(Lean) Six sigma contd
Lean can be applied to any sort of workflow, not just
But how does it help Six Sigma?
It does so by removing non value-add steps.
Once a process consists only of value-added steps,
Six Sigma can ensure that these steps are performed
as consistently as possible.
Six Sigma The good and the bad
Success stories
Six Sigma helped drive up the operating margins of GE from
14.8% to 18.9 % (stated by Jack Welch).
Saved $3 Billion for Caterpillar.
Home Depots adoption of Six Sigma was attributed to it losing
market share to its rivals
Is alleged to work well only if a company is solely interested in
increasing its manufacturing efficiency, but not if it wants to
drive growth through innovation.

Six Sigma is not the end all be all. It is simply a set of
process tools. We would never suggest that a
companys performance is solely linked to the adoption
of those tools. (Richardson, 2007)
Increasing success of Six Sigma
The following have been known to dramatically
increase the success of Six Sigma:
Six Sigma is integrated with business strategy
Six Sigma supports business objectives
Key executives are engaged in the process
Project selection is based on value potential
There is a critical mass of projects and resources
Projects in process are actively managed
Team Leadership skills are emphasized
Results are rigorously tracked.

Balanced scorecard and Six Sigma
Balanced scorecard
Is a framework to describe the strategy for creating value
and tool to manage the execution of that strategy.
When used as the centre-piece of the executive decision
process, the BSC identifies performance gaps and is used
to facilitate decisions on how to address specific
performance issues.
Unlike Six Sigma, the BSC is not a solution for closing
specific strategic performance shortfalls.
Provides the strategic context for targeted improvement
initiatives, whereas Six sigma is a business improvement
approach that can solve a myriad of performance issues.

Balanced scorecard and Six Sigma contd
Companies that successfully integrated Six Sigma and
Balanced scorecard did so by
Translating their strategy into quantifiable objectives
Cascading objectives through the organization
Setting targets based on the voice of the customer
Implementing strategic projects using Six Sigma
Executing processes in a consistent fashion to deliver business

BPM Technologies and Applications
BPM architecture

BPM systems consist of three logical parts:
BPM Applications
Information Hub
Source Systems

BPM Architecture and Applications
BPM applications
1. Strategy management
2. Budgeting, planning, and
3. Financial consolidation
4. Profitability modeling
and optimization
5. Financial, statutory, and
management reporting
BPM Architecture and Applications
BPM application demand
Leading BPM Application Suits/Vendors
SAP Business Objects
Oracle Hyperion
IBM Cognos
Gartners magic quadrant for vendors
Ability to execute and completeness of vision
Leaders quadrant

Execution Limited Strong
Strong Challengers Leaders
Limited Niche Visionaries
BPM and BI
BPM vs BI Market
BI markets much larger
More diverse
Microsoft, SAS, MicroStrategy also leaders
Key BI functions
BI Infrastructure
Metadata management
BI application development
Workflow and Collaboration

Performance Dashboards
Dashboards and scorecards both provide visual
displays of important information that is
consolidated and arranged on a single screen so that
information can be digested at a single glance and
easily explored
Three distinctive features of a dashboard:

Performance Dashboards

Dashboards versus scorecards
Performance dashboards
Visual display used to monitor operational performance

Performance scorecards
Visual display used to chart progress against strategic and
tactical goals and targets

Performance Dashboards of an IT Company
Performance Dashboards

Dashboard design
The fundamental challenge of dashboard design is to display
all the required information on a single screen, clearly and
without distraction, in a manner that can be assimilated
(Few, 2005)

Performance Dashboards
What to look for in a dashboard
Use of visual components (e.g., charts, performance bars, spark lines,
gauges, meters, stoplights) to highlight, at a glance, the data and
exceptions that require action
Transparent to the user, meaning that it requires minimal training
and is extremely easy to use
Combines data from a variety of systems into a single, summarized,
unified view of the business
Enables drill-down or drill-through to underlying data sources or
Presents a dynamic, real-world view with timely data updates
Requires little, if any, customized coding to implement, deploy, and