Sunday, November 8, 2009

Understanding business process flexibility

Flexibility in the context of business processes can be defined as ability of an organization to effect changes in the process components (activities, inputs, resources, information etc.) in a timely manner usually in response to changes in business environment and stakeholders’ needs.

The term business process flexibility is used generally both with respect to products and processes as well. However for academic interest, they can be seen from different perspectives. Product flexibility is the ability of the organization to produce multiple products with minimum wastage and the term generally is used with respect to manufacturing process. Business process flexibility enables an organization to be more innovative and responsive to customers. Product flexibility results basically from the availability of production equipment and its layout, which enables multiple and customised products on the same production lines with minimum overheads due to changeovers. Business process flexibility results from ability to incorporate changes in policies and procedures quickly and proactively in response to or in anticipation of changes in external environment.

An important point to note is that process flexibility entails trade-off in the operational efficiency of an organization – typically between cost and customisation. Even in a simple manufacturing process, through which an organization plans to produce customised products, the trade-off involved is overheads incurred in shifting between assembly lines or other equipment. Similar effect can be seen for business processes delivering highly customised services, which may incur expenses in employing people with diversified expertise.

Business process flexibility results in capability to produce customised and / or multiple products and solutions when the demand is uncertain. In the design of business processes, the level of flexibility required is an important parameter, considering the trade-off with operational efficiency, the aim generally is to achieve competitive levels of cost efficiency and flexibility to meet the uncertain demand or changing business needs with high degree of likelihood. This is a balancing act between flexibility and cost performance. The situation can be best represented by the following diagram:



Organizations producing low variety but high volumes of products and services are very cost effective. Process flexibility required is very low. But if undue flexibility is built in such processes, it results in imbalance between required flexibility and costs, and results in higher overheads – in a typical manufacturing process, the overheads are due to changeovers between production lines (top left quadrant). Organizations producing wide variety of products and solutions must be very flexible as they produce customised products in very low volumes – each product is unique to a specific customer. If attempt is made to make them more cost effective at the expense of flexibility, then the organization may incur huge opportunity costs (bottom right quadrant).

More importantly flexibility of business processes in any organization is a function of its organizational structure. Organizational structure, though is an ingredient of process environment in any process centric organization, represents the component which has huge inertia to change. For business processes to be flexible, the accompanying organizational structure needs to be more informal in nature. Such informal relationships are characterised by leadership, knowledge and trust rather than control, rules and supervision. Informal structure enables seamless changes in the process, roles and responsibilities to cater to the business and customer needs, and thus achieving high levels of responsiveness towards customers.

Flexibility combined with agility enables a company to change its processes proactively to changes in environment. Flexibility and agility, when combined with an organizational culture of learning and continuous improvement, results in developing organizational ability to change inherently – in other words the attitude of effecting positive changes in the business processes is deeply ingrained in the people carrying out the process through systematic evaluation of external environment.

How does one achieve desired levels of business process flexibility? Adaptive business process automation tools like business rules engines, and various BPM solutions aim to provide the answer, but the key to business process flexibility is the people competencies – not chain of command, policies based on customer needs – not on historically important issues and procedures delivering customer results – not internally focused departmental goals.

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