Partner Network and its Process Management

Taivo Kangilaski

, Igor Polyantchikov

and Eduard Shevtshenko

Department of Computer Control, Tallinn University of Technology, 5, Ehitajate Str., Tallinn, Estonia

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

 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

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

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

Modelling tool is

obtained/procured with

needed licences

FP decision and its costs

PN companies have

understood the importance

of processes and have

decided to implement the

rocess based management

model

There exists PNS’

decision and companies

board’ decision

Modelling rules are

developed and

implemented

Modelling rules are

approved by PNS

Modelling rules are

managed and updated

according to needs

PMO is formed (1-2

persons),

rocess for

rules management are

established

Periodical modeller’s

consultation and training

about modelling rules

PMO’s consultation

lan is approved by

PNS

Validating the modelling

rules’ usage in practice

PMO models’ validation

rules are established

Model publishing for PN

companies

Published periodically

by PMO

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

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

Process analysis

methodology is

developed

There exists procedures

which describe analysis

methodology and is

approved by PNS

Final process

maturity estimation

model is developed

Maturity model and its

criteria are approved by

PNS and by companies

management

Periodical processes

maturity estimation

and process

improvement is are

proceeding

Process Auditing plans

are developed and

approved by PNS and by

companies Management.

Stakeholders

interested in process

optimisation are

trained

Training plan is approved

and fulfilled

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

Customers’

requirements for

process outcomes

are modelled

Product/service tree is

modelled and connected

with customer

requirement and

processes

Process has KPIs

which indicate

customer’s

satisfaction with

process outcome

Processes at level 1 have

approved objectives and

KPIs by companies’

management

Process KPIs are

measured

periodically

Company management

checks KPIs periodically

in management meetings

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.

Process owner and

process analyst are

assigned

Companies management

has assigned these roles to

certain persons

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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