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Process is Free
By Jim Sinur | January 15, 2008
I remember when my daddy told me “nothing is ever free”. I found his wise sound bite to be true until now. In fact, early in my adult life I thought I found an exception when I worked for a company that gave me a daily “free lunch”.
On the surface, I did not pay anything for it from my cash flow, but this company under-paid me for years and giving me a free lunch kept me in the building, so it was quick and convenient to go back to work and keep pounding out deliverables.
Have I found an exception in BPM? I think under the right circumstances, one could imagine BPM as free. Just go with me for a few minutes and let’s look at the benefits in light of 2008.
BPM Brings Economic Benefits (Around 15%)
With the economy showing softness going into 2008, all expenditures, whether internal or external, will be scrutinized with additional reviews. This bodes well for BPM in a couple of ways. Historically, well scoped BPM projects approach a 15% internal rate of return. While we all can point to process projects that have exceeded that percentage, it is important to project a realistic expectation for a return on investments in BPM.
It also good to know that 15% will likely be as high, or higher than an organizations hurdle rate (the rate at which a company can invest their money in the current market). Both returns are before expenses, but BPM benefits are not taxed. Some BPM projects can cause displacements, so there could be some “one time” costs where “skill-fits” usher some people out the door.
“So the savings are there, but I had to pay for the BPM technologies and the salaries of the people who implemented the BPM process,” you say. Well, if you picked a BPM project with significant savings over the price of the software and people, then buddy, it’s free. The next question you ask is around opportunity costs while this money and people salaries are tied up (time value of money).
BPM Brings Time to Market (Less than a year or less)
Even if BPM can bring healthy rates of return, it will not necessarily be enough in tightening times. Since the pressures on organizations to increase their bottom lines within their fiscal years will dominate, BPM projects will be focused to bring in benefits quickly. The flow of monetary benefits will be important for BPM efforts in 2008. One should consider taking longer running BPM efforts in smaller bites to show a growing source of benefits bearing results.
In the case of quick hit mentality, the benefit flow is quick. A number of these smaller hits could add up to more than your BPM technology investment plus the labor to implement it. The payback is very fast, plus you can use the BPM software for future process efforts and win back your annual maintenance fees easily plus process maintenance costs. It sounds free to me.
There are Caveats
The danger of running to BPM efforts that are “short and sharp” while delivering quick cash flow, will revolve around creating functional excellence to the detriment to the overall evolving process scope. There is a real issue around sub-optimizing important over-arching process that can affect important customers, partners, suppliers, employees and regions. It wil bel important to look laterallyl as well as deep before moving forward. The balance here will revolve around completing the lateral look quickly so that the short term benefits are not held up. One should consider “T Modeling” which involves modeling the overarching process thinly and quickly before embarking on a benefit quest. This will greatly reduce the probability of sub-optimizing only to be sorry later. Sub-optimizing on functional excellence without considering the overall context only gives BPM a black eye in the long run.
Bottom Line
I think I have made a decent case for process being free. If managed properly BPM can be more than free; BPM can pay you back many times. Daddy wasn’t always right.
Topics: BPM |
January 16th, 2008 at 9:43 am
Good post, Jim.
The question, I believe, is not ‘Is process free?’ but rather, given that BPM can be had/done/implemented for a potential zero cost (or less!), why aren’t more companies jumping onto this? It would seem to be almost a profit centre under certain conditions, so what’s stopping everyone from doing this?
January 18th, 2008 at 10:52 am
Gary,
Great question. I think it is because people are afraid to try something different. Without some encouragement or an external event, it’s tough to get people to do what they know is good.
I have had those moments myself. When I was younger, my cousin had a rope swing that swung out over the water. He would grab the rope, swing over the water and drop into the water at apex of the swing. I could see he was having a blast and I knew it would be fun, but I could not go ahead and do it. After some encouragement and a surprise push from cousin, I did it. I did it over and over again. It is one of my fondest childhood memeories.
I think the surprise push will come from dealing with the economic realities of 2008 myself. It will engender a race to hone BPM skills over time that will deliver on the promise of process profitability. The add-on BPM efforts that take advantage of the early costs drives BPM as an ecomomic engine.