BPM case study: IBM’s Enterprise Transformation

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IBM Corporation – one of the world’s largest technology companies – is pursuing dozens of BPM projects and programs in the context of a broader top-down Enterprise Transformation initiative that’s seeing a large- scale operating model shift and the relocation and re-engineering of tens of thousands of positions across the company worldwide. Dozens of BPM-enabled transformation projects that integrate departments – across sales, marketing, supply chain and support functions and beyond – have been enacted; and often with global scale. The goal of “radical simplification” of processes, defined at the project level, has (at the time of writing) delivered aggregate productivity gains of $1.1bn.

Case study key facts

Organisation IBM Corporation – one of the world’s largest technology companies, with 2012 revenues of over $100 billion. The company has offices in over 170 countries, and employs over 400,000 people.
Industry Technology
Current BPM goals Deliver “radical simplification” of business processes across the company as part of an Enterprise Transformation initiative, with the aim of delivering $8bn worth of productivity gains to shareholders by 2015.
Process scenarios
  • Sequential workflow
  • Straight-through processing
  • Case management
  • Content lifecycle management
  • Collaborative process work
  • Value chain participation
Current approach IBM is pursuing dozens of BPM projects and programs in the context of a broader top-down Enterprise Transformation initiative that’s seeing a large-scale operating model shift and the relocation and re-engineering of tens of thousands of positions across the company worldwide.

A permanent Enterprise Transformation team – bringing together portfolio management, process improvement, IT implementation and organisational change management expertise – oversees all programs and provides expertise and services to individual projects.

Projects and programs progress with the use of five interlocking “foundational methods” for its transformation efforts: Business Architecture, BPM, Business Analytics, Better Change, and Lean Six Sigma. All of these methods build from IBM’s own commercial offerings (with, for example, the Better Change method coming from IBM’s Global Business Services division).

Outcome Dozens of BPM-enabled transformation projects that integrate departments – across sales, marketing, supply chain and support functions and beyond; and often with global scale. The goal of “radical simplification” of processes, defined at the project level, has so far delivered aggregate productivity gains of $1.1bn, and is targeted to deliver a further $2.5bn in the coming years.
BPM tools and suppliers used IBM’s own Business Process Manager, Blueworks Live, Business Monitor, Operational Decision Management and other associated tools.

Company background

IBM was founded in 1911 and is now one of the world’s largest technology companies, with revenues of over $100 billion, over 400,000 employees and offices in over 170 countries. Its main businesses are computer hardware, software and services. It runs 12 major research laboratories around the world. IBM’s staff have been responsible for many inventions that have gone on to shape the world of business and beyond, including the ATM, UPC codes, the relational database, the scanning tunnelling microscope, the punched card and the technology foundation for LASIK eye surgery.

Project background

The genesis of IBM’s transformation journey can be traced back to 2002 when the company’s former CEO, Sam Palmisano, instituted a global ‘jam’ amongst employees to reshape IBM’s corporate values. In parallel with this, Palmisano kicked off a project to reshape the company’s strategy to reflect three observations about the markets in which it operated: firstly, most of the growth opportunities were happening outside of IBM’s core geographic markets; secondly, hardware technology markets in which it was playing (such as the markets for PCs, printers and disk storage) were becoming commoditised; and thirdly, clients were increasingly looking to work with partners who could help them not just obtain technology, but deliver business value from it.

IBM consequently exited several hardware markets, acquired PwC consulting to build its global business services division, and started a large organisational shift towards an operating model it calls the “Globally Integrated Enterprise” – that is, a model of shared, centralised services that are located in the places where it makes most sense to locate them, in contrast to the previous model that saw the centralisation of many functions in the US but much duplication across the 170 or so other countries in which IBM operated.

From this point on, IBM made its plans to transform its business public through five-year ‘road maps’. Among other things the 2015 road map, published in 2011, made a public commitment to generate $8 billion in productivity improvements through enterprise transformation activities.

Since the start of IBM’s transition towards a Globally Integrated Enterprise (GIE) operating model in 2002, a focus on business processes – as a way to both understand how to make productivity improvements, and also as a way to manage the business going forward – has been central to IBM’s approach. In the years since 2010, though, IBM has placed much more explicit emphasis on the use of BPM and BPM technology to drive its ongoing transformation.

Implementation characteristics and status

Borrowing from its Smarter Planet initiative (which is founded on taking advantage of environments that are increasingly instrumented, intelligent and interconnected), internally IBM is now embarking on a ‘smarter transformation’ phase within its Enterprise Transformation program. ‘Smarter transformation’ projects use IBM’s BPM technologies to make IBM’s own business processes instrumented, intelligent and interconnected – and through this, aim to deliver what IBM refers to as ‘radical simplification’ of those processes. Radical simplification, for IBM, is defined as process change that delivers at least a 50% improvement regarding one or more of the following outcomes: radical reductions in elapsed cycle time, costs per transaction, and process handoffs.

As part of its Enterprise Transformation program IBM has addressed dozens of opportunities with BPM technology across 15 end-to-end process areas – including within opportunity-to-order, order-to-cash, financial management and IT management. Each of the 15 process areas has a ‘smarter process’ roadmap as part of achieving IBM’s 2015 objectives. These roadmaps include 163 individual initiatives.

This most recent phase of IBM’s Enterprise Transformation program builds on two previous multi-year phases of work. The first phase, which ran from 2002 to 2005, first revolved around construction of a consensus within IBM regarding transformation goals and priorities through tools such as online ‘jams’.

It then moved to a phase of high-level process architecture work that standardised on one common enterprise process framework, and also involved the initial creation of IBM’s transformation governance and performance measurement disciplines (see Governance below for more detail). The second phase, which ran from 2006 to 2009, focused on the formalisation of the GIE operating model and the creation of a number of shared services centres in various geographic locations. Initial work to integrate and centralise support functions from across IBM, relocating them according to where the right skills could be provided at the right cost, was also carried out.

Initial improvement projects were heavily focused on end-to-end automation of relatively static, standardised processes. But as IBM’s process needs and process technologies have matured it has expanded its implementation approach to include the use of workflow and business rules technologies to drive more flexible and adaptive processes.

IBM’s standard approach to the introduction of new technologies including BPM is to start small, show the value, and once the value has been proven, create standards for usage across the enterprise. This approach has allowed it to build senior management support by not asking for large investments in something that doesn’t have proven value. Initial BPM technology was deployed as early as 2005 and was in wide usage by 2007. Introduction of IBM’s latest BPM technology was proven through a set of initial projects supported by the Innovation team within its CIO organisation in 2010, leading to updated standards in early 2012.

The approach

IBM’s approach to BPM, as hinted at above, is to pursue BPM projects and programs in the context of a broader top-down Enterprise Transformation initiative that’s seeing a large-scale operating model shift and the relocation and re-engineering of tens of thousands of positions across the company worldwide. That said, process thinking is at the heart of IBM’s approach to enterprise transformation.

IBM’s Senior VP of Enterprise Transformation, Linda Sanford, heads a permanent Enterprise Transformation team that oversees all change work and provides expertise and services to individual projects. This team brings together the core CIO team, an organisational change management team, and three process transformation teams (focused on analytics, simplification and social business technologies and approaches). The latter two groups (excluding IT staff in the CIO team) together account for around 100 people. There’s also a small, specialised finance team that works hand-in-hand with IBM’s main finance team to build business cases and shape the transformation project portfolio.

In setting its terms of reference, the Enterprise Transformation team has made it clear that effective transformation within IBM can only come from the company jointly considering and tackling the disciplines of process improvement and management, IT enablement, and organisational change management. In line with this, the team has identified and is educating and promoting around five interlocking “foundational methods” for its transformation efforts: Business Architecture, BPM, Business Analytics, Better Change, and Lean Six Sigma. It’s adding a further foundational method, based around IBM’s Social Business capability, in 2013. All of these methods build from IBM’s own commercial offerings (with, for example, the Better Change method coming from IBM’s Global Business Services division).

Strategy

Given our comments above, it should be no surprise that BPM is seen within IBM as absolutely strategic. Part of the strategic value of BPM is in driving IBM’s internal enterprise transformation and delivering $8 billion of productivity improvements to 2015; but another part of its value is in supporting IBM’s other major strategic initiatives, which aim to drive growth and margin improvement through expanding in growth markets, more integrated solutions and acquisitions.

The pursuit and implementation of BPM projects and programs is driven top-down, and the enterprise transformation team has a mandate to drive behavioural change. One of the ways it does this is through education; since 2010, IBM has specifically identified and reinforced a new key management competency, focused on continuous transformation.

Part of the way that IBM managers are now targeted, measured and developed revolves around their ability to support IBM’s continuous transformation efforts. IBM is also taking the message beyond managers, and explicitly tasking all IBM employees around the world to actually get involved with and support the idea of radical simplification.

IBM measures and reviews the results of its overall enterprise transformation initiative, and the BPM elements of that, every quarter.

Architecture

Architecture – specifically, business architecture – is one of the five “foundational methods” that IBM uses in its Enterprise Transformation initiative. The core of the business architecture work that IBM has done revolves around an Enterprise Process Framework that is in place to create a common taxonomy and reference for all IBM business processes cutting across business units and geographies.

The Enterprise Process Framework identifies and formalises 15 high-level business processes that are common across IBM’s hardware software and services businesses. These processes are grouped into three categories: operating (client-facing), enabling (principally relating to planning and management), and supporting (principally relating to HR, Finance, transformation and technology, support and financing services). The Framework avoids references to vertical functions, and instead focuses on end-to-end business processes. Each of these “level 1” processes is aligned to an identified Senior VP, and has an identified Enterprise Process Owner.

Within IBM’s CIO function, architects are responsible for mapping process transformation projects to technology approaches and tools. The team uses a number of heuristics to guide the recommendations it makes, including:

  • If the process transformation is going to rely on packaged business application software, the business application has to be able to do 80% of what’s required without customisation.
  • Never implement BPM technology for its own sake. Use the technology to coordinate work where an ‘agility layer’ that spans existing applications, systems and organisational teams is required.

The application of these guidelines by architecture professionals is built into the architectural review process that precedes any technology investment. As part of these architecture reviews it also looks at where it can develop software services that can be reused, using SOA principles.

Organisation and people

We’ve already highlighted that organisational change management considerations are at the heart of IBM’s enterprise transformation initiative. In line with this, the “people side of change” is something that is considered right at the start and all the way through each BPM project and program that’s part of the initiative.

At the core of this aspect of IBM’s work is the use of IBM’s own Better Change Method, which was created by the strategy and change practice of IBM’s Global Business Services division. This method guides organisations – including IBM – to formalise a change impact assessment and change management plan for each project, and to conduct stakeholder analysis before formalising a communication approach for the project.

IBM has found that the language that project teams use when discussing process improvements and changes to working practices makes a huge difference to the degree of buy-in that is achieved. For example when working with sales teams to uncover opportunities to improve sales processes, the word ‘process’ may not be used at all. Instead, analysts and other project staff talk about the need to understand how salespeople work, and then talk about how to use technologies to make sales people’s jobs easier and get more sales progressed and closed more quickly.

When it comes to encouraging and enforcing behavioural changes, IBM looks for combined ‘carrot and stick’ approaches. Again taking sales improvement as an example, salespeople’s effectiveness is now measured partly according to how much they use IBM’s new Sales Management system – at the same time, they are only compensated based on sales that can be tracked through that system. If salespeople don’t use the system, they don’t get commission on the sales they make.

When it comes to the delivery of individual BPM projects themselves, IBM’s project teams analyse processes and design improvements by working as far as possible with individuals involved in the processes day-to-day. One of the approaches used here is shadowing, where process analysts spend one or more days sitting alongside individuals to understand exactly how they do their work day-to-day. They conduct sentiment analysis with these individuals to understand the things about their jobs and the systems they use that make them feel good or bad, and to understand key pain points. The data gathered from these exercises is analysed collaboratively with individuals for the business as far as possible, in joint design sessions.

When it comes to process mapping and modeling, historically this work has been carried out by technology specialists. However, with the introduction of easier-to-use tools into the initiative over the past couple of years teams find that it’s easier to include business analysts and non-specialists in modeling exercises.

IBM has established a BPM centre of excellence (CoE) – this forms part of the process transformation teams that report to senior VP of Enterprise Transformation Linda Sanford. Working in parallel to this is an IT group that is responsible for delivering shared technical and hosting services for BPM projects. The BPM CoE, in conjunction with the Architecture Review Councils in the CIO team, enforces policies, standards or designs on individual projects.

IBM’s Enterprise Transformation teams have had to learn new skills as they have developed their approach over the past few years. From a technical point of view the teams have had to learn how best to use IBM’s portfolio of BPM-related tools and platforms and continue this learning as new tools have been added to the mix, But more fundamentally, the current approach to organisational change management that’s integrated with process improvement, analytics, social business and IT capabilities has been something that the initiative’s staff have had to learn from scratch.

A couple of years into the most recent phase of IBM’s enterprise transformation journey, use of specialised BPM and business rules technologies has enabled project teams to offer business people much more operational control over systems solutions than they had previously (for example, giving them the opportunity to make changes to business rules and policies within systems themselves). Interestingly, though, it has found that as implementations are rolled out and business communities educated, business teams have declined that control, preferring to leave most of the control to IT and process change specialists while enjoying the benefits of faster responses to their requirements.

Governance

Given the extraordinary scope and scale of IBM’s enterprise transformation initiative and the number and scale of the BPM projects and programs within that, it’s perhaps no surprise that governance of the initiative and the project within it has long been a major focus for the team.

Governance of the overall initiative is exerted through a companywide Enterprise Transformation Management System that integrates six actors:

  • Linda Sanford, the Senior VP of enterprise transformation and head of an IBM wide “GIE Forum”.
  • A Globally Integrated Enterprise (GIE) Board, which sets IBM’s shared services strategic direction and drives the IBM GIE strategy.
  • An Enterprise Process Transformation Board, which seeks to create a set of agreed-on priorities for optimising end-to-end process performance; provides priority areas for technology investment; and serves as an alignment and coordination point for the overall Enterprise Transformation initiative.
  • A GIE Shared Service Council, which defines direction and oversees progress towards IBM’s shared service strategy and is responsible for driving integration, efficiency and effectiveness across shared services processes.
  • IBM’s CIO, who prioritises total IT budget to build technology capabilities that support the transformation priorities, manages technology risks and maintains end-to-end oversight of all the technology support pieces of the transformation initiative.
  • Enterprise Process Owners, one of whom is identified for each of the level 1 end-to-end processes in IBM’s Enterprise Process Framework.

Importantly, identified Enterprise Process Owners aren’t just in place to provide executive support for investment projects; they have specific responsibilities to help set process strategy and transformation priorities, deliver on commitments to make efficiency savings, support growth initiatives, and manage risks associated with their process. They are also tasked with identifying both upstream and downstream opportunities to improve process results – in other words, Enterprise Process Owners are explicitly motivated to work together to achieve results rather than focusing purely on the area of their direct responsibility.

Each Enterprise Process Owner is responsible for managing a ‘transformation roadmap’ for that process. The transformation roadmap details a portfolio of smarter transformations (i.e. transformations leveraging instrumentation, coordination and decision technologies), together with target business outcomes. Outcomes are expressed in terms of customer experience, employee experience and shareholder value.

When establishing technology and other change investment priorities, IBM uses a portfolio management approach. The enterprise transformation team owns an overall IBM-wide transformation expenditure budget; individual teams then compete for that budget by making their own business cases for improvements. Importantly, the Enterprise Transformation team has a long-standing relationship with IBM’s CFO and finance team. This established relationship is crucial to this process, because the level of trust that exists streamlines the activities required for the CFO to audit business cases that are put forward.

To drive ongoing improvement (‘continuous transformation’, in IBM’s language), the Enterprise Transformation team regularly benchmarks its maturity across level 1 end-to-end business processes, and also at the level of all the level 2 subprocesses. Benchmarks for the level 1 processes are conducted every two years. Maturity is assessed not overall, but in line with an agreed set of attributes, including design, documentation, standardisation, ownership, technology enablement, accountability, and continuous improvement.

Technology and infrastructure

For its Enterprise Transformation work, IBM relies as far as possible on the tools and platforms it sells commercially.

Across the board, the Enterprise Transformation initiative uses IBM’s SaaS-based Blueworks Live tool for process discovery and analysis. Process models are documented in Blueworks Live.

When it comes to implementation of software systems to support end-to-end business processes, IBM typically employs a combination of Business Process Manager (IBM BPM) and Operational Decision Management (ODM). In addition, it uses Business Monitor as an end-to-end activity and performance monitoring tool that can collect performance data across IBM BPM and ODM, as well as SAP and SugarCRM and other off-the-shelf business applications that play key roles in processes.

IBM is a very large user of SAP’s business application software, and in many transformation projects existing SAP functionality can be used without the project team needing to introduce specialised BPM technology. The company is also implementing a customised version of SugarCRM globally, and likewise, for many of the transformations it’s seeking to make in the context of sales and marketing, specialised BPM technology isn’t needed to drive work coordination or measurement.

In addition to using IBM’s core BPM-related tools, the Enterprise Transformation initiative also uses IBM’s Connections social collaboration platform as the underpinning for the company-wide communities of practices it nurtures. One example here is the “next generation transformation” forum across IBM that numbers around 21,000 IBM staff. This is a group of self-selected IBM employees who have an interest in participating actively in transformation projects (and is therefore fertile ground in which to find change champions).

The results

The current “smarter transformation” phase of IBM’s Enterprise Transformation initiative is set to run until at least 2015, and is global in scope and scale. However, the initiative has already seen a significant number of BPM project deliver results, and for the 2015 roadmap, $2.5bn of the overall $8bn in productivity benefits identified are targeted to be delivered through process transformations.

Here are some selected example results from the projects completed in 2011:

  • As part of its Opportunity-to-Order process, a project was delivered to streamline mid-market sales deal registration. Using business rules and workflow automation technologies within IBM BPM and ODM, the project reduced deal registration cycle time and ultimately the sales win rate. Initial process improvements drove a cycle time reduction of 70%; using IBM BPM that reduction was improved to 84%.
  • As part of its Procure-to-Pay process, a project was delivered to improve the instrumentation of IBM’s supply chain. The project has delivered annual savings of over $2m by improving the timeliness of notifications when supply chain disruptions occur.
  • Also within the Opportunity-to-Order area, a project was delivered that reduced the time taken to create cross-brand pricing estimates from 14 days to 1-4 days; deployment of new guidance to new territories now takes days rather than weeks.
  • Within the Manage Sales and Channels process, a project was delivered that enables managers within Growth Market territories to themselves update rules that assign location codes to activities. Although this work was focused on what might seem to be a simple administrative support procedure, the procedure was a bottleneck in wider work involved in setting up new sales operations in growth markets; the cycle time was reduced from several weeks to one week across 50 countries.

Recommendations for BPM adopters

In carrying out this case study, we asked Susan Watson, IBM’s VP of Enterprise Process Simplification and a member of Linda Sanford’s team, to share any recommendations she would offer to other organisations embarking on transformations of similar scope and scale. Many points were shared, but the following two points were highlighted as particularly crucial:

  • Don’t try and make everyone a process expert. Rather than trying to teach all staff to think and communicate using the language of business processes, modify your language so that you’re able to communicate change and its impact in terms that people intuitively understand in the context of their own roles and responsibilities.
  • Make sure you deal with organisational change management as a priority right from the start of your initiative. IBM is naturally an organisation that leans towards engineering and science; initial efforts to drive change focused on modeling and analysis over the softer side of change management. Teams were too quick to declare victory on process projects once systems were deployed, and the hoped-for gains were difficult to realise.

Best practice insights

Through the ongoing implementation of its BPM work program as part of its global Enterprise Transformation initiative, IBM has demonstrated a number of best practice insights that you should think about in the context of your own implementation.

Firstly, when setting out to start up an initiative on an enterprise-wide scale, strong sponsorship of the initiative from the very top of your organisation is not optional. What’s more, though, that sponsorship has to be unwavering and unequivocal. A public commitment to a very specific, measurable objective – in IBM’s case it’s to return $8bn in productivity improvements by 2015 – is a very good way to “hold everyone’s feet to the fire”. In the context of a public commitment like this, there can be no doubt in anyone’s mind that the most senior leadership tier within IBM is absolutely behind this initiative.

Secondly, when managing a program like this, it’s crucial to set up structures that have clear responsibility and authority to help identify, sign off, prioritise, co-ordinate and measure many dozens of projects using a transparent and consistent set of policies and procedures. In IBM’s case its governance framework brings together specialist teams responsible for portfolio management with subject-matter expertise groups focused on process improvement, technology implementation and organisational change management. This approach is vital to creating and sustaining an integrated, inclusive approach to process improvement that avoids organisational or skill-based silos.

Thirdly, work to create a clear, simple target for the kind of improvement you want that aligns with your top-level strategy and objectives. This simple target should, as far as possible, be applicable universally as a measurement test and as a motivator to project teams. In IBM’s case it has created and communicated the concept of “radical simplification” – defined as process change that delivers at least a 50% improvement regarding one or more of the following outcomes: elapsed cycle time, costs per transaction, and process handoffs.

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