Building_a_Process-Based_Organization

Building a Process-Based Organization: The Design Roadmap at Superjet International Angelo Corallo 1, Alessandro Margherita 1*, Massimo Scalvenzi 2 and Davide Storelli 1 1 Euro-Mediterranean Incubator, University of Salento, Lecce, Campus Ecotekne, Via Monteroni s.n., Lecce 73100, Italy 2 Alenia Aeronautica, CTO Process Improvement & Know-How Development, Turin, Italy The benefits of managing companies through a process-based approach are well recognized in the business literature and in many corporate contexts. However, there is a limited discussion on how to practically design and develop an organization based on processes. This paper aims to address this relative ‘gap’ in the literature by presenting the case of a recent international joint venture in the regional jet industry. In the following paper, we present a story of organization design based on the identification and description of the core process model of the company, with a specific focus on customer service activities. Based on interviews and direct observation at the field site, this paper shows the main steps undertaken to define the process taxonomy levels and to describe process elements, along with a discussion of the relationships with the business model components of the company. The paper provides practical value as it provides practical insights relating to the start-up of a new company driven by a process-based approach. Copyright # 2010 John Wiley & Sons, Ltd. INTRODUCTION The present turbulent economic landscape is forcing organizations to quickly adapt to both existing and emerging dynamic change and find effective and efficient solutions for doing business in novel situations. One of the areas mostly impacted by this turbulence relates to the design of appropriate organizational configurations. This design task becomes accordingly a more complex endeavour in such environments (Galbraith, 2002). Increased competition on cost, quality and service, along with inefficiencies of functional structures, has necessitated an increased focus on the horizontal view of business activities and the alignment of organizational systems towards business processes as a core management paradigm. *Correspondence to: Alessandro Margherita, Euro-Mediterranean Incubator, University of Salento, Campus Ecotekne, Via Monteroni s.n. 73100, Lecce, Italy E-mail: alessandro.margherita@unisalento.it Organizations are increasingly forced to focus on design, redesign and management of business processes in order to better meet the rising expectations of customers with respect to the quality, reliability and responsiveness of their products and/or services. Another reason for the focus on business processes and business process management (BPM) concerns the control of costs that are bound up in processes. Process management also demands detailed knowledge of the internal and external aspects of business (e.g. customers, markets, environment, etc.). There is thus a need to research, develop and apply appropriate conceptual tools for analyzing processes within organizations (Wensley, 2003). Business processes and BPM do not represent new topics of concern to management or management researchers. They have been among the most discussed topics in the management literature for the last 15 years (Davenport, 1993, 1995; Davenport and Stoddard, 1994; Hammer and Champy, 1993; Kettinger et al., 1997; Venkatraman, 1994; Zairi and Sinclair, 1995). Specifically, there has been a Copyright # 2010 John Wiley & Sons, Ltd. 50 A. Corallo et al. capabilities in order to be able to achieve efficient and effective business operations in such complex environments. Second, the aerospace industry is characterized by complex products that must meet stringent performance and reliability requirements. Further, the declining margins on products, associated to increasing margins relating to services, require that companies in the aerospace industry have to adjust their business models through the design of new processes serving the needs of worldwide customers. Process design and management are thus at the top of the corporate agenda in the aerospace industry. The need to build integration capabilities through value creation and customer orientation has a fundamental impact on the organization and is thus the primary issue to be investigated. With this in mind different ‘learning perspectives’ can be located in the case we analyse, at three key levels: (a) native customer orientation of the company to drive the process-based organization; (b) innovative process description methodology and integration with technology systems (c) integration of the overall business strategy with the purposefully created process model. In the following section, we explore the main theoretical foundations of our analysis. The research strategy and subject company are then introduced in next section. The process engineering phases and the design framework adopted are illustrated in the subsequent sections. A discussion and some conclusions, along with the identification of some directions for further research, are then presented in the final section. developing focus on business processes as drivers of efficiency and innovation thanks to movements like Business Process Reengineering (BPR), Capability Maturity Model Integration (CMMI) and Six Sigma and Total Quality Management (TQM). These approaches have attracted the interest of service industries, such as banking and finance, as well as complex industrial sectors such as the automotive and aerospace sectors. Most of initiatives that have been discussed and analysed in the past have addressed the reengineering of current process structures in order to improve cost, time, value added and customer satisfaction. Other initiatives have aimed to convert traditional organizational structures into process-oriented configurations, based on the recognized potential of business processes to drive flexibility and responsiveness. The adoption of Information Technology (IT) has also been extensively studied as an enabler of process development and optimization as well as facilitating improvements in the coordination and integration of process optimization (Short and Venkatraman, 1992; Venkatraman, 1994). Despite such a broad range of studies, there are still some gaps both in literature and in practice, as some relevant issues have not been fully addressed and the lack of a clear strategic roadmap still affects many process engineering initiatives. Indeed, creating an organization based on processes turns out to be far more challenging than redesigning activities or experimenting with incorporating a process model as an additional structure within a traditional functional or divisional model. Besides structural elements, it is crucial to discuss the alignment of all the important organization design elements which are likely to be relevant to the design, implementation and management of business processes such as management style, performance metrics, people practices and organizational culture (Hernaus, 2008b). The design of organizations around processes is thus a significant challenge for managers and both more research and more practical guidelines and exemplars are needed (Kiraka and Manning, 2005). This paper investigates the topic of process-based organization development in the aerospace industry. In particular, we introduce, analyse and discuss the case of Superjet International, a new company resulting from a partnership between Alenia Aeronautica and Sukhoi Civil Aircraft Company (SCAC), focused on worldwide sales, marketing and customer service in the regional aircraft industry. Two factors argue for the choice of this particular industrial context as for this study. First, aerospace is a highly concentrated sector, with a small number of system integrators and a large base of subcontractors and suppliers of smaller components and services. System integrators are thus required to have strong process orchestration and coordination Copyright # 2010 John Wiley & Sons, Ltd. THE PROCESS-BASED ORGANIZATION For many years, both normative and positive approaches to the study of management have been dominated by the functional perspective. Although the process perspective has begun to influence management theory and practice organizations are still primarily perceived as being functionally structured rather than being composed of a set of processes. Thus, designing structures still appears to be the main emphasis of organization design (Simon, 1995). Nevertheless, evidence exists that process focused design of organizations can result in superior organizational performance. For example, recent research results demonstrates that ‘process-complete’ departments that foster a collective sense of responsibility in their workers have faster cycle times with respect to functional departments (Majchrzak and Wang, 1996). Industry trends are also an important trigger for the process-oriented transformation of organizations. Companies in an increasing number of industrial sectors are rapidly transforming themselves from firm-centric to network-centric models Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm Building a Process-Based Organization 51 where corporations can be seen as portfolios of capabilities and relationships within and across organizational boundaries (Venkatraman, 2006). The increasing importance of the ‘platform architect’ or ‘orchestrator’ business model for organizations in many sectors is clear evidence of this trend, with examples in the automotive industry (e.g. GM and Ford), computer industry (e.g. Intel, Microsoft and Cisco) and many other sectors including aerospace and IT. In these cases, the systems of value adding intra- and inter-organizational processes thus represent key focal elements of analysis. Companies should thus move from a paradigm of ‘strategy, structure and system’ to a ‘people, purpose and process’ perspective (Ghoshal and Bartlett, 1997) and redesign management roles to facilitate frontline entrepreneurship and cross-unit learning. The process-based organization has been proposed in literature as a ‘natural organization strategy’ (Crosetto and Macazaga, 2005) and the horizontal process management structure has also been considered as a specific type of network organizational structure (Harrington and Harrington, 1994). Building on these assumptions, the traditional perspective which sees processes as derived from the overall corporate strategy, according to a ‘process follows strategy’ path, evolves to a new ‘strategy follows processes’ where the process becomes a cornerstone of organizational design. There is a mutual inter-relationship between a firm’s strategy and processes (Schmidt and Treichler, 1998) and it is important to articulate the organizational context of which critical processes are part, and then adopt a holistic approach to process design (Edwards et al., 2000; Short and Venkatraman, 1992). The process-based organization is not a unique concept and is better characterized as a family of organizations evidencing different levels of maturity depending on which the organization is considered to be a process-focused, process-based and process-oriented. Often, the process maturity concept is offered as providing a path to business improvement and success (McCormack, 2007) and its basic notion is that there are different levels of process orientation that companies strive to reach. The differences between the maturity levels can be investigated at different levels both inside and outside the organization. To support a clear representation and analysis of driving forces and components relating to process analysis, a comprehensive framework has been proposed (Kiraka and Manning, 2005) which includes, beside processes, the internal organizational context (with strategy and structure) and external environment (with macro-environment and external stakeholders). A process-based model is thus different from one organization to another since there are contingent aspects to consider such as management practices, Copyright # 2010 John Wiley & Sons, Ltd. performance measurement systems, reward systems, people competencies, career paths and organizational culture (Hernaus, 2008b). It is often the case that the customer perspective is one of the central foci relating to the design, management and measurement of core processes. Thus, processes aim at adding value to the stakeholders of an organization and this implies that activities constitute a process which must be linked explicitly to stakeholders’ expectations (Braganza and Lambert, 2000). Hence, the (internal and external) ‘customer’ of one company is thus a key stakeholder to satisfy and the process perspective is conducive to this objective. The most valuable characteristic of the processbased organization is that it can significantly enhance the coordination among people and activities and increase the company’s flexibility allowing it to respond to market changes and customer needs efficiently and effectively. The process structure allows attention to be directed toward the customer. Attention thus directed leads to greater satisfaction as well as improvements in productivity, speed and efficiency. In addition, employees are able to take a broader view of organizational goals rather than being focused on the goals of a single department because there are no boundaries among functional areas (Daft, 2006). Process-based organizations have a completely different organizational shape when compared to other organizational structures. Two key ideas underpin the organization configuration: (a) organization units are organized under core processes; (b) other processes are added to these units minimizing the necessity of coordination between units (Sepehri, 2004). However, processes cannot be the only basis for organizational structure since functional and product skills and knowledge remain important. In fact, the difficulty of designing and implementing process-based organization partially arises because of the need for horizontal and vertical management structures to co-exist and indeed be co-ordinated with each other. With this in mind, a multidimensional structure has been suggested with process ownership as a dominant dimension (Vanhaverbeke and Torremans, 1999). Vertical management systems may also need to be reworked, but they cannot be altogether dismantled (Hammer and Stanton, 1999). It is important to note, however, that many companies have engaged in setting up a process-based model simply by imposing process management as an additional dimension on top of the existing functional or product dimension. Process-based organizations can be seen representing a later stage of process orientation in which process thinking has become more pervasive in the organization and the responsibilities for managing processes are diffused throughout lower management levels (Brown and Ross, 2003). It is thus Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm 52 A. Corallo et al. always clearly defined. In fact, processes are selected portions of larger streams of activity and process boundaries must be set or established in this larger context, before they can be adequately identified (Nickols, 1998). The MIT Process Handbook repository represents an interesting approach to ‘taxonomization’ and the creative exploration of process models (Klein et al., 2003). A related approach involves the application of coordination principles to improve flow, fit and share dependencies and come up with more robust and innovative business processes based on the identification of a set of key process metrics (Margherita et al., 2007). Process orientation and business process practice have an influence on job characteristics and peoples’ existing and required future competencies. They shape job designs, accountabilities and skill requirements, all of which significantly impact culture and competencies (Gardner, 2004). There is thus the need to define methods, roadmaps and guidelines to streamline the introduction of a process mindset and structure within the organization. The analysis of practical examples of companies attempting to create a process-based structure can also provide interesting contributions to our understanding. evident that the implementation of a process-based organization necessitates a large-scale transition which can be particularly challenging because: (a) it is pervasive and includes changes of almost all aspects of the organization; (b) it involves the whole organization rather than particular units and (c) it is deep and requires fundamental changes in assumptions, beliefs and values (Hernaus, 2008a). Throughout the 1990s, some organizations transformed themselves from functionally oriented to process-based entities. An extended research study at Xerox Ltd showed the importance of coordinating effectively information management, strategy and structure within the context of a process-focused enterprise. The research shows that a holistic approach to management by process is possible if it is facilitated by the appropriate organization of information management (Seltsikas, 2001). Other significant cases of process-based (re)organizations are Barclays Bank, Duke Power, General Electric, IBM, Motorola, Quantum and Texas Instruments. In the aerospace industry, important experiences have been realized at Boeing Airlift Tanker and Northrop Grumman Space Technology. The extensive research literature which addresses process innovation can be utilized to identify the critical issues relating to transforming organizations into process-based organizations. Thus, it has been argued that in an extensive innovation initiative, it is crucial to analyse the complex dynamics of change by addressing issues such as feasibility, sequence and stakeholders’ evaluation (Brynjolfsson et al., 1997). The task of getting people to process and accept change and reengineering is difficult and painful and requires a change in the culture of the company (Garvin, 1995). As organizations attempt to deal with important changes, critical success factors include the need for a comprehensive action plan and clear understanding of aspirations and goals of people (Chrusciel and Field, 2006). Changes in the environment should also be evaluated to identify realistically whether to redesign existing processes or develop new ones (Edwards et al., 2000). Some researchers highlight the importance of sustaining change from the bottom-up and to ‘start small’ with pilot initiatives (Caron et al., 1994). Considering the integrated nature of an organization, it is important to consider the interacting influences of content, context, process and individual differences on change efforts (Walker et al., 2007). Further, the effective introduction of change requires addressing the nature and interaction of strategy, people, process and relevant enablers. A systems view of these components and their relationships is also a key to streamlining ICT adoption and process redesign (Margherita and Petti, 2010). One of the main difficulties in building an organization based on processes is the identification of processes because their boundaries are not Copyright # 2010 John Wiley & Sons, Ltd. RESEARCH SITE AND METHOD The research described in this paper leverages an ongoing collaboration between the authors and the Finmeccanica Group, and in particular with Alenia Aeronautica. The direct interaction with company managers and other key individuals allowed the researchers to obtain insights and information which would not have been accessible otherwise. In the following paragraphs, an initial description of the subject company, the study plan and its execution are reported, along with the main findings obtained. The subject company: Superjet International Superjet International (SJI) was established in July 2007 and started operations in February 2009. The company, headquartered in Venice (Italy), was created as a joint venture between the Italian Alenia Aeronautica and SCAC, the civil aviation branch of Sukhoi which is one of the most renowned Russian aviation companies. Alenia Aeronautica, a company totally owned by the Finmeccanica Group, owns ‘25% þ 1’ of shares in SCAC whereas Sukhoi holding owns the remaining ‘75% À 1’ shares. Thus, Alenia controls the majority of shares (51%) in SJL and the remaining part is owned by SCAC. Figure 1 shows the ownership structure of SJI. The motivation to create SJI resulted from a common interest of SCAC and Alenia Aeronautica in entering the market for regional jets. This interest Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm Building a Process-Based Organization 53 sequent agreement between the companies thus allowed for the identification of complementary roles: SCAC designs and produces aircraft and sells to the Russian, Chinese and other eastern markets whereas SJI buys the aircraft from SCAC, conducts marketing activities and sells to western markets and Japan. Thanks to its central role (and majority shareholding) of Alenia Aeronautica SJI also provides after-sales support and services worldwide. SJI also provides training and the design and development of customized ‘VIP’ and cargo versions of the Superjet 100 family. SJI is thus ‘native’ in the regional jet segment and this can be a competitive advantage with respect to other players. Besides, the company has the possibility to create de novo an organization according to a set of high-level standards. However, challenges are presented due to the lack of a set of consolidated rules to follow and the need to develop a unique corporate identity when the two partners have very different management styles, expectations and organizational models. Case study plan and interviews The primary focus of this research on one single organization and the peculiar industrial setting led us to apply a qualitative investigation methodology in order to address the needs of the specific context of analysis. In particular, a case study approach such as the one utilized in this research is generally appropriate in the study of contemporary events and non-controllable units of analysis (Stake, 1995; Yin, 2003). This study relied on different sources of evidence. Beside the company website and other web sources, most of the information was collected through a set of interviews involving Alenia Aeronautica and SJI employees. Following a ‘snowball’ approach (Bryman and Bell, 2007), the researchers firstly contacted a project manager and this key informant provided an extensive overview of topics and helped the research team to identify other people to interview. Interviews utilized semi-structured and open-ended questions, Figure 1 Ownership structure of Superjet International reflects the current market realities where aircraft producers are converging on producing 80/100-seat aircraft, due to factors such as the increase of oil price, cost-per-seat and total cost of ownership. Companies which previously produced 30/50-seat jets (e.g. Embraer and Bombardier) have begun to produce 100 and 110-seat versions. Boeing and Airbus are also adapting some of their aircraft in order to enter the market for this type of regional jet. SCAC developed the SJI 100 which is a state-ofthe-art aircraft which is the result of a joint effort involving leading players such as Boeing (supervision), Thales (Avionics) and Powerjet (engines). The aircraft is distinguished by a full fly-by-wire system, optimal wing-engine combination that guarantees fuel savings and reduction of polluting and acoustic emissions, and better comfort parameters (e.g. space per seat and baggage vane) with respect to competitors. Figure 2 shows the main features of the SJI 100 series and the companies involved in the creation of the aircraft. SCAC needed a partner in order to enter the civil market, particularly the market segments involving Western countries. In contrast, Alenia Aeronautica has strong competencies in flight certification and relationships with key certification institutions such as EASA (European Aviation Safety Agency) and the FAA (Federal Aviation Administration) but the company lacked a suitable product with which to enter the regional jet segment. The two companies, therefore, represented a natural ‘fit’. The sub- Figure 2 SJI 100 features and partnership network Copyright # 2010 John Wiley & Sons, Ltd. Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm 54 A. Corallo et al. with the objective of obtaining more diverse perspectives, views and opinions sharing (Creswell, 2003). Ten persons were interviewed in Venice (SJI headquarters), Rome (Finmeccanica Group headquarters) and Turin (one of the Alenia Aeronautica plants), divided as follows: (a) the CEO of SJI; (b) four persons in the ICT area; (c) two persons in the CTO and Know-How Improvement; (d) one person in the Operations; (e) one person in the Corporate Strategy and (f) one person in the Customer Service. The composition of the sample was made in order to satisfy two criteria: (1) involve all the core nucleus of persons who had a direct role in the creation of SJI; (2) define an ‘interdisciplinary’ group to capture the integrated technological, strategic and organizational perspectives of the experience made. The research was divided into three main phases: (a) focus identification and questionnaire design (March 2009); (b) interview and data collection (April 2009) and (c) draft case creation and validation (May–September 2009) based on a member-checking approach (Creswell, 2003) and the use of key informants to review the findings obtained. Two main research questions have oriented the study: (1) which approach, methods and activities have been defined and executed at SJI to design the process-based business model' (2) In which way has the process model been used in the frame of the overall organizational design' This focus, along with the main issues identified in the literature with the creation of a process-based organization, determined a particular focus on the following areas investigated through the interviews and the overall study: (1) industry and market positioning of SJI; (2) key phases and actors in the start-up; (3) process design and modelling approach and methods; (4) process management, performance monitoring and IT platforms; (5) information flows management and privacy security policy; (6) company network structure and dynamics; (7) partnership strategy and development (8) competence management approach, systems and programs. Whereas the first two areas are necessary in order to frame the organization background, the third and fourth areas represent the core aspects of process analysis. Besides, information flows, network development and partnership strategy are particularly relevant for the case in point given the mixed Italian–Russian management. Finally, competence management is a critical aspect of the study in order to identify the distinguishing skills required in process-oriented organizations as distinct from those present in traditional companies. The next section illustrates how the process design and modelling work were realized at SJI, with a detailed analysis of the roadmap of activities implemented. Copyright # 2010 John Wiley & Sons, Ltd. PROCESS DESIGN ROADMAP AT SJI The strong commitment to the creation of SJI by top management of the partner companies allowed for the new company to be created with an initial orientation towards business processes. It also allowed the design of an innovative organization through applying the experiences accumulated as a result of the prior professional experience of the participants. The first step (August/December 2007) involved the creation of a core team of professionals with the objective of designing and operationalizing the process and organizational model of the new company. The complete start-up and process design phase involved a variety of different stakeholders such as: Bain & Company, a consulting company involved in the initial interviews and process model definition; KPMG, for the definition of low-level process models and implementation of SAP systems; Ernst & Young, to support the ICT area and the management of technical data; Elsag Datamat (a Finmeccanica company), for technical training and operative support in process analysis and design; Alenia Aeronautica, with a major role in interviews, process modelling and deployment of the Component Business Model (CBM) methodology; Finmeccanica Group Services (FGS), providing the standard methodology for BPM and the BPM2CBM methodology (this methodology and the CBM approach will be analysed in the following section). In addition to these ‘external’ parties, SJI personnel were fully involved in the start-up team so that they could bring their professional experience as a critical asset in the definition of the organization and process model. The resulting team was characterized by a high level of diversity in terms of culture (15 different countries of origin) and professional background (e.g. people coming from airlines were recruited to simultaneously bring both a producer and a customer perspective). Experiences and ideas were translated into activity flows, organizational roles and other process details, thus, obtaining a holistic description of the company. The initial scope of the analysis was considered to be the enterprise as a whole in order to obtain a set of high-level models related to all the organizational areas. However, most attention was focused on those areas that, for strategic or urgency reasons, required an early detailed analysis. Areas such as ‘Sales and Accounting’ and ‘Customer Services’ were focused on. Absolute priority was given to modelling the processes and organizational structure of Customer Services, for three main reasons: (1) marketing and customer services are at the core of the mission of SJI and the company must be ready from the very beginning to support any sale and after-sales need; (2) after-sales is a particularly complex area which deserves a special focus and early design effort; (3) SJI employees were Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm Building a Process-Based Organization 55 Figure 3 Phases of process engineering at SJI likely to have a potential gap of competencies in customer services since they mostly come from organizations (such as Alenia Aeronautica and Alenia Aeronavali) which are more skilled on manufacturing rather than commercial aspects. For Customer Services and other key process areas which were initially focused on, the process engineering activities were organized in four phases (see Figure 3): (1) process identification and segmentation (December 2007/March 2008); (2) process flow modelling and tool identification (March 2008/May 2008); (3) process modelling in the BPM suite adopted, i.e. ARIS (produced by IDS Sheer) (April 2008/June 2008); (4) detailed activities and tool description (May 2008/June 2008). The official Technical Convention on ‘Business Architecture Modelling’ provided by FGS and the ARIS system (in particular, the ‘Business Architect’ and ‘Business Publisher’ modules) provided the core methodological and software platform. ARIS was also chosen because it is the standard BPM tool used in Finmeccanica and it is perfectly interoperable with SAP systems. The four phases led to the modelling of business processes on five levels (plus a level ‘0’) of detail, as showed in Figure 4. The starting point for modelling is represented by a high-level definition (level 0) of the business process areas of the company, i.e. core processes, management processes and support processes. The first level of detail is then obtained by creating the taxonomy of process areas and this resulted in the identification of four core processes (e.g. product design and manufacturing), two management processes (e.g. quality systems management) and five support processes (e.g. budget, planning and control). Each core process is then decomposed at the second level to obtain a set of value chain diagrams, i.e. sequences of value adding activities which compose the different first-level processes. The third-level analysis aims to define Event-driven Figure 4 Process modelling levels Copyright # 2010 John Wiley & Sons, Ltd. Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm 56 A. Corallo et al. Table 1 Mapping of process taxonomy levels and process phases Phase 1 2 3 4 Project phases Process identification and segmentation Process flow modelling and tools identification Process modelling in the BPM suite Detailed activities and tools description Level 0 1 2 3 4 5 Process taxonomy elements High-level business areas Basic process classification Process value chain Event-driven process chains Functions Function allocation diagrams Process Chain (EPC) diagrams, i.e. specific types of flow chart describing the processes detailed at the previous level in terms of functions and events, i.e. circumstances under which the function or process works (e.g. ‘requirement captured’ or ‘material on stock’). EPC diagrams are then expanded to represent functions (fourth level) and finally the fifth level contains Functional Allocation Diagrams (FAD), i.e. detailed descriptions about who performs functions and how they are performed, with information such as data, documentation, application systems (e.g. SAP systems), organizational units, types of responsibility, inputs and output. These five levels of process description have been obtained throughout the four phases of the roadmap applied at Superjet International in order to build the core process model of the company, as shown in Table 1. The first phase of the roadmap—‘Process identification and segmentation’—had the objective of defining an initial process classification along with a core organizational chart and description of jobs. The approach adopted was based both on the standard American Productivity and Quality Center (APQC) process classification framework for the aerospace (www.apqc.org) and on previous experiences of SJI managers and process analysts. As already highlighted, the focus was immediately placed on classifying customer service activities which had goals described by one the managers interviewed as follows: [T]he goal of Customer Services is provide superior service respect to competitors, support SuperJet 100 worldwide sales, and exceed customer expectations. To achieve this goal, SJI is building a structured and efficient organization gathering experienced professionals from the aviation world resulting in a truly international team. The basic structure of customer service processes of the company have been identified and is illustrated in Figure 5. With respect to the organizational chart for Customer Services, the four key areas of responsibility identified are: (1) spare and logistics; (2) technical support; (3) commercial services and (4) training/flight operations. The second phase of the roadmap—‘Process flow modelling and tools identification’—was aimed at obtaining a logical process flow and high-level process model. Process analysts at SJI realized the difficulties of mapping the taxonomy tree with EPC diagrams. In fact, starting from the taxonomy, it is possible to identify process activities but it is quite hard to define sequences and connections among activities. The reason for this derives from the fact that taxonomies are much less structured than business processes and they just define connections among macro-processes. The second phase started with information obtained from a set of unstructured interviews conducted with process owners and brainstorming sessions which led to the creation of a number of process diagrams. During this phase, some process analysts used the ARIS BPM suite to directly transform the information captured into EPC diagrams. Other analysts, who had no expertise with ARIS and EPC, used Power Point slides to design flow charts, trying to ensure Figure 5 Customer service activities of SJI (source: www.superjetinternational.com) Copyright # 2010 John Wiley & Sons, Ltd. Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm Building a Process-Based Organization 57 that they were as compliant as possible with the EPC notation. The modelling of flows was basically aimed at representing, for each process analysed, elements like events, tasks, logical connections, gateways, etc. The ‘misalignment’ in the modelling approach caused some difficulties in the third phase—‘Process modelling in the BPM suite’—aimed at bringing all the organizational and process modelling work within the process management system. In fact, the Power Point diagrams obtained in the previous phase had to be translated into EPC flows to obtain a standardized knowledge base about third-level processes. This translation activity, mainly done by people skilled on ARIS, was error prone and time consuming as a result of two kinds of problems: (1) EPC diagrams have a specific focus on events and require a different modelling approach with respect to traditional flow charts; and (2) some members in the core project nucleus did not participate in the interviews and the absence of ‘transcripts’ caused some problems in the interpretation of Power Point diagrams. The fourth phase of the process engineering roadmap—‘Detailed activities and tools description’— was aimed to provide a detailed description of activities and to integrate within ARIS the information about supporting tools and documentation. The last modelling level of ARIS (fifth level) allows for the specification for each activity, of information such as resources, input/output and supporting technology systems. This level of detail has been obtained for a limited sub-set of processes, in particular for those already enabled by the employees and systems. An important stimulus for process definition came from the commitment of the company to obtain quality certification. SJI was required to be certified according to the ISO 9001 standard which required a focus on business processes. The systematic process modelling effort undertaken with ARIS was an important enabler of the certification procedures. ISO 9001 does not provide precise indications about process taxonomies and modelling approaches and it just requires the enterprise to be organized by processes and to describe product-related activities (e.g. design, production, customer service, etc.). ISO 9001 is more explicit in terms of specific process definition. For example, in the aeronautic sector, it requires the accurate description of processes related to Configuration Management. The most relevant processes of SJI are directly translated into specific procedures whereas smaller or ‘support’ processes are aggregated within a single procedure. In particular, about 70 second-level processes are mapped on 60 procedures. Process analysts are also planning to use the BPM system for the automatic generation of documentation starting from process definition. Copyright # 2010 John Wiley & Sons, Ltd. When this study was formalized, 11 macroprocesses (first level) and 70 second-level models were defined. At the third level, there are more than 600 activities, whereas the fourth level still needs a significant effort for completion. Several fifth-level models are available, providing an integration interface with SAP systems. COMPONENT BUSINESS MODEL: STRATEGY FOLLOWS PROCESSES The identification, analysis and representation of business processes are important to create more effective and efficient enterprise activities. A manager of the company noted that: the start-up activities of SJI have suggested different scenarios for process approach application: 1) workflow, resources and IT modelling; 2) guidelines, procedures and reporting for knowledge management; 3) software development (e.g. ERP and CRM); 4) compliance with quality certification (e.g. ISO 9001); 5) support for component business model analysis (e.g. make-or-buy or budget allocation); 6) performance measurement (e.g. KPI and balanced scorecard models); 7) support for business processes reengineering and benchmarking. A limitation of process models and flows could be/is that they can be too complex to be understood by people not directly involved (e.g. top managers) and the link with the overall business strategy is not always easy to identify. The information provided by this research into SJI provides insight into the relationship that the company has tried to establish between processes and strategy, in a ‘strategy follows processes’ view (Schmidt and Treichler, 1998) where the process becomes a driver of organizational design. After having identified and modelled the key processes, the company adopted the CBM, a framework developed by IBM (IBM Business Consulting Services, 2005) to model and analyse an enterprise through a logical representation or map of business components or ‘building blocks’. CBM supports a set of strategic operations (e.g. mergers and acquisitions, gap analysis, make or buy analysis) which can be hardly accomplished through a pure process-based approach. In the CBM model, each component is like a suborganization with its own objectives, resources and activities and provides/consumes specific business services. Components can be internal or external to the organization and are organized by competency and accountability. Competencies are different for each enterprise and represent a high-level view of components according to the type of business value provided. They are typically aggregated under macro-families like ‘manage’, ‘design’, ‘buy’, ‘make’ and ‘sell’. Accountability is defined at three levels, Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm 58 A. Corallo et al. matically related to those used in ARIS EPC diagrams in this approach. However, some issues need still to be managed: (a) there is no control ensuring the allocation of a third-level process to CBM components and thus, in case of deletion or creation of a new third-level process, a misalignment with the CBM map can occur; (b) the one-to-one association of a third-level process to a single CBM component is not verified and it is thus possible to mistakenly create different occurrences of the same process in different CBM components; (c) there is no formal verification that the process level allocated in the component is correct (i.e. a third level). The BPM2CBM approach in SJI was firstly applied to support make-or-buy decisions based on the assessment of strategic competencies (to keep ‘in-house’) and non-strategic competencies (to outsource). This analysis is complex since the company works as an open system where many partners have different roles and the dependencies among the activities of each partner strongly influence the strategic choices. Another element of complexity is represented by the payback period which could postpone some investments with respect to others (concept of as late as possible (ALAP)). As an example, the creation of a spare parts warehouse can be postponed until the first aircraft are actually sold to customers. Cost analysis is of fundamental importance for many company decisions. The CBM approach is also being used in SJI to perform a ‘quick and dirty’ and high-level analysis of costs aimed at subdividing the overall company budget among different business components or functions. The methodology enables a precise evaluation of costs i.e. direct, for components providing strategic guidance and policy; control, bridging the gap between the other two levels by monitoring performance and handling exceptions and execute, providing actual activities and services that drive value creation. Figure 6 shows the core structure of a general CBM map. The creation of a CBM map for SJI began with a high-level framework defined by the corporate strategy area of Finmeccanica, based on a standard CBM map for the aeronautic sector. Each component groups the activities (derived from process models present in ARIS) which are under its ‘responsibility’. Activities are thus core elements both in process perspective and in the CBM view and the only substantial difference stays in the criteria used to aggregate and visualize content. In order to fully integrate the CBM analysis with the BPM approach, FGS created a methodology named ‘BPM2CBM’. At the beginning of the CBM study of SJI, an Excel spreadsheet was used to represent the information about process activities extracted from third-level models. This approach caused significant difficulties in that all the changes to process models had to be manually reported in the Excel file, with the accompanying loss of time and risk of inconsistencies. To solve this problem, the CBM approach was integrated directly into the ARIS BPM suite through the use of UML class diagrams (since CBM is not natively supported by ARIS). The customization of the system allowed analysts to manage both processes and business components in a single design environment, thus enabling a coherent implementation of the CBM2BPM methodology. In fact, third-level processes included in business components are auto- Figure 6 Business components in the CBM approach (adapted from IBM) Copyright # 2010 John Wiley & Sons, Ltd. Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm Building a Process-Based Organization 59 for each CBM component. Each component has a set of activities and each activity is a part of a business process. If a cost model is associated with activities and a simulation is conducted for the processes concerned, it is then possible to collect the results of the simulation and estimate in a reliable way the costs of components (as addition of costs of its activities). It is thus possible to undertake an initial rough analysis (dry run) to understand the macro-situation and then use simulations to go more in detail and refine process optimization. CBM analysis can be applied to a start-up but it can also be used in merger and acquisition operations where the comparison among processes can be even more complicated. The development and implementation of the BPM2CBM approach in SJI has fostered new applications in other Finmeccanica companies such as Selex Communications. At this stage, no Key Performance Indicators (KPI) or metrics have been defined for processes but CBM components have been analysed with respect to parameters or evaluation axes which have allowed the identification of ‘hot’ components. Such axes (some of them have been adopted from previous Finmeccanica and Alenia projects such as ALENET) relate to factors such as business relevance, cost, competence gap, ICT maturity, centrality for the company mission and interface with suppliers. After the categorization of such axes with respect to two synthetic indicators (i.e. quality and business), it was possible to represent business components in the CBM map for SJI. Figure 7 shows the map, and in particular the components related with Customer Services. Hot areas are indicated in darker boxes and represent the most urgent and strategic components for which make or buy and other strategic decisions have been needed since the first day of existence of the company. CONCLUSIONS AND FUTURE RESEARCH DIRECTIONS Process-based approaches can be utilized to streamline company activities and enhance a company’s ability to respond to customer needs. However, the development of a process-based organization is a complex and multifaceted task which should address different factors at strategic, structural and external environment level. A process-based model thus differs from one organization to another since there are contingences to consider like management practices, people competencies and culture and the network of stakeholders. The experience at SJI showed how crucial it is to obtain the full commitment of top management to create a new process-based organization. The creation of competitive advantage based on efficient Figure 7 Customer service components in the CBM map of SJI Copyright # 2010 John Wiley & Sons, Ltd. Know. Process Mgmt. 17, 49–61 (2010) DOI: 10.1002/kpm 60 A. Corallo et al. With an aircraft which combines deep technological expertise and innovative, customer-focused features, a workforce with a truly international mindset and a customer which is a real partner in the design and delivery process, SJI is gradually becoming a key player in the civil aviation field. More than 100 orders have been placed with the company and the first deliveries should occur in 2010. This study provides interesting insights into the creation of new companies with an organizational mindset beyond a functional model. One limitation of this paper concerns the lack of identification or application of performance indicators such as process consistency, cost and lead time and customer value. Future research will thus be dedicated to investigate the evolution of operations of SJI and to measure the overall performance and effects of the process-based approach that has been implemented. In addition, the experience provided by SJI will represent a starting point to identify a set of things ‘to-do’ and ‘not-to-do’ and also allow the identification of guidelines for defining a roadmap to streamline the creation of a successful process-based organization. and effective services to customers typically requires a process-based orientation. Therefore, since the very beginning the company has tried to link corporate strategy with everyday activity. The experience of SJI shows it is necessary to identify and define the core process model of the company. Beside the creation of a robust process taxonomy, process analysis should be enriched by elements relating to the organizational functions and roles involved, inter-process links, input, output, resources used and enabling technology systems. In addition, the relationships of processes with the overall business model of the company should be identified. SJI was conceived from the beginning as a ‘process-complete’ company in order to foster a collective customer mindset and sense of responsibility among its employees, resulting in faster cycle times, enhanced coordination and customer responsiveness with respect to functional departments. The process structure of SJI directs attention towards the customer, which leads to greater customer satisfaction as well as improvements in productivity, speed and efficiency. In addition, employees develop a broader view of organizational goals rather than being focused on narrow, departmental goals. In the process-based organization, organization units are organized under core processes and other processes are then added to these units minimizing the necessity of cross-unit coordination. Finally, process orientation shapes job designs, culture, competencies and skill requirements. From an operational point of view, some lessons learned have emerged throughout the experience made at SJI: (a) the starting point for creating the process-based organization should be the identification and modelling of those core processes that mostly contribute to the business model of the company; (b) the process represents the core nucleus around which to define the organizational model and other key elements; (c) processes should be defined and analysed at different levels of detail like flows, interactions, functions, etc.; (d) the ‘translation’ of the basic process taxonomy into a logical flow of activities is not immediate; (e) the consolidation of process models described with different methods (i.e. Power Point charts versus EPC charts) can be time consuming and cause possible inconsistencies, resulting in a slow down of the overall modelling activity; (f) the diffusion and knowledge of the modelling methodology and tools throughout the company is a critical factor for the success of the initiative; (g) BPM systems are fundamental to systematize the knowledge base, automate activities and establish links with other enterprise systems (e.g. ERP, SCM); (h) the core process model of the company can support the identification of ‘hot’ components in the business modelling perspective. 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