An organisation only competes with about 15-20% of its processes (Franz, Kirchmer, 2020), but how does an organisation identify those most important processes? In order to prioritise processes, you need to identify them. This is best achieved through a hierarchical decomposition of an organisation’s core processes.
Process hierarchies are usually defined from the top down, with level-one processes being core end-to-end processes, such as “Order-to-Cash”. Beneath that, level 2 sub-processes, such as “Shipping” are found. At level 3, processes such as “Plan Shipments” or “Develop Customer Service Segments” can be identified. Level 3 processes refer to the level of detail so that, on average, 150-200 process definitions describe the entire organisation. This level is detailed enough to obtain differentiated results but high level enough to avoid excessive work efforts and getting “lost in the weeds” (Franz, Kirchmer, 2012).
Those level 3 business processes of an organisation are evaluated based on their total assessed impact on the specified value-drivers. For each process, it must be assessed if it has no (0), low (1), medium (2), or high (3) impact on each of the value-drivers. We refer to the resulting matrix as process impact assessment matrix. The 15-20% processes with the highest weighted impact on the value-drivers are considered the high impact processes, while the others are commodity processes. An example of process impact assessment matrix is shown in Figure 3.
In practice, one often finds processes in a “grey area” that are somehow in-between high impact and commodity. In this case, the segmentation is done based on a management decision. For most of those processes it is prudent to include them into the high impact segment (Franz, Kirchmer, 2012).
Figure 3: Process Impact Assessment Matrix
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