Business Process Modelling in Industry – the Powerful Tool in
Enterprise Management

Brane KALPIC*, Peter BERNUS**

* ETI Jt. St. Comp., Obrezija 5, 1411 Izlake, Slovenia,

** Griffith University, School of CIT, Nathan, QLD, Australia,

Abstract

The article presents some findings and experience about the power of Enterprise Modelling as experienced in the implementation of an industrial project to improve the process of new product development in ETI. The project had two goals: 1) to reengineer the product development process and its management (in terms of its functional, decisional and organisational aspects) and 2) to design a reference model of the development process and its management which model can be re-used in subsequent development projects.

The article emphasises the importance of process modelling as a tool that allows the capturing, externalisation, formalisation and structuring of knowledge about enterprise processes. Furthermore, business process modelling is demonstrated to be a powerful tool and approach to Knowledge Management.

We also explain how reference models of business processes can be helpful in project- or process design, process reengineering, management and execution.

Finally we present findings acquired in the reengineering of the process of new product development that included an AS-IS model for analysis and the definition of a TO-BE model.

1. Introduction

Globalisation as the process of creating of a common, world-wide and free market no doubt represents one of the key features of the external environment of our business systems today. Globalisation as the result of the rapid development of information and communication technologies (fast access to accurate and reliable data), transport systems and consideration of common standards (which provide the world-wide comparability and compatibility of the products) Westkamper 1997 also allows the fusion of local and national markets into a global one and is one reason for mergers of previous competitors.

Unpredictability and changeability in the internal and the external environment, is experienced by enterprises as turbulenceWarnecke 1993, and requires responsiveness and flexibility in the organisation and in the execution of processes as well.

Customer orientation and time needed to turn an idea into a final product are increasingly important elements of competitiveness. Quality, technically sophistication and price competitiveness of a product is not sufficient today on the market. The product must be able to fulfil the individual customer demands as reflected in the increasing individualisation of the production.

A product represents today just a material base for the connection of an enterprise with customers. Therefore enterprises are directed into the integration of all aspects of business activity from customers and suppliers covering all phases in the product life-cycle.

Information and knowledge are becoming strategic resources in addition to traditional ones, such as raw material, energy and food, which used to be basis of progress of national economies for decades Warnecke 1993. Therefore information and communication technologies can be considered today as strategic technologies, and knowledge is considered as the key capital of enterprises.

This in turn is the motivation for the development of so-called Knowledge Management (KM) and its supporting tools, called Knowledge Management Systems (KMS). One aspect of KM is the objective to transform implicit and tacit knowledge into an explicit formal representation, and to distribute it throughout the organisation (availability and re-usability of the enterprise knowledge).

The rapid changes and development in the area of technologies, techniques and new materials (world-wide consideration of common standards, deep integration of customers and suppliers in the product life-cycle, virtual enterprises and project management, concurrent engineering, modern information systems and software, approaches in the product design, GroupWare tools, etc.) have provided rapid reduction of development time and rising of complexity and functionality even in most demanding products. For example, car manufacturers needed 7 to 10 years to develop a new car generation 15 years ago, compared with 3 year development cycle today.

Because of the extreme competitiveness on the global market mastering of the process of new product development becomes one of the key elements of competitiveness and success of an enterprise; product development is also becoming a major contributor to the new added value of the product.

Therefore enterprises invest every day more and more into continuous improvement of the development process itself and into the provision of adequate support (information, methodological, organisational) for its execution.

The above relations, events and demands of the business environment were the motivation for our company (ETI) to set-up a project intended to improve and support the process of new product development with the following objectives:

  • Re-engineering of the development process and the definition of its transparent decisional structure and corresponding organisation (definition of key decisions in the process and the appropriate allocation of authorities and responsibilities to decision makers);
  • Design of a reference model of the process of new product development as a support for planning, scheduling, management and in execution of development projects.

In the first part of the article we give an introduction to the project background and objectives. Then we present the role of Enterprise Models in the formalisation of enterprise knowledge. Therefore we present Business Process Modelling (and in general Enterprise Modelling) as an important contribution and approach to the process of Knowledge Management. Business Process Modelling (BPM) provides mechanisms for knowledge capturing, externalisation, formalisation, structuring and re-use.

Section four presents some findings and conclusions acquired in the re-engineering of the development process from the analysis phase (AS-IS model) to the design phase producing a TO-BE model.

In the last section we emphasise the role of a reference model for the development process. We also expose the important difference between a project management reference model and an engineering process reference model for new product development.

2. Why renew the process of new product development

Managers are often faced with different questions concerned the new product development as for instance:

  • How to reduce the time needed to turn an idea into a final product, and
  • Why are our competitors always quicker to integrate new technical solutions into products and be first to market?

The fact of which managers are often not conscious is that a competitive product is the result and reflection of the state of development (often referred to as 'maturity') of an enterprise and not just a simple result of the efforts and knowledge of some individuals in the development department.

We believe that high quality, technically sophisticated products, directed to fulfil customer demands, can only be created in an enterprise which is harmonically developed across all business functions (on the field of IT and IS, management, leadership, organisation, staffing, continuous improvement and development of professional competencies of employees,...).

In our company we are faced daily with the presented issues. Therefore in the start of the 1999 we launched a project intended to improve the engineering process and the management of new product development projects in our company. The project should help find answers to some important questions:

  • How to design business processes to be better, faster, efficient and more transparent?
  • How to provide reliable answers about the cost of the project in its planning phase?
  • How to provide better planning of project resources and scheduling of activities?
  • How to allocate authorities and responsibilities to decisions in the development process and empower people to be able to successfully execute tasks while at the same time providing enough control and transparency?

In our case the first task of the project was to create an AS-IS model of new product development process to the level of granularity that allowed us to identify and solve problems with the present engineering process as well as its management (including decisional tasks and the allocation of responsibilities).

The renewed and improved process model can be considered at the same time as a process reference model (i.e., the definition of activities which must be carried out in the development process) and is an important contribution to quality, reliability and efficiency of the planning of a product development project as also to its performance, management and control.

3. Enterprise Modelling and Knowledge Management

Knowledge represents the key capital of enterprises contributing to enterprise competitiveness and providing long term growth, development and existence.

Therefore one of the major questions is how to make more efficient use of knowledge in the enterprise. It is well known fact that much of existing information and knowledge, which is extremely valuable, is not made explicit, externalised and formalised and is consequently not available for use by other individuals or sometimes can even be lost for the enterprise. Therefore how can informal enterprise knowledge be captured, formalised, organised, spread and reused?

Knowledge management, as a part of an answer to the previous question, does not represent something new. We have seen several previous approaches to help people capture and share their knowledge, experience and expertise. Why is then that knowledge management (besides business process reengineering) became one of the hottest topics today? We believe that the development of Intranet GroupWare has really brought for the first time in history the technical solution which provides infrastructure for sharing of enterprise intellectual capital. Namely Intranet GroupWare integrates simple and efficient services for knowledge management (KM).

Therefore the key objective and purpose of KMS is:

  • Externalisation of knowledge of individuals and consequently its spreading, sharing and reuse;
  • Providing access to the desired information and knowledge to support innovation, responsiveness, productivity and competency of all employees, and consequently leveraging the enterprise’s intellectual capital Harreld 1998.

3.1. What is knowledge?

In literature several different definitions of knowledge can be found. According to one of definitions knowledge can be defined as the meaningful structured accumulation of information Nonaka and Takeuchi 1995.

The Knowledge Management literature Zack and Serino 1998 divides knowledge into two groups: explicit knowledge and tacit knowledge.

Explicit knowledge is knowledge that has been formally articulated and written down. Therefore such knowledge can be shared and spread.

Tacit knowledge is developed and derives from the practical environment (therefore it can be also called the knowledge from the practice). Such knowledge is highly pragmatic and specific to situations in which it developed. Tacit knowledge is subconscious, it is understood and used but at the same time difficult to formalise (albeit not always impossible to externalise). Tacit knowledge is, for example, suitable for exchange through direct conversation, telling of stories and experiences.

3.2. The knowledge life-cycle model

Figure 1. introduces a simple model of knowledge life-cycle. This model also represents some relations between different types of knowledge.

In order for employees to be able to execute business or decisional processes they must possess some ‘working knowledge’ (e.g. about process functionality, required process inputs and delivered outputs, organisation, management, etc.). Working knowledge is constantly developed and updated through receiving information from the internal environment (i.e. through the execution of business and decisional processes) and from the external environment.

Therefore capturing of working knowledge of employees (the knowledge which we would like to spread and share through the organisation) represents the main objective of Knowledge Management.

Working knowledge has usually (form the perspective of knowledge holder) the characteristics of tacit knowledge. Namely the knowledge holders don’t see and use the possessing knowledge as explicit, formal and structured information. They simply understand and know what they are doing and how they have to carry out required tasks.

According to knowledge suitability for formalisation and structuring working knowledge can be virtually divided into two groups – into formalisable and not formalisable knowledge.

Such division of knowledge into two broad categories seems to be closely corresponding to how much the process can be structured, i.e. to be decomposed into a small set of interrelated processes. This characteristics of formalisable and not formalisable knowledge can be simply observed on the example of knowledge about different typical business processes.

The formalisation and structural description (knowledge capturing) of innovative and creative processes, such as management, engineering and design processes (or in general the group of ad-hoc processes), is a difficult task; consequently the knowledge about this type of processes is considered the not formalisable part.

In contrast to the characteristics of the group of ad-hoc processes the group of ill-structured and structured (repetitive or algorithmic) processes can be formalised and structured at least to a degree; consequently the knowledge about this processes is considered the formalisable part.

Figure 1: The knowledge life-cycle model

The formalisable part of knowledge is extremely important and valuable for knowledge management, because this may be distributed and thus shared with relative ease. Namely the process of transformation of the formalisable part of working – tacit knowledge into the formal knowledge (which could be also called the explicit knowledge) represents one of the crucial processes in knowledge management. We believe that the effectiveness of knowledge management (measured by the level of reuse and return of investment to the enterprise) of explicit knowledge is higher than in case of tacit (also called implicit) knowledge, simply because the sharing of the latter is a slow and expensive process.

To be able to perform the aforementioned formalisation process we need additional knowledge known as culturally shared or situation knowledge (e.g. about mechanical engineering, accounting, process engineering, etc.). Culturally shared knowledge plays essential role in the understanding of the process or entity in question and in its formalisation and structuring. The definition of an accounting process can only be done by an individual who understands accounting itself, but this formalisation will be interpreted by other individuals who must have an assumed prior culturally shared and situational knowledge that is not part of the formal representation.

As we already mentioned the key objective of Knowledge Management represents the externalisation of knowledge. Regarding the type of knowledge (tacit and explicit) different tools and approaches in knowledge capturing can be found, as for instance:

  • Tacit and not formalisable knowledge can be captured and presented in form of informal external presentations (e.g. in a form of different multimedia records), and
  • Tacit and formalisable knowledge can be captured and presented in formal external presentations. A formal external presentation may be in unstructured form or in structured form. A textual description, like in quality procedure documents (ISO9000), can be considered as an example of presentation of process knowledge in unstructured form while different enterprise models (e.g. functional business process models) are an example of structured form of knowledge.

A structured approach to process description is an important aspect of the quality of captured and formalised knowledge (see the section 4.2.1. - definition of advantages of structured – models instead of textual descriptions of processes and entities).

However, to actually perform this formalisation of knowledge (e.g. business process modelling) formalisation (i.e. business process modelling) skills are needed.

Available – externalised knowledge can be now shared, spread and reused. As opposite to the above presented process of knowledge externalisation the process of knowledge internalisation is necessary for the reuse of available knowledge.

According to the type and form of externalised knowledge different internalisation processes (and corresponding skills) are necessary as for instance:

  • The informal external presentation of knowledge accompanied with its interpretation (e.g. interpretation of the presented story) can directly build our working (tacit) knowledge;
  • Structured formal external presentation, for instance a business process model developed in the IDEF0 modelling language, must be first interpreted. To interpret the content of information captured in a formal model, formal model interpretation skills are needed. Such formal knowledge must be further interpreted by reference to culturally shared, prior assumed knowledge so that the content of the formal knowledge (information captured in the business process model) can be understood (interpreted in the intended way) and thus integrated in our working knowledge (to improve our competencies).

The reuse of formal externalised knowledge could have an impact on execution of process (in terms of quality of solutions) and consequently represents the transfer of formal knowledge into informal one what usually represents simple and ‘natural’ process Nonaka and Takeuchi 1995. By the reuse of formal knowledge the loop of the knowledge life-cycle is closed.

3.3. Business Process Modelling and Knowledge Management

In general we can say that KMS are primarily focused on solutions for capturing of tacit knowledge and on the organisation of formalisable knowledge and its distribution. We feel that present KM approaches focus on techniques and tools that make the captured information available and relatively little attention is paid to those tools and techniques that ensure that the captured information is of high quality.

Based on the presented features of Enterprise Modelling (EM) we conclude that EM (including BPM) represents an efficient approach that enables the transformation of informal knowledge into an externalised form and in turn allows the externalised form to be interpreted and be used to build internalised pragmatic knowledge. EMs are a formalised, structured and externalised form of knowledge intended to be shared and spread throughout the organisation.

In ETI we use BPM for the capturing and distribution of the knowledge of our business processes. Business process modes are published and distributed through the Intranet system where process models are presented in form of web pages (see Fig. 2).