Embrace complexity, Simplify your organization

White Paper

Executive summary
When reality changes, the old best practices no longer suffice. The reality of business processes has significantly shifted. To deal with business megatrends such as mass customization and customer self-service, administrative processes have become more knowledge-intensive. In addition to traditional business process management techniques and technologies, new practices and technologies are needed to enable what analyst firm Forrester calls dynamic case management. In this paper, we explain how the transition can be made from process-based operations to a more case-based focus. We also explain how business processes can be tested to establish their level of knowledge-intensiveness and, if relevant, the extent to which this needs to be improved. Finally, we outline the principles which constitute the foundation of the Be Informed business process platform. Be Informed is an internationally operating, independent software vendor. The Be Informed business process platform supports administrative processes, which are becoming increasingly knowledge-intensive. Thanks to Be Informeds unique approach to dynamic case management, the next wave after business process management, organizations using Be Informed often report cost savings of tens of percents. Further benefits include a much higher straight-through processing rate leading to vastly improved productivity, and a reduction in time-to-change from months to days.

Embrace complexity, Simplify your organization

Introduction
Reduce complexity is one of the most important mantras in the board room. Complexity of processes, complexity of systems and the complexity of the organization itself. Complexity is the enemy of control, and most organizations feel that increased control is of key importance in order for their business to survive and thrive. As logical as it may sound and even feel, this intuitive reflex may very well turn out to be wrong. Wrong and, in the worst-case scenario, damaging to future business performance potential. Complexity is a natural phenomenon; it is simply the way the world is, with all its diversity and change. But there is a difference between what makes the world complex and what makes it complicated. Complicatedness is a human concept. It encompasses all the systems, processes and exceptions organizations have created. Over the years, companies have built complicated systems and processes, but this has rarely given them greater control. On the contrary: complicatedness leads to less control, inefficient operations and a growing distance from the customer. Consider the following examples: An insurance company that has a strong customer intimacy strategy wants to offer personalized cover, based on age, sociodemographics, asset value to be insured, and customer preference. This could easily result in billions of combined forms of cover. Should the IT department inform the CEO that the systems are unable to handle the complexity, and that the company should settle for standard products and services? Within a countrys immigration service, civil servants assess whether applicants should be granted a visa, the right to work or live in that country, or that countrys nationality. They have to deal with tens of thousands of rules, ranging from country-specific regulations to supranational legislation such as European Union policies and the specifics of the many treaties with other countries. Furthermore, rules change multiple times each year. Would it be acceptable for the agency to reject changes because its processes, systems and organizational activities cannot handle the complexity? A hospital wants to redesign its processes. Old-style optimization would consist of large batches of similar appointments and procedures, resulting in multiple visits for patients. Now, it wants to schedule all appointments and procedures for a patient on a single day where possible. However, some examinations require the patient to abstain from eating, while others require them to have a full stomach. Again, the many pre and

Embrace complexity, Simplify your organization

postconditions for procedures could easily lead to billions of combinations. How can full observance of the conditions be ensured? Complexity cannot be reduced. In attempting to achieve this, processes, systems, people and organizations create bottlenecks which obstruct the process of dealing with the natural complexity in the world. Instead, a competitive advantage in the private sector or sustainable government in the public sector can be achieved through a different competence: embracing complexity. A McKinsey report outlined the business case: If complexity, in all its aspects, is seen as a challenge to be managed and potentially exploited, not as a problem to be eliminated, businesses can generate additional sources of profit and competitive advantage. Companies reporting low complexity [which we refer to as complicatedness] had the highest returns on capital employed and returns on invested capital. 1

Source: Cracking the Complexity Code, McKinseyQuarterly, May 2007

Embrace complexity, Simplify your organization

Embrace complexity
In order to embrace complexity, we need to shift from a control-driven approach towards an approach of empowerment. This means enabling your customers, call center agents, citizens and so forth, to go with the flow. In other words, providing them with the means to do their job, instead of telling them what to do. This may sound risky, but the opposite is true. It may have been risky in traditional business management, but if reality shifts, so must best practices.

S-curves
Reality shifts like S-curves. A new trend starts slowly, takes off and becomes the new paradigm and best practice. Then, at a given moment, something unexpected happens2. The list of possible disruptions is endless: the introduction of Sarbanes-Oxley regulations turned business operations around; the credit crunch turned public opinion on business conduct around; globalization turned corporate thinking around. A new way of working is needed, as the old ways no longer suffice. Usually, new ways of working are not as proven, and their return is also lower. In fact, after a new S-curve has been adopted, business performance can drop even further before it goes up. Then the new S-curve becomes the next best-practice, until, at a given moment, something unexpected happens again (see figure 1).

Figure 1: S-curves

This moment is often referred to as a black swan. A black swan represents something thought impossible (within the existing view of the world).

Embrace complexity, Simplify your organization

If trends develop like S-curves in general, then trends in the world of business processes most likely follow the same pattern. Indeed, they have already in the past. From the beginning of the industrial revolution to the days of Frederick Taylors scientific management, manufacturing processes were optimized through mass production. Most people would be familiar with the quote that the T-Model Ford could be delivered in any color so long as it is black. Today, this could not be further from the truth. Cars, and other manufactured products, can often be ordered in millions of different configurations, and every product can be a unique combination of characteristics. Today, mass customization is the norm a new S-curve. Administrative processes have roughly followed the same path. In the 1980s, business process re-engineering brought the first levels of operational excellence for administrative processes, making back offices lean and efficient. Much faster than in manufacturing, and almost seamlessly, the next S-curve followed.

Mass customization and customer self-service

Administrative processes are now mass-customized as well. Insurers can offer personalized cover. Marketing departments use microsegmentation to offer discounts and special offers, both online and through other channels. There is almost no vertical where mass customization has not become a key value proposition. The principle of mass customization is also very prominent in the public sector. Bureaucracy, in its original meaning, was invented to treat everyone equally, by means of the same process. Nowadays fairness is defined differently. It means that a new S-curve, the best practices government agencies give every citizen the the old world are useless same special attention, based on their specific circumstances. Mass customization is often combined with another principle: self-service. Particularly in administrative organizations, this is the new norm. Internet banking at financial institutions, online check-in for flights, car and hotel reservations via airline companies, self-direction of the building-permit process.... These are all examples of customer self-service. The advantages are clear. When customers take over the front-office work, the companys costs are reduced and high-quality data is ensured (it is in the customers best interest to enter their data correctly). Moreover, it strengthens the companys value proposition, as customers are requesting self-service capabilities. As a result of mass customization and self-service, customers are effectively directing the organizations processes. They choose which customer contact channel is used in each process step and perform those tasks at a time which is convenient for them. In companies that have mass process customization, there is no longer a difference between the front and back office. Doing business is a process of continuous interaction and collaboration.

In of

Embrace complexity, Simplify your organization

Traditional business applications pose challenges

Control-driven processes no longer work. When there are billions of combinations, it is simply not possible to define and document every possibility and exception. In fact, every transaction is now a unique instance. The only way forward is to define goal-oriented processes; the goal is to successfully complete the process, and the process consists of those rules and activities which specifically contribute to the goal. Trying to run a process like this with a traditional business application the result of years of business process re-engineering is challenging, to say the least. Being able to change the system only twice a year when there is a new software release is simply unacceptable. Recently, Gartner said, 30% of organizations like to make changes to processes on a daily basis. 3 The best practice in the old S-curve was to optimize operations through deliberate and careful analysis, and execute with maximum precision. In short, stick to the plan. In a mass-customized world, the only thing you can do is stick to reality and optimize operations by keeping all your options open. It is one level up: from optimizing operations to optimizing the change of operations. Table 1 contains a list of characteristics of mass production and mass customization. Mass production
Every transaction is the same Control-driven Two changes per year (system release) Advance choices, stick to the plan Process-intensive Reduce complexity

Mass customization
Every transaction is a unique instance Goal-driven Continuous change, business-driven Keep options open, stick to reality Knowledge-intensive Embrace complexity

Table 1: mass production and mass customization

Michele Cantara, Gartner Research VP, Gartner Symposium, Cannes, 2010

Embrace complexity, Simplify your organization

Simplify your organization

Great. Great. Embrace complexity, instead of trying to reduce it. We get it. But how? What if you are stuck with the systems you have? And what if your employees are already handling the maximum of complexity they can cope with? What other choice is there than to try to reduce complexity and start standardizing products, services and business processes? The great leap forward comes from abandoning the central concept of the old Scurve: the process-centric approach. This approach dictates that transactions need to follow the process, and that the moment transactions do not fit with the process, the process needs more hardcoded exceptions. In more formal terms, this is called a prescriptive approach.

The case-based approach

If you turn it around, the complexity problem disappears: put the case at the heart, not the process. A case can be defined as all the work that needs to be done to achieve a certain result for a customer, for example, or with an object such as a building. The context of the case solely indicates which activities are required in order for the case to be completed. There is no predetermined sequence or set of activities that needs to be completed; there are no unnecessary steps. This is more formally referred to as a declarative approach. Table 2 compares the process-based approach with the case-based approach. Process-based approach
Linear, clear, discrete processes Procedure-based environments (what needs to be done next) Build the process Bottom-up, inductive User follows the process Syntax-based, IT instrument Prescriptive traditional business process management suite, business rules engine

Case-based approach
Non-linear, fuzzy, case-based processes Knowledge-based environments (why it needs to be done, what it contributes to the goal) Build the guardrails Top-down, deductive The process follows the user Semantic, business in control Declarative innovative business process platform, using ontological metamodels

Table 2: process-based versus case-based

Embrace complexity, Simplify your organization

Once you focus on the case, the old logic of having to fully define a process upfront disappears. The actual process which will be different as each transaction is passing through the process in a (slightly) different way becomes nothing more than a metamodel that states only what has to be done instead of how and in which order. To use a metaphor, instead of defining a road, like a traditional process does, the metamodel only defines the guard rails. This new way of thinking, referred to as dynamic case management by analyst firm Forrester, also requires a different analytical approach. Today, business processes are often defined inductively. This means that after many specific processes have been defined, more generic business rules appear. These new insights can be applied when these predefined processes are revisited. The advantage of this method is that it is easy to understand and to follow; the disadvantage is that it has led to the process spaghetti that many organizations suffer from today. A metamodel approach benefits more from a deductive approach, putting the process metamodel together first. Individual transactions then all use components of this metamodel to effectively create the singleinstance process. This is a sequence of steps derived from the metamodel to process a single transaction. Once the metamodel is approved, billions of different combinations can be made, while the metamodel ensures every single instance is valid. The advantage of the deductive approach is its agility; the disadvantage is that its comprehension requires more conceptual thinking. Putting the case in the middle greatly reduces the complicatedness of business process landscapes. It simplifies the organization and allows organizations to embrace the inevitable complexity presented by their environment.

Embrace complexity, Simplify your organization

Take the test

Administrative processes are becoming increasingly knowledge-intensive. According to Harvard Business Review, this means we have to redefine what constitutes a knowledge worker, both in the public sector and in commercial enterprise: When executives focus on knowledge workers, they lose sight of the fact that even highly routinized jobs require improvisation and the use of judgment in ambiguous situations, especially if the goal is to drive performance to new levels. Many of these improvisations require interactions with one's fellow humans. [] All employees are ultimately knowledge workers. 4 To test how knowledge-intensive your current or required business processes are, choose either the statement in the left or right column of the following table. Not knowledge-intensive
Mass production in administration, clear overview of possible combinations Low ambiguity, clear rules to follow Based on your own stable standards Operational decisions do not need to be communicated Little contextual information is needed the transaction speaks for itself No room to deviate from the rules in the process Transactions are discrete and not connected Transactions have a strict order of steps

Knowledge-intensive
Mass customization in administration, every transaction looks different Requires human judgment, high ambiguity Non-trivial impact of regulatory requirements Operational decisions require explanation to customers Contextual information is unstructured or not always available Easy terms and goodwill-sensitive Transactions and business rules are non-discrete and interconnected Transactions are processed in consultation with the customer

Table 3: Knowledge-intensive processes The more statements you have chosen in the right column of the table, the more knowledge-intensive your business processes are or should be. And the more knowledge-intensive your business processes, the more you need to embrace complexity.

http://blogs.hbr.org/bigshift/2010/04/are-all-employees-knowledge-wo.html

Embrace complexity, Simplify your organization

How Be Informed helps you to embrace complexity

The Be Informed business process platform, based on the principles of dynamic case management, helps organizations to achieve high levels of straight-through processing, dramatically reduce operating costs and optimize customer interaction. At the core of Be Informeds unique approach is ontology, as shown in figure 2.

Figure 2: A Be Informed ontology depicting a subsidy case An ontology is a formal representation of knowledge as a set of concepts within a domain and the relationships between those concepts. The relationships, in the form of pre and postconditions, define the boundaries of a process. They say what needs to be done in order for the transaction to be completed successfully, but without specifying the exact method. For example: If Activity A has a precondition for a certain result as input, then another activity that produces that result needs to be completed first, irrespective of which activity produces that specific result. If Activity A needs to produce a result, this is called a postcondition. Typical postconditions include creation of documents, assessments or data elements for potential next activities. Some activities are geared towards decision-making. This can be in the form of a calculation or classification, for instance. These decisions typically require multiple preconditions, and are communicated through a single postcondition.

Embrace complexity, Simplify your organization

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Off the shelf

Putting together the metamodel the ontology is the most important part of a Be Informed business process platform implementation. If one of Be Informeds standard solutions is used, much of the ontology comes as part of the off-theshelf product. When the ontology is started, the application comes to life instantaneously. Once you change an activity or its pre or postconditions, the changes take effect immediately (or within a specified time frame). The ontology also represents the documentation of the application, providing the big picture of the relationships between the various activities. Lastly, the ontology even drives the interface generated immediately for the user. The most visible element of the ontology for an end-user is Be Informeds goaloriented dynamic activity plan. Figure 3 depicts a drinking-and-driving process for a typical police force. On the left, the dynamic activity plan shows the status before a breath test is conducted, while on the right, the dynamic activity plan shows the status of the case after the breath test has been completed.

Figure 3: drinking and driving

Embrace complexity, Simplify your organization

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The dynamic activity plan is the guard rail of the Be Informed solution that is always active. It depicts the ontology in three intuitive ways: The current activities that you can perform if you wish to. There is no prescribed order for the current activities; users can choose which activity they prefer to perform first, based on their own insights, their discussions with the customer or their own preference. The processed activities are those which have been completed already. However, should new information arise, these activities can be repeated easily, without the necessity of restarting the process. Repeating activities immediately updates the status in the dynamic activity plan, retriggering other processed activities, current activities and future activities. Future activities that cannot yet be processed. The preconditions of these activities state that the information available for them is insufficient, and further information needs to be generated by other activities first. Whether activities should be processed manually, based on human interpretation of facts, or can be processed straight through, depends on design choices or the level of ambiguity of the available information.

What makes Be Informed unique?

The dynamic activity plan makes the Be Informed business process platform goaloriented. This means that the systems suggests only the activities which are necessary for the completion of the transaction. All unnecessary activities are omitted. At the same time, should the user find new information, the process does not need to be restarted. When the new information is processed, the new route to the goal is generated immediately. In short, the following principles are unique to the Be Informed business process platform: Everything is a business rule. In other words, there are no exceptions to the rules all conditions are rules. This approach allows many knowledgeintensive, complex transactions to be handled by a single generic process. Separate the know from the flow. The business rules (the know) are not stored in the business systems and the processes (the flow), but in a repository, so they can be reused. Furthermore, if a business rule changes, the system adapts accordingly. Do not model the process. Be Informed models the activities and their pre and postconditions so that each transaction can have its own unique flow. The system provides guidelines on how to successfully complete transactions. This is the idea on which the Be Informed business process platform is based an idea that has been adopted by many organizations already, both in the public and private sector.

Embrace complexity, Simplify your organization

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About Be Informed
Be Informed is an internationally operating, independent software vendor. The Be Informed business process platform supports administrative processes, which are becoming increasingly knowledge-intensive. Thanks to Be Informeds unique approach to dynamic case management, the next wave after business process management, organizations using Be Informed often report cost savings of tens of percents. Further benefits include a much higher straight-through processing rate leading to vastly improved productivity, and a reduction in time-to-change from months to days. Author: Frank Buytendijk Contributing authors: Jan Willem Ebbinge, Linda Muselaars and Geert Rensen

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