Realizing ROI in process management
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In a number of industries, market conditions and rules of the game are changing fundamentally and quickly. Many companies are realizing that just because they had success in the past, it does not automatically guarantee success in the years to come.
Therefore, the time has come to ask yourself some hard questions:
- Can my company differentiate itself from the competition in the market?
- Can it achieve a high level of customer satisfaction and loyalty?
- Are my company’s processes as efficient as possible?
If your answers are not all a resounding ‘yes', then you are probably considering just how to improve your performance with operational excellence and process optimization.
Your next question (as well as your board’s) will invariably be: ‘How can we evaluate and quantify any investments in process management?’
Evaluating ROI of process management
Return on investment (ROI) can be used to quantitatively evaluate the profitability of investments and is expressed as a percentage of profit in relation to the investment amount.
Let’s take the example of a company which makes an investment of €100,000 in the expansion of process management, to make the process of acquiring new customers, contact-to-order, more successful. With this measure, the company achieves an increase in sales of €120,000. The direct profit (sales increase minus costs) is therefore €20,000.
Return on investment = profit ÷ invested capital
= €20,000 ÷ €100,000
= 20 per cent
With each euro invested, €0.20 profit (and €1.20 additional turnover) was generated.
Categorizing the benefits of process management
In practice, the benefits of process management can be divided into three categories.
1. Efficiency gains that relate to process management itself
- The reduction of efforts and costs for process analysis and optimization (e.g. by using a uniform methodology, a central repository or by reusing processes, assets).
- Efficient transformation processes such as fast operational implementation of strategic decisions (e.g. through a clear methodology for business model mapping and linking strategy with operations).
- Efficient rollout of process knowledge to employees by reducing costs and increasing timeliness (e.g. through the use of a digital organization manual).
2. Meeting compliance requirements
Especially for companies operating in highly regulated markets, compliance is not a ‘nice to have’ but a mandatory requirement to meet the relevant standards and regulations. Often the regulations can create binding obligations and have the force of law.
- Quality (ISO 9001, GxP)
- Information Security (GDPR, ISO 27000, FISMA, PCI-DSS, HIPAA, GLBA)
- Business Continuity (ISO 22301)
- Environmental Management (ISO 14001)
3. Improvements resulting from the optimization of the core processes
- The reduction of lead times and costs for the most important core processes of the company such as contact-to-order, order-to-cash and issue-to-resolution.
- The increase in customer satisfaction, measured via NPS, with products and service quality.
- The reduction of risks along the supply chains (e.g. optimization of global logistics processes and reduction of the probability of supplier failure).
These three benefit categories are associated with various capabilities of a process management platform. The direct cost and effort optimizations of the first category are often based on the use of a central repository with the possibilities to distribute process knowledge to all employees in a role-specific manner.
The second category requires that the process management platform also covers the compliance subarea: You need to know the relevant legal requirements and align your processes accordingly. On the other hand, process mining can be used here to automatically analyze the fulfillment of these standards and deviations from the ‘to be’ processes, and this for each individual process execution.
In the third category, process mining plays a key role and it can be used to identify weak points in actual processes and improvement measures.
Driving ROI upwards
So where is the most potential for catapulting ROI and convincing management to invest? This answer may delight or disappoint you, but all three categories together add up to a great value proposition.
Compliance requirements are non-negotiable, they must be met and are expected by your customers – this is your license to operate. Efficient implementation of process management itself ensures that strategic decisions are implemented quickly and provides employees with the necessary role-specific expertise. The optimization of the core processes guarantees the satisfaction of your customers and a cost-efficient handling of the relevant end-to-end scenarios.
Find out more in a brand new Total Economic Impact™ (TEI)* study, where Forrester Consulting analyzes the ROI that can be achieved by using the process management platform ARIS. Based on customer cases, the study shows how to quantify the potential financial impact of ARIS on an organization.
Read here how to realize an ROI of more than 300 per cent over three years.
*Findings according to The Total Economic Impact™ of Software AG’s ARIS, a commissioned study conducted by Forrester Consulting on behalf of Software AG