Enterprise Engineering
with Processes
or
In the Footsteps of Monty Python
Michael Hammer
ESD Faculty Seminar
March 2005
© 2005 Hammer and Company. All rights reserved.
MIT ESD.38J-Faculty 3/05
Some
Interesting
Results
Oil company: filling orders
cycle time reduced by 75%, cost reduced 45%, customer
satisfaction increased 100%
Trucking firm: sales
RFP cycle time reduced 95%, win rate increased 70%
Consumer packaged goods: product deployment
lead time reduced 50%, inventory reduced 25%, backorders
decreased 50%
Auto insurer: claims handling
cycle time reduced 90%
Computer firm: product development
time to market reduced 75%, development costs reduced
40%, customer satisfaction increased 25%
Electric utility: new connections
cycle time reduced 90%, personnel required reduced 70%
What makes them even more interesting
© 2005 Hammer and Company. All rights reserved.
MIT EDS.38J-Faculty 3/05
1-2
The Underlying
Theme: Process
Concept: end-to-end work
as opposed to piecemeal work
Definition: an organized group of related tasks
that work together to create a result of value
transformation of inputs into outputs
structured purposeful work
Some common processes
order fulfillment
procurement
product development
order acquisition
demand creation
plan to produce
Themes
cross-functional
outcome-focused
context for activities
work, not structure
tasks, not people
small in number
The reality
processes are present but unrecognized in every enterprise
reversing a 200 year legacy
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MIT EDS.38J-Faculty 3/05
1-3
The Classical
Organization
Designers: Smith, Taylor, Ford
Capabilities: control, planning, scalability
Environment: stability and growth
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MIT EDS.38J-Faculty 3/05
1-4
The Old Way
CSR
Line tester
Dispatcher
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Field service
technician
MIT EDS.38J-Faculty 3/05
1-5
Customer Service
as a Process
Zone technician
CCA
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1-6
The Old Way
Sales
Engineering
Tooling
Manufacturing
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MIT EDS.38J-Faculty 3/05
1-7
Sample Development
as a Process
Sales and
Engineering
Engineering
Tooling
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Manufacturing
MIT EDS.38J-Faculty 3/05
1-8
The Process
Approach to
Performance
Improvement
Identify the enterprise’s processes
a business model in process terms, driven by strategic goals
Measure process performance
and set design goals
Create high-performance process designs
specifying precisely how tasks fit together
replacing inherited default designs
Implement new process designs
after suitable testing
including supporting training, infrastructure, and technology
Improve process performance
on an ongoing basis
Improved performance through improved design
© 2005 Hammer and Company. All rights reserved.
MIT EDS.38J-Faculty 3/05
1-9
The Process
Lifecycle
Understand source
of performance gap
Set performance
target
Measure
process
performance
Develop intervention plan
Improve
design
Improve
execution
Understand
customer needs
and benchmark
competitors
Modify
design
Replace
design
Ensure process compliance
Design, document, and implement process
© 2005 Hammer and Company. All rights reserved.
MIT EDS.38J-Faculty 3/05
1-10
The Dimensions of
Process Design
What tasks are to be performed
Who performs which tasks
When tasks are performed
Whether tasks are performed
Where tasks are performed
What information tasks employ
With what precision tasks
are performed
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Process Ilities
Repeatability
formal design
Improvability
context and process
Adaptability
a handle for change
Accountability
ownership
Manageability
measures and comprehensibility
Flexibility
separation of work and resources
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MIT EDS.38J-Faculty 3/05
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Representations
of a Process
Control flow
effective for time-oriented changes
Information flow
effective for information-based simplification
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MIT EDS.38J-Faculty 3/05
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The Old Way
P/O
Purchasing
Vendor
I
P/O
goods
$
Receiving
Payables
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MIT EDS.38J-Faculty 3/05
1-14
The New Way
P/O
Purchasing
Vendor
$
notification
Payables
© 2005 Hammer and Company. All rights reserved.
goods
Receiving
MIT EDS.38J-Faculty 3/05
1-15
Representations
of an Enterprise
Organization chart
who we are
P and L statement
how much we make
Balance sheet
what we own
Product catalog
what we sell
Customer list
whom we serve
Mission statement
what we aspire to
© 2005 Hammer and Company. All rights reserved.
MIT EDS.38J-Faculty 3/05
1-16
TI Semiconductor
Business Process
Model
Customer Communication
Concept Formulation
Market
Customer
Product Development
Manufacturing
Strategy
Development
Product
Development
Customer
Design
and
Support
Order
Fulfillment
Enablers
Manufacturing Capability Development
Source: Texas Instruments
(Reprinted with permission)
© 1992 Texas Instruments Inc. All rights reserved.
© 2005 Hammer and Company. All rights reserved.
MIT EDS.38J-Faculty 3/05
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Desiderata of a
Process Model
Simple
Customer-centric
Natural
Holistic
Precise
Comprehensive and all-encompassing
Non-hierarchical and non-organizational
Processes, not functions
Stable, non-product-dependent
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MIT EDS.38J-Faculty 3/05
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An Organizational
Model (But Not an
Organizational Chart)
C
U
Owner
S
Owner
T
Processes
O
Owner
M
E
R
S
Centers of
Excellence
Coach
Coach
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Coach
Coach
MIT EDS.38J-Faculty 3/05
1-19
Aligning with
Processes
Metrics
processed-based performance measures
Information systems
integrated systems to support process work
Facilities
work spaces to reinforce team work and process flow
Human resource systems
job descriptions, career models, and compensation
systems designed for process performers
Management systems
budgeting, planning, and financial systems focused on
processes
Culture
attitudes and values of teamwork, customer concern, and
personal responsibility
Integration
mechanisms for ensuring that processes work together as
well as individually
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The Tradeoff
System simplicity
vs. component
complexity
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