What is Kaizen?
“Kaizen” is a Japanese word that literally means “good change” and refers to a philosophy of continuous improvement of business processes. Kaizen was first implemented by Japanese businesses following World War II, most notably by Toyota in the Toyota Production System, a precursor of the Lean Manufacturing movement. Kaizen provides a culture of continuous improvement through innovation and evolution driven by people at all levels of an organization.

Why should I care?

  1. How many of us work for a perfect organization? Likely none of us do. Most organizations could benefit from improvement in one or more areas, and many desperately need improvements on all fronts. Kaizen is a method for bringing about these improvements.
  2. The pace of change in the economic environment is incredibly fast. A company’s business processes will likely need to change to keep up. Kaizen drives small changes on a continuous (daily) basis that will help companies match the pace of the business environment.
  3. Kaizen facilitates gradual change which is less costly, less disruptive, more humane, and more likely to succeed than immediate large changes driven by command-and-control methods.
  4. A kaizen culture can help a software organization achieve CMMI Level 5 – Optimizing, which stresses continuous refinement of quality and performance. (Anderson, 2010)

How does an organization develop Kaizen?
First, recognize the Kaizen is brought about through a cultural change. The social norms of an organization will need to be adjusted to create an environment in which continuous improvement is facilitated, encouraged, and celebrated. The following key features characterize a kaizen culture:

  1. A kaizen culture requires transparency. The workings of the organization, both strategic and tactical, must be visible both to management as well as the workers. This transparency is achieved through high-bandwidth information channels. Agile frameworks like Kanban and Scrum use “information radiators” such as kanban boards and burndown charts to make work visible.
  2. A kaizen culture requires feedback. All members of the organization use the information radiators to reflect upon the performance of the team and system. People must feel safe that raising an issue will not incur punishment. The organization must help people feel heard by acting on issues raised.
  3. A kaizen culture requires experimentation. The organization should encourage the use of the Scientific Method to facilitate improvement. The “guess, test, revise” approach should be adopted with a focus on team/system performance rather than individual performance. Recognize that every change may not succeed in bringing about improvements. Failures in this regard should not incur punishment.
  4. A kaizen culture requires empowered employees. Within certain limits, employees should be able to self-organize and decide how to go about doing the work. Those doing the work are the most informed and conscious of the details of the work. If management has practiced transparency, those doing the work will also be well aware of strategic goals.
  5. A kaizen culture requires trust and respect among members of the organization. Everyone’s input must be valued, and people must not be maligned for having conflicting opinions.
  6. A kaizen culture requires slack. An organization running at 100% (or more) capacity has no time to devote to reflection and adaptation. Change requires effort and time. Without this capital, an organization is locked into the status quo if not slipping into decline. Slack is an investment, not a cost.
  7. For an organization performing knowledge work, a kaizen culture requires a focus on effectiveness rather than efficiency. This is a very subtle distinction, but has a profound effect on the culture of an organization. “Efficiency” or “productivity” is measured in work done per time spent. This is a meaningless measure in knowledge work. On the other hand, “effectiveness” measures whether or not we are solving the problem at hand. Efficiency focuses on cramming more work into less time. Effectiveness focuses on doing the right things at the right time.

Author: John Pruitt http://blog.jgpruitt.com

Bibliography
Anderson, D. J. (2010). Kanban, Successful Evolutionary Change for your Technology Business. Sequim, WA: Blue Hole Press.

Demarco, T. (2002). Slack: Getting Past Burnout, Busywork, and the Myth of Total Efficiency. Broadway.

Wikipedia contributors. (2011, 03 26). Continuous improvement process. Retrieved 03 30, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Continuous_improvement_process&oldid=420842531

Wikipedia contributors. (2011, 03 29). Kaizen. Retrieved 03 30, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Kaizen&oldid=421303547

Wikipedia contributors. (2011, 03 30). Toyota Production System. Retrieved 03 31, 2011, from Wikipedia, The Free Encyclopedia: http://en.wikipedia.org/w/index.php?title=Toyota_Production_System&oldid=421417667

Change Management

March 30, 2011

By Alfredo Guzman

Change Management is a structured approach to shifting/transitioning individuals, teams, and organizations from a current state to a desired future state. It is an organizational process aimed at empowering employees to accept and embrace changes in their current business environment. In project management, change management refers to a project management process where changes to a project are formally introduced and approved. (1)

Today, the concept takes different meanings. The reason behind it is because change management is the application of several ideas from the engineering, business and psychology fields.

I wanted to cover a brief history to show how change management has becoming an essential process of any organizational changes (ex.: mission, structure, operations and/or technical changes) positioning the people as part of the equation.

History

To understand change management as we know it today, two converging fields need to be considered: an engineer’s approach to improving business performance and a psychologist’s approach to managing the people-side of change.

First, students of business improvement have been learning and practicing how to make changes to the operations of a business as a mechanical system since Frederick Taylor’s work in the late nineteenth century. From this perspective, a business is like a clock where each of the mechanical pieces can be changed or altered to produce a predictable and desirable solution. Historically companies embracing this mechanical approach to business improvement typically did not embrace change management concepts until their projects encountered resistance or faced serious problems during implementation. The other side of the story begins with psychologists. Concerned with how humans react to their environment, the field of psychology has often focused on how an individual thinks and behaves in a particular situation. (2)

The net result of this evolution is that two schools of thought have emerged contrasting both approaches in terms of focus (processes vs. people), business practice, measures of success (Business performance vs. Job Satisfaction) and perspective on change.

Eight steps to successful change

American John P Kotter is a Harvard Business School professor and author of organizational change management introduced his eight-step change process in his 1995 book, “Leading Change”. Each stage acknowledges a key principle identified by Kotter relating to people’s response and approach to change, in which people see, feel and then change.

Kotter’s eight step change model can be summarized as: (3)

1. Create Urgency. Inspire people to move, make objectives real and relevant.

2. Build the Guiding Team. Get the right people in place with the right emotional commitment, and the right mix of skills and levels.

3. Get the Vision Right: get the team to establish a simple vision and strategy focus on emotional and creative aspects necessary to drive service and efficiency.

4. Communicate the Vision. Involve as many people as possible, communicate the essentials, simply, and to appeal and respond to people’s needs. De-clutter communications – make technology work for you rather than against.

5. Remove Obstacles. Enable constructive feedback and lots of support from leaders – reward and recognize progress and achievements.

6. Create Short-term Wins. Set aims that are easy to achieve. Manageable numbers of initiatives. Finish current stages before starting new ones.

7. Build on the Change. Encourage determination and persistence – ongoing change – encourage ongoing progress reporting – highlight achieved and future milestones.

8. Make Change Stick. Reinforce the value of successful change via recruitment, promotion, and new change leaders.

Conclusion

Change management entails thoughtful planning and sensitive implementation, and above all, consultation with, and involvement of, the people affected by the changes. (4)

Today, a business have to continually look at its performance, strategy and processes to understand what changes need to be made. However, an organization must also understand the implications of a new business change on its employees given their culture, values and capacity for change. At the end, it is the front line employees that will perform the new day-to-day activities and make the new processes and systems come to life.

References:

(1) Wikipedia. Available at: http://en.wikipedia.org/wiki/Change_management

(2) Change Management Learning Center. Available at: http://www.change-management.com/tutorial-definition-history.htm

(3) MindTools. Available at: http://www.mindtools.com/pages/article/newPPM_82.htm

(4) Finnish National Education. Available at: http://www.oph.fi/english/sources_of_information/projects/wbl-toi/continuous_improvement/change_process

by Eddy Robinson

EE615 April 1, 2011

Capability Maturity Model, CMM, this part seems simple enough. It’s a model describing your corporations level of maturity. But maturity in what respect? Business, technology, age? And what does integration have to do with it? Perhaps we should start with where the CMM came from.

CMM

The Capability Maturity Model was first developed by the Software Engineering Institute (SEI) at Carnegie Mellon University as a method for government assessment of software contractors. Watts Humphreys, a Fellow at the SEI, published "Managing the Software Process" in 1989 and described the CMM including five maturity levels with five Key Process Areas (KPA) in each level. (i)

The maturity level described the contractors ability to reliably and sustainably produce required outcomes. These levels are 1) initial, 2) managed, 3) defined, 4) quantitatively managed, and 5) optimizing.

Development of the CMM quickly spread across different industries creating many reference models of matured practices in specific disciplines like Systems Engineering CMM, Software CMM, Software Acquisition CMM, and People CMM, each with differing KPA’s. This led to an alphabet soup with specific guidelines that were difficult to integrate.

SW-CMM – Software CMM

EPIC – Enterprise Process Improvement Collaboration

SE-CMM – Systems Engineering CMM

INCOSE – International Council on Systems Engineering

SECAM – Systems Engineering Capability Assessment Model

EIA/IS – Electronic Industries Alliance Interim Standard

IPD-CMM – Integrated Product Development Capability Maturity Model

Evolution not Revolution

CMMI is the successor of the CMM and evolved as a more matured set of guidelines. It was built combining the best components of individual disciplines of CMM (Software CMM, People CMM, etc) and can be applied to product manufacturing, people management, software development, etc. The aim was to improve the usability of maturity models by integrating many different models into one framework. (ii)

CMMI

CMMI is a process improvement approach, based on CMM, that helps organizations improve performance. According to the SEI, CMMI helps "integrate traditionally separate organizational functions, set process improvement goals and priorities, provide guidance for quality processes, and provide a point of reference for appraising current processes."(iii)

There are currently three "constellations", or areas of interest: CMMI-DEV, CMMI-SVC, CMMI-ACQ. And there are five maturity levels which are rated based on the capability level of core process areas. The process areas change slightly depending on which constellation you are working in, development, service, or acquisition.

Maturity Levels

1 – Initial Process is unpredictable, poorly controlled and reactive

2 – Managed Process characterized for projects and is often reactive

3 – Defined Process characterized for the organization and is proactive

4 – Quantitatively Managed Process measured and controlled

5 – Optimizing Focus on continuous process improvement

Capability Levels (CL)

0 – Incomplete Either not performed or partially performed

1 – Performed Baby step, you are doing something but can’t prove it’s working

2 – Managed Planned, performed, monitored, and controlled

3 – Defined Managed process tailored to guidelines contributing work products, measures, and other process improvement information to the organizational process assets

4 – Quantitatively Managed Defined process that is controlled using statistical and other quantitative techniques

5 – Optimizing Quantitatively managed process that is continuously improved

There are 22 core processes defined for CMMI-DEV. Whenever the following seven processes; CM, MA, PMC, PP, PPQA, REQM, and SAM, reach CL5, the organization is considered CMMI level 2. Whenever 11 more of them; DAR, IPM, OPD, OPF, OT, PI, RD, RSKM, TS, VAL, and VER reach CL5, then the organization is considered CMMI level 3. Two more, OPP and QPM take you to CMMI level 4. And finally two more, CAR, and OPM, and your organization reaches CMMI level 5. CMMI-SVC has 24 core processes defined and CMMI-ACQ has 22.

So what does all this mean? Maturity levels refer to a whole organizations level of competence whereas Capability level refers to the competence level of a given process. Organizations execute many processes every day and the CMMI gives management a way of ranking the capability of core processes and entire organizations while laying out a roadmap for which processes to improve first.

Conclusion

In EE615 we have been learning about Business Process Modeling and re engineering. CMMI can be used as a guide to process improvement across a project, division, or an entire organization. (iv) As applied to business processes think about it this way; how can you chart a path to where you want to go if you don’t know where you currently are? CMMI gives you the tools to find out where you currently are and in the discovery process, lays out the road map for how to move to the next step.

(i) Wikipedia – http://en.wikipedia.org/wiki/Capability_Maturity_Model

(ii) Tutorials Point – http://www.tutorialspoint.com/cmmi/index.htm

(iii) Wikipedia – http://en.wikipedia.org/wiki/Capability_Maturity_Model_Integration

(iv) SEI at Carnegie Mellon – http://www.sei.cmu.edu/

An increasing number of hospitals are adopting a Six Sigma process as a way to increase patient satisfaction and reduce errors by improving processes. Statistics compiled by the US Bureau of Labor Statistics show that health care costs have increased five to six times faster than much of the rest of the economy during the past 5 years.

Six Sigma is a program of quality that is grounded in statistical analysis of gathered data. The objective of the program is to improve quality by reducing variation in the output from organizational processes. In other words, the goal is to reduce variation and eliminate errors in every process. This consistency will lead to greater customer satisfaction. If a desired outcome is not delivered, known as a “defect,” it is necessary to discover the root cause and eliminate it from the process.

Although the Six Sigma Methodology may have been developed for a manufacturing organization, it can be used in a healthcare organization in order to give the same added benefits. The healthcare industry is a service organization facing challenges everyday. Quality improvement methods are more difficult to implement in a healthcare industry. The comprehensive approach offered by Six Sigma allows for the methodologies to be successfully implemented with positive results.

The DMAIC process is an important part of Six Sigma, standing for:

· Define

· Measure

· Analyze

· Improve

· Control

Each phase of the DMAIC process involves detailed plans that help to guide managers through the execution of the quality improvement project.

If implemented correctly, the Six Sigma process should:

· Increase revenue

· Improve patient satisfaction

· Reduce the number of new-hired staff

· Decrease operating costs at health care facilities

The speed of processes and procedures also should improve with initiation of a Six Sigma program.

The basic steps of a Six Sigma program

1. Identify what is critical to the quality (CTQ) of products or services to the customers.

2. Apply intensive analysis to the processes, products, and services to determine whether the customers are provided with these CTQs.

3. Uncover what variations are occurring in the current processes and whether your operations are stable (ie, is the same care provided no matter what time of day or night). A defect is created each time a process does not deliver acceptable results. Find out what defects are occurring, how often, and how much they cost.

4. Choose focus areas based on translation of company strategy into operational goals.

5. Translate the problem into quantifiable terms using CTQ characteristics.

6. Identify possible causal relationships between inputs and the CTQs.

7. Suggest solutions to the problem.

8. Draft a charter, which includes a cost/benefit analysis.

9. Design and implement process changes or adjustments to improve performance of CTQs.

10. Review implementation and results of process improvement regularly.

11. Quantify and then continually build upon improvements throughout the control phase.

Opportunities for the Six Sigma process in health care facilities

The following are some examples of how to use the Six Sigma process in health care facilities:

· Patient admission

· Accuracy of surgical procedures

· Reducing patient length of stay

· Outpatient scheduling

· Efficiency of the emergency department

Roles of Six Sigma team members

Different team members have different responsibilities:

· Champion—facilitates projects and breaks down barriers, carefully monitors projects and specified completion dates (4 hours of training)

· Master black belt (an expert)—coaches and supports black and green belts

· Black belt—leads strategic and high-impact process improvement projects, helps to coach green belts (160 hours of training)

· Green belt—leads process improvement projects within own areas (48 hours of training)

· Management team—commits to improving products and services, oversees recruitment of participants, assists in deciding upon focus areas, assists in implementing process improvements (1 hour of training)

· Hospital staff (1 hour of training)

An ongoing program

Six Sigma is not a temporary fix or a short-term program. Rather, it is a permanent change to the systems of the health care facility.

The perceived downsides of Six Sigma in health care

Six Sigma is a very complex system, and the use of it for solving simple problems sometimes is viewed as overkill. The danger of suboptimizing a process without considering the whole value is another concern. Sigma Six offers few standard solutions.

References

American Society for Quality. Lean Six Sigma in healthcare. Available at: http://www.asq.org/healthcaresixsigma/. Accessed May 10, 2010.

Implementing Six Sigma Certification in Healthcare. Available at: http://www.sixsigmaonline.org/six-sigma-training-certification-information/articles/implementing-six-sigma-certification-in-healthcare-environments.html. Accessed May 10, 2010.

Six Sigma Health Care. What is Six Sigma? Available at: http://www.sixsigmahealthcare.com/Pages/SixSigma.asp. Accessed May 10, 2010.

TLP, Inc. Six Sigma health care. Available at: http://www.sixsigmahealthcare.com/. Accessed May 10, 2010.

An increasing number of hospitals are adopting a Six Sigma process as a way to increase patient satisfaction and reduce errors by improving processes. Statistics compiled by the US Bureau of Labor Statistics show that health care costs have increased five to six times faster than much of the rest of the economy during the past 5 years.

Six Sigma is a program of quality that is grounded in statistical analysis of gathered data. The objective of the program is to improve quality by reducing variation in the output from organizational processes. In other words, the goal is to reduce variation and eliminate errors in every process. This consistency will lead to greater customer satisfaction. If a desired outcome is not delivered, known as a “defect,” it is necessary to discover the root cause and eliminate it from the process.

Although the Six Sigma Methodology may have been developed for a manufacturing organization, it can be used in a healthcare organization in order to give the same added benefits. The healthcare industry is a service organization facing challenges everyday. Quality improvement methods are more difficult to implement in a healthcare industry. The comprehensive approach offered by Six Sigma allows for the methodologies to be successfully implemented with positive results.

The DMAIC process is an important part of Six Sigma, standing for:

· Define

· Measure

· Analyze

· Improve

· Control

Each phase of the DMAIC process involves detailed plans that help to guide managers through the execution of the quality improvement project.

If implemented correctly, the Six Sigma process should:

· Increase revenue

· Improve patient satisfaction

· Reduce the number of new-hired staff

· Decrease operating costs at health care facilities

The speed of processes and procedures also should improve with initiation of a Six Sigma program.

The basic steps of a Six Sigma program

1. Identify what is critical to the quality (CTQ) of products or services to the customers.

2. Apply intensive analysis to the processes, products, and services to determine whether the customers are provided with these CTQs.

3. Uncover what variations are occurring in the current processes and whether your operations are stable (ie, is the same care provided no matter what time of day or night). A defect is created each time a process does not deliver acceptable results. Find out what defects are occurring, how often, and how much they cost.

4. Choose focus areas based on translation of company strategy into operational goals.

5. Translate the problem into quantifiable terms using CTQ characteristics.

6. Identify possible causal relationships between inputs and the CTQs.

7. Suggest solutions to the problem.

8. Draft a charter, which includes a cost/benefit analysis.

9. Design and implement process changes or adjustments to improve performance of CTQs.

10. Review implementation and results of process improvement regularly.

11. Quantify and then continually build upon improvements throughout the control phase.

Opportunities for the Six Sigma process in health care facilities

The following are some examples of how to use the Six Sigma process in health care facilities:

· Patient admission

· Accuracy of surgical procedures

· Reducing patient length of stay

· Outpatient scheduling

· Efficiency of the emergency department

Roles of Six Sigma team members

Different team members have different responsibilities:

· Champion—facilitates projects and breaks down barriers, carefully monitors projects and specified completion dates (4 hours of training)

· Master black belt (an expert)—coaches and supports black and green belts

· Black belt—leads strategic and high-impact process improvement projects, helps to coach green belts (160 hours of training)

· Green belt—leads process improvement projects within own areas (48 hours of training)

· Management team—commits to improving products and services, oversees recruitment of participants, assists in deciding upon focus areas, assists in implementing process improvements (1 hour of training)

· Hospital staff (1 hour of training)

An ongoing program

Six Sigma is not a temporary fix or a short-term program. Rather, it is a permanent change to the systems of the health care facility.

The perceived downsides of Six Sigma in health care

Six Sigma is a very complex system, and the use of it for solving simple problems sometimes is viewed as overkill. The danger of suboptimizing a process without considering the whole value is another concern. Sigma Six offers few standard solutions.

References

American Society for Quality. Lean Six Sigma in healthcare. Available at: http://www.asq.org/healthcaresixsigma/. Accessed May 10, 2010.

Implementing Six Sigma Certification in Healthcare. Available at: http://www.sixsigmaonline.org/six-sigma-training-certification-information/articles/implementing-six-sigma-certification-in-healthcare-environments.html. Accessed May 10, 2010.

Six Sigma Health Care. What is Six Sigma? Available at: http://www.sixsigmahealthcare.com/Pages/SixSigma.asp. Accessed May 10, 2010.

TLP, Inc. Six Sigma health care. Available at: http://www.sixsigmahealthcare.com/. Accessed May 10, 2010.

Object Management Group (OMG) is an international, open membership and not for profit computer industry consortium (1). This group develops a set of standards and relationships where any type of organizations can join this group and have a way to be able to have a set of specifications yet it does not provide the information for implementation. The OMG standards are used for any type of industries such as manufacturing, transportation, space, health care and information technology. Another way I see the OMG is similar to the Project Management Office (PMO), where they are a centralized organization that set up the standards and rules within the group. However what’s different between the two is that once the PMO makes their decisions within the group, they implement the project while OMG does not, only set standards.

The Object Management Group was originally founded in 1989 by eleven companies (including Hewlett-Packard, IBM, Sun Microsystems, Apple Computer, American Airlines and Data General) and the international headquarters is located in Needham, Massachusetts; OMG’s initial focus was to create a heterogeneous distributed object standard (2). Today, over 800 companies from both the computer industry and software-using companies from other industries are members of OMG. (2) The OMG has gone through many changes since it was founded and always changing to use as a better source of business process. In June of 2005, the Business Process Management Initiative (BPMI.org) and the Object Management Group™ (OMG™) announced the merger of their Business Process Management (BPM) activities to provide thought leadership and industry standards for this vital and growing industry. The combined group has named itself the Business Modeling & Integration (BMI) Domain Task Force (DTF) (4). In 2007 the Business Motivation Model (BMM) was adopted as a standard by the OMG. The BMM is a metamodel that provides a vocabulary for corporate governance and strategic planning and is particularly relevant to business undertaking governance, regulatory compliance, business transformation and strategic activities (2). Before anything can be accepted as a standard, there has to be a majority of companies to agree to a new standard otherwise the standard will not be accepted by anyone. A good example of a standard specification that is accepted by the OMG is the Unified Modeling Language (UML). UML is OMG’s most used-modeling specification. UML allows users to model the business process, application structure, application behavior, data structure, and architecture (3).

Model Driven Architecture

OMG evolved towards modeling standards by creating the standard for Unified Modeling Language (UML) followed by related standards for

* Meta-Object Facility (MOF),

* XML Metadata Interchange (XMI) and

* MOF Query/Views/Transformation (QVT).

These together provide the foundation for Model Driven Architecture (MDA), and related set of standards, building upon the success of UML and MOF.

Systems Modeling Language (SysML), a modeling language based on UML for use in Systems Engineering, has been standardized in collaboration with INCOSE.

Significant progress has also been made in bringing the world of UML modeling and the Semantic Web together through the adoption of the Ontology Definition Metamodel which relates UML models in a standard way with RDF and Web Ontology Language (OWL) models.

Semantics of Business Vocabulary and Business Rules (SBVR) is a landmark for the OMG, the first OMG specification to incorporate the formal use of natural language in modeling and the first to provide explicitly a model of formal logic. Based on a fusion of linguistics, logic, and computer science, and two years in preparation, SBVR provides a way to capture specifications in natural language and represent them in formal logic so they can be machine-processed. SBVR is an integral part of MDA (2).

OMG also provides a number of professional certifications as well. They are OCRES – OMG Certified Real-time and Embedded Systems Specialist, OCUP – OMG Certified UML Professional, OCEB – OMG Certified Expert in Business Process Management (BPM) and OCSMP – OMG Certified Systems Modeling Professional (2). One of the examples is the OMG Certified Systems Modeling Professional sponsored by IBM, Lockheed Martin, No Magic, Inc. and Sparx Systems out of Australia. The program awards the OMG Certified Systems Modeling Professional certification at four levels. The first level, OCSMP Model User, covers a wide range of essential MBSE and SysML knowledge and skills and so enhances the résumé of those who contribute to a model-based systems engineering project. Building on this foundation, since all lower levels will be prerequisites for the levels above, are three levels targeted at model builders and advanced model users.

These levels, termed OCSMP Model Builder – Fundamental, Intermediate, and Advanced, cover advanced topics with an emphasis on the interconnectedness among the different model viewpoints that gives MBSE its advantage over conventional engineering methods. (5).

References

1. http://www.omg.org/gettingstarted/gettingstartedindex.htm

2. http://en.wikipedia.org/wiki/Object_Management_Group

3. Minoli, Daniel. Enterprise Architecture A to Z: Frameworks, Business Processing, SOA, and Infrastructure Technology. Taylor and Francis Group, LLC. 2008

4. http://www.bpmi.org/

5. http://www.omg.org/ocsmp/

How do you know if a business deal or investment is worth your time and most importantly your money? The answer to this question can be answered by calculating and understanding the meaning behind expecting a “return on investment”. Return on Investment (ROI) (also referred to as Rate of Return (ROR)) (3) gives you the percentage of gain you have received or expect to realize on a given investment.

ROI can be defined as the following: “ A measure of a corporation’s profitability, equal to a fiscal year’s income divided by common stock and preferred stock equity plus long-term debt “(1). For those of us that are not bankers or accountants a simpler definition would be: The percentage of money that has or will be made on a given investment.

The website Investopedia states the return on investment formula as:

ROI=(Gain from Investment – Cost of Investment)/Cost of Investment (2)

In the above calculation, if the number generated is positive you made money. For example if the above calculation gave you a solution of .25, you would state that you made a 25% return on your investment.

In the last few decades, ROI has become a central financial metric for asset purchase decisions (computer systems, factory machines, or service vehicles, for example), approval and funding decisions for projects and programs of all kinds (such as marketing programs, recruiting programs, and training programs), and more traditional investment decisions (such as the management of stock portfolios or the use of venture capital) (4).

The wonderful thing about ROI is the ability to calculate accurate percentages on expected profits from different investments. Let’s look at a fictional example:

Rob has recently filed his taxes and expects to get an even $1000.00 back. Being a wise individual, Rob decides to let his money work for him. Rob talks with Jill about two different investment opportunities.

Investment A: The first investment requires Rob to invest $500 upfront and another $500 in 6 months. This investment is expected to give Rob $92.50 per month.

Investment B: The second investment requires Rob to initially invest $900 upfront, leaving Rob $100 left over. This investment is expected to give Rob $85 per month.

Rob is quickly able to work these calculations and determine which investment is right for him. After performing the calculations Rob is able to see that Investment B is the better investment giving him a 13.33% return on his investment while investment A only gives him a return of 11%.

The above example illustrates the power behind using ROI as a financial tool. It is easy to see that with different initial investment amounts which investment is the better choice.

A very important thing to note about ROI calculations is that the formula can and will be modified by the individual giving the statistic. Always make sure you understand how they reached this number because depending on what values are used you can receive different results. This goes double if time is involved within the calculation.

A word to the wise; ROI calculations are not guarantees unless the calculation is done after the investment has matured. Be very cautious about performing a single calculation when doing your comparisons. Make sure, as an investor or business owner that you calculate your ROI at different investment and return amounts to guard against investments not living up the potential they promise.

As you can see calculating the Return on Investment for individuals and businesses can prove to be a very profitable and wise decision. Given the ability to compare opportunities and measure different investments side by side allows you to make the most informed and educated investment decision. Just remember that little phrase your grandparents said to you when you where younger, “If it is too good to be true, it probably is”.

References

1) Investorwords – Return on Investment (http://www.investorwords.com/4250/Return_on_Investment.html)

2) Investopedia – Return on Investment – ROI (http://www.investopedia.com/terms/r/returnoninvestment.asp)

3) Wikipedia – Rate of return (http://en.wikipedia.org/wiki/Return_on_Investment)

4) Solution Matrix – Return on Investment: What is ROI analysis? (http://www.solutionmatrix.com/return-on-investment.html)

According to Michael Hammer and James Champy, “…reengineering is the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in …cost, quality, service, and speed.” Reengineering processes incur costs in its goal to achieve these improvements. In today’s competitive environment, you most focus on maximizing the value generated from cost expenditures. You have to prove that your project’s worth. It’s no secret: when a customer is spending money, they always want to make sure their getting exactly what they paying for. As your organization considers spending large amounts of money on replacing or maintaining their IT systems, they expect to gain money from increased productivity, and/or reduced maintenance or energy costs. Considering this new reality, you most show the value IT expenditures will provide the organization. How do you show the value of a future expenditure? Present management with the actual cost of the purchase by using financial tools like Payback analysis, Total cost of ownership, or Return on Investment.

The payback method is a great way of analyzing multiple projects. It simply shows you how long it will take to earn your initial investment back. As a general rule the shorter the payback period the better. Payback analysis is simple to learn and great for small projects. However, it does have its faults. It does not account for it does not account for the time value of money, risk, financing or other important considerations, such as the opportunity cost. Even with these limitations it is still a good tool to use in determining the value of a project.

Total cost of ownership, TCO is more complex than Payback analysis and takes more effort to complete for large projects. However, the TCO provides the total cost of an IT expenditure; everything from hardware, software, outside services, and all internal costs. TCO is calculated by adding all of the costs associated with a given purchase over its expected life time. It is not uncommon that a project with a low initial cost may be become too expensive when all costs are considered. Good TCO analysis brings out the hidden or non-obvious ownership costs that might otherwise be overlooked in making purchase decisions or planning budgets.

Return on Investment ROI is the performance measurement used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the return of an investment is divided by the cost of the investment. At one time, ROI was the most common analyzing tool, however it status to both TCO and Payback Analysis.

An ROI calculation quantifies both the costs and the expected benefits of a specific project over a specific timeframe. TCO includes just total costs of the project. While Payback only shows the amount of time you will get your initial investment back. The question is which tool is better for analyzing you project. There is no, “one size fits all” solution. All three of these options are valuable tools when analyzing your project.

By: Brandon Johnson

Works Cited

Business Reengineering, Information Systems Planning and Acquisition, http://www.umsl.edu/~joshik/msis480/chapt13.htm

Business process reengineering, http://en.wikipedia.org/w/index.php?title=Business_process_reengineering&oldid=411743998

Return On Investment, http://www.investopedia.com/terms/r/returnoninvestment.asp

Getting a Grip on TCO and ROI, http://itmanagement.earthweb.com/columns/bizalign/article.php/3076031/Getting-a-Grip-on-TCO-and-ROI.htm

Rate of return, http://en.wikipedia.org/w/index.php?title=Rate_of_return&oldid=410674458

by Ignacio Cobacho

Business Process Modeling Notation (BPMN) is a standard managed and maintained by the Object Management Group (OMG) created in May 2004. BPMN was created to provide a set of rules for graphical representations of a business process. The main goal is to define a notation language that could be used across different levels of an organization independently of their focus. Furthermore, it’s main focus is to serve as a cross-discipline language that can be understood by technical or non-technical stakeholders. The current version of BPMN is 2.0 was released on August 2009.

This blog post is not intended to cover the differences and advantages of each release to date, but to review the basic principles of the standard and show you the next steps to start modeling business processes.

Basic Areas

The four basic areas of BPMN are Objects (Flow and Connecting), Data, Swim lanes and Artifacts. These areas are comprised of multiple categories.

The starting point of any Business Process is a Flow Object called an Event. As common sense will dictate, every event has a starting point and an end point. Intermediate events describe something that happens in between the beginning and the end of the process. They are all depicted by a circle.

Data Objects provide specific information about the activity that needs to be performed. For example, “send email to customer” or “Print account balance”.

Swimlanes are used to organize and distinguish responsibilities across subprocesses. They can be very useful when dealing with multiple players or areas of an organization.

Artifacts allow for additional information to be included in the model that may not be directly related to an object. For instance they may provide flexibility for a programmer to document additional information for the model to become easier to understand.

Advanced Concepts

Now that we have covered the basic areas, lets expand on other crucial areas for the creation of a business process model. For the purpose of this exercise I have selected modeling elements that should cover most business process models.

Sub-processes are a collection of activities that are part of a process. These activities are broken down to provide additional detail on a process with the purpose of providing clarity to a complex task. There are many different ways of graphically representing a sub-process including:

  • Collapsed Sub-Process: Represented by a square and a plus sign in the lower-middle of the shape drawn.
  • Expanded Sub-process: Multiple sub-processes visible in the drawing with arrows pointing to the next activity or data object.
  • Gateways: They present a decision point that define merging or dividing an activity into others. Gateways are presented by a diamond shape figure. A drawing inside further defines the type of behavior. For instance, an asterisk inside a gateway expresses a complex situation with that particular activity. Please refer to the BPMN specification for other shapes.
  • Transactions represents “a sub-process that insures that all parties involved have reached an agreement that a particular activity should be completed or canceled.” (Business Process Model Notation v2.0 www.bpmn.org).

The location of the text, color and size of the notation is also defined in the BPMN specification. In general, the labels should be situated inside, above or below the shape. Graphical elements, such as a gateway or subprocess, should be white or clear. Lines connecting sequences or message flows should be black and of the same thickness in order to comply with the BPMN standard.

Software

I know what you are thinking. It’s your lucky day since there is an app for that. Actually, there are multiple open-source and paid programs and plugins available that follow BPMN guidelines.

The most recommended ones, according the Business Process Modeling Forum are:

  • Magic Draw: The multi award-winning UML business process, architecture, software and system modeling tool with teamwork support (http://www.magicdraw.com/ )
  • U-Model: UML tool for visually designing application models and generating program code and project documentation. It supports all 14 UML diagram types and integrates tightly with Visual Studio and Eclipse. (http://www.altova.com/products.html)
  • Oracle BPEL – BPEL is the standard for assembling a set of discrete services into an end-to-end process flow, radically reducing the cost and complexity of process integration initiatives. Oracle BPEL Process Manager offers a comprehensive and easy-to-use infrastructure for creating, deploying and managing BPEL business processes (www.oracle.com)

What’s next?

Now that you have a basic understanding of the basic components and the use of BPMN standard, I recommend you to go by the OMG website to absorb and review the extensive number of business process examples available.

You may also want to read the complete BPMN standard in detail. (http://www.omg.org/spec/BPMN/2.0/). It’s a tough read. However, like every business process, it has a beginning and an end.

References

  1. Business Process Modeling Forum website – http://www.bpmodeling.com/faq/
  2. Object Management Group webiste – http://www.omg.org
  3. Wikipedia – http://en.wikipedia.org/wiki/Business_Process_Modeling_Notation

By John Polmatier

As many organizations have found and/or have known, improving products, services, and customer satisfaction is paramount to maintaining a successful business. While the finished product most often determines the winners and losers in any industry, the processes performed behind the scenes are essentially responsible. In order to be successful as a whole, then, it is necessary to improve the individual business processes (as well as their sub processes). Those who have become unfamiliar with business process, you can refresh here.

Business Process Modeling or BPM is the activity of representing the business processes of an organization in its current state, as well as its future or expected state, so that all of those processes may be analyzed, improved, and monitored. As expected, here is a formal definition:

‘Business process modeling (BPM) seeks to standardize the management of business processes that span multiple applications, multiple data repositories, multiple corporate departments, or even multiple companies (or government agencies). BPM provides the foundation for interoperability, whether among departments or among affiliated organizations.’[1]

In the remainder of this post I will focus on fundamentals of BPM and aligning business processes with a best fit IT solution. It should be noted that BPM is not solely implemented in the IT sector, but this blog does maintain that slant. The core subject matter will be:

· Objectives

· When is it time?

· Tools and standards

· Advantages/Benefits

· Disadvantages or common problems

BPM Objectives

As stated above the purpose of BPM is ultimately to identify problem areas within the business processes of an organization and find a solution for those. These include all tasks and subtasks associated with those processes. Examples of these problem areas can be manual tasks that could be or should be automated, redundant activities, and even obsolete processes. Four objectives of BPM, as stated in Enterprise Architecture A to Z:

1. Obtaining knowledge about the business processes of the enterprise

2. Utilizing business process knowledge in business process reengineering projects to optimize the operation

3. Facilitating the decision-making efforts of the enterprise

4. Supporting interoperability of the business process [1]

BPM – When is it time?

BPM is an integral part of Business Process Reengineering (BPR) – a period in which analysis and workflow are redesigned within an enterprise or across enterprises. But other periods in the lifecycle of an organization benefit from BPM as well. Particularly in the early stages of software development projects, BPM provides clarity for requirements gathering and the conceptual workflow. Another valuable role for BPM is in mergers and acquisitions of enterprises.

Tools and Standards

There are numerous utilities and standards developed for BPM, some of which are graphical and others that are in a language format. This section is meant to serve as an introduction therefore I will not provide incredible detail here nor imply that any of these are preferred over the other.

· BPMN (Business Process Modeling Notation)- Developed by the Object Management Group (OMG), this standard utilizes objects for a highly visual model. ‘The primary goal of BPMN is to provide a notation that is readily understandable by all business users’, from the analysts that create the initial drafts of processes, to technical developers, to business people who will manage those processes. [2]

· UML (Unified Modeling Language) – Another OMG standard, this visual standard is utilized to document processes as well as data structure. This is OMG’s most used standard

· BPEL (Web Services Business Process Execution Language) – OASIS developed this language as a notation for specifying behavior of business processes based on Web Services

· WS-CDL (Web Services Choreography Description Language) – Developed/recommended by the world wide web consortium (W3C), this is an XML language that describes the collaboration between peer to peer participants.

Advantages

Below are three benefits of BPM as noted by contributor pasindulathpandura in article published on Zimbio. [3]

1. Formalize existing processes and spot needed improvements

2. Facilitate automated, efficient process flow

3. Increase productivity and decrease head count [3]

Disadvantages

Here I will summarize a few disadvantages or problems as described in an article on benefits and capability of BPM.

1. Documentation purposes only – Models may be produced strictly for documentation requirements that have been issued by quality management.

2. All processes are not modeled – Organizations may model only those processes they have determined to be the most important. This can be detrimental in identifying some underlying tasks that may be the true problem area.

3. Constructs for entities – Terminology may be a deficiency in modeling certain business processes. This can be a problem in identifying redundant processes, or establishing an effective workflow for different entities. [4]

Conclusion

BPM is meant to assist in streamlining business processes of an organization through common standards. While many standards and tools exist, only a select few have been provided in this post. It is very important to also note the supposed benefits and problems with BPM as you move forward in your quest for efficiency.

References:

1. Minoli, Daniel. Enterprise Architecture A to Z. Boca Raton, FL: Auerbach Publications. 2008

2. http://www.omg.org/spec/BPMN/2.0/PDF

3. http://www.zimbio.com/Business+Processes/articles/3/Advantages+Business+Process+Modeling

4. http://www.aaai.org/Papers/Symposia/Spring/2008/SS-08-01/SS08-01-009.pdf