Let’s Talk Business Process First! – How to Calibrate Business Relationship Maturity through Business Process Culture
Use of information technology. Is it creating value? Is it improving business processes and capabilities? Or merely creating new wants? Is it important, or only urgent? What is it for? Every Business and IT engagement around business requirements revolves around these questions but managing it isn’t always easy.
First, let’s talk about IT organization’s critical role in the company’s business processes. One of the consequences of Business Process Management is a large majority of these programs are initiated in the IT organization. There are very good motives for this. One of the most common: the IT organization is responsible for providing the technology that enables business processes. Take for example, ERP (Enterprise Resource Planning) systems like SAP, Oracle, etc. This ERP solution is a suite of integrated applications that a company can use for many business processes. Most ERP systems incorporate best practices reflecting the vendor’s interpretation of the most effective way to perform each business process. Systems vary on how conveniently the customer can modify these practices. Talking about best practices, it is advisable not to over-customize because doing so will keep you from taking advantage of the expected improvements and innovations from the purchased ERP package.
How do you characterize the nature of your engagement with your business partners? Is it functional orientated? If it is, there is more tendency for having more solution-based discussion versus process- and value-based. Even worse, it could be possible that your internal customer is engaging you at the tail end of their decision cycle–when they have already determined what they want or need. There is lack of business-IT alignment and strategic partnership.
How do you then improve the level of your business relationship with the business? There are numerous paths towards that elusive business-IT strategic partnership. In this post, I will talk about Business Process Maturity as a path— so I would say – Let’s Talk Process First! This has worked for me in the past. One of the most effective ways to change the orientation and focus of business IT interactions is to start with business process. Calibrate your organization’s business process maturity and you will take along with it to a great degree IT-business relationship maturity. What you need are experienced business process managers with business relationship management competencies. Below I will walk you through these 3 stages of Business Process and Business Relationship maturity and describe what it means.
Business Process and Business Relationship Maturity
Level 1: Support
Business Process Maturity = Diverse and Business Relationship Maturity= Adhoc / Order Taker
When your organizational approach to business process is diverse, more often business-IT initiatives are managed with lack of integration. At this stage, most of the organization’s process knowledge is known only to a few individuals. For business process engagement facilitation, there is dependency on external consultancy. There is no standard process management discipline that leads to more functional orientation of IT requirements discussion. Consequently, IT as a provider organization is hardly seen as a strategic partner–at most, a service provider. In terms of business relationship maturity level, most of the time, IT is treated as an order taker. This type of business relationship is characterized by loudest in – first out tendency causing reactive course of actions. My advice is to embark on a business process maturity journey. Establish a discipline of managing business processes as the means for improving business performance outcomes and operational agility. Leverage use of technology to improve business processes.
Level 2: Improve
Business Process Maturity = Model Integration and IT-Business Relationship Maturity = Service Provider
You want to become an organization that designs processes first and then goes on to implement the technology enablers. Your organization wants to keep pace with technology and maintain a competitive advantage. Companies at this level adapt a consolidated method to design and implement business models using standard processes and tools. Process ownership ultimately improves as management breaks silos and approaches process and technology implementation equally. The common tendency is for companies to establish process governance and ownership. IT plays a key role in the process evolution of the company and starts to be seen as a service provider and some cases even a strategic partner.
Level 3: Innovate
Business Process Maturity = Process Culture and IT-Business Relationship Maturity = Strategic Partner
The final step to Process Culture Maturity occurs when innovation and change in business practices through process understanding are consistently promoted within the company. As executives passionately embrace process thinking, they are able to promote innovation more confidently when implementing new technologies. In many cases, companies with mature process culture has End-to-End orientation to process management and IT plays a key role as center of process excellence. IT starts to be regarded as trusted and strategic partner. Business–IT relationship is based on cooperation and mutual trust with shared goals to maximize value from business initiatives.
Technology will not automatically implement itself and run your organization’s processes the way you envision. IT has a unique opportunity to spearhead business process improvements in the company. Start by changing the orientation of your business interactions from functional to business process, from solutions to value. Do not shy away from this opportunity. Use business process management to create greater strategic value and by doing so advance business-IT relationship level to new heights.
Don’t tell me I did not warn you. The only thing I can promise is that you’ll learn a thing or two from this one, so please read on.
I came across a predictive validity framework called the “Libby boxes”, popularized by Cornell Accounting Professor Robert Libby. This framework is used to examine the distinction between underlying constructs of strategic objectives and their proxy measures to illustrate causal models related to some objectives in an organization. Another definition of “strategy” is as a hypothesis about the cause and effect of your objectives. Predictive validity allows you to measure and analyze how well the execution of your objective (cause) predicts your desired performance (effect).
Simple Business-IT Strategy
Now, to illustrate the importance of a Business Relationship Management (BRM) function in an Information Technology (IT) organization, let’s start by picking a Business-IT strategy to dissect. Let’s call it “Strategy A”.
Strategy A: “Create business value through better use of technology.”
Let’s start it simple and take an approach to illustrate cause and effect depict Strategy A using the model. We are going to be taking a very logical approach. The strategy here is— you believe that if you use technology better, you create business value. Let’s assume that technology is comprised of infrastructure and applications that enable the business or enterprise.
Observe that Strategy A is too simple—or maybe exceedingly simple. Can we really say that if IT provides better technology, we create business value, in the form of profits or savings? Yes, no, maybe. How about this – it is because of better use of technology, we improve business processes of the company and therefore we create business value. In this predictive validity framework, the middle action is called, mediating variable. It stands between two variables and it is an effect of one variable and the cause to another. This brings us to iteration to our business-IT strategy. Let’s refer to this improved business-IT strategy as “Strategy B”.
Strategy B: “Create value by improving business processes through better use of technology”.
So how do you interpret this strategy? As an IT organization, your goal is to provide the business with the technology, infrastructure and applications to enable efficient business processes. This will result to business value creation through optimized cost, profitability and strategic advantage. Whew! Follow all that so far?
I think this business-IT strategy works. If you run this, you have a good chance of successful outcomes. But your aim is not to be just good. Your aim is to be great. Your goal is to differentiate your IT department and to support your enterprise to be the best performing company in its industry or to be the best performing company (period!).
The Missing Component to be great
So there is a missing component to your strategy, a moderating component—a component that will have a multiplying effect from certain causes and effects coming out from the collective work that you do. In this predictive validity framework, it is called the moderating variable. The moderating variable is a variable that determines how big an effect you get from a certain cause.
To illustrate, let’s say you want to improve your performance at playing basketball. By practicing basketball, doing drills and shooting, for sure it will improve your performance. This is a very simple causal model. You practice more and that, in effect, will improve your basketball performance. But think about this, is there a certain amount of practice that will allow you to be like Mike (Michael Jordan)? Most likely, no. Talent and perhaps physical capacities are the moderating variables here. Sure, practice will improve your performance, but if you have a lot of talent, a little bit of practice goes a long way and will make you much better. If you don’t have that much talent, you’ll have to practice a lot to get just a little better. Talent in this case is a moderating variable.
Now that you understand what a moderating variable is, let’s go back to our Business-IT strategy. Think about an organizational capability equivalent to talent that can potentially transition your IT organization from good to great—it is business relationship management (BRM).
BRM in this case is a moderating variable. The BRM capabilities moderate the effect of improvement of business processes on performance, making it bigger (high Business-IT alignment) or smaller (in cases where it is lacking). Improved business processes doesn’t cause BRM capabilities, it just moderates the effect. How? BRMs (1) facilitate Business-Provider convergence, (2) ensure that use of IT services drives value and (3) facilitate productive and connections and mobilize business-IT projects and programs.
For many years, IT organizations responsible for deploying technology systems to enable enterprise processes have had one goal in mind – namely, to assure business-IT alignment. Today, however, as IT capabilities become more and more embedded in business capabilities, and given the pace of technological change and the pervasive nature of IT, alignment is no longer sufficient. The goal today, therefore, is “convergence”. This has given momentum to the growing emergence of the Business Relationship Management (BRM) role, which, according to the Business Relationship Management Institute (BRMI), is about “stimulating, surfacing and shaping business demand for a provider’s products and services, ensuring that the potential business value from those products and services is captured, optimized and communicated.”