Contents

1Definitions

2Changes in business process management

3BPM life-cycle
o

3.1Design

3.2Modeling

3.3Execution

3.4Monitoring

3.5Optimization

3.6Re-engineering

4BPM suites

5Practice
o

5.1BPM technology

5.2Cloud computing BPM

5.2.1Market

5.2.2Benefits
5.3Internet of Things

Definitions
BPMInstitute.org[4] defines Business Process Management as:
the definition, improvement and management of a firm's end-to-end enterprise business processes in order to
achieve three outcomes crucial to a performance-based, customer-driven firm: 1) clarity on strategic
direction, 2) alignment of the firm's resources, and 3) increased discipline in daily operations. Read the article
What is BPM Anyway?[5]
The Workflow Management Coalition,[6] BPM.com[7] and several other sources[8] have come to agreement on the
following definition:
Business Process Management (BPM) is a discipline involving any combination of modeling, automation,
execution, control, measurement and optimization of business activity flows, in support of enterprise goals,
spanning systems, employees, customers and partners within and beyond the enterprise boundaries.
The Association Of Business Process Management Professionals [9] defines BPM as:
Business Process Management (BPM) is a disciplined approach to identify, design, execute, document,
measure, monitor, and control both automated and non-automated business processes to achieve consistent,
targeted results aligned with an organizations strategic goals. BPM involves the deliberate, collaborative and
increasingly technology-aided definition, improvement, innovation, and management of end-to-end business
processes that drive business results, create value, and enable an organization to meet its business
objectives with more agility. BPM enables an enterprise to align its business processes to its business
strategy, leading to effective overall company performance through improvements of specific work activities
either within a specific department, across the enterprise, or between organizations.
Gartner defines Business process management (BPM) as:
"the discipline of managing processes (rather than tasks) as the means for improving business performance
outcomes and operational agility. Processes span organizational boundaries, linking together people,
information flows, systems and other assets to create and deliver value to customers and constituents." [10]
It is common to confuse BPM with a BPM Suite (BPMS). BPM is a professional discipline done by
people, while a BPMS is a technological suite of tool designed to help the BPM professional

accomplish their goals. BPM should also not be confused with an application or solution that was
developed to support a particular process. Suites and solutions represent ways of automating
business processes, but automation is only one aspect of BPM.

Changes in business process management[edit]

The

concept

of

business

process

may

be

as

traditional

as

concepts

of tasks, department, production, and outputs, arising from job shop scheduling problems in the early
20th Century.[11] The management and improvement approach as of 2010, with formal definitions and
technical modeling, has been around since the early 1990s (see business process modeling). Note
that the term "business process" is sometimes used by IT practitioners as synonymous with the
management of middleware processes or with integrating application software tasks.[citation needed]
Although BPM initially focused on the automation of business processes with the use of information
technology, it has since been extended[by whom?] to integrate human-driven processes in which human
interaction takes place in series or parallel with the use of technology. For example, workflow
management systems can assign individual steps requiring deploying human intuition or judgment to
relevant humans and other tasks in a workflow to a relevant automated system. [12]
More recent variations such as "human interaction management" [13][14] are concerned with the
interaction between human workers performing a task.[citation needed]
As of 2010 technology has allowed the coupling of BPM with other methodologies, such as Six
Sigma.[citation

needed]

Some

BPM

tools

such

as SIPOCs, process

flows, RACIs, CTQs and histograms allow users to:

visualize - functions and processes

measure - determine the appropriate measure to determine success

analyze - compare the various simulations to determine an optimal improvement

improve - select and implement the improvement

control - deploy this implementation and by use of user-defined dashboards monitor the
improvement in real time and feed the performance information back into the simulation model in
preparation for the next improvement iteration

re-engineer - revamp the processes from scratch for better results

This brings with it the benefit of being able to simulate changes to business processes based on
real-world data (not just on assumed knowledge). Also, the coupling of BPM to industry
methodologies allows users to continually streamline and optimize the process to ensure that it is
tuned to its market need.[15][full citation needed]

As of 2012 research on BPM has paid increasing attention to the compliance of business processes.
Although a key aspect of business processes is flexibility, as business processes continuously need
to adapt to changes in the environment, compliance with business strategy, policies and government
regulations should also be ensured.[16] The compliance aspect in BPM is highly important for
governmental organizations. As of 2010 BPM approaches in a governmental context largely focus on
operational processes and knowledge representation. [17] Although there have been many technical
studies on operational business processes in both the public and private sectors, researchers have
rarely taken legal compliance activities into account, for instance the legal implementation processes
in public-administration bodies.[citation needed]

BPM life-cycle[edit]
Business process management activities can be arbitrarily grouped into categories such as design,
modeling, execution, monitoring, and optimization. [18]

Design[edit]
Process design encompasses both the identification of existing processes and the design of "to-be"
processes. Areas of focus include representation of the process flow, the factors within it, alerts and
notifications, escalations, standard operating procedures, service level agreements, and task handover mechanisms.
Whether or not existing processes are considered, the aim of this step is to ensure that a correct and
efficient theoretical design is prepared.
The proposed improvement could be in human-to-human, human-to-system or system-to-system
workflows, and might target regulatory, market, or competitive challenges faced by the businesses.
The existing process and the design of new process for various applications will have to synchronise
and not cause major outage or process interruption.

Modeling[edit]
Modeling takes the theoretical design and introduces combinations of variables (e.g., changes in
rent or materials costs, which determine how the process might operate under different
circumstances).

It may also involve running "what-if analysis"(Conditions-when, if, else) on the processes: "What if I
have 75% of resources to do the same task?" "What if I want to do the same job for 80% of the
current cost?".

Execution[edit]

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One of the ways to automate processes is to develop or purchase an application that executes the
required steps of the process; however, in practice, these applications rarely execute all the steps of
the process accurately or completely. Another approach is to use a combination of software and
human intervention; however this approach is more complex, making the documentation process
difficult.
As a response to these problems, software has been developed that enables the full business
process (as developed in the process design activity) to be defined in a computer language which
can be directly executed by the computer. The process models can be run through execution
engines that automate the processes directly from the model (e.g. calculating a repayment plan for a
loan) or, when a step is too complex to automate, Business Process Modeling Notation (BPMN)
provides front-end capability for human input. [19] Compared to either of the previous approaches,
directly executing a process definition can be more straightforward and therefore easier to improve.
However, automating a process definition requires flexible and comprehensive infrastructure, which
typically rules out implementing these systems in a legacy IT environment.
Business rules have been used by systems to provide definitions for governing behavior, and a
business rule engine can be used to drive process execution and resolution.

Monitoring[edit]
Monitoring encompasses the tracking of individual processes, so that information on their state can
be easily seen, and statistics on the performance of one or more processes can be provided. An
example of this tracking is being able to determine the state of a customer order (e.g. order arrived,
awaiting delivery, invoice paid) so that problems in its operation can be identified and corrected.
In addition, this information can be used to work with customers and suppliers to improve their
connected processes. Examples are the generation of measures on how quickly a customer order is
processed or how many orders were processed in the last month. These measures tend to fit into
three categories: cycle time, defect rate and productivity.

The degree of monitoring depends on what information the business wants to evaluate and analyze
and how business wants it to be monitored, in real-time, near real-time or ad hoc. Here, business
activity monitoring (BAM) extends and expands the monitoring tools generally provided by BPMS.
Process mining is a collection of methods and tools related to process monitoring. The aim of
process mining is to analyze event logs extracted through process monitoring and to compare them
with an a priori process model. Process mining allows process analysts to detect discrepancies
between the actual process execution and the a priori model as well as to analyze bottlenecks.

Optimization[edit]
Process optimization includes retrieving process performance information from modeling or
monitoring phase; identifying the potential or actual bottlenecks and the potential opportunities for
cost savings or other improvements; and then, applying those enhancements in the design of the
process. Process mining tools are able to discover critical activities and bottlenecks, creating greater
business value.[20]

Re-engineering[edit]
When the process becomes too complex or inefficient, and optimization is not fetching the desired
output, it is usually recommended by a company steering committee chaired by the president / CEO
to re-engineer the entire process cycle. Business process reengineering (BPR) has been used by
organizations to attempt to achieve efficiency and productivity at work.

BPM suites[edit]
A market has developed for Enterprise software leveraging the Business Process Management
concepts to organize and automate processes. The recent convergence of these software from
distinct pieces such as Business rules engine, Business Process Modelling, Business Activity
Monitoring and Human Workflow has given birth to integrated Business Process Management
Suites. Forrester Research, Inc recognize the BPM suite space through three different lenses:

human-centric BPM

integration-centric BPM (Enterprise Service Bus)

document-centric BPM (Dynamic Case Management)

However, standalone integration-centric and document-centric offerings have matured into separate,
standalone markets.

Practice[edit]

Example of Business Process Management (BPM) Service Pattern: This pattern shows how business process
management (BPM) tools can be used to implement business processes through the orchestration of activities
between people and systems.[21]

While the steps can be viewed as a cycle, economic or time constraints are likely to limit the process
to only a few iterations. This is often the case when an organization uses the approach for short to
medium term objectives rather than trying to transform the organizational culture. True iterations are
only possible through the collaborative efforts of process participants. In a majority of organizations,
complexity will require enabling technology (see below) to support the process participants in these
daily process management challenges.
To date, many organizations often start a BPM project or program with the objective of optimizing an
area that has been identified as an area for improvement.
Currently, the international standards for the task have limited BPM to the application in the IT
sector, and ISO/IEC 15944 covers the operational aspects of the business. However, some
corporations with the culture of best practices do use standard operating procedures to regulate their

operational process.[22] Other standards are currently being worked upon to assist in BPM
implementation (BPMN, Enterprise Architecture, Business Motivation Model).

BPM technology[edit]
BPM is now considered a critical component of operational intelligence (OI) solutions to deliver realtime, actionable information. This real-time information can be acted upon in a variety of ways alerts can be sent or executive decisions can be made using real-time dashboards. OI solutions use
real-time information to take automated action based on pre-defined rules so that security measures
and or exception management processes can be initiated.
As such, some people view BPM as "the bridge between Information Technology (IT) and
Business."[citation

. In fact, an argument can be made that this "holistic approach" bridges

needed]

organizational and technological silos.

There are four critical components of a BPM Suite:

Process engine a robust platform for modeling and executing process-based applications,
including business rules

Business analytics enable managers to identify business issues, trends, and opportunities
with reports and dashboards and react accordingly

Content management provides a system for storing and securing electronic documents,
images, and other files

Collaboration tools remove intra- and interdepartmental communication barriers through

discussion forums, dynamic workspaces, and message boards

BPM also addresses many of the critical IT issues underpinning these business drivers, including:

Managing end-to-end, customer-facing processes

Consolidating data and increasing visibility into and access to associated data and information

Increasing the flexibility and functionality of current infrastructure and data

Integrating with existing systems and leveraging service oriented architecture (SOA)

Establishing a common language for business-IT alignment

Validation of BPMS is another technical issue that vendors and users need to be aware of, if
regulatory compliance is mandatory.[23] The validation task could be performed either by an
authenticated third party or by the users themselves. Either way, validation documentation will need

to be generated. The validation document usually can either be published officially or retained by
users.

Cloud computing BPM[edit]

Cloud computing business process management is the use of (BPM) tools that are delivered
as software services (SaaS) over a network. Cloud BPM business logic is deployed on an
application server and the business data resides in cloud storage.
Market[edit]
According to Gartner, 20% of all the "shadow business processes" will be supported by BPM cloud
platforms[citation needed]. Gartner refers to all the hidden organizational processes that are supported by IT
departments as part of legacy business processes such as Excel spreadsheets, routing of emails
using rules, phone calls routing, etc. These can, of course also be replaced by other technologies
such as workflow software.
Benefits[edit]
The benefits of using cloud BPM services include removing the need and cost of maintaining
specialized technical skill sets in-house and reducing distractions from an enterprise's main focus. It
offers controlled IT budgeting and enables geographical mobility.
The details of this are still emerging.[24][full citation needed]

Internet of Things[edit]
The emerging Internet of Things poses a significant challenge to control and manage the flow of
information through large numbers of devices. To cope with this, a new direction known as BPM
Everywhere shows promise as way of blending traditional process techniques, with additional
capabilities to automate the handling of all the independent devices.

Business model[edit]
A business model is a framework for creating economic, social, and/or other forms of value. The term 'business
model' is thus used for a broad range of informal and formal descriptions to represent core aspects of a business,
including purpose, offerings, strategies, infrastructure, organizational structures, trading practices, and operational
processes and policies.
In the most basic sense, a business model is the method of doing business by which a company can sustain itself.
That is, generate revenue. The business model spells-out how a company makes money by specifying where it is
positioned in the value chain.

Business process[edit]
A business process is a collection of related, structured activities or tasks that produce a specific service or product
(serve a particular goal) for a particular customer or customers. There are three main types of business processes:
1. Management processes, that govern the operation of a system. Typical management processes
include corporate governance and strategic management.
2. Operational processes, that constitute the core business and create the primary value stream. Typical
operational processes are purchasing, manufacturing, marketing, and sales.
3. Supporting processes, that support the core processes. Examples include accounting, recruitment,
and technical support.
A business process can be decomposed into several sub-processes, which have their own attributes, but also
contribute to achieving the goal of the super-process. The analysis of business processes typically includes the
mapping of processes and sub-processes down to activity level. A business process model is a model of one or more
business processes, and defines the ways in which operations are carried out to accomplish the intended objectives
of an organization. Such a model remains an abstraction and depends on the intended use of the model. It can
describe the workflow or the integration between business processes. It can be constructed in multiple levels.
A workflow is a depiction of a sequence of operations, declared as work of a person, of a simple or complex
mechanism, of a group of persons,[5] of an organization of staff, or of machines. Workflow may be seen as any
abstraction of real work, segregated into workshare, work split or other types of ordering. For control purposes,
workflow may be a view of real work under a chosen aspect.

Artifact-centric Business Process[edit]

The artifact-centric business process model has emerged as a holistic approach for modeling business processes, as
it provides a highly flexible solution to capture operational specifications of business processes. It particularly focuses
on describing the data of business processes, known as artifacts, by characterizing business-relevant data objects,
their lifecycles, and related services. The artifact-centric process modelling approach fosters the automation of the
business operations and supports the flexibility of the workflow enactment and evolution. [6]

Business process modeling tools[edit]

Business process modeling tools provide business users with the ability to model their business processes,
implement and execute those models, and refine the models based on as-executed data. As a result, business
process modeling tools can provide transparency into business processes, as well as the centralization of corporate
business process models and execution metrics.[7]

Modeling and simulation[edit]

Modeling and simulation functionality allows for pre-execution what-if modeling and simulation. Post-execution
optimization is available based on the analysis of actual as-performed metrics. [7]

Use case diagrams created by Ivar Jacobson, 1992 (integrated in UML)

Activity diagrams (also adopted by UML)

Some business process modeling techniques are:

Business Process Model and Notation (BPMN)

Cognition enhanced Natural language Information Analysis Method (CogNIAM)

Extended Business Modeling Language (xBML)

Event-driven process chain (EPC)

ICAM DEFinition (IDEF0)

Unified Modeling Language (UML), extensions for business process such as Eriksson-Penker's

Formalized Administrative Notation (FAN)

Programming language tools for BPM[edit]

BPM suite software provides programming interfaces (web services, application program interfaces (APIs)) which
allow enterprise applications to be built to leverage the BPM engine. [7] This component is often referenced as
the engine of the BPM suite.

Programming languages that are being introduced for BPM include:[8]

Business Process Execution Language (BPEL),

Web Services Choreography Description Language (WS-CDL).

XML Process Definition Language (XPDL),

Some vendor-specific languages:

Architecture of Integrated Information Systems (ARIS) supports EPC,

Java Process Definition Language (JBPM),

Other technologies related to business process modeling include model-driven architecture and service-oriented
architecture.

See also[edit]

Business reference model[edit]

Example of the US Federal Government Business Reference Model [9]

A business reference model is a reference model, concentrating on the functional and organizational aspects of
an enterprise, service organization or government agency. In general a reference model is a model of something that
embodies the basic goal or idea of something and can then be looked at as a reference for various purposes. A
business reference model is a means to describe the business operations of an organization, independent of the
organizational structure that perform them. Other types of business reference model can also depict the relationship
between the business processes, business functions, and the business areas business reference model.
These reference models can be constructed in layers, and offer a foundation for the analysis of service components,
technology, data, and performance.
The most familiar business reference model is the Business Reference Model of the US Federal Government. That
model is a function-driven framework for describing the business operations of the Federal Government independent
of the agencies that perform them. The Business Reference Model provides an organized, hierarchical construct for

describing the day-to-day business operations of the Federal government. While many models exist for describing
organizations - organizational charts, location maps, etc. - this model presents the business using a functionally
driven approach.[10]

Business process integration[edit]

Example of the interaction between business process and data models [11]

A business model, which may be considered an elaboration of a business process model, typically shows business
data and business organizations as well as business processes. By showing business processes and their
information flows a business model allows business stakeholders to define, understand, and validate their business
enterprise. The data model part of the business model shows how business information is stored, which is useful for
developing software code. See the figure on the right for an example of the interaction between business process
models and data models.[11]
Usually a business model is created after conducting an interview, which is part of the business analysis process.
The interview consists of a facilitator asking a series of questions to extract information about the subject business
process. The interviewer is referred to as a facilitator to emphasize that it is the participants, not the facilitator, who
provide the business process information. Although the facilitator should have some knowledge of the subject
business process, but this is not as important as the mastery of a pragmatic and rigorous method interviewing
business experts. The method is important because for most enterprises a team of facilitators is needed to collect
information across the enterprise, and the findings of all the interviewers must be compiled and integrated once
completed.[11]
Business models are developed as defining either the current state of the process, in which case the final product is
called the "as is" snapshot model, or a concept of what the process should become, resulting in a "to be" model. By
comparing and contrasting "as is" and "to be" models the business analysts can determine if the existing business
processes and information systems are sound and only need minor modifications, or if reengineering is required to
correct problems or improve efficiency. Consequently, business process modeling and subsequent analysis can be
used to fundamentally reshape the way an enterprise conducts its operations. [11]

Business process reengineering[edit]

Business Process Reengineering Cycle

Business process reengineering (BPR) aims to improve the efficiency and effectiveness of the processes that exist
within and across organizations. It examines business processes from a "clean slate" perspective to determine how
best to construct them.
Business process reengineering (BPR) began as a private sector technique to help organizations fundamentally
rethink how they do their work. A key stimulus for reengineering has been the development and deployment of
sophisticated information systems and networks. Leading organizations use this technology to support innovative
business processes, rather than refining current ways of doing work. [12]

Business process management[edit]

Business process management is a field of management focused on aligning organizations with the wants and needs
of clients. It is a holistic managementapproach[citation needed] that promotes business effectiveness and efficiency while
striving for innovation, flexibility and integration with technology. As organizations strive for attainment of their
objectives, business process management attempts to continuously improve processes - the process to define,
measure and improve your processes a "process optimization" process.

Business process reengineering

From Wikipedia, the free encyclopedia

Business Process Reengineering Cycle

Business process re-engineering is a business management strategy, originally pioneered in the early 1990s,
focusing on the analysis and design ofworkflows and business processes within an organization. BPR aimed to
help organizations fundamentally rethink how they do their work in order to dramatically improve customer service,

cut operational costs, and become world-class competitors.[1] In the mid-1990s, as many as 60% of the Fortune
500companies claimed to either have initiated reengineering efforts, or to have plans to do so. [2]
BPR seeks to help companies radically restructure their organizations by focusing on the ground-up design of their
business processes. According to Davenport (1990) a business process is a set of logically related tasks performed
to achieve a defined business outcome. Re-engineering emphasized a holistic focus on business objectives and how
processes related to them, encouraging full-scale recreation of processes rather than iterative optimization of subprocesses.[1]
Business Process Reengineering is also known as business process redesign, business transformation, or business
process change management.

Overview[edit]

Reengineering guidance and relationship of Mission and Work Processes to Information Technology.

Business Process Reengineering (BPR) is the practice of rethinking and redesigning the way work is done to better
support an organization's mission and reduce costs. Reengineering starts with a high-level assessment of the
organization's mission, strategic goals, and customer needs. Basic questions are asked, such as "Does our mission
need to be redefined? Are our strategic goals aligned with our mission? Who are our customers?" An organization
may find that it is operating on questionable assumptions, particularly in terms of the wants and needs of its
customers. Only after the organization rethinks what it should be doing, does it go on to decide how best to do it. [1]
Within the framework of this basic assessment of mission and goals, re-engineering focuses on the organization's
business processesthe steps and procedures that govern how resources are used to
create products and services that meet the needs of particular customers or markets. As a structured ordering of
work steps across time and place, a business process can be decomposed into specific activities, measured,
modeled, and improved. It can also be completely redesigned or eliminated altogether. Re-engineering identifies,
analyzes, and re-designs an organization's core business processes with the aim of achieving dramatic
improvements in critical performance measures, such as cost, quality, service, and speed. [1]

Re-engineering recognizes that an organization's business processes are usually fragmented into sub-processes and
tasks that are carried out by several specialized functional areas within the organization. Often, no one is responsible
for the overall performance of the entire process. Reengineering maintains that optimizing the performance of subprocesses can result in some benefits, but cannot yield dramatic improvements if the process itself is fundamentally
inefficient and outmoded. For that reason, re-engineering focuses on re-designing the process as a whole in order to
achieve the greatest possible benefits to the organization and their customers. This drive for realizing dramatic
improvements by fundamentally re-thinking how the organization's work should be done distinguishes the reengineering from process improvement efforts that focus on functional or incremental improvement. [1]

History[edit]
Business Process Reengineering (BPR) began as a private sector technique to help organizations fundamentally
rethink how they do their work in order to dramatically improve customer service, cutoperational costs, and become
world-class competitors. A key stimulus for re-engineering has been the continuing development and deployment of
sophisticated information systems and networks. Leading organizations are becoming bolder in using this technology
to support innovative business processes, rather than refining current ways of doing work. [1]

Reengineering Work: Don't Automate, Obliterate, 1990[edit]

In 1990, Michael Hammer, a former professor of computer science at the Massachusetts Institute of
Technology (MIT), published the article "Reengineering Work: Don't Automate, Obliterate" in theHarvard Business
Review, in which he claimed that the major challenge for managers is to obliterate forms of work that do not add
value, rather than using technology for automating it. [3] This statement implicitly accused managers of having focused
on the wrong issues, namely that technology in general, and more specifically information technology, has been used
primarily for automating existing processes rather than using it as an enabler for making non-value adding work
obsolete.
Hammer's claim was simple: Most of the work being done does not add any value for customers, and this work
should be removed, not accelerated through automation. Instead, companies should reconsider their inability to
satisfy customer needs, and their insufficient cost structure[citation needed]. Even well established management thinkers,
such as Peter Drucker and Tom Peters, were accepting and advocating BPR as a new tool for (re-)achieving success
in a dynamic world.[4] During the following years, a fast-growing number of publications, books as well as journal
articles, were dedicated to BPR, and many consulting firms embarked on this trend and developed BPR methods.
However, the critics were fast to claim that BPR was a way to dehumanize the work place, increase managerial
control, and to justify downsizing, i.e. major reductions of the work force,[5] and a rebirth of Taylorism under a different
label.
Despite this critique, reengineering was adopted at an accelerating pace and by 1993, as many as 60% of
the Fortune 500 companies claimed to either have initiated reengineering efforts, or to have plans to do so. [2] This
trend was fueled by the fast adoption of BPR by the consulting industry, but also by the study Made in America,
[6]

conducted by MIT, that showed how companies in many US industries had lagged behind their foreign counterparts

in terms of competitiveness, time-to-market and productivity.

Development after 1995[edit]

With the publication of critiques in 1995 and 1996 by some of the early BPR proponents [citation needed], coupled with abuses
and misuses of the concept by others, the reengineering fervor in the U.S. began to wane. Since then, considering
business processes as a starting point for business analysis and redesign has become a widely accepted approach
and is a standard part of the change methodology portfolio, but is typically performed in a less radical way than
originally proposed.
More recently, the concept of Business Process Management (BPM) has gained major attention in the corporate
world and can be considered as a successor to the BPR wave of the 1990s, as it is evenly driven by a striving for
process efficiency supported by information technology. Equivalently to the critique brought forward against BPR,
BPM is now accused[citation needed] of focusing on technology and disregarding the people aspects of change.

Business Process Reengineering Topics[edit]

The most notable definitions of reengineering are:

"... the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements
in critical contemporary modern measures of performance, such as cost, quality, service, and speed." [7]

"encompasses the envisioning of new work strategies, the actual process design activity, and the
implementation of the change in all its complex technological, human, and organizational dimensions." [8]

BPR is different from other approaches to organization development (OD), especially the continuous improvement or
TQM movement, by virtue of its aim for fundamental and radical change rather than iterative improvement. [9] In order
to achieve the major improvements BPR is seeking for, the change of structural organizational variables, and other
ways of managing and performing work is often considered as being insufficient. For being able to reap the
achievable benefits fully, the use of information technology (IT) is conceived as a major contributing factor. While IT
traditionally has been used for supporting the existing business functions, i.e. it was used for increasing
organizational efficiency, it now plays a role as enabler of new organizational forms, and patterns of collaboration
within and between organizations[citation needed].
BPR derives its existence from different disciplines, and four major areas can be identified as being subjected to
change in BPR - organization, technology, strategy, and people - where a process view is used as common
framework for considering these dimensions.
Business strategy is the primary driver of BPR initiatives and the other dimensions are governed by strategy's
encompassing role. The organization dimension reflects the structural elements of the company, such as hierarchical
levels, the composition of organizational units, and the distribution of work between them [citation needed]. Technology is
concerned with the use of computer systems and other forms of communication technology in the business. In BPR,
information technology is generally considered as playing a role as enabler of new forms of organizing and
collaborating, rather than supporting existing business functions. The people / human resources dimension deals with
aspects such as education, training, motivation and reward systems. The concept of business processes -

interrelated activities aiming at creating a value added output to a customer - is the basic underlying idea of BPR.
These processes are characterized by a number of attributes: Process ownership, customer focus, value adding, and
cross-functionality.

The role of information technology[edit]

Information technology (IT) has historically played an important role in the reengineering concept. [10] It is considered
by some as a major enabler for new forms of working and collaborating within an organization and across
organizational borders[citation needed].
BPR literature [11] identified several so called disruptive technologies that were supposed to challenge traditional
wisdom about how work should be performed.

Shared databases, making information available at many places

Expert systems, allowing generalists to perform specialist tasks

Telecommunication networks, allowing organizations to be centralized and decentralized at the same time

Decision-support tools, allowing decision-making to be a part of everybody's job

Wireless data communication and portable computers, allowing field personnel to work office independent

Interactive videodisk, to get in immediate contact with potential buyers

Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found

High performance computing, allowing on-the-fly planning and revisioning

In the mid-1990s, especially workflow management systems were considered as a significant contributor to improved
process efficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP,JD Edwards,
Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement.

Research and Methodology[edit]

Model based on PRLC approach

Although the labels and steps differ slightly, the early methodologies that were rooted in IT-centric BPR solutions
share many of the same basic principles and elements. The following outline is one such model, based on the PRLC
(Process Reengineering Life Cycle) approach developed by Guha. [12] Simplified schematic outline of using a business
process approach, exemplified for pharmaceutical R&D
1. Structural organization with functional units
2. Introduction of New Product Development as cross-functional process
3. Re-structuring and streamlining activities, removal of non-value adding tasks
Benefiting from lessons learned from the early adopters, some BPR practitioners advocated a change in emphasis to
a customer-centric, as opposed to an IT-centric, methodology. One such methodology, that also incorporated a Risk
and Impact Assessment to account for the effect that BPR can have on jobs and operations, was described by Lon
Roberts (1994).[13] Roberts also stressed the use of change management tools to proactively address resistance to
changea factor linked to the demise of many reengineering initiatives that looked good on the drawing board.
Some items to use on a process analysis checklist are: Reduce handoffs, Centralize data, Reduce delays, Free
resources faster, Combine similar activities. Also within the management consulting industry, a significant number of
methodological approaches have been developed. [14]

Business Process Reengineering Framework[edit]

An easy to follow seven step INSPIRE framework is developed by Bhudeb Chakravarti which can be followed by any
Process Analyst to perform BPR. The seven steps of the framework are Initiate a new process reengineering project
and prepare a business case for the same; Negotiate with senior management to get approval to start the process
reengineering project; Select the key processes that need to be reengineered; Plan the process reengineering
activities; Investigate the processes to analyze the problem areas; Redesign the selected processes to improve the

performance and Ensurethe successful implementation of redesigned processes through proper monitoring and
evaluation.

BPR success & failure factors[edit]

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Factors that are important to BPR success include:

1. BPR team composition.
2. Business needs analysis.
3. Adequate IT infrastructure.
4. Effective change management.
5. Ongoing continuous improvement
The aspects of a BPM effort that are modified include organizational structures, management systems, employee
responsibilities and performance measurements, incentive systems, skills development, and the use of IT. BPR can
potentially affect every aspect of how business is conducted today. Wholesale changes can cause results ranging
from enviable success to complete failure.
If successful, a BPM initiative can result in improved quality, customer service, and competitiveness, as well as
reductions in cost or cycle time. However, 50-70% of reengineering projects are either failures or do not achieve
significant benefit. regarded [15]
There are many reasons for sub-optimal business processes which include:
1. One department may be optimized at the expense of another
2. Lack of time to focus on improving business process
3. Lack of recognition of the extent of the problem
4. Lack of training
5. People involved use the best tool they have at their disposal which is usually Excel to fix problems
6. Inadequate infrastructure

7. Overly bureaucratic processes

8. Lack of motivation
Many unsuccessful BPR attempts may have been due to the confusion surrounding BPR, and how it should be
performed. Organizations were well aware that changes needed to be made, but did not know which areas to change
or how to change them. As a result, process reengineering is a management concept that has been formed by trial
and error or, in other words, practical experience. As more and more businesses reengineer their processes,
knowledge of what caused the successes or failures is becoming apparent. [16] To reap lasting benefits, companies
must be willing to examine how strategy and reengineering complement each other by learning to quantify strategy in
terms of cost, milestones, and timetables, by accepting ownership of the strategy throughout the organization, by
assessing the organizations current capabilities and process realistically, and by linking strategy to the budgeting
process. Otherwise, BPR is only a short-term efficiency exercise. [17]

Organization wide commitment[edit]

Major changes to business processes have a direct effect on processes, technology, job roles, and workplace
culture. Significant changes to even one of those areas require resources, money, and leadership. Changing them
simultaneously is an extraordinary task.[16] Like any large and complex undertaking, implementing reengineering
requires the talents and energies of a broad spectrum of experts. Since BPR can involve multiple areas within the
organization, it is important to get support from all affected departments. Through the involvement of selected
department members, the organization can gain valuable input before a process is implemented; a step which
promotes both the cooperation and the vital acceptance of the reengineered process by all segments of the
organization.
Getting enterprise wide commitment involves the following: top management sponsorship, bottom-up buy-in from
process users, dedicated BPR team, and budget allocation for the total solution with measures to demonstrate value.
Before any BPR project can be implemented successfully, there must be a commitment to the project by the
management of the organization, and strong leadership must be provided. [18] Reengineering efforts can by no means
be exercised without a company-wide commitment to the goals. However, top management commitment is
imperative for success.[19][20] Top management must recognize the need for change, develop a complete
understanding of what BPR is, and plan how to achieve it. [21]
Leadership has to be effective, strong, visible, and creative in thinking and understanding in order to provide a
clear vision.[22] Convincing every affected group within the organization of the need for BPR is a key step in
successfully implementing a process. By informing all affected groups at every stage, and emphasizing the positive
end results of the reengineering process, it is possible to minimize resistance to change and increase the odds for
success. The ultimate success of BPR depends on the strong, consistent, and continuous involvement of all
departmental levels within the organization. It also depends on the people who do it and how well they can be
motivated to be creative and to apply their detailed knowledge to the redesign of business processes. [23]

BPR team composition[edit]

Once organization-wide commitment has been secured from all departments involved in the reengineering effort and
at different levels, the critical step of selecting a BPR team must be taken. This team will form the nucleus of the BPR
effort, make key decisions and recommendations, and help communicate the details and benefits of the BPR
program to the entire organization. The determinants of an effective BPR team may be summarized as follows:

competency of the members of the team, their motivation,[24]

their credibility within the organization and their creativity,[25]

team empowerment, training of members in process mapping and brainstorming techniques, [26]

effective team leadership,[27]

proper organization of the team,[28]

complementary skills among team members, adequate size, interchangeable accountability, clarity of work
approach, and

specificity of goals.[29]

The most effective BPR teams include active representatives from the following work groups: top management,
business area responsible for the process being addressed, technology groups, finance, and members of all ultimate
process users groups. Team members who are selected from each work group within the organization will affect the
outcome of the reengineered process according to their desired requirements. The BPR team should be mixed in
depth and knowledge. For example, it may include members with the following characteristics:

Members who do not know the process at all.

Members who know the process inside-out.

Customers, if possible.

Members representing affected departments.

One or two members of the best, brightest, passionate, and committed technology experts.

Members from outside of the organization [19]

Moreover, Covert (1997) recommends that in order to have an effective BPR team, it must be kept under ten players.
If the organization fails to keep the team at a manageable size, the entire process will be much more difficult to
execute efficiently and effectively. The efforts of the team must be focused on identifying breakthrough opportunities
and designing new work steps or processes that will create quantum gains and competitive advantage. [21]

Business needs analysis[edit]

Another important factor in the success of any BPR effort is performing a thorough business needs analysis. Too
often, BPR teams jump directly into the technology without first assessing the current processes of the organization
and determining what exactly needs reengineering. In this analysis phase, a series of sessions should be held with
process owners and stakeholders, regarding the need and strategy for BPR. These sessions build a consensus as to
the vision of the ideal business process. They help identify essential goals for BPR within each department and then
collectively define objectives for how the project will affect each work group or department on individual basis and the
business organization as a whole. The idea of these sessions is to conceptualize the ideal business process for the
organization and build a business process model. Those items that seem unnecessary or unrealistic may be
eliminated or modified later on in the diagnosing stage of the BPR project. It is important to acknowledge and
evaluate all ideas in order to make all participants feel that they are a part of this important and crucial process.
Results of these meetings will help formulate the basic plan for the project.
This plan includes the following:

identifying specific problem areas,

solidifying particular goals, and

defining business objectives.

The business needs analysis contributes tremendously to the re-engineering effort by helping the BPR team to
prioritize and determine where it should focus its improvements efforts.[19]
The business needs analysis also helps in relating the BPR project goals back to key business objectives and the
overall strategic direction for the organization. This linkage should show the thread from the top to the bottom of the
organization, so each person can easily connect the overall business direction with the re-engineering effort. This
alignment must be demonstrated from the perspective of financial performance, customer service, associate value,
and the vision for the organization.[16] Developing a business vision and process objectives relies, on the one hand, on
a clear understanding of organizational strengths, weaknesses, and market structure, and on the other, on
awareness and knowledge about innovative activities undertaken by competitors and other organizations. [30]
BPR projects that are not in alignment with the organizations strategic direction can be counterproductive. There is
always a possibility that an organization may make significant investments in an area that is not a core competency
for the company and later outsource this capability. Such reengineering initiatives are wasteful and steal resources
from other strategic projects. Moreover, without strategic alignment, the organizations key stakeholders and
sponsors may find themselves unable to provide the level of support the organization needs in terms of resources,
especially if there are other more critical projects to the future of the business, and are more aligned with the
strategic direction.[16]

Adequate IT infrastructure[edit]
Researchers consider adequate IT infrastructure reassessment and composition as a vital factor in successful BPR
implementation.[22] Hammer (1990) prescribes the use of IT to challenge the assumptions inherent in the work process
that have existed since long before the advent of modern computer and communications technology.[31] Factors
related to IT infrastructure have been increasingly considered by many researchers and practitioners as a vital
component of successful BPR efforts.[32]

Effective alignment of IT infrastructure and BPR strategy,

building an effective IT infrastructure,

adequate IT infrastructure investment decision,

adequate measurement of IT infrastructure effectiveness,

proper information systems (IS) integration,

effective reengineering of legacy IS,

increasing IT function competency, and

effective use of software tools are the most important factors that contribute to the success of BPR projects.

These are vital factors that contribute to building an effective IT infrastructure for business processes. [22] BPR must be
accompanied by strategic planning which addresses leveraging IT as a competitive tool. [33] An IT infrastructure is
made up of physical assets, intellectual assets, shared services, [34] and their linkages.[35] The way in which the IT
infrastructure components are composed and their linkages determines the extent to which information resources
can be delivered. An effective IT infrastructure composition process follows a top-down approach, beginning with
business strategy and IS strategy and passing through designs of data, systems, and computer architecture. [36]
Linkages between the IT infrastructure components, as well as descriptions of their contexts of interaction, are
important for ensuring integrity and consistency among the IT infrastructure components. [32] Furthermore, IT
standards have a major role in reconciling various infrastructure components to provide shared IT services that are of
a certain degree of effectiveness to support business process applications, as well as to guide the process of
acquiring, managing, and utilizing IT assets.[35] The IT infrastructure shared services and the human IT infrastructure
components, in terms of their responsibilities and their needed expertise, are both vital to the process of the IT
infrastructure composition. IT strategic alignment is approached through the process of integration between business
and IT strategies, as well as between IT and organizational infrastructures. [22]
Most analysts view BPR and IT as irrevocably linked. Walmart, for example, would not have been able to reengineer
the processes used to procure and distribute mass-market retail goods without IT. Ford was able to decrease its
headcount in the procurement department by 75 percent by using IT in conjunction with BPR, in another well-known

example.[33] The IT infrastructure and BPR are interdependent in the sense that deciding the information requirements
for the new business processes determines the IT infrastructure constituents, and a recognition of IT capabilities
provides alternatives for BPR.[32] Building a responsive IT infrastructure is highly dependent on an appropriate
determination of business process information needs. This, in turn, is determined by the types of activities embedded
in a business process, and their sequencing and reliance on other organizational processes. [37]

Effective change management[edit]

Al-Mashari and Zairi (2000) suggest that BPR involves changes in people behavior and culture, processes, and
technology. As a result, there are many factors that prevent the effective implementation of BPR and hence restrict
innovation and continuous improvement. Change management, which involves all human and social related changes
and cultural adjustment techniques needed by management to facilitate the insertion of newly designed processes
and structures into working practice and to deal effectively with resistance, [26] is considered by many researchers to
be a crucial component of any BPR effort.[38] One of the most overlooked obstacles to successful BPR project
implementation is resistance from those whom implementers believe will benefit the most. Most projects
underestimate the cultural effect of major process and structural change and as a result, do not achieve the full
potential of their change effort. Many people fail to understand that change is not an event, but rather a management
technique.
Change management is the discipline of managing change as a process, with due consideration that employees are
people, not programmable machines.[16] Change is implicitly driven by motivation which is fueled by the recognition of
the need for change. An important step towards any successful reengineering effort is to convey an understanding of
the necessity for change.[19] It is a well-known fact that organizations do not change unless people change; the better
change is managed, the less painful the transition is.
Organizational culture is a determining factor in successful BPR implementation.[39] Organizational culture influences
the organizations ability to adapt to change. Culture in an organization is a self-reinforcing set of beliefs, attitudes,
and behavior. Culture is one of the most resistant elements of organizational behavior and is extremely difficult to
change. BPR must consider current culture in order to change these beliefs, attitudes, and behaviors effectively.
Messages conveyed from management in an organization continually enforce current culture. Change is implicitly
driven by motivation which is fueled by the recognition of the need for change.
The first step towards any successful transformation effort is to convey an understanding of the necessity for change.
[19]

Management rewards system, stories of company origin and early successes of founders, physical symbols, and

company icons constantly enforce the message of the current culture. Implementing BPR successfully is dependent
on how thoroughly management conveys the new cultural messages to the organization. [18] These messages provide
people in the organization with a guideline to predict the outcome of acceptable behavior patterns. People should be
the focus for any successful business change.
BPR is not a recipe for successful business transformation if it focuses on only computer technology and process
redesign. In fact, many BPR projects have failed because they did not recognize the importance of the human
element in implementing BPR. Understanding the people in organizations, the current company culture, motivation,

leadership, and past performance is essential to recognize, understand, and integrate into the vision and
implementation of BPR. If the human element is given equal or greater emphasis in BPR, the odds of successful
business transformation increase substantially.[18]

Ongoing Continuous Improvement[edit]

Many organizational change theorists hold a common view of organizations adjusting gradually and incrementally
and responding locally to individual crises as they arise

[19]

Common elements are:

BPR is a successive and ongoing process and should be regarded as an improvement strategy that enables
an organization to make the move from traditional functional orientation to one that aligns with strategic business
processes.[30]

Continuous improvement is defined as the propensity of the organization to pursue incremental and
innovative improvements in its processes, products, and services. [19] The incremental change is governed by the
knowledge gained from each previous change cycle.

It is essential that the automation infrastructure of the BPR activity provides for performance measurements
in order to support continuous improvements. It will need to efficiently capture appropriate data and allow access
to appropriate individuals.

To ensure that the process generates the desired benefits, it must be tested before it is deployed to the end
users. If it does not perform satisfactorily, more time should be taken to modify the process until it does.

A fundamental concept for quality practitioners is the use of feedback loops at every step of the process and
an environment that encourages constant evaluation of results and individual efforts to improve. [40]

At the end users level, there must be a proactive feedback mechanism that provides for and facilitates
resolutions of problems and issues. This will also contribute to a continuous risk assessment and evaluation
which are needed throughout the implementation process to deal with any risks at their initial state and to ensure
the success of the reengineering efforts.

Anticipating and planning for risk handling is important for dealing effectively with any risk when it first occurs
and as early as possible in the BPR process.[41] It is interesting that many of the successful applications of
reengineering described by its proponents are in organizations practicing continuous improvement programs.

Hammer and Champy (1993) use the IBM Credit Corporation as well as Ford and Kodak, as examples of
companies that carried out BPR successfully due to the fact that they had long-running continuous improvement
programs.[40]

In conclusion, successful BPR can potentially create substantial improvements in the way organizations do business
and can actually produce fundamental improvements for business operations. However, in order to achieve that,
there are some key success factors that must be taken into consideration when performing BPR.

BPR success factors are a collection of lessons learned from reengineering projects and from these lessons common
themes have emerged. In addition, the ultimate success of BPR depends on the people who do it and on how well
they can be committed and motivated to be creative and to apply their detailed knowledge to the reengineering
initiative. Organizations planning to undertake BPR must take into consideration the success factors of BPR in order
to ensure that their reengineering related change efforts are comprehensive, well-implemented, and have minimum
chance of failure.

Critique[edit]
Many companies used reengineering as a pretext to downsizing, though this was not the intent of reengineering's
proponents; consequently, reengineering earned a reputation for being synonymous with downsizing and layoffs. [42]
In many circumstances, reengineering has not always lived up to its expectations. Some prominent reasons include:

Reengineering assumes that the factor that limits an organization's performance is the ineffectiveness of its
processes (which may or may not be true) and offers no means of validating that assumption.

Reengineering assumes the need to start the process of performance improvement with a "clean slate," i.e.
totally disregard the status quo.

According to Eliyahu M. Goldratt (and his Theory of Constraints) reengineering does not provide an effective
way to focus improvement efforts on the organization's constraint[citation needed].

Others have claimed that reengineering was a recycled buzzword for commonly-held ideas. Abrahamson (1996)
argued that fashionable management terms tend to follow a lifecycle, which for Reengineering peaked between 1993
and 1996 (Ponzi and Koenig 2002). They argue that Reengineering was in fact nothing new (as e.g. when Henry
Ford implemented the assembly line in 1908, he was in fact reengineering, radically changing the way of thinking in
an organization).
The most frequent critique against BPR concerns the strict focus on efficiency and technology and the disregard of
people in the organization that is subjected to a reengineering initiative. Very often, the label BPR was used for major
workforce reductions. Thomas Davenport, an early BPR proponent, stated that:
"When I wrote about "business process redesign" in 1990, I explicitly said that using it for cost reduction alone was
not a sensible goal. And consultants Michael Hammer and James Champy, the two names most closely associated
with reengineering, have insisted all along that layoffs shouldn't be the point. But the fact is, once out of the bottle,
the reengineering genie quickly turned ugly."

[43]

Hammer similarly admitted that:

"I wasn't smart enough about that. I was reflecting my engineering background and was insufficient appreciative of
the human dimension. I've learned that's critical."

[44]

Business process improvement

Business process Improvement (BPI) is a systematic approach to help an organization optimize its underlying
processes to achieve more efficient results. The methodology was first documented in H. James Harringtons 1991
book Business Process Improvement.[1] It is the methodology that both Process Redesign and Business Process
Reengineering are based upon. BPI has allegedly been responsible for reducing cost and cycle time by as much as
90% while improving quality by over 60%.[citation needed]
Process improvement is an aspect of organizational development (OD) in which a series of actions are taken by
a process owner to identify, analyze and improve existing business processes within anorganization to meet
new goals and objectives,[2] such as increasing profits and performance,[2] reducing costs[2] and accelerating
schedules.[citation needed] These actions often follow a specificmethodology or strategy to increase the likelihood of
successful results.[2] Process improvement may include the restructuring of company training programs to increase
their effectiveness.[2]
Process improvement is also a method to introduce process changes to improve the quality of a product or service,
to better match customer and consumer needs.[2]

Overview[edit]
The organization may be a for-profit business, a non-profit organization, a government agency, or any other ongoing
concern. This was the first methodology developed that focused away from the production processes to address the
service and support process. It was developed within IBM as a result of the IBM president John F. Akers putting out a
Corporate Instruction in the early 1980s requiring the rest of IBM operations to upgrade their processes so that they
were at least as good as the production processes. At that time the production processes were required to be at
a Cpk of 1.4. To measure and meet these performance goals required major improvements in IBMs business
processes. To accomplish this, IBMs Business Process Improvement methodology was developed. On March 13,
1984 after the Business Process Improvement was under way at IBM, John Akers stated at the American Electronics
Association seminar on Quality in Boston, Our studies show that more than 50 percent of the total cost of billing
relates to preventing, catching, or fixing errors. This approach was first documented outside of IBM by H. James
Harrington while at Ernst & Young[3] and then in Harringtons 1991 book entitled Business Process Improvement the
Breakthrough Strategy for Total Quality, Productivity, and Competitiveness [1] published by McGraw-Hill. More detailed

information about the methodology was documented in Harringtons 1997 book Business Process Improvement
Workbook-Documentation, Analysis, Design, and Management of Business Process Improvement [4]also published by
McGraw-Hill.
It should be noted that BPI focuses on "doing things right" more than it does on "doing the right thing". In essence,
BPI attempts to reduce variation and/or waste in processes, so that the desired outcome can be achieved with better
utilisation of resources.
BPI works by:

Defining the organization's strategic goals and purposes (Who are we, what do we do, and why do we do it?)

Determining the organization's customers (or stakeholders) (Who do we serve?)

Aligning the business processes to realize the organization's goals (How do we do it better?)

The goal of BPI is a radical change in the performance of an organization, rather than a series of incremental
changes (compare TQM). Michael Hammer and James Champy popularized this radical model in their book
Reengineering the Corporation: A Manifesto for Business Revolution (1993). Hammer and Champy stated that the
process was not meant to impose trivial changes, such as 10 percent improvements or 20 percent cost reductions,
but was meant to be revolutionary (see breakthrough solution).
Many businesses in the 1990s used the phrase "reengineering" as a euphemism for layoffs. Other organizations did
not make radical changes in their business processes and did not make significant gains, and, therefore, wrote the
process off as a failure. Yet, others have found that BPI is a valuable tool in a process of gradual change to a
business.
BPI typically involves six steps:

Selection of process teams and leader[edit]

Process teams, comprising 2-4 employees from various departments that are involved in the particular process, are
set up. Each team selects a process team leader, typically the person who is responsible for running the respective
process.

Process analysis training[edit]

The selected process team members are trained in process analysis and documentation techniques.

Process analysis interview[edit]

The members of the process teams conduct several interviews with people working along the processes. During the
interview, they gather information about process structure, as well as process performance data.

Process documentation[edit]
The interview results are used to draw a first process map. Previously existing process descriptions are reviewed and
integrated, wherever possible. Possible process improvements, discussed during the interview, are integrated into
the process maps.

Review cycle[edit]
The draft documentation is then reviewed by employees working in the process. Additional review cycles may be
necessary in order to achieve a common view (mental image) of the process with all concerned employees. This
stage is an iterative process.

Problem analysis[edit]
A thorough analysis of process problems can then be conducted, based on the process map, and information
gathered about the process. At this time of the project, process goal information from the strategy audit is available
as well, and is used to derive measures for process improvement.

Employee roles[edit]

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There are four roles within a business Management system: Business Leader, Process Owner, Operational
Manager, and Process Operator. The responsibilities of each of these roles are unique, but work together as a
system. Some employees in an organization may perform as many as all four of these roles over the course of a day,
week, month, or year.
The responsibilities of the roles all follow the PDCA (plan, do, check, and act) cycle.[citation needed][5]

Business leaders[edit]
Business leaders are responsible for creating the business plans[citation needed] (including strategic plans created during
the strategic planning process) and associated resourcing plans necessary to cause the organization to be
successful.
Senior leaders (corporate) are responsible for defining the customer and business objectives which an organization
needs[citation needed] to achieve to be successful. This process includes overseeing the development of the
organization's mission, vision (goal), and values.[citation needed] These persons are accountable for meeting customer and
business objectives.

Lower leader-levels (business unit and functional) are responsible for translating senior leaders' business objectives
into business objectives that make sense for their level and that support the accomplishment of the senior leaders'
business objectives.[citation needed] These persons are accountable for meeting business unit and functional objectives.
Plan: The business leaders create and own the business performance objectives of the organization. Senior leaders
need to first understand the requirements of their customers, stockholders, workforce, suppliers, and communities.
They need to understand their competition. They need to understand the environmental, economic, technological,
social, legal, and political environments that they do business within. Senior leaders need to consider all of these
elements as they design a Business model and business Strategy map that will meet the customer and business
requirements. Business Leaders then translate these requirements and business environment issues into business
performance objectives. Business Leaders then create business plans and associated resourcing plans that will
cause the organization to achieve these business objectives. The Business Leaders establish business performance
metrics to measure the businesss capability to meet these business objectives. Many organizations create
a Balanced scorecard to organize and communicate business performance metrics.
Do: The business leaders are responsible for communicating to the organization their business plans. As the
organization conducts business, the Business Leaders are responsible to build bridges and remove barriers that will
allow the business performance objectives to be met. The business performance metric data is produced and
collected as business is performed by the organization.
Check: The business leaders periodically analyze the business performance data and use it to visualize the
businesss capability to meet business objectives over time (performance trends), compare actual performance
against performance targets, and identify performance issues.
Act: The business leaders are responsible to create improvement actions to address the performance issues that are
identified during their analysis of the business performance data. These improvement actions are created to ensure
the organization is able to achieve their business plans.

Process owner[edit]
The process owner is responsible for designing the processes necessary to achieve the objectives of the business
plans that are created by the Business Leaders. The process owner is responsible for the creation, update and
approval of documents (procedures, work instructions/protocols) to support the process. Many process owners are
supported by a process improvement team. The process owner uses this team as a mechanism to help create a high
performance process. The process owner is the only person who has authority to make changes in the process and
manages the entire process improvement cycle to ensure performance effectiveness. This person is the contact
person for all information related to the process. This person is accountable for the effectiveness of the process.
Plan: The process owners create and own the process performance objectives of the organization. The process
owner first needs to understand the external and internal customer requirements for the process. This person uses
the business plans as a source to help understand the long term and short term customer and business
requirements. This person then translates these requirements into process performance objectives and establishes
product (includes service) specifications. This person establishes process performance metrics to measure the

processs capability to meet the product specifications and overall process objectives. The set of metrics that are to
be reviewed by operational managers and process operators are called key performance indicators (KPIs). The
process owner then designs process steps to describe work that when performed will have the capability to produce
products that meets the customer and business requirements.
Do: The process owner is responsible to communicate to the operational managers the details of the processes that
the operational managers are responsible to execute. As the operational managers and process operators perform
the processes, the process owner is responsible to build bridges and remove barriers that will allow the process
performance objectives to be met. The process performance metric data is produced and collected as the process is
performed by process operators. The process owner is continually involved with the operational managers and
process operators as they usekaizen to continually improve the process as they are performing the work.
Check: The Process Owner periodically analyzes the process performance data and use it to visualize the processs
capability to operate within control limits over time (performance trends), compare actual performance against
performance targets, and identify performance issues.
Act: The Process Owner is responsible for creating improvement actions that address performance issues that are
identified during their analysis of the process performance data. Improvement actions may include the initiation of
Lean projects to reduce waste from the process or include the initiation of Six Sigma projects to reduce variation in
the process. Improvement actions may include the use of problem solving tools that would include risk assessment
and root cause analysis. Risk assessment is used to identify and reduce, eliminate, or mitigate risk within the
process. This is the proactive approach to avoid problems being created from the process. Root-cause analysis is the
reactive way to respond to problems that occur from the process. Root-cause analysis is used to identify the causes
of problems within the process and identify and implement improvement actions that will ensure these problems do
not occur again.

Operational manager[edit]
The Operational Manager is responsible for bringing the resources and processes together to achieve the objectives
of the business plans that are created by the business leaders. This person is accountable for how well the process
is performed.
Plan: The Operational Manager - in collaboration with each Process Operator, creates Process Operator
performance objectives for the employees they supervise. The Operational Manager needs to understand the
performance requirements of the process. They match employees (Process Operators) with the competency and skill
requirements of the process to be performed. They ensure that the Process Operators have the budget, facilities,
and technology available to them that is necessary to achieve the performance objectives of the processes.
Do: The Operational Manager is responsible for teaching process operators how to perform the processes (work).
Process Operator instruction usually consists of classroom and on-the-job training. The Operational Manager
oversees the work and ensures Process Operators receive ongoing informal feedback as to their performance. As
the Process Operators perform the processes, the Operational Managers are responsible to build bridges and
remove barriers that will allow the process and Process Operator performance objectives to be met. Process and

Process Operator performance metric data is produced and collected as the process is performed. The Operational
Manager ensures that Process Operators are using Kaizen to continually improve the process as they are performing
the work.
Check: The Operational Manager periodically analyzes the key performance indicators (KPIs) during the production
cycle to evaluate the work groups ability to achieve the process and process operator performance objectives. This
data is used to visualize the process and process operator capability to meet business plan objectives over time
(performance trends), compare actual performance against performance targets, and identify performance issues.
They review this performance data and sort out process operator performance issues from process performance
issues. Many organizations use a war room concept to post performance data. Within the war room, the operational
manager conducts periodic review and analysis of this performance data.
Act: The Operational Manager is responsible for creating improvement actions to address the performance issues
that are identified during their analysis of the process and Process Operator performance data. They address
Process Operator performance with ongoing feedback to the Process Operator and/or by using an employee
performance management review process. They communicate process performance issues to the Process
Operator(s) and the Process Owner.

Process operator[edit]
The process operator is responsible for learning and perform the processes (work) necessary to achieve the
objectives of the business plans that are created by Business Leaders. This person is accountable for performing the
requirements of the process.
Plan: The process operators - in collaboration with their Operational Manager, create and own their performance
objectives. Process Operators are responsible to understand the performance objectives of the process they are to
perform and the specifications of the product they are to produce.
Do: Process operators are responsible for learning the processes (work) that they are to perform. They ensure the
processes are performed to meet the process performance objectives and produce product that meets specification.
As the Process Operators perform the processes, they are responsible to communicate to their Operational Manager
(supervisor) the bridges that need to be built and the barriers that need to be removed to allow the process and
Process Operator performance objectives to be met. Process and Process Operator performance metric data is
produced and collected as the process is performed.
Check: The process operator periodically reviews the Key performance indicators (KPIs). The Process Operator
makes adjustments to their work based on their actual performance compared to KPI targets. The Process Operator
is responsible for identifying and reporting any performance issues and stopping production if necessary.
Act: Process operators practice kaizen to continually challenge the process and communicate improvement
suggestions to their operational manager (supervisor).

Key considerations[edit]

Processes need to align to business goals An organization's strategic goals should provide the key direction for
any Business Process Improvement exercise. This alignment can be brought about by integrating programs
like Balanced Scorecard to the BPI initiative. e.g. When deploying Six Sigma, identification of projects can be done
on the basis of how they fit into the Balanced Scorecard agenda of the organization.
Customer focus Fast-changing customer needs underscore the importance of aligning business processes to
achieve higher customer satisfication. It is imperative in any BPI exercise that the "Voice of Customer" be known, and
factored in, when reviewing or redesigning any process.
Importance of benchmarks BPI tools place a lot of emphasis on "measurable results". Accordingly, benchmarks
assume an important role in any BPI initiative. Depending on the lifecycle of the process in question, benchmarks
may be internal (within the organization), external (from other competing / noncompeting organizations) or dictated
by the senior management of the organization as an aspirational target.
Establish process owners For any process to be controllable, it is essential that there be clarity on who are
the process owners, and what constitutes success/failure of the process. These success/failure levels also help
establish "control limits" for the process, and provide a healthy check on whether or not a process is meeting the
desired customer objectives.

Methodologies[edit]

Carrying out BPI is a project, so all principles of project management apply; but there are additional tools and
discipline needed to be effective in mastering BPI work. This ensures, for example, that improvement processes
do not conflict with each other (such issues would be addressed as part of risk planning). [6] BPI is truly a process
in and of itself; part of the ultimate goal is to build in continuous improvement.

The first step in BPI is to define the existing structure and process at play (AS-IS), and identify key process
areas that need renovation.

Then, the BPI process owners should determine what outcomes would add value to the organization's
objectives and how best to align its processes to achieve those outcomes (TO-BE).

Once the outcomes are determined, the organization's work force may need to be re-organized to meet the
new objectives, using the variety of tools available within the BPI methodology. The critical success factor in any
BPI effort is change management with people.

Process-Oriented Architecture[edit]
Tristan Boutros and Tim Purdie defined a fresh approach in the industry when they created their 2013 book

[7]

The

Process-Oriented Architecture (POA) defined within was developed beginning in 2005 and forms the base level
taxonomy for their systematic and best in class method for driving effective business outcomes while driving high
levels of employee engagement and satisfaction. The POA was originally developed to illustrate the interdependence
of process design and successful business outcomes to aid the workers faced with necessary change a simple to
understand map to drive them safely through the improvement lifecycle. Throughout the following years the POA

became a platform for significant employee performance boost, and effective business processes that market-ably
turned out high yield financial results.

Rummler-Brache methodology[edit]
Rummler and Brache defined a comprehensive approach to organizing companies around processes, managing and
measuring processes and redefining processes in their 1990 book. [8] This is a systematic approach to business
process change and ideas first introduced in this book have been influential on other, less comprehensive
approaches. This book draws heavily from the basic approach laid out in Improving Processes.

The Helix Methodology[edit]

The Helix Methodology (Helix) was developed by Michael R. Wood beginning in 1979. Helix was originally developed
to help small to medium businesses to replace manual and outdated business practices and processes with
automated solutions. Throughout the 1980s and 1990s, Helix was expanded to become a complete Enterprise (Value
Delivery) Improvement and Business Process Analysis (HEI/BPA) methodology. The Business Process Improvement
component of Helix has been published in a series of two books.[9][10] HEI/BPA provides a method for aligning business
processes and IT systems with organization strategies, goals and objectives. In addition, HEI/BPA provides the
metrics and performance measures needed to support MBO and performance score card programs.[11]
The Helix Method is the premier methodology for aligning value from strategy through operations. The latest edition
of the work was published in June 2016 and is available on request in PDF form. Send requests to
mike_wood@msn.com The book is over 500 pages in length and provides the only true HOW-TO case study within
the BPI / Total Value Management space. Below is the table of contents.
1- THE QUEST 2 - PREPARING FOR THE JOURNEY 3 - THE ROAD AHEAD 4 - LAYING THE FOUNDATION FOR
THE ROAD AHEAD 5 - EXECUTIVE OVERVIEW MANAGING THE HELIX PROCESS 6 - INTRODUCTION TO THE
CASE STUDY & IMPLEMENTERS GUIDE 7 - IDENTIFYING WINNING PROJECTS WELCOME TO JONATHAN,
MILLS INC. CASE STUDY 8 - KICKING OFF THE PROJECT 9 - FACILITATION TOOLS AND TECHNIQUES 10 CONDUCTING FACILITATION WORK SESSIONS 11- CONDUCTING POST DIAGNOSTIC WORK SESSIONS
BASIC DIAGNOSTICS 12 - CONDUCTING POST DIAGNOSTIC WORK SESSIONS ADVANCED DIAGNOSTICS
13 - CONDUCTING SUBSEQUENT WORK SESSIONS AND PRESENTATIONS 14 - IMPLEMENTING
IMPROVEMENT RECOMMENDATIONS 15 - DEVELOPING IT APPLICATION REQUIREMENTS
APPENDIX APPENDIX - SUMMARY OF HELIX FACTORS APPENDIX - IMPLEMENTERS CHECKLISTS
APPENDIX - JMI CASE STUDY DOCUMENTATION APPENDIX - GLOSSARY OF TERMS APPENDIX SUGGESTED READING AND LISTENING APPENDIX - INDEX
The Principle upon which Helix is based are as follows:
The Principle Factors There are 8 factors that form the philosophical foundation of HELIX. HELIX is as much a
philosophy as it is a set of pragmatic tools and techniques for helping organizations discover ways to improve

processes and achieve alignment. Through the #1 Principle of Making a Difference, an organization can instill a
positive attitude for moving forward.
1. 2 The Principle of Value-added Delivery Systems helps the organization move away from viewing itself as a
hierarchy to viewing itself as a series of cross-functional activities that add value to its stakeholders.
2. 3 The Principle of Discovery liberates the organization to explore and to tap into its human resources for
ways to improve how it adds value to stakeholders.
3. 4 The Principle of Collaboration provides the understanding that breakthrough learning and growth comes
through dialogue and collaboration during periods of discovery.
4. 5 The Principle of Context presents how to energize collaborative work efforts by creating meaningful
objectives that are actionable at all levels of the organization.
5. 6 The Principle of Conditioning for Change provides insights into how people and organizations react to
change. The process of conditioning people and organizations for successful change is introduced.
6. 7 The Principle of Catharsis and Revelation explores the human need to vent before they can let go and
move forward and unleash their creativity. It provides a stable and non-confrontational method of allowing
people to experience this process.
7. 8 The Principle of Focused Urgency and Momentum presents how an organization can achieve its objectives
without becoming reactive.
Factor #1 - The Principle of Making a Difference - We all make a difference - The kind of difference we make is up to
us We All Make a Difference. The only question is, What kind of difference will we make? Will we make a positive or
negative difference in the lives of people and organizations with whom we work? Our presence or absence in a
situation may alter the outcome of that situation. Even if we are oblivious to our impact, the impact is still there.
However, making consistently positive differences is a matter of persistent and conscious intent; we enter situations
with the awareness and desire to add value to the outcome. With this mindset, the chances of success are increased
tenfold.
Factor #2 - The Principle of Value-added Delivery Systems - Organizations are Value-added Delivery Systems HELIX
views organizations as Value-added Delivery Systems (VADS). VADS are the processes that provide specific
outcomes each time they are executed. By definition, these outcomes add value to an organizations stakeholders
(Owners, Employees, Customers, Suppliers, Community, etc.) VADS are end-to-end processes where people share
information and take action that result in the achievement of a specific outcome.
Factor #3 - The Principle of Discovery - Discovery is Critical to Learning and Improvement One of the key concepts
promoted by HELIX is the principle of discovery. Discovery provides the framework for exploring the implications of
change in a nonthreatening way. It allows teams to be creative about solutions and enables them to develop models
for improving processes that can be implemented in a practical and cost-effective manner. Discovery is where HELIX

begins. During the Discovery phase, the needs of the business are explored. A contrast between where the
organization sees itself today and how it would like to see itself in the future is developed. This future state is
articulated by management through concrete, action-focused goals. When John F. Kennedy declared that we would
land a man on the moon by the end of the decade in the early 1960s, he created a compelling vision for the future
that was concrete and extremely focused.
Factor #4 - The Principle of Collaboration - Breaking down barriers requires collaboration In virtually every
organization there exists political and communication barriers that make positive change difficult, if not impossible. In
order for VADS to be improved, these barriers must be neutralized (or at least set aside). Fortunately, HELIX
incorporates techniques that encourage collaboration. In a structured, collaborative process, barriers are slowly
dissolved. People begin to focus on process, not each other. They become open to explore possibilities. Telling
people they must cooperate, collaborate and get along with each other rarely works. More often than not, people
need to feel free to choose to share and collaborate. When this happens naturally, true buy-in occurs, not just
compliance to the process.
Factor #5 - The Principle of Context - Building a context for dialogue and understanding is essential To understand
the meaning of words and events, each must be viewed in their situational context. Listening to others or viewing an
exchange or set of actions without regard to their context, diminishes and hinders the ability to interpret meaning and
intent is lost. Words said in jest (a humorous context) are interpreted differently than those words said in anger. With
political correctness the rage du jour, people are being conditioned to take words and actions both critically and
literally without regard to their context, resulting in more confrontations, hidden agendas and misaligned
expectations. The workflows that make up the VADS in an organization define the context in which people
communicate and share information.
Factor #6 - The Principle of Conditioning for Change - Unconditioned change creates resistance and chaos. Change
is inevitable. People grow older and, in the process, change. Mountains change shape and rivers change direction
over millions of years. These types of changes are slow and easy to adjust to. Too much change, done too quickly,
creates upheaval. There can be radical reactions. Mountains can soar or crumble. Rivers can overflow or dry up.
Abrupt or rapid change can throw people, organizations and systems out of control and into chaos. The natural
response to change is resistance. Resistance to change is not good or bad; resistance to change is natural. As one
might imagine, people and organizations prefer to stay in a predictable and stable state. When change occurs to any
organism, that organism will make internal adjustments to keep change to a minimum. It will try to keep a sense of
balance and reject forces that cause stress. Science calls this state homeostasis, the self-regulating of life
processes.
actor #7 - The Principle of Catharsis and Revelation - Catharsis and Revelation are keys to creative solutions. Part of
the leverage-building process for change requires that people be allowed to vent their frustrations in a
nonthreatening, constructive environment. Allowed to air their frustrations, people are more able to openly, creatively,
and interactively explore alternatives. HELIXs facilitation process provides the safe haven needed for process
groups to collectively release their frustrations and experience the revelations that come from creative solution
development. At the beginning of each HELIX work session, participants (knowledge workers) are facilitated to
develop or update a model that lists existing situations that could be improved and what that improved situation

(preliminary goal) would look like. This model is called a change analysis. The model is a simple, two-column format
that is easy to understand. The beauty of the model is that it allows each participant to get burning issues off their
chest (emotional and functional) while focusing them to project a more desirable future state. The point to remember
is that the first steps toward getting leverage on change are to release frustration, build perspective and focus on the
future, not the past. With leverage comes the creative tension (a force that pulls us forward) needed to move forward
and achieve desired outcomes.
Factor #8 - The Principle of Focused Urgency and Momentum - Focused Urgency is key to maintaining momentum
Urgency is often associated with reacting to what appears to be the most pressing issue at the time. This is often
referred to as the Tyranny of the Urgent. In this context, urgency is not considered a good thing. However, there is
another form of urgency that helps people and organizations achieve results: Focused Urgency. Focused Urgency is
the process of acting on important goals with deliberate dispatch. Focused Urgency rivets attention on to what is
important while screening out interference and distraction. Through Focused Urgency, an organization or person
accelerates the pace of their actions until the desired result is achieved. When an organization sets out to achieve
objectives, it is critical that they do so with Focused Urgency. In doing so, energy and momentum are maintained.
People see the objective as a serious and passionate pursuit of the organization. Focused Urgency builds shared
vision and direction. Virtually every high achiever instinctively understands the importance of Focused Urgency. Each
knows how to become single minded in their actions. Without Focused Urgency, it is doubtful that any form of a major
initiative will succeed. Organizations that harness the power of Focused Urgency set the pace for others to follow.
Each action builds on the last. Objectives become rallying points. There is no confusion or doubt as to the path the
group is taking or what will be accomplished.
The Alignment Factors
Factor #9 - Alignment of Stakeholder Needs to Strategic Direction Aligning stakeholder needs to strategic direction
requires that: 1) the organization knows who its stakeholders are and what they want; 2) the organization has a
consciously developed strategic direction. All organizations have stakeholders and a direction it pursues. The
distinction is whether or not the organization is consciously aware of either.

Organizations exist to satisfy stakeholder needs for value. Typically, these stakeholders are: Owners Customers
Employees Community Strategic Alliances and Providers Adding value to a stakeholder implies an understanding
of that stakeholders expectations. If an organization does not understand its stakeholders needs, then it is unlikely
that it will align those needs with its strategic direction. Deploying HELIX at any level increases the chance that
people will begin to think more strategically.
Factor #10 - Alignment of Strategic Direction to Business Objectives Once a strategic direction has been established
(a path that moves the organization toward a greater fulfillment of stakeholders needs), it needs to align its business
objectives with that direction. In essence, once the company has defined WHO (stakeholders) it serves and WHERE
(strategic direction) it wants to go, it needs to build a series of WHATS (business objectives) that will get them to the
WHERE. Business objectives should be stated in context of the strategic direction they support. This way, there can
be no doubt why the business objective is important. Good business objectives are specific enough to leave nothing

to interpretation. Good objectives contain the criteria for knowing when success has been achieved and plainly states
the challenge. Real alignment within an organization happens when top management provides a strategic direction
that is supported by business objectives that rally and compel the workforce to action.
Factor #11 - Alignment of Business Objectives to Value-added Delivery Systems and Process Groups Once the
business objectives are established they need to be correlated with each of the VADS that will support them. Valueadded Delivery Systems (VADS) represent processes that provide stakeholders with expected value. They are endto-end work processes that have the conscious intent to provide specific products and services to the stakeholders of
an organization. Examples include: The process of selling (from point of order through delivery and payment) - Here
the stakeholders are the customer (receiving value for money), and the owners or stockholders (making a profit on
the sale). The process of compensating employees (from beginning of a pay period through paycheck distribution) Here the stakeholders are the employee (receiving money for services provided), and the employer (receiving labor
or value for money). The process of divisional business planning (from reviewing the organizations strategy &
business objectives to assessing last years performance, or developing divisional objectives and action plans to
creating budgets and to getting approval); here, the stakeholders are everyone connected to the organization
(customers, employees, owners, vendors and community). In each of these examples, the VADS encompasses
many transactions and process groups. HELIX provides a way to align business objectives with VADS. The HELIX
process promotes this alignment both explicitly and implicitly.
Factor #12 -Alignment of Value-Added Delivery Systems and Process Groups to the Information Being Shared &
Moved Process groups share information among themselves and other process groups. This information typically
relates to completing a portion of a larger effort. When the sales desk completes and sends the sales order to the
Credit department for approval, they are performing only a small piece of work in the sales process. The act of
sending the order to the Credit department implies that more work will need to be done before the order can be
complete its cycle. The Credit department, in turn, adds value to the order by approving it and authorizing it for
shipment. This act of sharing information to move work through the organization does not happen by accident.
Aligning and understanding how and why process groups share information sets the stage for breakthrough process
improvements.
Factor #13 -Alignment of Information Being Shared to Stimulus Triggers and Process Group Actions Stimulus triggers
are the visual, audio, tactile or other sensory cues that let a person know when to take action. Within the context of
HELIX, a stimulus trigger alerts a knowledge worker that it is time to perform a predetermined set of actions related
to information moving through a specific VADS. In traditional work environments, stimulus triggers often take the form
of paperwork appearing in front of someone. But stimulus triggers take many forms. For a hotel front-desk clerk, a
stimulus trigger is a guest appearing at the front desk. The guests mere appearance alerts the clerk to inquire how
they can help the guest. At that point, a key placed on the counter could trigger the actions needed to check the
guest out of the hotel. For a firefighter, the sound of a siren triggers the actions needed to put out a fire. When
embarking on an effort to improve VADS-related work processes, it is important to understand explicitly the stimulus
triggers that will occur and the subsequent actions that are to be taken. It is also important to understand how fast an
action is to be taken once the trigger has occurred. Finally, there needs to be an understanding of the frequency of
these stimulus triggers within a given time frame. In short, stimulus triggers must be understood in terms of what they
are, how fast an action must be taken and how often they occur. Understanding stimulus triggers raises the

knowledge workers conscious awareness of what is going on around them in the workplace. They become more
competent in their interpretation of cues. They learn how to focus on stimulus triggers and disregard distractions.
Their perceptual acuity is heightened. In essence, in a field full of flowers and weeds, they are being trained to
recognize the flowers while not being distracted by the weeds.
Factor #14 - Alignment of Process Group Actions to Process Sequence Along with understanding the stimulus
triggers that cue people to take action, it is important for the VADS team to understand the sequence in which these
actions must take place. Rework, inefficiency and failure are often the result of people taking the right actions in the
wrong sequence. By using the HELIX workflow mapping techniques and correlating these maps back to the change
analysis, action-sequencing errors can be identified and engineered out of VADS.
Factor #15 - Alignment of Process Sequence to VADS Object Transformations To understand where actionsequencing errors exist there needs to be an understanding of the relationships between process sequence and the
concept of object transformation. In the context of workflows, objects are the core subject matter being moved
through a process. As an object is moved from one process group to another, it changes, it transforms. This means
that it has different characteristics coming out of the process group than it had going in. These transformations
manifest themselves as changes in the status of the object. One of the keys to designing effective and efficient VADS
is to understand how and when objects transform as they move through a process. Failure to understand object
transformation results in rework, reduced customer service levels, frustration and costly errors.
Factor #16 - Alignment of VADS Object Transformation to the Value-added As objects transform, they should have a
discernible increase in value. This means that the transformation of an object leads directly to the completion of the
current VADS cycle or positions a future cycle for success. When engineering VADS, it is imperative that each object
being transformed be tested for the value that transformation has on current and future VADS cycles. Understanding
object transformation in context to adding value to VADS requires breaking processes down to their most
fundamental level. By streamlining VADS to focus only on the steps needed to transform the primary and secondary
objects, true improvements can be realized. Think of the process of aligning object transformations as a chiropractor
aligning the vertebrae of the spine to allow the nervous system to function properly. This alignment process tunes a
VADS to operate at peak efficiency.
Factor #17 - Alignment of VADS Object Transformation to Process Failures and VADS Impediments For every action
that can go right, there is at least one way it can go wrong. There is little likelihood that a flawless process that
involves people can ever be developed. Chaos theory teaches that there are too many variables to control to have
100 percent predictability over outcomes. Part of developing VADS that are watertight requires that we take an
honest look at where they can breakdown. Once the processes, sequences and object transformations are
understood and aligned, it is possible to systematically develop recovery scenarios for those instances when the
VADS breaks down. Breakdowns occur for many reasons. The key is to develop recovery procedures for
breakdowns that may affect critical objects from properly transforming. This means that each VADS needs to have
integrated, early-warning systems and fail-safe stimulus trigger procedures. This allows people to identify, avoid or
respond to breakdowns as soon as possible.

Implementation[edit]

Most resistance to BPI comes from within an organization. Managers often do not wish to change existing structures
because they feel threatened by changes to their organization or power.[12] The labor force may resist BPI because of
fears of layoffs; however, an organization using BPI on a regular basis, argue many proponents, will already have the
proper work force to meet existing business challenges.
Some organizations have implemented BPI on a smaller scale and reported success, by doing the following:

Start with a small process that can be completed in a short time frame.

Set clear timelines.

Do not spread resources thinly and focus on the short term payoff.

Management and primary stakeholders must be involved, or else even a limited implementation will fail.

Process improvement and management[edit]

Identify, analyze and improve the Key Processes[edit]

An organization is only as good as its processes. To be able to make the necessary changes in an organization, one
needs to understand the key processes of the company. Rummler and Brache suggested a model for running a
Process Improvement and Management project (PI&M), containing the following steps: [13]
1. Identify the process to be improved (based on a critical business issue): The identification of key processes
can be a formal or informal exercise. The management team might select processes by applying a set of
criteria derived from strategic and tactical priorities, or process selection is based on obvious performance
gaps. It is important is to select the process(es) which have the greatest impact on a competitive
advantage or customer requirement.
2. Develop the objective(s) for the project based on the requirements of the process: The focus might be on
quality improvement, productivity, cost, customer service or cycle time. The goal is however always the
same; to get the key process under control.
3. Select the members of the cross-functional team: A horizontal (cross-functional) analysis is carried out by a
team composed of representatives of all functions involved in the process. While a consultant or in-house
staff person can do the job, the quality of the analysis and the commitment to change is far greater with a
cross-functional team.
4. Document the current process by creating a flowchart or "organization map.": Describe the process regarding
the Organizational level, the Process level and the Job/Performer level according to Rummler.[14] Develop a
cross-functional process map for the process.

5. Identify "disconnects" in the process: Disconnections are everything that inhibit the efficiency and
effectiveness of the process. The identification should be categorized into the three levels: The
Organizational level, the Process level and the Job/Performer level.
6. Recommend changes (organizational, in the process or in its execution): Categorize and prioritize the main
problems and possibilities, evaluate alternative solutions. Develop a cross-functional process map for the
recommended process.
7. Establish process and sub-process measures: The process measures should reflect the objectives of the
project.
8. Implement the improvements.

The elements of a successful implementation effort[edit]

Executive leadership and management commitment to see the project through to successful implementation.

A clear statement of why the change is necessary.

A clear vision of how the organization will be different after the changes.

Sound, comprehensive recommendations.

A sound implementation strategy and plan.

Adequate resources and time.

Communication of plans, roles and responsibilities, benefits, progress, resolutions.

Willingness of affected functions and individuals to support the proposed changes.

Implementation is effectively managed and executed.

This model for process analysis is just as useful for smaller processes as for larger and more complex processes.
Completion of Steps 4-7 can take from three days to three months, depending on the complexity of the process and
the extent of change required to remove the disconnects. Some of the benefits of this cross-functional team
approach to process improvement are that the participants learn a tremendous amount about the overall business
and their role in it. People earlier seen as unskilled might suddenly understand what is required from them, and will
start behaving according to this. The increased understanding of the process will also increase the learning from
additional formal training initiated, but also reduce the amount of training needed. When the organization finally
understand what their key processes are they will more easily feel committed to the implementation of improvements.

Ongoing Process Improvement and Management (PI&M)[edit]

Ongoing Process Improvement and Management can be introduced by:

Monitoring its performance against customer-driven process measures.

Certifying the process (ensuring that it meets a set of effectiveness criteria).

Appointing a process owner who is responsible on an ongoing basis for process performance.

Ensuring that the process has a plan and a budget.

Creating a reward system which encourages process (as opposed to parochially functional) effectiveness.

Managing the white space between functions and seeing that their subordinate managers do the same.

The system framework of PI&M can be used both to improve the flow of a specific process and at the organizational
level to examine general management issues. By introducing PI&M as a standard for continuous improvement,
employees are given clear guidance as to how they are expected to behave. By this she would create clear values
for a company that will have a good chance of being accepted by the whole organization.

Kaizen
From Wikipedia, the free encyclopedia

Kaizen in Japanese characters/Kanji

Kaizen, Japanese for "improvement." When used in the business sense and applied to the workplace, kaizen refers
to activities that continuously improve all functions and involve all employees from the CEO to the assembly
line workers. It also applies to processes, such as purchasing and logistics, that cross organizational boundaries into

the supply chain.[1] It has been applied in healthcare,[2] psychotherapy,[3] life-coaching, government, banking, and other
industries.
By improving standardized activities and processes, kaizen aims to eliminate waste (see lean manufacturing). Kaizen
was first implemented in several Japanese businesses after the Second World War, influenced in part by American
business and quality management teachers who visited the country. It has since spread throughout the world [4] and is
now being implemented in environments outside of business and productivity.

Overview[edit]
The Sino-Japanese word "kaizen" simply means "change for better", with no inherent meaning of either "continuous"
or "philosophy" in Japanese dictionaries or in everyday use. The word refers to any improvement, one-time or
continuous, large or small, in the same sense as the English word "improvement". [5] However, given the common
practice in Japan of labeling industrial or business improvement techniques with the word "kaizen" (for lack of a
specific Japanese word meaning "continuous improvement" or "philosophy of improvement"), especially in the case
of oft-emulated practices spearheaded by Toyota, the word "kaizen" in English is typically applied to measures for
implementing continuous improvement, or even taken to mean a "Japanese philosophy" thereof. The discussion
below focuses on such interpretations of the word, as frequently used in the context of modern management
discussions. Two kaizen approaches have been distinguished:[6]

flow kaizen;

process kaizen.

The former is oriented towards the flow of materials and information, and is often identified with the reorganization of
an entire production area, even a company. The latter means the improvement of individual workstands. Therefore,
improving the way production workers do their job is a part of a process kaizen. The use of the kaizen model
for continuous improvement demands that both flow and process kaizens are used, although process kaizens are
used more often to focus workers on continuous small improvements. In this model, operators mostly look for
small ideas which, if possible, can be implemented on the same day. This is in contrast to traditional models of work
improvement, which generally have a long lag between concept development and project implementation. In the
traditional model, the time between concept development and project implementation is very long. In the kaizen
model, workers mostly look for small ideas and improvements which can be implemented on the same day.
Kaizen is a daily process, the purpose of which goes beyond simple productivity improvement. It is also a process
that, when done correctly, humanizes the workplace, eliminates overly hard work ("muri"), and teaches people how to
perform experiments on their work using the scientific method and how to learn to spot and eliminate waste in
business processes. In all, the process suggests a humanized approach to workers and to increasing productivity:
"The idea is to nurture the company's people as much as it is to praise and encourage participation in kaizen
activities."[7] Successful implementation requires "the participation of workers in the improvement." [8] People at all
levels of an organization participate in kaizen, from the CEO down to janitorial staff, as well as external stakeholders
when applicable. Kaizen is most commonly associated with manufacturing operations, as at Toyota, but has also
been used in non-manufacturing environments.[9] The format for kaizen can be individual, suggestion system, small
group, or large group. At Toyota, it is usually a local improvement within a workstation or local area and involves a

small group in improving their own work environment and productivity. This group is often guided through the kaizen
process by a line supervisor; sometimes this is the line supervisor's key role. Kaizen on a broad, cross-departmental
scale in companies, generates total quality management, and frees human efforts through improving productivity
using machines and computing power.[citation needed]
While kaizen (at Toyota) usually delivers small improvements, the culture of continual aligned small improvements
and standardization yields large results in terms of overall improvement in productivity. This philosophy differs from
the "command and control" improvement programs (e g Business Process Improvement) of the mid-twentieth
century. Kaizen methodology includes making changes and monitoring results, then adjusting. Large-scale preplanning and extensive project scheduling are replaced by smaller experiments, which can be rapidly adapted as
new improvements are suggested.[citation needed]
In modern usage, it is designed to address a particular issue over the course of a week and is referred to as a
"kaizen blitz" or "kaizen event".[10][11] These are limited in scope, and issues that arise from them are typically used in
later blitzes.[citation needed] A person who makes a large contribution in the successful implementation of kaizen during
kaizen events is awarded the title of "Zenkai".

History[edit]
The small-step work improvement approach was developed in the USA under Training Within Industry program (TWI
Job Methods).[12] Instead of encouraging large, radical changes to achieve desired goals, these methods
recommended that organizations introduce small improvements, preferably ones that could be implemented on the
same day. The major reason was that during WWII there was neither time nor resources for large and innovative
changes in the production of war equipment.[6] The essence of the approach came down to improving the use of the
existing workforce and technologies.
After World War II, to help restore Japan, American occupation forces brought in American experts to help with the
rebuilding of Japanese industry while the Civil Communications Section (CCS) developed a management training
program that taught statistical control methods as part of the overall material. Homer Sarasohn and Charles
Protzman developed and taught this course in 1949-1950. Sarasohn recommended W. Edwards Deming for further
training in statistical methods.
The Economic and Scientific Section (ESS) group was also tasked with improving Japanese management skills and
Edgar McVoy was instrumental in bringing Lowell Mellen to Japan to properly install theTraining Within Industry (TWI)
programs in 1951.
Prior to the arrival of Mellen in 1951, the ESS group had a training film to introduce the three TWI "J" programs (Job
Instruction, Job Methods and Job Relations) - the film was titled "Improvement in 4 Steps" (Kaizen eno Yon Dankai).
Thus "Kaizen" was introduced to Japan. For the pioneering, introduction, and implementation of Kaizen in Japan, the
Emperor of Japan awarded the 2nd Order Medal of the Sacred Treasure to Dr. Deming in 1960. Subsequently, the
Japanese Union of Science and Engineering (JUSE) instituted the annual Deming Prizes for achievement in quality
and dependability of products.
On October 18, 1989, JUSE awarded the Deming Prize to Florida Power & Light Co. (FPL), based in the US, for its
exceptional accomplishments in process and quality-control management. FPL became the first company outside
Japan to win the Deming Prize.[13]

Implementation[edit]
The Toyota Production System is known for kaizen, where all line personnel are expected to stop their moving
production line in case of any abnormality and, along with their supervisor, suggest an improvement to resolve the
abnormality which may initiate a kaizen.

The PDCA cycles[14]

The cycle of kaizen activity can be defined as:

Plan->Do->Check->Act
This is also known as the Shewhart cycle, Deming cycle, or PDCA.
Another technique used in conjunction with PDCA is the 5 Whys, which is a form of root cause analysis in which the
user asks a series of 5 "why" questions about a failure that has occurred, basing each subsequent question on the
answer to the previous.[15][16] There are normally a series of causes stemming from one root cause, [17] and they can be
visualized usingfishbone diagrams or tables. The Five Whys can be used as a foundational tool in personal
improvement, or as a means to create wealth.[18]
Masaaki Imai made the term famous in his book Kaizen: The Key to Japan's Competitive Success.[1]
Apart from business applications of the method, both Anthony Robbins [19][20] and Robert Maurer have popularized the
kaizen principles into personal development principles. In the book One Small Step Can Change Your Life: The
Kaizen Way, and CD set The Kaizen Way to Success, Maurer looks at how individuals can take a kaizen approach in
both their personal and professional lives.[21][22]
In the Toyota Way Fieldbook, Liker and Meier discuss the kaizen blitz and kaizen burst (or kaizen event) approaches
to continuous improvement. A kaizen blitz, or rapid improvement, is a focused activity on a particular process or
activity. The basic concept is to identify and quickly remove waste. Another approach is that of the kaizen burst, a
specific kaizen activity on a particular process in the value stream.[23] Kaizen facilitators generally[weasel words] go through
training and certification before attempting a Kaizen project. [citation needed]

Strategic management
From Wikipedia, the free encyclopedia

"Business strategy" redirects here. For other uses, see business process.

Strategy

Strategic management involves the formulation and implementation of the major goals and initiatives taken by a
company's top management on behalf of owners, based on consideration of resources and an assessment of the
internal and external environments in which the organization competes. [1]
Strategic management provides overall direction to the enterprise and involves specifying the organization's
objectives, developing policies and plans designed to achieve these objectives, and then allocating resources to
implement the plans. Academics and practicing managers have developed numerous models and frameworks to
assist in strategic decision making in the context of complex environments and competitive dynamics. [2] Strategic
management is not static in nature; the models often include a feedback loop to monitor execution and inform the
next round of planning.[3][4][5]
Michael Porter identifies three principles underlying strategy: creating a "unique and valuable [market] position",
making trade-offs by choosing "what not to do", and creating "fit" by aligning company activities with one another to
support the chosen strategy.[6] Dr. Vladimir Kvint defines strategy as "a system of finding, formulating, and developing
a doctrine that will ensure long-term success if followed faithfully." [7]
Corporate strategy involves answering a key question from a portfolio perspective: "What business should we be in?"
Business strategy involves answering the question: "How shall we compete in this business?" [8] In management
theory and practice, a further distinction is often made between strategic management and operational management.
Operational management is concerned primarily with improving efficiency and controlling costs within the boundaries
set by the organization's strategy.

Definition[edit]

Strategic management processes and activities

Strategic management involves the formulation and implementation of the major goals and initiatives taken by a
company's top management on behalf of owners, based on consideration of resources and an assessment of the
internal and external environments in which the organization competes. [1] Strategy is defined as "the determination of
the basic long-term goals of an enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals."[9] Strategies are established to set direction, focus effort, define or clarify the
organization, and provide consistency or guidance in response to the environment. [10]
Strategic management involves the related concepts of strategic planning and strategic thinking. Strategic planning is
analytical in nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic
thinking, which synthesizes the data resulting in the strategy.Strategic planning may also refer to control mechanisms
used to implement the strategy once it is determined. In other words, strategic planning happens around the strategic
thinking or strategy making activity.[11]
Strategic management is often described as involving two major processes: formulation and implementation of
strategy. While described sequentially below, in practice the two processes are iterative and each provides input for
the other.[11]

Formulation[edit]
Formulation of strategy involves analyzing the environment in which the organization operates, then making a series
of strategic decisions about how the organization will compete. Formulation ends with a series of goals or objectives
and measures for the organization to pursue. Environmental analysis includes the:

Remote external environment, including the political, economic, social, technological, legal and
environmental landscape (PESTLE);

Industry environment, such as the competitive behavior of rival organizations, the bargaining power of
buyers/customers and suppliers, threats from new entrants to the industry, and the ability of buyers to substitute
products (Porter's 5 forces); and

Internal environment, regarding the strengths and weaknesses of the organization's resources (i.e., its
people, processes and IT systems).[11]

Strategic decisions are based on insight from the environmental assessment and are responses to strategic
questions about how the organization will compete, such as:

What is the organization's business?

Who is the target customer for the organization's products and services?

Where are the customers and how do they buy? What is considered "value" to the customer?

Which businesses, products and services should be included or excluded from the portfolio of offerings?

What is the geographic scope of the business?

What differentiates the company from its competitors in the eyes of customers and other stakeholders?

Which skills and capabilities should be developed within the firm?

What are the important opportunities and risks for the organization?

How can the firm grow, through both its base business and new business?

How can the firm generate more value for investors?[11][12]

The answers to these and many other strategic questions result in the organization's strategy and a series of specific
short-term and long-term goals or objectives and related measures.[11]

Implementation[edit]
The second major process of strategic management is implementation, which involves decisions regarding how the
organization's resources (i.e., people, process and IT systems) will be aligned and mobilized towards the objectives.
Implementation results in how the organization's resources are structured (such as by product or service or
geography), leadership arrangements, communication, incentives, and monitoring mechanisms to track progress
towards objectives, among others.[11]
Running the day-to-day operations of the business is often referred to as "operations management" or specific terms
for key departments or functions, such as "logistics management" or "marketing management," which take over once
strategic management decisions are implemented.[11]

Many definitions of strategy[edit]

Strategy has been practiced whenever an advantage was gained by planning the sequence and timing of the deployment of resources
while simultaneously taking into account the probable capabilities and behavior of competition.
Bruce Henderson[13]

In 1988, Henry Mintzberg described the many different definitions and perspectives on strategy reflected in both
academic research and in practice.[14][15] He examined the strategic process and concluded it was much more fluid and
unpredictable than people had thought. Because of this, he could not point to one process that could be
called strategic planning. Instead Mintzberg concludes that there are five types of strategies:

Strategy as plan a directed course of action to achieve an intended set of goals; similar to the strategic
planning concept;

Strategy as pattern a consistent pattern of past behavior, with a strategy realized over time rather than
planned or intended. Where the realized pattern was different from the intent, he referred to the strategy
as emergent;

Strategy as position locating brands, products, or companies within the market, based on the conceptual
framework of consumers or other stakeholders; a strategy determined primarily by factors outside the firm;

Strategy as ploy a specific maneuver intended to outwit a competitor; and

Strategy as perspective executing strategy based on a "theory of the business" or natural extension of the
mindset or ideological perspective of the organization.

In 1998, Mintzberg developed these five types of management strategy into 10 schools of thought and grouped
them into three categories. The first group is normative. It consists of the schools of informal design and conception,
the formal planning, and analytical positioning. The second group, consisting of six schools, is more concerned with
how strategic management is actually done, rather than prescribing optimal plans or positions. The six schools are
entrepreneurial, visionary, cognitive, learning/adaptive/emergent, negotiation, corporate culture and business
environment. The third and final group consists of one school, the configuration or transformation school, a hybrid of
the other schools organized into stages, organizational life cycles, or episodes. [16]
Michael Porter defined strategy in 1980 as the "...broad formula for how a business is going to compete, what its
goals should be, and what policies will be needed to carry out those goals" and the "...combination of
the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there." He
continued that: "The essence of formulating competitive strategy is relating a company to its environment." [17]

Historical development[edit]

Origins[edit]
The strategic management discipline originated in the 1950s and 1960s. Among the numerous early contributors, the
most influential were Peter Drucker, Philip Selznick, Alfred Chandler, Igor Ansoff, and Bruce Henderson. [2] The
discipline draws from earlier thinking and texts on 'strategy' dating back thousands of years. Prior to 1960, the term
"strategy" was primarily used regarding war and politics, not business. [18] Many companies built strategic
planning functions to develop and execute the formulation and implementation processes during the 1960s. [19]
Peter Drucker was a prolific management theorist and author of dozens of management books, with a career
spanning five decades. He addressed fundamental strategic questions in a 1954 book The Practice of
Management writing: "...the first responsibility of top management is to ask the question 'what is our business?' and
to make sure it is carefully studied and correctly answered." He wrote that the answer was determined by the
customer. He recommended eight areas where objectives should be set, such as market standing, innovation,
productivity, physical and financial resources, worker performance and attitude, profitability, manager performance
and development, and public responsibility.[20]

In 1957, Philip Selznick initially used the term "distinctive competence" in referring to how the Navy was attempting to
differentiate itself from the other services.[2] He also formalized the idea of matching the organization's internal factors
with external environmental circumstances.[21] This core idea was developed further by Kenneth R. Andrews in 1963
into what we now call SWOT analysis, in which the strengths and weaknesses of the firm are assessed in light of the
opportunities and threats in the business environment. [2]
Alfred Chandler recognized the importance of coordinating management activity under an all-encompassing strategy.
Interactions between functions were typically handled by managers who relayed information back and forth between
departments. Chandler stressed the importance of taking a long term perspective when looking to the future. In his
1962 ground breaking work Strategy and Structure, Chandler showed that a long-term coordinated strategy was
necessary to give a company structure, direction and focus. He says it concisely, structure follows strategy.
Chandler wrote that:
"Strategy is the determination of the basic long-term goals of an enterprise, and the adoption of courses of action
and the allocation of resources necessary for carrying out these goals."[9]
Igor Ansoff built on Chandler's work by adding concepts and inventing a vocabulary. He developed a grid that
compared strategies for market penetration, product development, market development andhorizontal and vertical
integration and diversification. He felt that management could use the grid to systematically prepare for the future. In
his 1965 classic Corporate Strategy, he developed gap analysis to clarify the gap between the current reality and the
goals and to develop what he called gap reducing actions.[22] Ansoff wrote that strategic management had three
parts: strategic planning; the skill of a firm in converting its plans into reality; and the skill of a firm in managing its
own internal resistance to change.[23]
Bruce Henderson, founder of the Boston Consulting Group, wrote about the concept of the experience curve in 1968,
following initial work begun in 1965. The experience curve refers to a hypothesis that unit production costs decline by
20-30% every time cumulative production doubles. This supported the argument for achieving higher market share
and economies of scale.[24]
Porter wrote in 1980 that companies have to make choices about their scope and the type of competitive advantage
they seek to achieve, whether lower cost or differentiation. The idea of strategy targeting particular industries and
customers (i.e., competitive positions) with a differentiated offering was a departure from the experience-curve
influenced strategy paradigm, which was focused on larger scale and lower cost. [17] Porter revised the strategy
paradigm again in 1985, writing that superior performance of the processes and activities performed by organizations
as part of their value chainis the foundation of competitive advantage, thereby outlining a process view of strategy.[25]

Change in focus from production to marketing[edit]

The direction of strategic research also paralleled a major paradigm shift in how companies competed, specifically a
shift from the production focus to market focus. The prevailing concept in strategy up to the 1950s was to create
a product of high technical quality. If you created a product that worked well and was durable, it was assumed you
would have no difficulty profiting. This was called theproduction orientation. Henry Ford famously said of the Model T
car: "Any customer can have a car painted any color that he wants, so long as it is black." [26]

Management theorist Peter F Drucker wrote in 1954 that it was the customer who defined what business the
organization was in.[12] In 1960 Theodore Levitt argued that instead of producing products then trying to sell them to
the customer, businesses should start with the customer, find out what they wanted, and then produce it for them.
The fallacy of the production orientation was also referred to as marketing myopia in an article of the same name by
Levitt.[27]
Over time, the customer became the driving force behind all strategic business decisions. This marketing concept, in
the decades since its introduction, has been reformulated and repackaged under names including market orientation,
customer orientation, customer intimacy, customer focus, customer-driven and market focus.
It's more important than ever to define yourself in terms of what you stand for rather than what you make, because what you make is
going to become outmoded faster than it has at any time in the past.
Jim Collins[28]

Jim Collins wrote in 1997 that the strategic frame of reference is expanded by focusing on why a company exists
rather than what it makes.[28] In 2001, he recommended that organizations define themselves based on three key
questions:

What are we passionate about?

What can we be best in the world at?

What drives our economic engine?[29]

Nature of strategy[edit]
In 1985, Professor Ellen Earle-Chaffee summarized what she thought were the main elements of strategic
management theory where consensus generally existed as of the 1970s, writing that strategic management: [8]

Involves adapting the organization to its business environment;

Is fluid and complex. Change creates novel combinations of circumstances requiring unstructured nonrepetitive responses;

Affects the entire organization by providing direction;

Involves both strategy formulation processes and also implementation of the content of the strategy;

May be planned (intended) and unplanned (emergent);

Is done at several levels: overall corporate strategy, and individual business strategies; and

Involves both conceptual and analytical thought processes.

Chaffee further wrote that research up to that point covered three models of strategy, which were not mutually
exclusive:
1. Linear strategy: A planned determination of goals, initiatives, and allocation of resources, along the lines of
the Chandler definition above. This is most consistent with strategic planningapproaches and may have a
long planning horizon. The strategist "deals with" the environment but it is not the central concern.
2. Adaptive strategy: In this model, the organization's goals and activities are primarily concerned with
adaptation to the environment, analogous to a biological organism. The need for continuous adaption
reduces or eliminates the planning window. There is more focus on means (resource mobilization to address
the environment) rather than ends (goals). Strategy is less centralized than in the linear model.
3. Interpretive strategy: A more recent and less developed model than the linear and adaptive models,
interpretive strategy is concerned with "orienting metaphors constructed for the purpose of conceptualizing
and guiding individual attitudes or organizational participants." The aim of interpretive strategy is legitimacy
or credibility in the mind of stakeholders. It places emphasis on symbols and language to influence the minds
of customers, rather than the physical product of the organization. [8]

Concepts and frameworks[edit]

The progress of strategy since 1960 can be charted by a variety of frameworks and concepts introduced by
management consultants and academics. These reflect an increased focus on cost, competition and customers.
These "3 Cs" were illuminated by much more robust empirical analysis at ever-more granular levels of detail, as
industries and organizations were disaggregated into business units, activities, processes, and individuals in a
search for sources of competitive advantage.[18]

SWOT Analysis[edit]
Main article: SWOT Analysis

A SWOT analysis, with its four elements in a 22 matrix.

By the 1960s, the capstone business policy course at the Harvard Business School included the concept of matching
the distinctive competence of a company (its internal strengths and weaknesses) with its environment (external
opportunities and threats) in the context of its objectives. This framework came to be known by the acronym SWOT
and was "a major step forward in bringing explicitly competitive thinking to bear on questions of strategy." Kenneth R.
Andrews helped popularize the framework via a 1963 conference and it remains commonly used in practice. [2]

Experience curve[edit]

Experience curve

Main article: Experience curve

The experience curve was developed by the Boston Consulting Group in 1966.[18] It is a hypothesis that total per unit
costs decline systematically by as much as 15-25% every time cumulative production (i.e., "experience") doubles. It
has been empirically confirmed by some firms at various points in their history.[30] Costs decline due to a variety of
factors, such as the learning curve, substitution of labor for capital (automation), and technological sophistication.
Author Walter Kiechelwrote that it reflected several insights, including:

A company can always improve its cost structure;

Competitors have varying cost positions based on their experience;

Firms could achieve lower costs through higher market share, attaining a competitive advantage; and

An increased focus on empirical analysis of costs and processes, a concept which author Kiechel refers to as
"Greater Taylorism."

Kiechel wrote in 2010: "The experience curve was, simply, the most important concept in launching the strategy
revolution...with the experience curve, the strategy revolution began to insinuate an acute awareness of competition
into the corporate consciousness." Prior to the 1960s, the word competition rarely appeared in the most prominent
management literature; U.S. companies then faced considerably less competition and did not focus on performance
relative to peers. Further, the experience curve provided a basis for the retail sale of business ideas, helping drive the
management consulting industry.[18]

Corporate strategy and portfolio theory[edit]

Main articles: Modern portfolio theory and Growthshare matrix

Portfolio growthshare matrix

The concept of the corporation as a portfolio of business units, with each plotted graphically based on its market
share (a measure of its competitive position relative to its peers) and industry growth rate (a measure of industry
attractiveness), was summarized in the growthshare matrix developed by the Boston Consulting Group around
1970. By 1979, one study estimated that 45% of the Fortune 500 companies were using some variation of the matrix
in their strategic planning. This framework helped companies decide where to invest their resources (i.e., in their high
market share, high growth businesses) and which businesses to divest (i.e., low market share, low growth
businesses.)[18]
Porter wrote in 1987 that corporate strategy involves two questions: 1) What business should the corporation be in?
and 2) How should the corporate office manage its business units? He mentioned four concepts of corporate
strategy; the latter three can be used together:[31]
1. Portfolio theory: A strategy based primarily on diversification through acquisition. The corporation shifts
resources among the units and monitors the performance of each business unit and its leaders. Each unit
generally runs autonomously, with limited interference from the corporate center provided goals are met.
2. Restructuring: The corporate office acquires then actively intervenes in a business where it detects potential,
often by replacing management and implementing a new business strategy.
3. Transferring skills: Important managerial skills and organizational capability are essentially spread to multiple
businesses. The skills must be necessary to competitive advantage.
4. Sharing activities: Ability of the combined corporation to leverage centralized functions, such as sales,
finance, etc. thereby reducing costs.[31]
Other techniques were developed to analyze the relationships between elements in a portfolio. The growth-share
matrix, a part of B.C.G. Analysis, was followed by G.E. multi factoral model, developed by General Electric.
Companies continued to diversify as conglomerates until the 1980s, when deregulation and a less restrictive antitrust environment led to the view that a portfolio of operating divisions in different industries was worth more as many
independent companies, leading to the breakup of many conglomerates. [18] While the popularity of portfolio theory has

waxed and waned, the key dimensions considered (industry attractiveness and competitive position) remain central
to strategy.[2]

Competitive advantage[edit]
Main article: Competitive advantage
In 1980, Porter defined the two types of competitive advantage an organization can achieve relative to its rivals:
lower cost or differentiation. This advantage derives from attribute(s) that allow an organization to outperform its
competition, such as superior market position, skills, or resources. In Porter's view, strategic management should be
concerned with building and sustaining competitive advantage. [25]

Industry structure and profitability[edit]

A graphical representation of Porter's Five Forces

Main article: Porter five forces analysis

Porter developed a framework for analyzing the profitability of industries and how those profits are divided among the
participants in 1980. Infive forces analysis he identified the forces that shape the industry structure or environment.
The framework involves the bargaining power of buyers and suppliers, the threat of new entrants, the availability of
substitute products, and the competitive rivalry of firms in the industry. These forces affect the organization's ability to
raise its prices as well as the costs of inputs (such as raw materials) for its processes. [17]
The five forces framework helps describe how a firm can use these forces to obtain a sustainable competitive
advantage, either lower cost or differentiation. Companies can maximize their profitability by competing in industries
with favorable structure. Competitors can take steps to grow the overall profitability of the industry, or to take profit
away from other parts of the industry structure. Porter modified Chandler's dictum about structure following strategy
by introducing a second level of structure: while organizational structure follows strategy, it in turn follows industry
structure.[17]

Generic competitive strategies[edit]

Main article: Porter's generic strategies

Michael Porter's Three Generic Strategies

Porter wrote in 1980 that strategy target either cost leadership, differentiation, or focus.[17] These are known as
Porter's three generic strategies and can be applied to any size or form of business. Porter claimed that a company
must only choose one of the three or risk that the business would waste precious resources. Porter's generic
strategies detail the interaction between cost minimization strategies, product differentiation strategies, and market
focus strategies.
Porter described an industry as having multiple segments that can be targeted by a firm. The breadth of its targeting
refers to the competitive scope of the business. Porter defined two types of competitive advantage: lower cost or
differentiation relative to its rivals. Achieving competitive advantage results from a firm's ability to cope with the five
forces better than its rivals. Porter wrote: "[A]chieving competitive advantage requires a firm to make a choice...about
the type of competitive advantage it seeks to attain and the scope within which it will attain it." He also wrote: "The
two basic types of competitive advantage [differentiation and lower cost] combined with the scope of activities for
which a firm seeks to achieve them lead to three generic strategies for achieving above average performance in an
industry: cost leadership, differentiation and focus. The focus strategy has two variants, cost focus and differentiation
focus."[25]
The concept of choice was a different perspective on strategy, as the 1970s paradigm was the pursuit of market
share (size and scale) influenced by the experience curve. Companies that pursued the highest market share
position to achieve cost advantages fit under Porter's cost leadership generic strategy, but the concept of choice
regarding differentiation and focus represented a new perspective.[18]

Value chain[edit]

Michael Porter's Value Chain

Main article: Value chain

Porter's 1985 description of the value chain refers to the chain of activities (processes or collections of processes)
that an organization performs in order to deliver a valuable product or service for the market. These include functions
such as inbound logistics, operations, outbound logistics, marketing and sales, and service, supported by systems
and technology infrastructure. By aligning the various activities in its value chain with the organization's strategy in a
coherent way, a firm can achieve a competitive advantage. Porter also wrote that strategy is an internally consistent
configuration of activities that differentiates a firm from its rivals. A robust competitive position cumulates from many
activities which should fit coherently together.[32]
Porter wrote in 1985: "Competitive advantage cannot be understood by looking at a firm as a whole. It stems from the
many discrete activities a firm performs in designing, producing, marketing, delivering and supporting its product.
Each of these activities can contribute to a firm's relative cost position and create a basis for differentiation...the value
chain disaggregates a firm into its strategically relevant activities in order to understand the behavior of costs and the
existing and potential sources of differentiation."[2]

Core competence[edit]
Main article: Core competency
Gary Hamel and C. K. Prahalad described the idea of core competency in 1990, the idea that each organization has
some capability in which it excels and that the business should focus on opportunities in that area, letting others go
or outsourcing them. Further, core competency is difficult to duplicate, as it involves the skills and coordination of
people across a variety of functional areas or processes used to deliver value to customers. By outsourcing,
companies expanded the concept of the value chain, with some elements within the entity and others without. [33] Core
competency is part of a branch of strategy called the resource-based view of the firm, which postulates that if
activities are strategic as indicated by the value chain, then the organization's capabilities and ability to learn or adapt
are also strategic.[2]

Theory of the business[edit]

Peter Drucker wrote in 1994 about the Theory of the Business, which represents the key assumptions underlying a
firm's strategy. These assumptions are in three categories: a) the external environment, including society, market,
customer, and technology; b) the mission of the organization; and c) the core competencies needed to accomplish
the mission. He continued that a valid theory of the business has four specifications: 1) assumptions about the
environment, mission, and core competencies must fit reality; 2) the assumptions in all three areas have to fit one
another; 3) the theory of the business must be known and understood throughout the organization; and 4) the theory
of the business has to be tested constantly.
He wrote that organizations get into trouble when the assumptions representing the theory of the business no longer
fit reality. He used an example of retail department stores, where their theory of the business assumed that people
who could afford to shop in department stores would do so. However, many shoppers abandoned department stores
in favor of specialty retailers (often located outside of malls) when time became the primary factor in the shopping
destination rather than income.
Drucker described the theory of the business as a "hypothesis" and a "discipline." He advocated building in
systematic diagnostics, monitoring and testing of the assumptions comprising the theory of the business to maintain
competitiveness.[34]

Strategic thinking[edit]
Main article: Strategic thinking
Strategic thinking involves the generation and application of unique business insights to opportunities intended to
create competitive advantage for a firm or organization. It involves challenging the assumptions underlying the
organization's strategy and value proposition. Mintzberg wrote in 1994 that it is more about synthesis (i.e.,
"connecting the dots") than analysis (i.e., "finding the dots"). It is about "capturing what the manager learns from all
sources (both the soft insights from his or her personal experiences and the experiences of others throughout the
organization and the hard data from market research and the like) and then synthesizing that learning into a vision of
the direction that the business should pursue." Mintzberg argued that strategic thinking is the critical part of
formulating strategy, more so than strategic planning exercises. [35]
General Andre Beaufre wrote in 1963 that strategic thinking "is a mental process, at once abstract and rational, which
must be capable of synthesizing both psychological and material data. The strategist must have a great capacity for
both analysis and synthesis; analysis is necessary to assemble the data on which he makes his diagnosis, synthesis
in order to produce from these data the diagnosis itself--and the diagnosis in fact amounts to a choice between
alternative courses of action."[36]
Will Mulcaster[37] argued that while much research and creative thought has been devoted to generating alternative
strategies, too little work has been done on what influences the quality of strategic decision making and the
effectiveness with which strategies are implemented. For instance, in retrospect it can be seen that the financial crisis
of 20089 could have been avoided if the banks had paid more attention to the risks associated with their

investments, but how should banks change the way they make decisions to improve the quality of their decisions in
the future? Mulcaster's Managing Forces framework addresses this issue by identifying 11 forces that should be
incorporated into the processes of decision making and strategic implementation. The 11 forces are: Time; Opposing
forces; Politics; Perception; Holistic effects; Adding value; Incentives; Learning capabilities; Opportunity cost; Risk
and Style.

Strategic planning[edit]
Main article: Strategic planning
Strategic planning is a means of administering the formulation and implementation of strategy. Strategic planning is
analytical in nature and refers to formalized procedures to produce the data and analyses used as inputs for strategic
thinking, which synthesizes the data resulting in the strategy. Strategic planning may also refer to control
mechanisms used to implement the strategy once it is determined. In other words, strategic planning
happens around the strategy formation process.[11]

Environmental analysis[edit]
Porter wrote in 1980 that formulation of competitive strategy includes consideration of four key elements:
1. Company strengths and weaknesses;
2. Personal values of the key implementers (i.e., management and the board)
3. Broader societal expectations.[17]
The first two elements relate to factors internal to the company (i.e., the internal environment), while the latter two
relate to factors external to the company (i.e., the external environment). [17]
There are many analytical frameworks which attempt to organize the strategic planning process. Examples of
frameworks that address the four elements described above include:

External environment: PEST analysis or STEEP analysis is a framework used to examine the remote external
environmental factors that can affect the organization, such as political, economic, social/demographic, and
technological. Common variations include SLEPT, PESTLE, STEEPLE, and STEER analysis, each of which
incorporates slightly different emphases.

Industry environment: The Porter Five Forces Analysis framework helps to determine the competitive rivalry
and therefore attractiveness of a market. It is used to help determine the portfolio of offerings the organization will
provide and in which markets.

Relationship of internal and external environment: SWOT analysis is one of the most basic and widely used
frameworks, which examines both internal elements of the organization Strengths andWeaknesses and

external elements Opportunities and Threats. It helps examine the organization's resources in the context of
its environment.

Scenario planning[edit]
A number of strategists use scenario planning techniques to deal with change. The way Peter Schwartz put it in 1991
is that strategic outcomes cannot be known in advance so the sources of competitive advantage cannot be
predetermined.[38] The fast changing business environment is too uncertain for us to find sustainable value in formulas
of excellence or competitive advantage. Instead, scenario planning is a technique in which multiple outcomes can be
developed, their implications assessed, and their likeliness of occurrence evaluated. According to Pierre Wack,
scenario planning is about insight, complexity, and subtlety, not about formal analysis and numbers. [39]
Some business planners are starting to use a complexity theory approach to strategy. Complexity can be thought of
as chaos with a dash of order. Chaos theory deals with turbulent systems that rapidly become disordered.
Complexity is not quite so unpredictable. It involves multiple agents interacting in such a way that a glimpse of
structure may appear.

Measuring and controlling implementation[edit]

Generic Strategy Map illustrating four elements of a balanced scorecard

Once the strategy is determined, various goals and measures may be established to chart a course for the
organization, measure performance and control implementation of the strategy. Tools such as the balanced
scorecard and strategy maps help crystallize the strategy, by relating key measures of success and performance to
the strategy. These tools measure financial, marketing, production, organizational development,
and innovation measures to achieve a 'balanced' perspective. Advances in information technology and data
availability enable the gathering of more information about performance, allowing managers to take a much more
analytical view of their business than before.
Strategy may also be organized as a series of "initiatives" or "programs", each of which comprises one or more
projects. Various monitoring and feedback mechanisms may also be established, such as regular meetings between
divisional and corporate management to control implementation.

Evaluation[edit]
A key component to strategic management which is often overlooked when planning is evaluation. There are many
ways to evaluate whether or not strategic priorities and plans have been achieved, one such method is Robert
Stake's Responsive Evaluation.[40] Responsive evaluation provides a naturalistic and humanistic approach to program
evaluation. In expanding beyond the goal-oriented or pre-ordinate evaluation design, responsive evaluation takes
into consideration the programs background (history), conditions, and transactions among stakeholders. It is largely
emergent, the design unfolds as contact is made with stakeholders.

Limitations[edit]
While strategies are established to set direction, focus effort, define or clarify the organization, and provide
consistency or guidance in response to the environment, these very elements also mean that certain signals are
excluded from consideration or de-emphasized. Mintzberg wrote in 1987: "Strategy is a categorizing scheme by
which incoming stimuli can be ordered and dispatched." Since a strategy orients the organization in a particular
manner or direction, that direction may not effectively match the environment, initially (if a bad strategy) or over time
as circumstances change. As such, Mintzberg continued, "Strategy [once established] is a force that resists change,
not encourages it."[10]
Therefore, a critique of strategic management is that it can overly constrain managerial discretion in a dynamic
environment. "How can individuals, organizations and societies cope as well as possible with ... issues too complex
to be fully understood, given the fact that actions initiated on the basis of inadequate understanding may lead to
significant regret?"[41] Some theorists insist on an iterative approach, considering in turn objectives, implementation
and resources.[42] I.e., a "...repetitive learning cycle [rather than] a linear progression towards a clearly defined final
destination."[43] Strategies must be able to adjust during implementation because "humans rarely can proceed
satisfactorily except by learning from experience; and modest probes, serially modified on the basis of feedback,
usually are the best method for such learning."[44]
In 2000, Gary Hamel coined the term strategic convergence to explain the limited scope of the strategies being
used by rivals in greatly differing circumstances. He lamented that successful strategies are imitated by firms that do
not understand that for a strategy to work, it must account for the specifics of each situation. [45] Woodhouse and
Collingridge claim that the essence of being strategic lies in a capacity for "intelligent trial-and error" [44] rather than
strict adherence to finely honed strategic plans. Strategy should be seen as laying out the general path rather than
precise steps.[46] Means are as likely to determine ends as ends are to determine means.[47] The objectives that an
organization might wish to pursue are limited by the range of feasible approaches to implementation. (There will
usually be only a small number of approaches that will not only be technically and administratively possible, but also
satisfactory to the full range of organizational stakeholders.) In turn, the range of feasible implementation approaches
is determined by the availability of resources.

Strategic themes[edit]
Various strategic approaches used across industries (themes) have arisen over the years. These include the shift
from product-driven demand to customer- or marketing-driven demand (described above), the increased use of self-

service approaches to lower cost, changes in the value chain or corporate structure due to globalization (e.g., offshoring of production and assembly), and the internet.

Self-service[edit]
One theme in strategic competition has been the trend towards self-service, often enabled by technology, where the
customer takes on a role previously performed by a worker to lower the price. [6]Examples include:

Automated teller machine (ATM) to obtain cash rather via a bank teller;

Self-service at the gas pump rather than with help from an attendant;

Retail internet orders input by the customer rather than a retail clerk, such as online book sales;

Mass-produced ready-to-assemble furniture transported by the customer;

Self-checkout at the grocery store; and

Online banking and bill payment.[48]

Globalization and the virtual firm[edit]

One definition of globalization refers to the integration of economies due to technology and supply chain process
innovation. Companies are no longer required to be vertically integrated (i.e., designing, producing, assembling, and
selling their products). In other words, the value chain for a company's product may no longer be entirely within one
firm; several entities comprising a virtual firm may exist to fulfill the customer requirement. For example, some
companies have chosen to outsource production to third parties, retaining only design and sales functions inside their
organization.[6]

Internet and information availability[edit]

The internet has dramatically empowered consumers and enabled buyers and sellers to come together with
drastically reduced transaction and intermediary costs, creating much more robust marketplaces for the purchase
and sale of goods and services. Examples include online auction sites, internet dating services, and internet book
sellers. In many industries, the internet has dramatically altered the competitive landscape. Services that used to be
provided within one entity (e.g., a car dealership providing financing and pricing information) are now provided by
third parties.[49] Further, compared to traditional media like television, the internet has caused a major shift in viewing
habits through on demand content which has led to an increasingly fragmented audience. [citation needed]
Author Phillip Evans said in 2013 that networks are challenging traditional hierarchies. Value chains may also be
breaking up ("deconstructing") where information aspects can be separated from functional activity. Data that is
readily available for free or very low cost makes it harder for information-based, vertically integrated businesses to
remain intact. Evans said: "The basic story here is that what used to be vertically integrated, oligopolistic competition
among essentially similar kinds of competitors is evolving, by one means or another, from a vertical structure to a

horizontal one. Why is that happening? It's happening because transaction costs are plummeting and because scale
is polarizing. The plummeting of transaction costs weakens the glue that holds value chains together, and allows
them to separate." He used Wikipedia as an example of a network that has challenged the traditional encyclopedia
business model.[50] Evans predicts the emergence of a new form of industrial organization called a "stack", analogous
to a technology stack, in which competitors rely on a common platform of inputs (services or information), essentially
layering the remaining competing parts of their value chains on top of this common platform. [51]

Strategy as learning[edit]
See also: Organizational learning
In 1990, Peter Senge, who had collaborated with Arie de Geus at Dutch Shell, popularized de Geus' notion of the
"learning organization".[52] The theory is that gathering and analyzing information is a necessary requirement for
business success in the information age. To do this, Senge claimed that an organization would need to be structured
such that:[53]

People can continuously expand their capacity to learn and be productive.

New patterns of thinking are nurtured.

Collective aspirations are encouraged.

People are encouraged to see the whole picture together.

Senge identified five disciplines of a learning organization. They are:

Personal responsibility, self-reliance, and mastery We accept that we are the masters of our own destiny.
We make decisions and live with the consequences of them. When a problem needs to be fixed, or an
opportunity exploited, we take the initiative to learn the required skills to get it done.

Mental models We need to explore our personal mental models to understand the subtle effect they have
on our behaviour.

Shared vision The vision of where we want to be in the future is discussed and communicated to all. It
provides guidance and energy for the journey ahead.

Team learning We learn together in teams. This involves a shift from a spirit of advocacy to a spirit of
enquiry.

Systems thinking We look at the whole rather than the parts. This is what Senge calls the Fifth discipline.
It is the glue that integrates the other four into a coherent strategy. For an alternative approach to the learning
organization, see Garratt, B. (1987).

Geoffrey Moore (1991) and R. Frank and P. Cook[54] also detected a shift in the nature of competition. Markets driven
by technical standards or by "network effects" can give the dominant firm a near-monopoly.[55] The same is true of
networked industries in which interoperability requires compatibility between users. Examples include Internet
Explorer's and Amazon's early dominance of their respective industries. IE's later decline shows that such dominance
may be only temporary.
Moore showed how firms could attain this enviable position by using E.M. Rogers' five stage adoption process and
focusing on one group of customers at a time, using each group as a base for reaching the next group. The most
difficult step is making the transition between introduction and mass acceptance. (See Crossing the Chasm). If
successful a firm can create a bandwagon effect in which the momentum builds and its product becomes a de
facto standard.

Strategy as adapting to change[edit]

In 1969, Peter Drucker coined the phrase Age of Discontinuity to describe the way change disrupts lives.[56] In an
age of continuity attempts to predict the future by extrapolating from the past can be accurate. But according to
Drucker, we are now in an age of discontinuity and extrapolating is ineffective. He identifies four sources of
discontinuity: new technologies, globalization, cultural pluralism and knowledge capital.
In 1970, Alvin Toffler in Future Shock described a trend towards accelerating rates of change. [57] He illustrated how
social and technical phenomena had shorter lifespans with each generation, and he questioned society's ability to
cope with the resulting turmoil and accompanying anxiety. In past eras periods of change were always punctuated
with times of stability. This allowed society to assimilate the change before the next change arrived. But these periods
of stability had all but disappeared by the late 20th century. In 1980 in The Third Wave, Toffler characterized this shift
to relentless change as the defining feature of the third phase of civilization (the first two phases being the
agricultural and industrial waves).[58]
In 1978, Derek F. Abell (Abell, D. 1978) described "strategic windows" and stressed the importance of the timing
(both entrance and exit) of any given strategy. This led some strategic planners to buildplanned obsolescence into
their strategies.[59]
In 1983, Noel Tichy wrote that because we are all beings of habit we tend to repeat what we are comfortable with.
[60]

He wrote that this is a trap that constrains our creativity, prevents us from exploring new ideas, and hampers our

dealing with the full complexity of new issues. He developed a systematic method of dealing with change that
involved looking at any new issue from three angles: technical and production, political and resource allocation,
and corporate culture.
In 1989, Charles Handy identified two types of change.[61] "Strategic drift" is a gradual change that occurs so subtly
that it is not noticed until it is too late. By contrast, "transformational change" is sudden and radical. It is typically
caused by discontinuities (or exogenous shocks) in the business environment. The point where a new trend is
initiated is called a "strategic inflection point" by Andy Grove. Inflection points can be subtle or radical.

In 1990, Richard Pascale wrote that relentless change requires that businesses continuously reinvent themselves.
[62]

His famous maxim is Nothing fails like success by which he means that what was a strength yesterday becomes

the root of weakness today, We tend to depend on what worked yesterday and refuse to let go of what worked so
well for us in the past. Prevailing strategies become self-confirming. To avoid this trap, businesses must stimulate a
spirit of inquiry and healthy debate. They must encourage a creative process of self-renewal based on constructive
conflict.
In 1996, Adrian Slywotzky showed how changes in the business environment are reflected in value
migrations between industries, between companies, and within companies.[63] He claimed that recognizing the
patterns behind these value migrations is necessary if we wish to understand the world of chaotic change. In Profit
Patterns (1999) he described businesses as being in a state ofstrategic anticipation as they try to spot emerging
patterns. Slywotsky and his team identified 30 patterns that have transformed industry after industry.[64]
In 1997, Clayton Christensen (1997) took the position that great companies can fail precisely because they do
everything right since the capabilities of the organization also define its disabilities. [65]Christensen's thesis is that
outstanding companies lose their market leadership when confronted with disruptive technology. He called the
approach to discovering the emerging markets for disruptive technologies agnostic marketing, i.e., marketing under
the implicit assumption that no one not the company, not the customers can know how or in what quantities a
disruptive product can or will be used without the experience of using it.
In 1999, Constantinos Markides reexamined the nature of strategic planning. [66] He described strategy formation and
implementation as an ongoing, never-ending, integrated process requiring continuous reassessment and
reformation. Strategic management is planned and emergent, dynamic and interactive.
J. Moncrieff (1999) stressed strategy dynamics.[67] He claimed that strategy is partially deliberate and partially
unplanned. The unplanned element comes from emergent strategies that result from the emergence of opportunities
and threats in the environment and from "strategies in action" (ad hoc actions across the organization).
David Teece pioneered research on resource-based strategic management and the dynamic capabilities perspective,
defined as the ability to integrate, build, and reconfigure internal and external competencies to address rapidly
changing environments".[68] His 1997 paper (with Gary Pisano and Amy Shuen) "Dynamic Capabilities and Strategic
Management" was the most cited paper in economics and business for the period from 1995 to 2005. [69]
In 2000, Gary Hamel discussed strategic decay, the notion that the value of every strategy, no matter how brilliant,
decays over time.[45]

Strategy as operational excellence[edit]

Quality[edit]
A large group of theorists felt the area where western business was most lacking was product quality. W. Edwards
Deming,[70] Joseph M. Juran,[71] A. Kearney,[72] Philip Crosby[73] and Armand Feignbaum[74] suggested quality

improvement techniques such total quality management (TQM), continuous improvement (kaizen), lean
manufacturing, Six Sigma, and return on quality (ROQ).
Contrarily, James Heskett (1988),[75] Earl Sasser (1995), William Davidow,[76] Len Schlesinger,[77] A. Paraurgman
(1988), Len Berry,[78] Jane Kingman-Brundage,[79] Christopher Hart, and Christopher Lovelock (1994), felt that poor
customer service was the problem. They gave us fishbone diagramming, service charting, Total Customer
Service (TCS), the service profit chain, service gaps analysis, the service encounter, strategic service vision, service
mapping, and service teams. Their underlying assumption was that there is no better source of competitive
advantage than a continuous stream of delighted customers.
Process management uses some of the techniques from product quality management and some of the techniques
from customer service management. It looks at an activity as a sequential process. The objective is to find
inefficiencies and make the process more effective. Although the procedures have a long history, dating back
to Taylorism, the scope of their applicability has been greatly widened, leaving no aspect of the firm free from
potential process improvements. Because of the broad applicability of process management techniques, they can be
used as a basis for competitive advantage.
Carl Sewell,[80] Frederick F. Reichheld,[81] C. Gronroos,[82] and Earl Sasser[83] observed that businesses were spending
more on customer acquisition than on retention. They showed how a competitive advantage could be found in
ensuring that customers returned again and again. Reicheld broadened the concept to include loyalty from
employees, suppliers, distributors and shareholders. They developed techniques for estimating customer lifetime
value (CLV) for assessing long-term relationships. The concepts begat attempts to recast selling and marketing into a
long term endeavor that created a sustained relationship (called relationship selling, relationship marketing,
and customer relationship management). Customer relationship management (CRM) software became integral to
many firms.

Reengineering[edit]
Michael Hammer and James Champy felt that these resources needed to be restructured. [84] In a process that they
labeled reengineering, firm's reorganized their assets around whole processes rather than tasks. In this way a team
of people saw a project through, from inception to completion. This avoided functional silos where isolated
departments seldom talked to each other. It also eliminated waste due to functional overlap and interdepartmental
communications.
In 1989 Richard Lester and the researchers at the MIT Industrial Performance Center identified seven best
practices and concluded that firms must accelerate the shift away from the mass production of low cost
standardized products. The seven areas of best practice were: [85]

Simultaneous continuous improvement in cost, quality, service, and product innovation

Breaking down organizational barriers between departments

Eliminating layers of management creating flatter organizational hierarchies.

Closer relationships with customers and suppliers

Intelligent use of new technology

Global focus

Improving human resource skills

The search for best practices is also called benchmarking.[86] This involves determining where you need to improve,
finding an organization that is exceptional in this area, then studying the company and applying its best practices in
your firm.

Other perspectives on strategy[edit]

Strategy as problem solving[edit]

Professor Richard P. Rumelt described strategy as a type of problem solving in 2011. He wrote that good strategy
has an underlying structure called a kernel. The kernel has three parts: 1) A diagnosisthat defines or explains the
nature of the challenge; 2) A guiding policy for dealing with the challenge; and 3) Coherent actions designed to carry
out the guiding policy.[87] President Kennedy outlined these three elements of strategy in his Cuban Missile
Crisis Address to the Nation of 22 October 1962:
1. Diagnosis: This Government, as promised, has maintained the closest surveillance of the Soviet military
buildup on the island of Cuba. Within the past week, unmistakable evidence has established the fact that a
series of offensive missile sites is now in preparation on that imprisoned island. The purpose of these bases
can be none other than to provide a nuclear strike capability against the Western Hemisphere.
2. Guiding Policy: Our unswerving objective, therefore, must be to prevent the use of these missiles against
this or any other country, and to secure their withdrawal or elimination from the Western Hemisphere.
3. Action Plans: First among seven numbered steps was the following: To halt this offensive buildup a strict
quarantine on all offensive military equipment under shipment to Cuba is being initiated. All ships of any kind
bound for Cuba from whatever nation or port will, if found to contain cargoes of offensive weapons, be turned
back.[88]
Active strategic management required active information gathering and active problem solving. In the early days of
Hewlett-Packard (HP), Dave Packard and Bill Hewlett devised an active management style that they
called management by walking around (MBWA). Senior HP managers were seldom at their desks. They spent most
of their days visiting employees, customers, and suppliers. This direct contact with key people provided them with a
solid grounding from which viable strategies could be crafted. Management consultants Tom Peters and Robert H.
Waterman had used the term in their 1982 book In Search of Excellence: Lessons From America's Best-Run
Companies.[89] Some Japanese managers employ a similar system, which originated at Honda, and is sometimes

called the 3 G's (Genba, Genbutsu, and Genjitsu, which translate into actual place, actual thing, and actual
situation).

Creative vs analytic approaches[edit]

In 2010, IBM released a study summarizing three conclusions of 1500 CEOs around the world: 1) complexity is
escalating, 2) enterprises are not equipped to cope with this complexity, and 3) creativity is now the single most
important leadership competency. IBM said that it is needed in all aspects of leadership, including strategic thinking
and planning.[90]
Similarly, Mckeown argued that over-reliance on any particular approach to strategy is dangerous and that multiple
methods can be used to combine the creativity and analytics to create an "approach to shaping the future", that is
difficult to copy.[91]

Non-strategic management[edit]
A 1938 treatise by Chester Barnard, based on his own experience as a business executive, described the process as
informal, intuitive, non-routinized and involving primarily oral, 2-way communications. Bernard says The process is
the sensing of the organization as a whole and the total situation relevant to it. It transcends the capacity of merely
intellectual methods, and the techniques of discriminating the factors of the situation. The terms pertinent to it are
feeling, judgement, sense, proportion, balance, appropriateness. It is a matter of art rather than science. [92]
In 1973, Mintzberg found that senior managers typically deal with unpredictable situations so they strategize in ad
hoc, flexible, dynamic, and implicit ways. He wrote, The job breeds adaptive information-manipulators who prefer the
live concrete situation. The manager works in an environment of stimulus-response, and he develops in his work a
clear preference for live action.[93]
In 1982, John Kotter studied the daily activities of 15 executives and concluded that they spent most of their time
developing and working a network of relationships that provided general insights and specific details for strategic
decisions. They tended to use mental road maps rather than systematic planning techniques. [94]
Daniel Isenberg's 1984 study of senior managers found that their decisions were highly intuitive. Executives often
sensed what they were going to do before they could explain why.[95] He claimed in 1986 that one of the reasons for
this is the complexity of strategic decisions and the resultant information uncertainty.[96]
Zuboff claimed that information technology was widening the divide between senior managers (who typically make
strategic decisions) and operational level managers (who typically make routine decisions). She alleged that prior to
the widespread use of computer systems, managers, even at the most senior level, engaged in both strategic
decisions and routine administration, but as computers facilitated (She called it deskilled) routine processes, these
activities were moved further down the hierarchy, leaving senior management free for strategic decision making.
In 1977, Abraham Zaleznik distinguished leaders from managers. He described leaders as visionaries who inspire,
while managers care about process.[97] He claimed that the rise of managers was the main cause of the decline of

American business in the 1970s and 1980s. Lack of leadership is most damaging at the level of strategic
management where it can paralyze an entire organization. [98]
Dr Maretha Prinsloo developed the Cognitive Process Profile (CPP) psychometric from the work of Elliott Jacques.
The CPP is a computer-based psychometric which profiles a person's capacity for strategic thinking. It is used
worldwide in selecting and developing people for strategic roles.
According to Corner, Kinichi, and Keats,[99] strategic decision making in organizations occurs at two levels: individual
and aggregate. They developed a model of parallel strategic decision making. The model identifies two parallel
processes that involve getting attention, encoding information, storage and retrieval of information, strategic choice,
strategic outcome and feedback. The individual and organizational processes interact at each stage. For instance,
competition-oriented objectives are based on the knowledge of competing firms, such as their market share. [100]

Strategy as marketing[edit]
The 1980s also saw the widespread acceptance of positioning theory. Although the theory originated with Jack
Trout in 1969, it didnt gain wide acceptance until Al Ries and Jack Trout wrote their classic book Positioning: The
Battle For Your Mind (1979). The basic premise is that a strategy should not be judged by internal company factors
but by the way customers see it relative to the competition. Crafting and implementing a strategy involves creating a
position in the mind of the collective consumer. Several techniques enabled the practical use of positioning
theory. Perceptual mapping for example, creates visual displays of the relationships between
positions. Multidimensional scaling, discriminant analysis, factor analysis and conjoint analysis are mathematical
techniques used to determine the most relevant characteristics (called dimensions or factors) upon which positions
should be based. Preference regression can be used to determine vectors of ideal positions and cluster analysis can
identify clusters of positions.
In 1992 Jay Barney saw strategy as assembling the optimum mix of resources, including human, technology and
suppliers, and then configuring them in unique and sustainable ways. [101]
James Gilmore and Joseph Pine found competitive advantage in mass customization.[102] Flexible
manufacturing techniques allowed businesses to individualize products for each customer without losingeconomies
of scale. This effectively turned the product into a service. They also realized that if a service is mass-customized by
creating a performance for each individual client, that service would be transformed into an experience. Their
book, The Experience Economy,[103] along with the work of Bernd Schmitt convinced many to see service provision as
a form of theatre. This school of thought is sometimes referred to as customer experience management (CEM).

Information- and technology-driven strategy[edit]

Many industries with a high information component are being transformed. [104] For example, Encarta
demolished Encyclopdia Britannica (whose sales have plummeted 80% since their peak of $650 million in 1990)
before it was in turn, eclipsed by collaborative encyclopedias like Wikipedia. The music industry was similarly
disrupted. The technology sector has provided some strategies directly. For example, from the software development
industry agile software development provides a model for shared development processes.

Peter Drucker conceived of the knowledge worker in the 1950s. He described how fewer workers would do physical
labor, and more would apply their minds. In 1984, John Naisbitt theorized that the future would be driven largely by
information: companies that managed information well could obtain an advantage, however the profitability of what
he called information float (information that the company had and others desired) would disappear as inexpensive
computers made information more accessible.
Daniel Bell (1985) examined the sociological consequences of information technology, while Gloria Schuck and
Shoshana Zuboff looked at psychological factors.[105] Zuboff distinguished between automating technologies and
informating technologies. She studied the effect that both had on workers, managers and organizational structures.
She largely confirmed Drucker's predictions about the importance of flexible decentralized structure, work teams,
knowledge sharing and the knowledge worker's central role. Zuboff also detected a new basis for managerial
authority, based on knowledge (also predicted by Drucker) which she called participative management. [106]

Maturity of planning process[edit]

McKinsey & Company developed a capability maturity model in the 1970s to describe the sophistication of planning
processes, with strategic management ranked the highest. The four stages include:
1. Financial planning, which is primarily about annual budgets and a functional focus, with limited regard for the
environment;
2. Forecast-based planning, which includes multi-year budgets and more robust capital allocation across
business units;
3. Externally oriented planning, where a thorough situation analysis and competitive assessment is performed;
4. Strategic management, where widespread strategic thinking occurs and a well-defined strategic framework is
used.[18]

PIMS study[edit]
The long-term PIMS study, started in the 1960s and lasting for 19 years, attempted to understand the Profit Impact of
Marketing Strategies (PIMS), particularly the effect of market share. The initial conclusion of the study was
unambiguous: the greater a company's market share, the greater their rate of profit. Market share
provides economies of scale. It also provides experience curve advantages. The combined effect is increased profits.
[107]

The benefits of high market share naturally led to an interest in growth strategies. The relative advantages
of horizontal integration, vertical integration, diversification, franchises, mergers and acquisitions, joint ventures and
organic growth were discussed. Other research indicated that a low market share strategy could still be very
profitable. Schumacher (1973),[108] Woo and Cooper (1982),[109] Levenson (1984),[110] and later Traverso (2002)
[111]

showed how smaller niche players obtained very high returns.

Other influences on business strategy[edit]

Military strategy[edit]
See also: Military strategy
In the 1980s business strategists realized that there was a vast knowledge base stretching back thousands of years
that they had barely examined. They turned to military strategy for guidance. Military strategy books such as The Art
of War by Sun Tzu, On War by von Clausewitz, and The Red Book by Mao Zedong became business classics. From
Sun Tzu, they learned the tactical side of military strategy and specific tactical prescriptions. From von Clausewitz,
they learned the dynamic and unpredictable nature of military action. From Mao, they learned the principles
of guerrilla warfare. Important marketing warfare books include Business War Games by Barrie James, Marketing
Warfare by Al Ries and Jack Trout and Leadership Secrets of Attila the Hun by Wess Roberts.
The four types of business warfare theories are:

Offensive marketing warfare strategies

Defensive marketing warfare strategies

Flanking marketing warfare strategies

Guerrilla marketing warfare strategies

The marketing warfare literature also examined leadership and motivation, intelligence gathering, types of marketing
weapons, logistics and communications.
By the twenty-first century marketing warfare strategies had gone out of favour in favor of non-confrontational
approaches. In 1989, Dudley Lynch and Paul L. Kordis published Strategy of the Dolphin: Scoring a Win in a Chaotic
World. "The Strategy of the Dolphin was developed to give guidance as to when to use aggressive strategies and
when to use passive strategies. A variety of aggressiveness strategies were developed.
In 1993, J. Moore used a similar metaphor.[112] Instead of using military terms, he created an ecological theory of
predators and prey(see ecological model of competition), a sort of Darwinianmanagement strategy in which market
interactions mimic long term ecological stability.
Author Phillip Evans said in 2014 that "Henderson's central idea was what you might call the Napoleonic idea of
concentrating mass against weakness, of overwhelming the enemy. What Henderson recognized was that, in the
business world, there are many phenomena which are characterized by what economists would call increasing
returns -- scale, experience. The more you do of something, disproportionately the better you get. And therefore he
found a logic for investing in such kinds of overwhelming mass in order to achieve competitive advantage. And that
was the first introduction of essentially a military concept of strategy into the business world... It was on those two
ideas, Henderson's idea of increasing returns to scale and experience, and Porter's idea of the value chain,
encompassing heterogenous elements, that the whole edifice of business strategy was subsequently erected." [113]

Traits of successful companies[edit]

Like Peters and Waterman a decade earlier, James Collins and Jerry Porras spent years conducting empirical
research on what makes great companies. Six years of research uncovered a key underlying principle behind the 19
successful companies that they studied: They all encourage and preserve a core ideology that nurtures the
company. Even though strategy and tactics change daily, the companies, nevertheless, were able to maintain a core
set of values. These core values encourage employees to build an organization that lasts. In Built To Last (1994) they
claim that short term profit goals, cost cutting, and restructuring will not stimulate dedicated employees to build a
great company that will endure.[114] In 2000 Collins coined the term built to flip to describe the prevailing business
attitudes in Silicon Valley. It describes a business culture where technological change inhibits a long term focus. He
also popularized the concept of the BHAG (Big Hairy Audacious Goal).
Arie de Geus (1997) undertook a similar study and obtained similar results.[115] He identified four key traits of
companies that had prospered for 50 years or more. They are:

Sensitivity to the business environment the ability to learn and adjust

Cohesion and identity the ability to build a community with personality, vision, and purpose

Tolerance and decentralization the ability to build relationships

Conservative financing

A company with these key characteristics he called a living company because it is able to perpetuate itself. If a
company emphasizes knowledge rather than finance, and sees itself as an ongoing community of human beings, it
has the potential to become great and endure for decades. Such an organization is an organic entity capable of
learning (he called it a learning organization) and capable of creating its own processes, goals, and persona. [115]
Will Mulcaster[116] suggests that firms engage in a dialogue that centres around these questions:

Will the proposed competitive advantage create Perceived Differential Value?"

Will the proposed competitive advantage create something that is different from the competition?"

Will the difference add value in the eyes of potential customers?" This question will entail a discussion of
the combined effects of price, product features and consumer perceptions.

Will the product add value for the firm?" Answering this question will require an examination of cost
effectiveness and the pricing strategy.

A Guide to Customer Lifecycle

Marketing in Ecommerce
Customer lifecycle marketing: a definition
Customer lifecycle marketing (CLM) is an approach to customer communication that recognises that
different stages on the journey to becoming a loyal, active customer require different marketing messages
and strategies.
Moreover, it involves using what you know about each individual customer - from how they interact with
your store to their transactional and demographic data - to develop campaigns that nurture them through
their journey.

Put simply, customer lifecycle marketing comes down to three key principles:

Insight
Using data from a number of sources to get a detailed view of the customer and their preferences, and
identify where they are in their customer journey.

Relevancy
Using these insights to decide which marketing messages will guide each customer through to the next
stage of their journey.

Timeliness
Delivering these message at the right time to encourage them to make that transition.

Customer lifecycle marketing: the benefits

We've covered what customer lifecycle marketing is, but why should you invest in it? Here are just a few
of the benefits:

1.

Focusing on retaining existing customers is less costly than acquiring

new ones.
Its often said that it is more costly to acquire a new customer than to retain an old one - according to
Bain and Co. a 5 per cent increase in customer retention can increase a companys profitability by 75 per
cent. With its concentration on extending a customers lifetime value, customer lifecycle marketing
focuses on long term profitability.

2.

The conversion rates of your marketing campaigns are higher.

Relevant marketing means higher response rates.

Your customers are happy.

3.

Nobody enjoys being hounded with marketing that theyre not interested in. When you focus on delivering
relevant messages at the right time, your customers are more likely to respond to them, and connect with
your brand.
Happy customers stick around for longer: theyre more loyal and, ultimately, they spend more money with
you.

4.

You gain important insight into your customer base.

By segmenting your customers into lifecycle stages, you have great insight into how your business is
performing.

The stages of the customer lifecycle

Weve talked about the customer lifecycle, but what exactly are the stages of the customer lifecycle and
how do we define them? The following lifecycle stages should form the basis of any solid CLM strategy.

Prospects
Those who have given you their email address, but has not yet made a purchase.
GOAL: Nurture them into making a first purchase

Active customers
Those who have made one or more purchases from your store.
Sub-segments:

One-time purchasers - those who have made one purchase and arent
considered at risk or lapsed (more on this below).

Repeat purchasers - those who have made more than one purchase and are
buying at their expected purchase frequency.
GOAL: Turn one-time purchasers into repeat purchasers and repeat purchasers in loyal, long term
customers.

At risk customers
A customer who has passed the time they might be expected to have made their next purchase, based on
the average repeat rate for all other repeat customers, or those in their segment. (This will vary from
business to business).
GOAL: Reactivate at risk customers before they lapse.

Lapsed customers
A customer who has gone far beyond the time they were expected to make a subsequent purchase.
Defining this lapsed time frame is perhaps the trickiest of all.
GOAL: Reactivate lapsed customers into active customers.

Implementing customer lifecycle marketing

Before we talk about some of the tactics that you can employ to nurture people on in their journey to
becoming a loyal customer, its first important to get the broader context and understand how customer
lifecycle marketing needs to align with other areas of your online retail business.

Marketing and sales strategy

Your CLM strategy should integrate with existing customer strategies, such as:

Pricing and discount strategies

Hero customer or VIP retention schemes

Attribution modeling

Merchandising strategy and product affi nity

Its also important to align your CLM strategy with broader business areas and objectives:

Stock management and product availability

Product affinity and personalisation - using customer data to personalise your
marketing communications
Category cross-selling priorities

Customer lifecycle marketing: tactics

Weve talked a lot about ways of segmenting your customer base in order to market to them more
effectively. But how do you build these segments into your actual marketing efforts? Here are some
examples of tactics you might use.

Welcome series
A lifecycle email marketing campaign designed to introduce new subscribers to the brand.
GOAL: building brand loyalty from the off and encouraging a quick first purchase
Re ad more : A Guide to Sending Brilliant Ecommerce Welcome Emails

Cart and browse abandonment retargeting

Emails and social/display ads triggered by a prospect or existing customer browsing products (or adding
an item to their cart) and then leaving.
GOAL: drawing those who have shown purchase intent back to the store to make a purchase
Read more: An Introduction to Browse Abandonment Emails for Ecommerce

Newsletter personalisation
The personalisation of an entire newsletter or sections of a newsletter based on interaction or
demographic data.
GOAL: encouraging people to click through from broadcast emails by making them more relevant to the
interests of the recipient

Post-purchase campaigns
A series of triggered emails aimed at maintaining brand engagement after a purchase is made, and
encouraging first time customers to make their second purchase.
GOAL: encouraging customers to continue interacting with the brand, and make further purchases

R e a d m o r e : 6 Ways to Ke e p a C u s to m e r En g a g e d Po s t - Pu r c h a s e

VIP recognition campaigns

A lifecycle email marketing campaign that focuses on the acknowledgement and retention of hero
customers, usually through an exclusive offer or membership to a club.
GOAL: maintaining the loyalty of hero customers

Reactivation / win-back campaigns

A campaign that focuses on reactivating lapsed or at risk customers
GREAT FOR: nurturing these types of customers back into active customers
R e a d m o r e : H o w To S e n d G r e a t L a p s e d C u s t o m e r W i n - B a c k E m a i l s

Customer lifecycle software

Customer lifecycle analytics

Successful customer lifecycle marketing hinges on detailed insight into your customer base to determine
the status of each customer.
To achieve this youll need a tool that brings together data from a number of touchpoints, for example:

Interaction data - how a customer interacts with your online store (i.e. their journey
through your store, the products they view, the products they add to cart).

Transactional data - information (usually from your ecommerce platform) about the
transactions each customer has made.

Demographic data - additional details about each customer (i.e. their age, location,
gender etc.)

Segmentation
On top of this, youll need to be able to define each lifecycle stage (which will vary from online retailer to
online retailer) and segment your customer base based on these definitions, as well as track and
measure their flow from one stage to another.
While prospects and active customers are fairly easy to define, the boundaries for when you consider a
customer to be at risk or lapsed should be calculated based on your business model and repurchase
rates.

Automated lifecycle marketing

Once youve segmented your customer base into lifecycle stages, youll need a tool that can automate the
process of getting these marketing messages in front of the right people, whether in the form of email
marketing, social or display advertising, SMS, physical mail-outs etc.

Customer lifecycle marketing with Ometria

Ometria is a marketing platform for online retailers that empowers them to use data to send
customers the right marketing messages at the right time to maximise revenue.
Interested in a quick tour of the product?

5 Steps to Understanding the Customer Lifecycle

Step 1: Reach
This is the part where you make contact with the customer. It's the ad you put on the bus
stop bench, the ad in a magazine, the social coupon delivered in the mail or the good word
someone hears from a friend. Metrics are key at this stage, letting you analyze which
marketing efforts are giving you the best reach for your dollar.
Step 2: Acquisition
Acquisition comes after youve got that potential customers attention; its the first contact
with a new customer. This is where your frontline service employees, phone
representatives and salespeople earn their pay. Depending on the nature of your business,
this might happen via email, in person on the phone or solely through a Web page.
Danger Zone: Abandonment can happen at this point of the process when you aren't
interesting or useful enough to hold a potential client's attention. Its critical that the first
contact contains enough value for that person to want to continue the conversation.
Step 3: Conversion
Conversion is another way of saying "sales." It's where you turn an interested person into
an actual customer. The best advice for this step is to sell the relationship, not your product.
Make the customer feel welcome, included and important, and the purchase will take care
of itself.
Danger Zone: Attrition is when a sale vanishes. Sometimes it's your team's faultan
"unforced error" that alienates the buyer. Other times, it's completely out of your control. In

either case, treating each lost sale as a learning experience reduces your chances of
attrition with the next customer.
Step 4: Retention
You've made the sale. That's great, but selling more to a client already at this stage is 1/6th
as expensive as starting over at the reach stage. This means up-selling or cross-selling,
but also doing everything you can to maintain a relationship with a customer. You can do
this by making contact from time to time, in value-rich ways that makes sure the customer
will think of you every time he or she needs your product or service.
Danger Zone: Churn is the loss of an existing customer. Beware of becoming a "churn and
burn" company that only looks for that first sale and moves on to the next like corporate
pick-up artists. The customer isn't always rightbut she's always, always the customer.
Step 5: Loyalty
This is the desired end result of every customer lifecycle, the equivalent of enjoying an
early retirement at the end of a successful career. At this stage, the client has become a
friend, a loyal ambassador who calls you by your first name and recommends your shop to
everybody who will listen. Not every customer will reach this stage, but you should acquire
a few more with every product cycle. If not, look back at the earlier steps to see where
you're failing in the process.
Better understanding the customer lifecycle, from making contact to making the sale and
retaining dedicated loyal customers who keep coming back for more, is the key for
continued success.
Understanding the customer lifecycle can be a tough concept to explain to your staff. How
do you convey this idea to them?