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1. 1
A Simulation Based
Framework for Business
Process Design Projects
Chapter 3
Business Process Modeling, Simulation and
Design

2. 2
Overview
 The Overall Framework
• Step 1: Case for Action and Vision Statement
• Step 2: Process Identification and Selection
• Step 3: Obtain Management Commitment
• Step 4: Evaluate Design Enablers
• Step 5: Acquire Process Understanding
• Step 6: Creative Process Design
– Benchmarking
– Design Principles
• Step 7: Process Modeling and Simulation
• Step 8: Implementation of the New Process
Design

3. 3
A Simulation Based Framework for BPD
Projects
1. Case for action
and vision
2. Process Identification
and selection
3. Obtaining Management
commitment
4. Evaluation of Design
Enablers
5. Acquiring Process
understanding
6. Creative Process
Design
7. Process Modeling and
Simulation
8. Implementation of the
New Process Design

4. 4
 A clear message about the need for change and where the
change is going to take us is necessary for successfully selling
the redesign concept to the company’s employees
 Case for Action
– Here is where we are as a company and this is why we cannot stay here
– Five major elements build an effective argumentation
1. Business context – what is important and what is changing
2. Business problems – source of the company’s concern
3. Marketplace demand – performance standards & demands to meet
4. Diagnostics – why are we unable to meet the posed demands
5. Cost of inaction – consequences of not changing
Case for Action and Vision Statements (I)

5. 5
Case for Action and Vision Statements (II)
We are disappointed by the length of time we require to develop and register
drugs in the United States and in major international markets.
Our leading competitors achieve significantly shorter development cycles
because they have established larger-scale, high-flexible, globally integrated
R&D organizations that operate with a uniform set of work practices and
information systems.
The competitive trend goes against our family of smaller, independent R&D
organizations, which are housed in several decentralized operating companies
around the world.
We have strong competitive and economic incentives to move as quickly as
possible toward a globally integrated model of operation. Each week we save in
the development and registration process extends the commercial life of our
patent protection and represents, at minimum, an additional $1 million in annual
pretax profit — for each drug in our portfolio.
 Example: Case for action in a pharmaceutical company

6. 6
 Vision Statement
– This is what we as a company need to become
– Should include both quantitative and qualitative
statements
– Need not be excessively long but should not be
simplistic
Case for Action and Vision Statements (III)

7. 7
Case for Action and Vision Statements (IV)
We are a worldwide leader in drug development.
1. We have shortened drug development and registration by an average of six
months.
2. We are acknowledged leaders in the quality of registration submissions.
3. We have maximized the profit potential of our development portfolio.
We have created, across our operating companies, a worldwide R&D organization
with management structures and systems that let us mobilize our collective
development resources responsibly and flexibly.
1. We have established uniform and more disciplined drug development,
planning, decision-making, and operational processes across all sites.
2. We employ innovative technology-based tools to support our work and
management practices at all levels and between all R&D sites.
3. We have developed and implemented common information technology
architecture worldwide.
 Example: Vision Statement in a pharmaceutical company

8. 8
• Process selection is critical for the success of a design project
– Core processes have the highest impact on overall performance but are
also more costly and risky to change
– The implementation tactic cannot be ignored, even due to budget
constraints
• Useful criteria for prioritization of projects are:
 Dysfunction
 Importance
 Feasibility
• Other relevant screening issues/questions are:
 What are the project’s scope and costs involved?
 Can a strong and effective team be formed?
 Is it likely to obtain strong management commitment?
 Can other programs (e.g. continuous improvement) be used instead?
 Is the process obsolete or the technology outdated?
Process Identification and Selection

9. 9
• Top management must set the stage both for the design
project and the subsequent implementation
– Without top management support the improvement effort is bound
to fail
– The more profound and strategic the change is the more crucial the
top management support becomes
Obtaining Management Commitment
• Commitment assumes understanding and
cannot be achieved without education
– People are more likely to be fearful and resisting
change if there is a lack of direction and they do
not understand the implications of the change
– Occurrence of “resisting change” issues is
particularly prevalent in rapid revolutionary
change scenarios

10. 10
• New (information) technology is an essential
design enabler…
• …but could also reinforce old ways of thinking
– Automation  redesign
– Do not look for problems first and then the technology to
fix them
– Evaluating new technology needs inductive thinking
• New technology should not be evaluated within the
structure of the existing process
– New technology enables us to break old rules and
compromises
• To avoid the automation trap the question to ask is:
– How can new technology enable us to do new things or to
do things in new ways?
Evaluation of Design Enablers

11. 11
Technology as a Mechanism to Break
Rules and Compromises
Old Rule New Technology New Rule
Information can appear Shared databases Information can appear
in only one place at a time. simultaneously in as many
places as needed.
Only experts can perform Expert systems A generalist may be able to do
complex work. the work of an expert.
The best contact with a potential Interactive videodisk The best contact with a potential
buyer is personal contact. and web pages. buyer is effective contact.
Businesses must choose Telecommunication Businesses can simultaneously
Between centralization networks reap the benefits of centralization
and decentralization.
and decentralization.
People must find where Automatic identification Things tell you where they are.
tracking technology. Plans get revised instantaneously.
things are.
Field personnel need offices Wireless data Field personnel can send and
Where to receive, store, retrieve
portable computers.
receive information wherever
and transmit information.
communication and
they are.
Plans get revised periodically. High performance
computers.
Plans get revised
instantaneously.
Managers make all decisions. (databases, modeling tools) everyone’s job.
Decision support tools -
Decision making is part of

12. 12
• Subtle difference between redesigning an existing process
and designing a new currently non-existing process
– In both cases we need to understand the purpose of the process
and what the customers desire from it
– If the process exists, we need to understand what it is currently
doing and why it is unsatisfactory
• Business Process Benchmarking may be a useful tool
– To gain process understanding
– To inspire creative new designs
Acquiring Process Understanding

13. 13
• Questions the design team needs to answer
 What is the existing process doing?
 How well does it perform?
 What are the critical issues that impact the process performance?
• The redesign team must understand the process but should
not overanalyze it in order to avoid “analysis paralysis”
– Becoming so familiar with the process it is impossible to think of
new ways of doing it
• Essential activities for building process understanding
1. Configure the redesign team
2. Build a high level process map
3. Test the initial scope and scale
4. Identify the process owner
Understanding the Existing Process

14. 14
1. Configure the redesign team
– A mix of business insiders (managers and workers directly involved in
the current process) and business outsiders (consultants and employees
not involved in the process)
2. Build a high level process map
– Neither a low level flow chart nor an organizational chart
– Shows interactions between sub-processes, not the flow of data
– Focuses on customers and business outcomes
– Objectives
1.Build common understanding 4.Use a cross functional vocabulary
2.Highlight critical sub-processes 5.Test initial scope and scale
3.Identify key interfaces 6.Pinpoint redundancies and waste
Activities for Building Process
Understanding (I)

15. 15
High Level Process Map for a Telecom
Company
Capacity
Provisioning
Service
Assurance
Markets &
Planning
Local Network
Operations
Mass Markets
Service Delivery
Customer
Transactions
and Billing
Customers
Carrier Service
Delivery

16. 16
3. Test the initial scope and scale
– Self examination
– Environmental scanning/benchmarking
– Customer visits
4. Identify the process owner
– The person that will take responsibility
and be accountable for the performance
of the new process
Activities for Building Process
Understanding (II)

17. 17
Understanding the Customer
• The customer end is the best place to start
understanding a business process
– What are the customers’ real requirements?
– What do they say they need and what do they really
need?
– What problems do they have?
– What do they do with the process output?
• The ultimate goal with a business process is to
satisfy the customers’ real needs in an efficient
way!

18. 18
Creative Process Design (I)
• Designing new processes is more of an art than a science
– Cannot be achieved through a formalized method
• Most existing processes were not designed; they just
emerged as new parts were added iteratively to satisfy
immediate needs
• The end result of any design is very much dependent on the
order in which information becomes available
– Inefficient processes are created when iterative design methods are
applied

19. 19
Illustration Process Evolution (I)
• Two pieces of plastic are given to you with instructions to
arrange them in an easily described shape

20. 20
Illustration Process Evolution (II)
• Then a third piece is added still the objective is to build a
simple shape

21. 21
Illustration Process Evolution (III)
• Two more pieces are added, but very few people are able to
incorporate these and still obtain a simple shape
?

22. 22
Illustration Process Evolution (IV)
• Considering the pieces independently of the sequence by
which they appear leads to a much better solution!

23. 23
Benchmarking
• Comparing the firm’s/process’s activities and performance
with what others are doing
– In the same company, in the same industry or across industries
• Every benchmarking relationship involves two parties
 The initiator firm – who initiates contact and observes (the pupil)
 The target firm (or benchmark) – who is being observed (the master)
• Fruitful benchmarking relationships are usually characterized
by reciprocity
• Two basic benchmarking purposes
1. To assess the firm’s/process’s performance relative to the
competition  identify performance gaps and goals
2. To stimulate creativity and inspire innovative ideas for how to do
things better, i.e. improve process designs & process performance
• For BPD projects both purposes are relevant

24. 24
Business Process Benchmarking (I)
• Focus on how things are done
– Typically the most involved type of benchmarking
• The underlying idea is to learn and be inspired by the best
– The best in a certain industry (best-in-class benchmark)
– The best across industries (best-of-the-best benchmark)
• Generally, the further away from the firm’s own industry that
the design team goes
– Higher potential for getting breakthrough design ideas
– More difficult to identify and translate similarities between processes
• After choosing a target firm a good starting point for a
business process benchmarking effort is the 5w2h framework
(Robinson 1991)
– Can also be used to understand an existing process to be redesigned

25. 25
Business Process Benchmarking (II)
The 5w2h framework
Classification 5w2h questions Description
People Who? Who is performing the activity?
Why is this person doing it?
Could/Should someone else perform the activity?
Subject matter What? What is being done in this activity?
Can the activity in question be eliminated?
Sequence When? When is the best time to perform this activity?
Does it have to be done at a certain time?
Location Where? Where is this activity carried out?
Does it have to be done at this location?
Purpose Why? Why is this activity needed?
Clarify its purpose.
Method How? How is the activity carried out?
Is this the best way or are there alternatives?
Cost How much? How much does it currently cost?
What would be the tentative cost after improvement?

26. 26
Design Principles
General people-oriented and conceptual process design principles
1. Organize work around
outcomes, not tasks
2. Let those who use the process
output perform the process
3. Merge information processing
and data gathering activities
5. Put the decision point where
the work is performed and build
control into the process
4. Capture the information once –
at the source
8. Design the process for the
dominant flow not the exceptions
6. Treat geographically dispersed
resources as though they were
centralized
7. Link parallel activities instead
of just integrating their output
9. Look for ways to mistake-proof
the process
10. Examine process interactions
to avoid sub-optimization
Themes:
Horizontal and vertical integration of
work, hand-off elimination, improved
quality and task coordination
Coordination of activities,
simplification of flows, elimination
of waste and rework

27. 27
1. Organize work around outcomes not tasks
– Focus on horizontal integration of activities
– Eliminates unnecessary handoff and control steps
– Process complexity is reduced while activity complexity grows
• This integration approach often referred to as case management
2. Let those who use the process perform the process
– Work should be carried out where it makes most sense to do it
– Risk of coordination inefficiencies due to excessive delegation decreases
3. Merge information processing and data gathering
activities
– The people collecting the data should also process it into information
– Reduces the risk of errors and incorrect information
4. Capture information once – at the source
– Reduces costly reentry and frequency of erroneous data
– Speeds up the process, increases the quality of information and reduces
costs
Ten Conceptual Design Principles (I)

28. 28
5. Put the decision point where the work is performed and
build control into the process
– Case management compresses processes horizontally and employee
empowerment compresses them vertically
– Workers are taking over previous management responsibilities
6. Treat geographically dispersed resources as though they
were centralized
– IT breaks spatial compromises through virtual co-location
– Geographically disbursed resources should not constrain the design
team to only consider decentralized approaches
7. Link/coordinate parallel activities instead of just
integrating their results
– If parallel activities are operated independently  operational errors
are not detected until the outcomes are integrated
– Reduces the amount of rework
Ten Conceptual Design Principles (II)

29. 29
8. Design the process for the dominant flow not for the
exceptions
– Reduces the risk of fragmentation and overly complex processes
with inherent coordination problems
9. Look for ways to mistake-proof (or fail-safe) the process
– Design so that certain critical errors cannot occur
– Mistake-proofing = Poke Yoke
10. Examining interactions to avoid sub-optimization
– By neglecting interactions, isolated improvements to sub-processes will
lead to sub-optimal solutions
– Known in systems theory as “disjointed incrementalism”
Ten Conceptual Design Principles (III)

30. 30
• Stems from the field of industrial engineering
– Successfully used for designing manufacturing systems for decades
Seven Workflow Oriented Design Principles
 Establish product orientation in the process
 Eliminate Buffers
 Establish one at a time processing
 Balance the flow to the bottleneck
 Minimize sequential processing and hand-offs
 Schedule work based on its critical characteristics
 Minimize multiple paths due to specialized operations
for exception handling
Traditional, technically oriented workflow design principles
Focus: Efficient process flows, managing resource capacity,
throughput and cycle times

31. 31
• Conceptual process designs need to be tested before they are
implemented in full scale
– Pilot projects or process modeling techniques
• Business processes are often too complex and dynamic to be
analyzed only with simple tools like flowcharts and spreadsheets
• Discrete event simulation is a powerful and realistic tool to
complement the more simplistic methods
– Allows exploration of the redesign effects without costly interruptions
of current operations
– Helps reduce the risks inherent in any design/change project
• Compared to pilot projects simulation is faster and cheaper
– Simulation not good for capturing soft people issues and attitudes
 Simulation and pilots complement each other
Process Modeling and Simulation (I)

32. 32
• A discrete event simulation model mimics the
real world but in compressed time
– Focus only on events when the state of the system
changes and skips the time between these events
• Basic steps in evaluating a process design
through discrete event simulation
1. Building the simulation model
2. Running the simulation
3. Analyzing performance measures
4. Evaluation of alternative scenarios
Process Modeling and Simulation (II)

33. 33
Advantages with discrete event simulation
• Promotes creativity by enabling easy testing of ideas
• Captures system dynamics but avoids disturbances of
current process
• Can capture interactions between sub-processes
– Mitigates the risk of sub-optimization
• Graphical reporting features promotes better process
understanding and facilitates communication
• The quantitative nature brings a sense of objectivity into
the picture
Process Modeling and Simulation (III)

34. 34
• Detailed implementation issues beyond the scope of the
design project
• High level implementation issues need to be considered
when selecting a process to design
– No point in designing a process which cannot be implemented
• Crucial high level implementation issues
 Time
 Cost
 Improvement potential
 Likelihood of success
Implementation of the Process Design (I)

35. 35
• Conceptually an implementation strategy can be
characterized as revolutionary, evolutionary or on a
continuum in between
– A rapid revolutionary approach tends to require more external
resources
• Regardless of the implementation tactic important
factors for a successful implementation are
 Strong leadership
 Buy-in from line managers and employees
 Training of the workforce
Implementation of the Process Design (II)

36. 36
• Important to reflect on what can be learned from a
given design and/or implementation project
– What worked, what didn’t and why?
– What were the main challenges?
– What design ideas didn’t work out in practice and why?
• The process of designing and implementing new
process designs also needs improvement
– Sharing experiences and collecting feedback is key to any
improvement effort
Final Notes