Partner Network and its Process Management
Taivo Kangilaski
1
, Igor Polyantchikov
2
and Eduard Shevtshenko
2
1
Department of Computer Control, Tallinn University of Technology, 5, Ehitajate Str., Tallinn, Estonia
2
Department of Mechanical Engineering, Tallinn University of Technology, 5, Ehitajate Str., Tallinn, Estonia
Keywords: Partner Network, Virtual Organization, Business Process Management, Process Maturity Estimation Model.
Abstract: Business processes define how the organizations operate, deliver products or services and interact with
customers; how they support their corporate strategies and enable companies to react to changes more
rapidly. Business process management empowers the business analysts to define, manage, analyse and
optimize their processes. The current article specifies the principles to describe the processes in a Partner
Network to ensure efficient information exchange. As fluent cooperation is based on processes and depends
on process maturity, the maturity estimation model is proposed in this article.
1 INTRODUCTION
Globalization has created a world market driven by
fierce competition among companies that are located
in different parts of the world though producing
similar products. To be more competitive, the
organizations require flexible manufacturing
systems and Partner Networks (PN) to meet
customer demands. In order to achieve customer
satisfaction, to increase productivity and to reduce
the involved costs, there is a need for analysis,
modelling, design and optimization of these systems
that primarily means optimization of business
processes (Miers, 2006).
Thus, companies in better financial and market
position (called Focal Players (FP)) are forming a
new ecosystem in order to be more competitive and
flexible. Building an ecosystem means that the
necessary companies are initially recruited among
the partners and are employed as subcontractors for
the necessary tasks by the FP as the general project
manager. In case the needed competencies are not
represented in the PN or they are not of a
sufficiently high quality, the external companies will
be asked to participate in the Virtual Organization
(VO). Therefore, to be able to quickly respond to
market needs and to not have to invest too much
time to develop necessary network competencies
and processes for each new business opportunity, in
many cases companies wishing to participate in the
VO will establish a core network. Such a network is
mostly a long term strategic alliance. In addition to
the strategic alliances, there are also the goal-
oriented networks, which can be considered as
extensions of the strategic alliances when essential
competences / resources are missing or are not
reachable (Kangilaski, 2010a).
2 DYNAMICS OF VO
When the PN has been developed, the FP starts to
search for new business opportunities. The
identification of the business opportunity by the FP
or a PN member will activate the necessary
processes to start the project. Based on its
competence, the FP will analyse the business
opportunity to find out whether it is worthwhile to
launch a new project. This includes business
planning, which leads to the development of an
integrated business model including business
concept (processes, communication, skills,
resources, etc.) and financial model (flow of funds,
responsibilities, compensation of participation).
When the companies are formed and Virtual
Organization (VO) is created, the actual operation,
which may range from design to manufacturing and
retail, will start. The successful accomplishment of
the operation leads to the desired business impact,
after which – unless there is a directly succeeding
order – the project will be terminated. The
termination means the ending of the unique group of
companies and their employees to make space for
the next upcoming business opportunities (VOSTER
519
Kangilaski T., Polyantchikov I. and Shevtshenko E..
Partner Network and its Process Management.
DOI: 10.5220/0004405105190527
In Proceedings of the 10th International Conference on Informatics in Control, Automation and Robotics (ICINCO-2013), pages 519-527
ISBN: 978-989-8565-71-6
Copyright
c
2013 SCITEPRESS (Science and Technology Publications, Lda.)
project consortium, 2004).
Such a PN based approach converts ordinary
place-centric enterprise structures into highly
virtualized and customer-centric structures, but it is
highly dependent on business processes.
3 BUSINESS PROCESSES
To form VOs and to handle all legal issues
regulating business roles and responsibilities,
financial topics, cooperation problems etc, the
business processes are the key elements that
accelerate time critical activities.
Business processes are the essence of the
business. All companies are basically established
using the same architecture – every company has a
business model, processes and IT applications. The
business model describes what products or services
are produced for which markets as well as who are
the customers and business partners and which is the
company’s plan for the future (Polyantchikov et al.,
2012).
Processes are elaborated for each company
basing on the business model. Each process exists at
varying level of maturity – from ad hoc and manual
processes to well documented and automated
processes (Paulk, 1994). The backbone of the layer
of processes is IT, which ensures the business
processes have the applications and data they need.
In PNs, which consist mainly of SMEs, the
companies’ business model changes frequently
because it has to be adaptable. New products are
launched, new market shares have to be gained, new
companies will enter into the PN, some companies
will leave – this all directly impacts the company’s
processes.
Keeping the process model up-to-date is a
permanent task. The working processes have to be
modified and the new processes have to be
established. Processes from the new PN members or
from an acquired organization have to be aligned
and integrated. Also, the IT landscape has to be
adjusted. That means that the existing applications
have to be changed, the new applications have to be
introduced and the acquired applications have to be
integrated.
The problem is that this adaption is not very fluid
in case of the most organizations because the
business model, the process layer and the IT
applications are not well connected, frequently they
are disconnected. If the strategy changes, it will be
complicated to realize which processes are affected
and how they should be changed to support the new
processes. Once the processes are implemented at
the application layer, it is almost impossible for most
of the organizations to prove that all processes
support the new strategy.
With such a disconnection between strategy,
processes and applications, it is difficult to adapt
quickly to the changing business models and the
new market conditions.
To stay agile and competitive, the enterprises
should concern about how fast they can adjust to the
business model changes and how fast their process
landscape and supporting applications landscape can
be adjusted.
The tools and techniques for process
improvement are best deployed systematically as
part of a process improvement such as Lean, Kaizen,
ISO 9001:2008 and Six Sigma (Polyantchikov and
Shevtsenko, 2010).
The process governance consists of policies and
processes that define the way the organization’s
business processes are managed. The key elements
of good process governance include transparency,
responsibility, flexibility, accountability,
commitment to the organization’s business goals and
fast realization through automation. Governance
processes are modelled just like any other processes
(Polyantchikov et al., 2012).
4 DESCRIPTION PRINCIPLES
To establish a PN control model, the modelling
principles have to be settled. According to our
approach, there are at least three types of views
needed – objective view, product/service view and
process view.
The objective view is needed to describe PN’s
objectives and companies’ objectives that belong
into PN. Via these views, it is possible to analyse
companies’ objectives’ alignment.
The product/service view is needed to analyse
which company produces which services/goods and
as well to understand which services/goods support
which objectives. The second objective is to realize
which services/goods a company needs to provide its
services/goods.
The process view is needed to learn which
processes produce which services/goods and who
are responsible for these processes, as well as who
are the consumers/providers, the participants, what
are the inputs/outputs, normative documents etc.
For companies’ level, there is an organizational
aspect needed to be modelled.
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4.1 Modelling Objectives and
Product/Services
The modelling objectives derive from PN strategies.
Every PN has its product/services to bring to the
market. These objectives will be then distributed and
accepted by Partner Network Steering Group (PNS)
and basing on these objectives the companies will
create their own objectives according to which they
will support PN activities.
Being related to objectives, the product/service
tree will be developed and services will be divided
between companies who are capable of supporting
these services.
To simplify such a model, it is reasonable to
combine these services into several service groups
and to model these objectives and services via
product/service groups (Fig. 1).
Organizational
unit 3
Product /
service
group 1
Objective Objective Objective
Organizational
unit 1
Organizational
unit 2
Product/Service
Product/Service
control service
Figure 1: Product group goals and companies’ product /
services that support it.
Companies will develop their objective trees
based on Company politics – all objectives will
support some Company politics (Fig. 2).
In addition, the goals that are aligned with PN
product group goals should be also modelled, as it is
valuable information to PNS and for companies
employees to understand the whole PN objective
tree and value chain. All objectives will be
supported at least by one process and by KPIs.
4.2 Modelling Processes
Several known notations exist for process modelling
like IDEF family, Value Added Chain diagrams
(VAC), UML modelling notations, BPEL, BPMN,
etc. Each of them has their strengths and
weaknesses. Our team has good experiences with
VAC and Event-Process Chain diagrams (EPC)
from previous projects (Kangilaski, 2010b, 2012).
Strategic
Goals
Company
Politics
Objective
Objective
Objective
Objective
Objective
Objective
Objective
Objective
Objective
Product/Service group 1
Objective
Figure 2: Objective diagram at Company level.
From the process modelling perspective, the
processes are differentiated into three process
categories:
1. Main processes – the company creates value via
these processes;
2. Auxiliary processes – these are processes which
are supporting the main processes and control
processes (e.g. financial services, human
resources, purchasing);
3. Control processes – these are processes that are
used to control all companies’ processes.
Sometimes the control processes include also
the developmental processes which will create
new production capabilities for the main
processes. Sometimes the developmental
processes are considered as separate process
groups.
In addition to the process categories, our team’s
experience proves that there is reasonable to model
PN through the five modelling layers where the four
levels are for a company and one for PN. (Fig. 3):
Level 0 – this is the level where all PN strategic
alliance companies’ main processes and their
interconnections (via consumed/produced goods and
services) at high level are represented and
interconnections are modelled. If information is
accessible, then the goal oriented alliance
companies’ information is represented. If PN has
some certain product/service groups it offers to the
market, then that should be shown at that modelling
level. Owner of this model is PNS.
Level 1 – this is the first level which describes
the company’s business processes including control
(developmental), main and supporting processes at a
high level. The process owner will be assigned to the
PartnerNetworkanditsProcessManagement
521
processes at the level of company management. The
processes supporting PN value chain should be
mapped with level 0 processes to have an integral
view. When there are products/services modelled at
the 0 level, then these processes have to be linked
with the processes which produce these outcomes.
Process goals and KPI-s should be synchronized
with the company objectives model. The owner of
these models is company’s CEO.
Level 2 – at this level the procedures belonging
to the process are represented. Each procedure’s
inputs/outputs and consumed services are named
more precisely. At the same time the product/service
tree will be modelled. At that level, the owners of
procedures are named via occupations – these are
mostly the head of departments. The owner of this
model is a company board member.
Level 1 and Level 2 are modelled via Value
Added Chain’s (VAC) notation. When there is a
need to model more information at the generalized
level, the separate VAC model is created for a
certain process or procedures where needed
information is presented (e.g. normative regulatory
documents, other participants at the level of
departments or companies, connected information
systems). All procedures have their goals and KPIs,
which are related to the process goals and KPIs.
Figure 3: Process modelling levels for a company.
Level 3 – this level describes all activities and
events related to the procedure. Each activity will
have its inputs and outputs and the performer. If all
processes are described, the performers’ job
description can be generated. In our case, the
procedures are modelled in EPC notations. EPCs
will start and end always with business events. The
owner of this model is usually the head of
department/head of group.
Level 4 – this level describes procedure activity
at the instruction level. That level will be modelled
by EPCs. If this is already modelled, the owner of
this model is mostly the same person who is
responsible for level 3 corresponding process views.
At the levels 3 and 4 we suggest to use Functional
Allocation Diagrams (FAD) to hide complicity from
the reader at these levels to describe all input and
output documents if these are many, as well as the
participating roles, IT systems etc. FAD hides the
complicity from EPC view but keeps all needed
information in model.
Based on these models, the influence analyses,
role activity analyses, product/service consumption
analysis etc. can be performed.
5 PROCESS MATURITIES
When the modelling principles are settled, then it is
needed to estimate in which maturity level the
processes are.
In level 1, each company has at least 10 main
process steps, 5 control processes and 7 supporting
processes. In second level, every process has at least
4 to 10 procedures which mean that if PN consists of
10 companies then it is already ca. 1000 procedures
to evaluate the maturity of the processes. According
to our experience we propose the following
principles – the primary focus should be on the main
processes, the second focus should be on those
supporting processes that influence the critical main
process steps and lastly the focus will be given to
the control processes and all remaining processes.
After the maturity level is estimated, the PNS or
company management can prioritize those processes
which maturity should be raised and the way how
that should be done.
A question about the necessity for maturity based
approach frequently is arises in companies. The
executives often see their processes as a ’black box’.
They don’t know the details, but somehow the
processes produce outcomes. The executives
suppose that these processes may not be as efficient
or as effective as they could be (quality and rework
are not measured), but at least they work, and
managers are afraid to change anything because a
change might disrupt these fragile ‘black box’
processes, to solve a problem is more complicated
when the problem is unclear. Automating the ‘black
box’ is therefore easier, because it becomes a project
and businesses ‘do’ projects.
As in many others above mentioned frameworks,
we use five maturity levels to identify companies’
and PNs’ processes maturities (TutorialsPoint,
2013). These levels are the initial, the awareness, the
defined, the managed and the optimized level.
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5.1 Level: Initial
The goal of the initial level is to be aware of the
importance of the business processes, to define the
rules and principles to continue with process based
approach and to have the description of the approved
processes at level 0.
The main activities are related to FP actions that
should force PN members to understand the need to
have process overview from ‘helicopter’ view. This
means that companies’ management, belonging to
PN, has decided to support that initiative (Fig.4).
Figure 4: PMO Responsibility area.
During this phase, the FP has to choose the
toolset and agree in the modelling principles to be
used in supporting these modelling activities.
From the organization’s perspective, there should
be a group of persons that will form the initial
Process Management Office’s (PMO) structure,
which will take the responsibility for these initial
modelling activities. When documenting PN’s level
0 processes, there is need for a support from
companies’ side – in some cases it is formed by
companies as a project, which is supported by PMO.
As PMO is responsible for methodology, it also
performs trainings for modellers and extends the
documentation rules if needed. In addition, it is
responsible for keeping modelling environment in
operation, checking its content and publishing in PN
intranet all the modelled information.
To conclude, the most important aspect in order
to reach the next maturity level is to have the level
zero’s processes agreed and signed by companies’
management belonging to PN strategic alliance, and
if possible also by its goal oriented network
companies’ management. The proposed criteria’s
and their measures to exit the initial maturity level
are presented in Table 1.
Table 1: Criteria’s for entering maturity level Awareness.
Nr Criteria Measure
1
Modelling tool is
obtained/procured with
needed licences
FP decision and its costs
2
PN companies have
understood the importance
of processes and have
decided to implement the
p
rocess based management
model
There exists PNS’
decision and companies
board’ decision
3
Modelling rules are
developed and
implemented
Modelling rules are
approved by PNS
4
Modelling rules are
managed and updated
according to needs
PMO is formed (1-2
persons),
p
rocess for
rules management are
established
5
Periodical modeller’s
consultation and training
about modelling rules
PMO’s consultation
p
lan is approved by
PNS
6
Validating the modelling
rules’ usage in practice
PMO models’ validation
rules are established
7
Model publishing for PN
companies
Published periodically
by PMO
8
Stakeholders are trained to
use the models.
Companies understand
the models
9 Level 0 is modelled
Level 0 is approved by
PNS
5.2 Level: Awareness
The goal of the awareness level is to ensure that the
companies by their management have documented
and approved the first and second level process
maps.
The processes between the companies’ partners
are described at the third level (process flows). PMO
has to have a developed and agreed process analyse
methodology and the agreed process maturity
evaluation rules. Companies belonging into PN
strategic alliance have to periodically evaluate their
processes, estimate the processes` maturities and
attempt to improve process maturities in areas where
smooth cooperation within VO-s is most frequently
needed.
Critical is the way how PMO is working with
stakeholders. Stakeholders must understand how to
use process models for their benefit and how they
could extend its usage.
From the process landscape view, crucial is that
all companies belonging to PN has their first and
second level process models, have modelled the
processes’ results, their consumers and their
PartnerNetworkanditsProcessManagement
523
demands for outcome as well as inputs and their
providers.
From the process management perspective, it is
essential that every process has its Key Performance
Indicators (KPI), which are measured periodically
and are approved by companies’ management. There
should be a certain person who has the responsibility
to collect these KPI measures from processes.
From the organizational point of view there is a
huge cultural change comparing with the previous
maturity level – every process and procedure has to
have an owner (for procedures of level 1 and for
level 2), who is responsible for the
process/procedure and who has the permission to
change it when needed. In addition, every process
has to have a process analyst whose responsibility is
to find out process improvement potentials. One of
the process owner responsibilities is to inform its
processes members about process goals, KPIs and
their roles in process. These role descriptions will be
the bases to the job descriptions.
At the end of this phase, the PMO should if
possible to be separated from FP and Board of
Process Architecture (BPA) should be created. The
BPA responsibility is to evaluate and plan the major
business process changes inside PN. BPA will be the
board who must evaluate PMO work productivity.
To conclude, in order to reach the next maturity
level, the most important thing is to define the first
and the second level processes and their KPIs, to
assign process owners, analysts and to form BPA
which will optimize PN agility to form more quickly
VOs to respond to market demands. The evaluation
criteria’s are presented in the Table 2.
5.3 Level: Defined
The goal of this level is to get all business critical
processes as well as all control and main supporting
processes described and structured.
This means that the third level activity diagrams
are modelled (EPC). The most critical part is to
check whether the modelled processes correspond to
the real life activities. In reality it means that there
are the audit plans for organizations to check their
processes’ correspondence to the model. This is
important as the models are used by the management
as the business tool to make the business decisions.
For the PN model, the most important fact at this
maturity level is that all processes have to be
modelled in a way that the processes
interconnections’ were also determined through the
model – i.e. through services / goods / data /
documents / oral communication or IT solutions.
Table 2: Criteria’s for entering maturity level Defined.
Nr Criteria Measure
1
Levels 1 and 2 are
modelled. Major
cooperation points
are modelled at
level 3.
Models of the level 1 and
2 are approved by
companies’ management
and by process owners
2
Process analysis
methodology is
developed
There exists procedures
which describe analysis
methodology and is
approved by PNS
3
Final process
maturity estimation
model is developed
Maturity model and its
criteria are approved by
PNS and by companies
management
4
Periodical processes
maturity estimation
and process
improvement is are
proceeding
Process Auditing plans
are developed and
approved by PNS and by
companies Management.
5
Stakeholders
interested in process
optimisation are
trained
Training plan is approved
and fulfilled
6
Process results and
their consumers and
process inputs and
their suppliers are
modelled
Processes at level 2 are
modelled via
inputs/outputs and
connected with processes
which provide/consume
these
7
Customers’
requirements for
process outcomes
are modelled
Product/service tree is
modelled and connected
with customer
requirement and
processes
8
Process has KPIs
which indicate
customer’s
satisfaction with
process outcome
Processes at level 1 have
approved objectives and
KPIs by companies’
management
9
Process KPIs are
measured
periodically
Company management
checks KPIs periodically
in management meetings
10
There is assigned
person who is
responsible for
collecting process
measures.
Company’s head of
departments have
assigned the persons to
processes to collect
process measures.
11
Process owner and
process analyst are
assigned
Companies management
has assigned these roles to
certain persons
12
Process participants
are informed about
process goals and
measures.
Process goals are part of
participants’ job
measurements.
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At this level inorder to improve communication, it is
suitable to define the templates for documents as it
gives further possibilities to automate all processes
because documents are just information carriers
between the process participants or for the process
analysts or the auditors.
To be aware about the duration of processes, the
processes should be determined standard
performance time. This is estimation, but it gives for
the VO formers important information about
probable duration when they prepare proposals for
market demands. At the same time, the companies
have to work to collect the real measures about the
process performance. And this is the valuable
information to the process analysts. Mostly this
leads to the need to document also all IT solutions
and their contents that support the business
processes.
From the organizational point of view, the
process participants’ job descriptions should be
synchronized with the processes in which they
participate. In addition, the amount of personnel
needed to perform the processes have to be
determined.
5.4 Level: Managed
The goal of this level is to manage the process goals
and to risk in systematic way.
When the processes and their KPIs are handled,
then it is time to align processes’ goals with the
companies’ and PN’s overall goals. As the goals are
SMART (Specific, Measurable, Attainable,
Realistic, Time-related) (Doran, 1981) then the
alignment of the process goal and organizational
goals and PN goals is a complicated task
(Kangilaski, 2008). Those alignment activities
cannot be done at earlier phases because when the
processes are not provided by measurable KPI-s,
then there could be a considerable risk that the goal
alignment process will end up with ‘endless’
discussions that organizational KPIs cannot be
aligned with process’ KPIs.
As PN is generally the customer oriented
network, then at this maturity level the processes’
KPIs have to be extended with risk dimension. This
means that there should appear the measures within
the processes measures that will estimate the
negative business scenarios when customer’s
demands are not handled as planned or agreed
before.
During this phase, the process KPIs have to be
measured regularly to value drifts from planned
ones. From the organizational perspective, the
process participants’ KPIs have to be aligned with
the process KPIs to measure the employees’
commitment and to influence the process efficiency
and quality.
Modelling the negative business scenario KPIs,
the major process risks are documented. Having this
information, it is also necessary to have risk
management scenarios in place to control these
determined risks. The process risk manager should
be specified. These risk managers should have an
access to all information concerning determined
risks through all PN companies participating in
analysed process.
To conclude, in this phase the main focus is in
the risk management which influences mainly the
organizational aspects of organization as well as of
PN.
5.5 Level: Optimized
The goal of this level is to have an effective risk
management settled while supporting the process
based management in PN-s and VOs.
One of the major part to minimize risks is to
collect the improvement proposals from customers,
suppliers, and process participants. This should be
the process that will be carried out periodically. As
there is a major amount of information collected for
the processes, it makes possible to perform profound
process analyses taking into account different
scenarios, risks, their probabilities and influences. In
addition, such possibilities give option to improve
the risk control effectiveness.
To understand how well a network operates,
performing benchmarking is needed – firstly to
benchmark the similar companies or processes
inside the PN strategic alliance, secondly to
benchmark the similar companies or processes
inside the goal-oriented partner network and after
that in external companies.
The main challenge here is to determine how to
motivate companies’ employees to think how to
improve the business processes in a way that they
were more effective. In some companies there are
motivations schemas implemented to motivate
continuous improvement approach.
To conclude, within this phase the major focus is
on the risk management via continuous
improvement.
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525
6 IMPLEMENTATION
FOCUSPOINTS
As described above, when the modelling principles
are settled, there is a need for framework to estimate
at which maturity level the processes are. When the
PN level processes are modelled and having such
checklist for every maturity level (shown in tables 1,
2) it is easy for the companies to estimate their
processes maturity. Such information will be helpful
for FP and PNS for planning a further cooperation
with existing partners in PN and also to evaluate the
new companies entering into PN.
The value of this process maturity estimation and
further maturity improvement leads to more flexible
cooperation, risk management and to set priorities
for certain focus points.
A crucial point here is that the project team and
business are seeking to understand the current
processes – the main risk here is to document too
much. Once a process is clearly understood and
documented, the further documentation must be
stopped as this is already in enough detail. If there
has been made an agreement with the company’s
management that the process models may be used
for documentation and training purposes, then an
agreement about the level of modelling detail has to
be made separately.
The main obstacle to implement before described
process evaluation mechanism for PN is that some
executives try to not change the processes. The
executives do not want or cannot deal with
processes’ efficiency nor with the maturity
estimation. Instead of searching problems’ root
cause, the focus will remain on symptoms. Even if
there is detected process inefficiency, these
organizations prefer to obtain new technology rather
than to deal with the science of transforming
business processes.
7 CONCLUSIONS
Business Process Management considers processes
as strategic assets of an organization that have to be
understood, managed, and improved to deliver the
value-added products and services to the clients.
Companies have realized that they need to make
significant changes to apply the power of processes,
but managers are unsure about what exactly needsto
be changed, by how much, and when.
Thus, in PN there is a need for a toolset that
could help the FP to learn the PN companies’
process maturities as the PN’s agility and speed is
assured through flexible processes.
In our research we have developed maturity
evaluation checklists, which will provide
understanding about the processes’ maturities.
As our team has not performed any maturity
evaluation projects, the proposed approach is
theoretical, but is based on that approach we are
currently in the preparation phase to implement such
an approach for PN operating in oil-shale energy
industry domain. The project will be launched in this
year. Our team is convinced that behind the
processes, there is a huge potential for efficiency.
ACKNOWLEDGEMENTS
Publication of this paper has been supported by
Estonian Ministry of Education and Research for
targeted financing scheme T113A and Grant
ETF9460.
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