It’ll be interesting to see what the BPM vendors report in for Q3.  Its clearly a challenging sales environment in general, right now, but we’ve been hearing from a couple of folks in the business that sales have been brisk in Q3 and into Q4.  Since I don’t have access to raw #’s, I don’t know if “brisk” is relative to lowered expectations, or whether its relative to possibly more optimistic plans made at the beginning of the year.

Sandy captured some notes from the Lombardi conference call here, and Dennis captured additional notes here.  They both do a good job capturing the gist of the call -maybe we’ll get invited one of these days :)

One thing Dennis points out from the call is fewer pilots, just diving in and doing it.  This makes sense in a rough economy, as the pilot process is expensive.  A long selection process is expensive.  If you can get the right product and skip some of the expense of a pilot, so much the better.  I’ve heard similar points made by other folks in the business lately.

Sandy points out that while she believes BPM is well positioned in a tough market, that she thinks the real spending will be on projects with customers who have already swallowed the capex to buy software.  We’ve definitely observed this phenomenon in the market - expanding on old solutions, building new ones on existing infrastructure.  Its good to be a BPM consultant in this environment, and really see the yield that customers can get on this process improvement investment.

I’m looking forward to seeing if some of the other vendors in the space will do these calls as well, and see if the trend of good news is across the market or localized with just a couple of the vendors.  I think the big news was continued growth of license revenue, and the fact that they are profitable for 2008.  Given the funding environment right now, it seems like A Very Good Thing to be profitable.

Ok, back to work on processes now…

Kevin Stollznow wrote a good article on process modeling. He makes a couple of key points that I would agree with, slightly rephrased…

• There is no right or wrong way to model a process.  I would say rather, just that “right or wrong” isn’t the primary question.  The primary question is whether the process is effective.  This is essentially the point Kevin makes, but I would posit that it is actually possible to have a “wrong” process model :)
• He takes a casual swipe at BPMN as a modeling and the idea that commenting on modeling a process must necessarily include a diatribe about the “right” way to use BPMN to do it, or cover some minutiae of the specification.  If you’re an avid reader of BPM blogs like I am, this especially hits home with recent discussions about BPMN compliance and roundtripping with BPEL and whether models should even be executable! :)
• He cites Occam’s Razor (though, I think it actually hypothesizes that the simplest explanation is also the most likely explanation). The point is, simplicity is generally preferred over complexity, when both represent the problem adequately.
• Kevin makes a good point about focusing on the audience or intended use of the model (a model for training purposes may be quite different than the executable model of the same process).

One thing I really like about the article is that Kevin correctly points out that even modeling a process is, itself, a process.  And it is a process that we can improve upon over time…

A friend and colleague at Lombardi, Kalvin Stollznow wrote a post at Lombardi’s blog on Monday articulating the need to view the business and associated wastes and defects through the lens of a “process prism”. I certainly agree with Kalvin on this point. Especially where it concerns the insurance business, for at BP3 we have had a lot of experience in this area.

Kalvin discussed the power of Lean Six Sigma as a method to deal with the very thing that causes great angst in companies and that is the waste (aka Muda) and defects mentioned above. He moves on to bring light to the fact that these particular approaches may have been born from the world of manufacturing but absolutely are applicable and more importantly effective in transactional or service based businesses. This is a fact, and expanded or integrated into a company who views business process management as a true discipline then you have a truly remarkable organization who can retain and grow customers as if they were born to do it.  However, it does require “translating” some of the standard Lean Six examples out of the manufacturing world and understanding their analogs in the transactional and services world.

I will take what Kalvin was alluding to in his post and give an example from a financial services perspective of the things we do everyday that create waste and defects in our processes - and the key here is to be able to identify these things so that they can be managed. Let’s do this from ”The 7 Deadly Wastes” from Lean Six Sigma to examine this closer, in no particular order (although ‘Overproduction’ is considered the worst waste in Lean). I will go ahead and make it 8 and add rework as I believe it is very insidious but not officially declared in the initial 7 wastes-

1. Rework: Anytime you see a loop in a process, that is probably rework. Think of touching the same thing over and over again. For example, an invoice is sent to a member or group customer and the bill is wrong. Requests are made to change coverages, drop dependents, etc. The clock starts ticking for that request to be fulfilled. If the request cannot be fulfilled in time, the next bill will generate and it will be wrong again. rinse. repeat.  Customer satisfaction declines, and administrative costs go up.

2. Defects: An enrollment form with missing information or incorrect information; a bad requirement for that new claims handling system; a bad or “dirty” invoice from the rework example above, forms or applications with unclear instructions or usability. Defects are pretty easy to understand although I have heard businesses tell me “we don’t have defects, we have exceptions”. Whatever you want to call it is ok by me, but exceptions and defects both cost the business money.

3. Inventory: A backlog of policy change requests, a queue of contracts, or claims unprocessed, callers on hold, piles of forms and the like. Financial Services companies have a ton of “inventory”, just not in the way people normally think of it.  But it can have the same negative effects: clogging a process and creating or exposing bottlenecks in a hurry.

4. Waiting: Waiting for an approval on a claim, an expense reimbursement, an underwriting decision, 1/24 hour batching of data. Waiting promotes the clogging of processes, can create defects and cause rework.  When expensive specialists are waiting for a response or for work to hit their queue, the company is letting money walk out the door.

5. Processing: Or Overprocessing more specifically, such as an inordinate amount of approval steps to pay a claim or making sure a document is imaged and re-imaged over and over again. Basically doing more work than is absolutely necessary to delight the customer.

6. Motion: Constantly switching between screens and applications to get the policy change made, having to go out and find an archived image/document in the DMS or on a network share, keystrokes and clumsy navigation of systems. Running over to the printer constantly to get those TPS reports (couldn’t resist the last example, Office Space fans).

7. Transportation: Similar to rework and examples could be having to get physical signatures from across the campus, delivering and picking up paperwork from all over the place, delivering reports, etc.

8. Overproduction: Lean considers this the worst waste because it can often be the root cause of many other wastes listed and if you think about it we see this all the time. 100 reports when really 3-5 would do the trick, constant emailing, a requirements specification 300+ pages deep for a small to medium software project, print-outs of everything going to everyone, flooding queues with tasks just spit out from that batch processing which in turn causes the backlog to grow or at a minimum not shrink.

It all comes down to delivering goods and services to customers how they want it, when they want it, and at a price they want to pay. If any company, not just financial services, are not managing their business via a process view then it will be those companies who will not keep customers. Applying Lean Six can identify the causes of waste and defects, and then can help remedy the waste/defects with prescriptive solutions (perhaps more on the prescriptive side in a future post!). This comes down to pure physics and physics cannot be wished away. Manage the processes or they will manage you as the saying goes.

Like everyone else, I’m reading a lot of press about the economy, and most of it is negative. But in our little bubble of BPM, things are cooking along pretty well. Sure there are ups and downs but the trend-lines are up.

As if to underscore that, we’re starting to see the 1H2008 press releases from BPMS vendors. Lombardi’s is here (not to mention that it was well-covered by Bruce Silver’s blog, Sandy’s Blog, and the BPM in Action blog) and Savvion just released theirs here (if other vendors posted similar announcements I haven’t seen them yet). We’ve also seen some interesting investment news from Appian (a $10M investment round). Lombardi points to some impressive growth, especially regarding the license bookings (85% growth year over year). All indications are that the number could actually accelerate next year since they have seeded a much larger user base with Blueprint (their SaaS process mapping tool)- users that are likely to have positive impressions of the software and that may translate into more buys for the execution software (Teamworks).

Savvion also points out some nice gains- most profitable quarter yet (operating profit). However, in comparison to the Lombardi release it lacks a lot of detail. We don’t know how much profit grew year over year or by how much it exceeds previous profit numbers. And we don’t know how they’re doing on key metrics that might point the path toward growth (license growth, maintenance revenue renewals, consulting $, etc.). Not that either of these companies are required to disclose numbers, as they’re private firms, but the amount of disclosure from Lombardi is clearly greater so far. That speaks volumes about their confidence vis-a-vis the other pure-play vendors which are not putting out the same level of detail. And it puts pressure on the other guys to start putting up the same details. Hopefully with the Metastorm IPO filing, we’ll start getting at least two sets of more complete numbers to look at for trends.

Regardless of the shakeout in BPMS vendors, we believe the BPM segment is growing - the need for Process-oriented services is growing.  And we’re well-equipped to help customers with process-oriented solutions.  However, as an independent consulting firm, we keep our eyes open for this kind of trending data because we want to be playing good defense - we want to be where the ball is likely to go. That’s where the work will be, and that’s where we’ll make our investments. As a consultancy, we’d like to see all of these vendors grow at the kind of rates Lombardi is growing at, but we don’t have the numbers yet to know if Lombardi is typical, or the standout.  I think we have the most experienced Lombardi BPMS implementation team on the planet right now, but that’s another subject, and another post!

Overview and What’s New

We had a chance to see Lombardi’s latest Blueprint release at Driven last week.  We’ve used Blueprint before in earlier versions, but after revisiting it this time around, there are definite, significant improvements.  I thought we’d share our early experiences with Blueprint here, and specifically our reaction to some of the new features added.  What’s new? Visio import and a good export/import into Teamworks are big pluses. Word export is another new feature, and of course PowerPoint generation has been there from virtually Day 1.  Archiving and a revamped project screen were also introduced.

The New Stuff

Visio importing has long been the “holy grail” for process modeling tools.  If I had a dollar for every time someone asked me if a particular BPM product could import Visio models directly I would be rich!  However, Visio import into a process execution environment isn’t always all its cracked up to be.  Visio diagrams tend to be quite unstructured, whereas BPMN is very structured, and executable BPMN is even more structured in form.  Moreover, Visio models don’t have enough information attached to them to be immediately executable.  It is possible to run into issues of “who owns this model” once you import the Visio (the business may have the expectation that they can keep making modifications and “reimport” into Teamworks, for example).  At some point, the implementors must take over the model and own it to produce something executable.  I’ve been working on some models for OMG certification and I thought they would be a fun (albeit simple) set of examples to import into Blueprint for a test drive.  Blueprint imports these easily and accurately.  I went back to the archives and tried importing some really awful process diagrams circa 2004.  The results weren’t pretty (the original wasn’t pretty), but Blueprint imported the models nicely (a visio diagram with 10 tabs and one process per tab).  Going to the Diagram View I was able to sort out the diagram into swimlanes and go from there.  Interestingly, when I imported a diagram WITH swimlanes defined, Blueprint created those swimlanes and participants for me.

Word export works great, but didn’t work so well on my Mac.  On Windows it produces a professional document that is a good appendix or a good starting point for the doc.  It also eliminates the need to maintain two separate documentation formats - you can use Blueprint as your source and export when you need a Word doc snapshot.  Moreover, you can “snapshot” the process in Blueprint as well, so that if you need to reproduce the Word export later, you can…

The diagramming is much improved, from process mapping to actual BPMN
diagramming.  The new clickable controls are more intuitive (though I had to unlearn some previous notions because I’ve been using Blueprint since the early Betas).  As before, quick double-click on any item takes you to a pretty robust editing interface for adding participants, owners, experts, inputs, outputs, problems, documentation…  Its the Process Diagram (BPMN) view that has really changed over time.  Clicking on any line allows adding a new activity, gateway, subprocess or event.  Blueprint successfully removes the need to obsess over placement of each item in the diagram. It tends to organize things in neat right-angles, taking care of horizontal and vertical placement within a lane (you pick the lane though). 

Project Details Page - This page is so different as to feel like a new page.  You can export powerpoint, word, excel process data, and BPDM all from a simple project page.  From this page you can also move a process to a different project, archive it, or copy it.  The value of these things is more obvious after you import ten processes from Visio!

The Tried and True

The PowerPoint generation is a nice whiz bang feature (only available in the paid-for version).  It lays out the first section nicely: goals, followed by process mapping, followed by opportunities. I’d like to see it turn out a process-diagram view as well, but that may be a little tricky to squeeze into a small space.  The appendix is aptly named for its content, which is a blow-by-blow layout of participants, inputs, outputs, and problems with each step of the process.  I found the color scheme in this section a little jarring compared to the relatively slick look of the rest of the powerpoint.  All-in-all, its a great timesaver.  It ran so fast for me that I thought it hadn’t actually done anything the first time I ran it, ad I can pull together a reasonably professional presentation out of it using the generated slides as a starting point, and putting my own slides referencing ROI or Business Case up front, along with some concluding slides about the opportunities presented and how to tackle them.

BPMN Diagramming.  I actually like the diagramming portion better than
Teamworks!  And collaborating on the same process isn’t just possible,
its actually cool.  You almost look for an excuse to try to be logged
into the same process at the same time so you can try to step on each
other.  Blueprint handles all the conflicting edits really well.  I’m
impressed!  And I understand a good deal of the diagramming techniques
in Blueprint may be adapted for Teamworks in Teamworks 7, which is an
exciting development for Business Process implementors. 

The handling of Revision History is a clear advantage over Visio or any other tool I’ve worked with.  As far as I can tell, every change I make is tracked as a revision, such that I can recover lost work if I accidentally delete something important by restoring from those automated snapshots.  But I can also create my own Snapshot and name it, a point in time to be easily remembered going forward.  This takes the risk out of collaborative authoring, and out of revisions in general, because you don’t have to be worried about version history.  Cycling between versions is simple and fast, so finding the right one isn’t too stressful.

Room for Improvement?

The product has a clean interface and a good look overall.  But there are a few parts I’m not too excited about (yet) that mostly have to do with teeing up projects.  First, when prioritizing problems, you can select severity (low medium high) and frequency (low medium high) but you don’t have the ability to track how observable the problem is.  A problem that is very difficult to detect is much more serious than a problem that is easy to detect, and implies a different type of solution approach.  It might seem too complicated for some, but no reason you can’t ignore the third column by leaving it always at “low” if the notion of detection/observing is too complicated.

Second, the overall analysis screen leaves something to be desired.  It wasn’t immediately obvious to me that the impact scores I was looking at were the impacts of solving one problem across the set of higher level business goals I had established.  Once that was clear, I found myself wondering how these impact scores were derived.  To the layman it doesn’t appear that there is any structural relationship between a timing problem and my goals, but if I give them both high weight then the impact score will be higher against that goal…. So it isn’t immediately clear to me if the idea is to look at this page and then revisit your scores, or if it is really supposed to guide me in determining which parts of the process to look at.  But as long as the correlation is a black box, I don’t trust it.

Third, a process as we know has multiple dimensions to it; it’s not just the activities and relationships. Blueprint would benefit from adding Lean Flow data elements like WIP, Cycle Time, Throughput Time, Takt Time, Lead Time, and Number of Operators to each activity and to the process as a whole and have these values actually calculated, not just string values (perhaps an advanced user view or analysis view). Blueprint would then be much more effective in prioritizing and triaging process improvement, i.e. It would close the loop on the qualitative aspects (Severity, Frequency, and the missing Detection) and now provide quantitative elements as well such as time and volume. Again, this would really address the need to represent the many dimensions of business processes.

But for the primary purpose of capturing process maps and diagrams and capturing living documentation about those processes, Blueprint looks like a great tool.  Its come a long way in one year, and I look forward to seeing what else is coming down the pipeline. The progress so far is encouraging for what is to come.

We’re one week away from Lombardi’s Driven 2008. We’re looking forward to it for more than one reason this year. Of course we’re excited to see what Lombardi has cooking in the R&D labs, and we’re looking forward to reconnecting with old friends from Lombardi and our customer base, but we’re also looking forward to having our own team together in one place for the first time, so that we can all talk and look each other in the eye for a change!

One of the challenges of a professional services company is the distributed nature of the work. Even if everyone lives in one place, we’re likely to travel a lot. And if we live in different places, its even harder to stay connected. When I was building out the professional services technical team at Lombardi, we decided early on that we needed to hire people where our customers lived, rather than hiring them all in Austin. There is real value in being closer to customers, but also in being able to access a more diverse talent pool. I believe in this strategy of following the customer, and it served us well when I was at Lombardi, at a time when everyone else was just focused on lowest-cost-resource.

One thing we realized is that if you’re spending serious money on a BPM project, and you’re going to change core business processes, saving a few dollars by going with the cheapest available talent halfway around the world was not worth the risk of having a major project blow up. Spending the extra $ on the right kind of talent and experience is well worth it to reduce risk of failure, and likely to increase the overall ROI of the project… Its that old penny-wise pound-foolish saying, I think… At BP3, we’ve continued along those lines.  We’re going to build a team of really great practitioners and focus on quality over quantity, on depth over breadth, and we think the fruits of that strategy will bear over time.

Lance Gibbs, Flournoy Henry, and I are going to be attending Lombardi’s Driven 2008. This was a great event every time we’ve been to it (prior to Driven 2006 it was under a different name). Its a rare event in that it really is driven by customer-presenters, and the discussion is typically fast and content-rich.

At the last Driven, we had an early look at Blueprint, a game-changing product for collaborative process mapping. We had a vigorous debate about whether SOA or BPM were (or should be) in the driver’s seat for business process transformation. There was another session on applying Six-Sigma to BPM projects. And of course there were customer keynote speakers, and a great customer panel Q&A. It was a really energizing experience.

Of course there’s usually good food too ;)

This year there are three tracks- Implementation (technical/tactical), Project Leadership (managers/leaders of BPM initiatives), and Business Champions (for executive sponsors). If you’re working with us and you’re wondering about Driven, or whether it makes sense to attend, talk to us. I think we can help you understand what you’re likely to get out of it, and how it might energize your efforts.

You can find the Lombardi Driven website here: Lombardi Driven 2008 .

You’ll find us at Driven too. June 17 and 18. See you there,

Scott