BPM Open House Party – Report from the GARAGE

While Russell and Caspar spent time with our guests preparing some meals in ‘Hell’s Kitchen’, we were in the garage playing with heavy tools: ‘how operating models and value flows can be used for effective business steering’ (see following figure for definitions).

It is no light matter to dive deep into verbal exchanges with top managers on strategies for establishing effective business steering based on operating models and value flows. 

Our discussions began with a short introduction of our guests and then went along some guiding questions we had prepared. 

A variety of insights were shared among our growing number of guests in the garage. For example we learned about the difficulties in industries whose competitive advantage lays in product development (R&D, PLM). 
The timespan between resource inputs and outputs is long resulting in a challenge for the top management when deriving strategies for business steering in such a context.
Another guest drew attention to his experience struggling to get buy-in from management to use a Business Process Management (BPM) methodology as the basis for deriving performance metrics for business steering. On this topic many participants shared their approach on linking KPIs to business processes, some more mature organisations even derived KPIs from their enterprise process models.

For us as hosts it was an amazing experience to see the dynamics within the meeting. Over long periods, our guests took turns in leading and facilitating the conversation. So handling the heavy tools wasn’t so hard after all; We could just lean back and listen into this exchange of thoughts. So thank you to all the participants for your engagement and openness.

Also we would like to thank the party host Gülsüm who helped in the background to make this afternoon such a rewarding and exceptional event.

Ike and Markus

Business Flows Release 3 available

- Rachael Föcker

When we created our Business Flows reference model and set of best practice methodology over three years ago, our objective was to provide a simple process repository for everybody. The challenge we saw, was finding the right balance of being specific as well as being relevant for a wide range of customers.

The use cases and feedback from customers show that we accomplished this job well, but also let us think about what we can do developing it further.
Since the beginning of the year we have been working on upgrading model contents, conventions and methodologies and are now happy to announce the new release. version 3, of Business Flows.

The main points we have changed or added for the current release are

Additional Content (Domains, Scenarios)

We now cover several additional domains:

  • Lead to Opportunity (L2O)

  • After Sales and Services (ASS),

  • Forecast to Plan (F2Pl) and

  • Master Data Management (MDM)

Especially ASS and MDM are hot topics as many industrial companies strategically want to transform their business model more towards offering services and solutions rather than just products. This in combination with ever shorter product-innovation-cycle-times and growing markets has a massive impact on master data processes.
They need to become better integrated, faster and more reliable in order to facilitate the core processes.

Simplified role model

We have decided to discontinue the roles on BPMN level and just provide the department role on process level.

The feedback on the value of roles associated with individual processes and process steps was ambivalent as most customers have very individual organizations and corresponding role definition and naming. The added value of having an example was diminished by the discussions on how best to adapt to the actual situation.
Also, frequently - depending on size of departments and organization the role model has to be more differentiated or sometimes less differentiated.

Use case related content in detailed process charters in BPMN

We encounter two main types of use cases for the most detailed process level modeled in BPMN:

  • Act as a modeling template to be copy/adjusted rather than starting on a white modeling canvas.

  • Provide content on the main activities, the degrees of automation, inputs/outputs etc in order to facilitate process workshops and business requirements sessions.

We think the latter use case is of greater value to Business Flows users for which we provide the BPMN processes and have decided to focus on accumulating relevant information into dedicated sections. We call this the process charter. 

The models still comply with the BPMN notation but are now structured according to the fixed scheme shown below.

Each process charter contains two core lanes representing the Happy Flow and the Exception Handling.

Where the Happy Flow indicates the best practice processing, the Exception Handling supports process workshops as they indicate the essential questions to be clarified prior to a detail design.

Additionally where available, stewardship documents covering essential business requirements such as policies, guidelines, risks and controls are included.

Value Flows

The accounting impacts of business operations are often unknown or unclear to business professionals from purchasing, production planning, and sales & distribution. By the same token, experience has shown that Finance & Controlling departments are repeatedly left in the dark during process design phases of major business transformation initiatives.

Value Flows represent the impact of business activities and events in Finance and Controlling to trigger the discussion between Operations and Financial and Managerial Accounting. 

Value Flows enrich process documentation by establishing cross references between Key Value Flow topics within a business such as ‘Cost Of Goods Sold’ (COGS), inventory postings, and related E2E scenarios.

 

Value Management Framework

Business transformation is all about operationalising strategies. With our Value Management Framework we offer a structured approach on how to derive and prioritize your business drivers from your companies strategy and identify the appropriate scope and value drivers in order to achieve your objectives.

Our framework is inspired by SCOR performance attributes (strategic pillars) and metrics. Business Drivers represent trending industry hot topics for each strategic pillar. Whereby Value Drivers represent industry best practices required to achieve transformation objectives. Last but not least, System Capabilities (S/4HANA) provide the foundation for your solution design.

Although the content of the above mentioned features are all prepared not everything is already available in the customer portal yet. We shall be publishing it step-wise over the next weeks in order to have finalized the publishing by mid September. Just in time for our customer event. 

Business Flows Release 3: Introducing Value Flow

From Value Creation to Finance & Controlling - Aligning the separated views on your business

- Ikemefuna Allen

The situation

When talking to professionals from purchasing, production planning, and sales & distribution, they often seem not aware how their business operations impact accounting. By the same token, accounting departments are repeatedly left in the dark about business operations during process design phases of major transformation initiatives. This misalignment can be very costly, causing gaps from process design through to business rule definition, and Key Performance Indicator (KPI) interpretation.

Business processes are essential building blocks for organisational change and change can only be brought about when the stakeholders share a common goal; aligning on what needs to be done, how it is to be done, and what the implications are, once the work is done.

It is widely believed that thinking about business processes from an End to End (E2E) perspective fosters operational excellence since the key process flows, business rules, business roles and expected business outcomes are considered at all levels within the organisation. But Accounting too has its share of rules, legal requirements, roles, and expected outcomes, and often depend on input from upstream processes to ensure optimal service delivery. Keeping this in mind, one clearly sees the potential risks associated with a misalignment between business operations and accounting.

The solution approach

To foster holistic organisational transformation, it is essential that all business areas are in sync at the earliest stage of process design. The Value Flow approach facilitates the marriage between value creating processes and their Finance & Controlling requirements. This shall be demonstrated in the following examples.

1. Perform goods issue for sales from stock

Based on a customer order, goods are issued from stock, triggering a delivery to the customer. When this occurs, the relevant accounting entries are made namely, a posting to Cost of Goods Sold (COGS) and posting of the inventory reduction. The illustrated BPMN model below visualises this business transaction and the corresponding accounting impacts. In this model, the accounting postings are presented in a separate pool.

2. Create Customer Invoice

Once goods have been issued and a delivery is triggered, we expect the customer to be billed accordingly. The creation of a customer invoice will result in the recording of a receivable on the customer’s account, and the posting of the revenue which is derived from the business transaction as shown below.

3. Cross-company Business

Though the above presented examples may seem simplistic, Value Flow visualisation becomes more complex when considering business transactions among companies from one corporate group. A cross-company sales scenario typically involves a customer, the company selling to the customer (selling entity), and at least one other company belonging to the same corporate group as the seller (delivering entity). Showing the Value Flow for the transfer of ownership of goods, and the invoice creation can be equally challenging and enlightening when considering aspects of materials transfer, cross-company billing, commission agreements, and accounting requirements for balance sheet and P&L account consolidation. The illustrated BPMN model visualises the transfer of ownership of goods during a cross-company business transaction. 

4. Product Costing

When calculating the product cost for manufactured goods, it is necessary to keep detailed track of all incurring direct and indirect costs. To do so, controlling functions must ensure that related costs are recorded and allocated accordingly within the relevant accounting period. Value Flow can be used to visualise the material and time consumption related to manufacturing processes. This provides useful information when aligning the policies and computation method for product costing. The BPMN model shows the accounting impacts when materials are used in the production process. 

The way forward

Value Flow representation enriches process documentation by establishing cross references between key Value Flow topics within a business such as COGS and inventory postings, and the various instances and related E2E scenarios. These should be defined at the same point in time as process design with an early involvement of accounting departments. Value Flow therefore offers a framework to ensure alignment between Operations, and Financial and Managerial Accounting in business transformation initiatives. 

In the next release of Business Flows, we will provide reference models with Value Flow representation for all core business processes. These can be used as a template to refine according to the scope and concepts of your business transformation initiative. 

For inquiries on the concept and how to establish value flows in your environment please feel free to contact me.