Reducing Operating Costs

Today the pressure is on the CIO and the IT organization to identify, enable, and create new business opportunities while dramatically reducing operating costs. In virtually every industry, aggressive, more technologically agile competitors are now offering new products and services faster or are executing processes more efficiently, to win customers, market share, and profit.

Thankfully, advances in technology and technical standards, specifically SOAs, are now allowing IT budgets to be reclaimed and the organization to be repositioned. New technical tools and capabilities complement traditional BPM methods and even unlock existing application functionality to greatly accelerate process improvement and innovation.

Leading firms are using BPM technologies to accomplish the following tasks:

• Choreograph human and system interactions
• Provide real-time visibility into key performance indicators (KPIs)
• Manage escalations in the event of failure or missed targets
• Provide the foundation for continued process improvement and optimization

However, on their own SOA/BPM do not address waste management or efficiency considerations. This is where Lean Six Sigma can help.

Step Back – Definitions & Terms

Lean Six Sigma (LSS) produces real results in difficult economic times by uncovering process waste, reducing non-value adding activity, and increasing productivity. The benefits are even felt in IT. According to the consulting firm McKinsey & Company, “companies can reduce application development and maintenance costs by up to 40%.” That application development productivity can be improved “by up to 50%” by applying LSS techniques, freeing budget for needed investments. 

Business process management (BPM) and service-oriented architectures(SOAs) combine with LSS to accelerate improvements and results. At the same time, they increase organizational flexibility and technology enabled responsiveness.

Many successful companies have found that the linkages are clear. Early adopters who have worked their way past cultural and organizational barriers are seeing impressive performance and financial results: 

• Improved responsiveness to market challenges and changes through aligned and  market and tuning processes to meet the specific needs of key market segments
• Improved ability to innovate and achieve strategic differentiation by driving change into the and respond to problems by using real-time data, automated alerts, and planned escalation
• Reduced process costs through automation and an improved ability to monitor, detect,higher levels of component reuse
• Significantly lower technical implementation costs through shared process models and improved ability to gain feedback and buy-in prior to coding
• Lower analysis costs and reduced risk through process simulation capabilities and an improved ability to gain feedback and buy-in prior to coding

Recommendations

Lean Six Sigma (LSS) and business process management have much in common. Both methodologies use iterative improvement and design techniques to deliver financial and performance benefits through better managed and optimized processes.  

By combining key concepts from LSS with the capabilities of BPM (including process modeling and analysis, automation, and executive dashboards that deliver real-time performance metrics to process consumers), a company can ensure that its people are focused on the most meaningful value-added work. SOAs add increased flexibility so that processes can be quickly assembled from reusable Lego-type building blocks of technical functionality.

Companies that successfully bring together LSS, BPM, and SOA initiatives will realize a competitive advantage.

To fully understand the linkages between BPM, SOA, and LSS, and fully realize the benefits of these linkages, it is important to establish definitions and list key concepts for each initiative.

Conclusion

Process improvement experts are uniquely positioned to play a key role in this transformation as they are able to leverage their business and technical knowledge in combination with the tools and techniques of Lean Six Sigma.

Take Aways

• Understand the basics of Lean Six Sigma and how BPM and SOA support the Lean Six Sigma methodology
• Understand how to use data to select the right improvement project
• Understand how Business Analysts can play a role in accelerating results
• Consider embedding Lean Six methodology into your SOA/BPM strategy as part of your overall Enterprise Architecture

The rewards can be great, especially for those who take action now.