What is a Business Process?
Business processes are an organized series of tasks, events, and decisions that consumes a product or service (the input) from a supplier, adds value to that product or service through some transformation (the process), and then delivers a product or service of more value (the output) to a customer. All commerce is transacted through a series of business processes that connect to form business systems or value streams, such as finance, operations, sales, and human resources.
This brings us to the first principle to know about a business process. Every process is perfectly designed to get the results it gets. It does not matter whether a process was specifically designed to serve a valuable purpose or it grew out of people doing work to get something out the door. Every process contains the essential components discussed below and delivers the results – good, bad, and ugly – that it is designed to deliver given its operating characteristics.
This brings us to the second principle: If you are unhappy with your current performance, it is your responsibility to define, study and improve the business process or series of processes that deliver that performance. Anything different will likely produce shortfall and frustration. There is an explainable reason that results are disappointing and the solution can ALWAYS be found somewhere in business processes.
What are the Essential Components of Business Processes?
So this brings us to the third principle: All business processes contain the following essential components, whether well designed or homegrown.
1. A Responsible Owner
Somewhere in every organization there is an employee or set of employees who understand, or at least partly understand, how the process works. A process that is designed by those who do the work will deliver the most accurate and meaningful benefit to the organization. The better the employee ownership, the more likely the process will be successfully defined, executed, followed, and improved.
2. A Customer
The customer of a process is the person, process or organization – internal or external – using the product or service provided by the process to solve a problem or satisfy a want or need. While a process may serve many customers with different needs, most processes generally serve a single or a few customers.
3. A Value Proposition
The value proposition clearly defines the customer of the process, the customer’s problem, want or need that the process is addressing, the solution that solves this problem or satisfies this want or need, and the net benefit of this solution to the customer. The more painful the unsolved customer problem, the more important the process is to the customer. And the more desirable the customer’s want or need, the more valuable the process is to the organization.
4. An Output
The process delivers an output that fulfills its value proposition. In general, the goal of the value proposition is to provide a physical or intellectual product or service that solves a customer’s painful problem or satisfies a want or need in a way that delights and builds a loyal customer.
5. A Process
A process transforms inputs through a series of connected tasks (jobs, actions), events (meetings, training, etc.) and decisions (yes/no, go/no-go) that deliver a transformed output of value to its customers. Business processes operate in a connected series to form business systems and value streams.
6. A Supplier
A supplier provides the physical or intellectual input to the process that is to be transformed by the process for its customer. The supplier provides its own value proposition to a process and most processes are significantly affected by supplier performance. Most process owners do not adequately know the supplier to their process, what the process needs from their supplier, and what the supplier is capable of providing to the process.
7. An Input
The process supplier provides a product or service input to be transformed by the process to deliver its value proposition. Inputs are comprised of the raw materials – physical or intellectual – consumed by the process to create its output.
A process contains feedback from outputs (the customer back to the process), inputs (the process back to the supplier) and the transformation (from within the series of tasks, events, and decisions). Whether formal or not, some form of feedback exists through the behavior of the customer, the process and the transformation itself.
Knowledge is the intellectual property of the organization used by the process to deliver its value proposition. Knowledge can include a variety of information and content such as records, data, policies, standards, training, metrics, regulatory requirements, bills of material, customer specifications, trademarks, and patents. Knowledge is accessed and utilized by business processes through tasks, events, and decisions.
A process utilizes resources provided by the organization to create the transformation that delivers its value proposition. These resources include facilities, equipment, people, information technology, and budget. While all productive resources are consumed by processes, rarely are they organized or analyzed in connection with the processes that consume them.
Process performance captures both process effectiveness (the extent to which the process solves the customer’s problem or satisfies the customer’s need or want) and process efficiency (the extent to which the process uses the minimum resources to do so). Process effectiveness is expressed in four dimensions, including Solution Effectiveness or the extent to which the product or service fulfills its intended purpose, Process Responsiveness or how quickly the process serves it customer, Customer Economics or the customer’s cost of ownership, and Customer Relationship or the customer’s perception of process value. Process efficiency is captured by the use of resources to operate the process and their consumption relative to process production. A basic goal of a process is to minimize the resources consumed to deliver the process output.
Why do Business Processes Matter?
Through understanding the power of process, you can possess an amazing capability to diagnose and solve a wide variety of organizational challenges. The lasting power of a process is in creating a state of control, where the business is predictable, reliable and repeatable. Every process should ethically serve a loyal customer using minimum resources. In this way, the process is being operated according to the rules, the value proposition of the process is effective, and the process is not wasting valuable organization resources.