Achieving Cost Reduction through Business Transformation

Achieving Cost Reduction through
Business Transformation
Professor Mark von Rosing
Global University Alliance
LEAD Frameworks, Founder
Mark Stanford
Senior Director, Program Mgt.
iGrafx

What will you learn?
•Case studies of cost-reduction; what works and what
doesn't
•Cost saving strategies and critical success factors, and how
to relate them to specific business areas and processes
•How to identify opportunities for cost-reduction by
identifying duplication of business functions/tasks,
resources and services through a process view
•How to monitor success of cost-reduction measures in
real-time through dashboards & cockpits (KPI's and PPI's)

World expert in strategic enterprise modeling and
enterprise architecture
• Founder of LEAD Frameworks
(Layered Enterprise Architecture Development)
• Global TOGAF ADM and Business Architecture Methods
and Certification Development Group
(using LEADing Practices)
• Advisor to John Zachman (using LEADing Practices)
• Founder of the User Group www.LEADingPractice.com
(over 2500 practitioners)
Introducing Mark von Rosing

Academic leadership
• For the past 14 years Lecturer at multiple Universities
• Academic Research within BPM, Value Modelling,
Service orientation and Enterprise Architecture
• Head and founder of the Global University Alliance
which has developed BPM, Service Oriented Computing,
Information Management and Enterprise Architecture
curriculum programs that are taught all over the world
at various Universities

IT-tool Vendor partner for LEADing Practices
• iGrafx
• IBM Rational Suite (System Architect)
• Software AG
• SAP

SAP Co-developer
• SAP Methods & Approaches
• ASAP 7.X
• Business Architecture
• Process Architecture
• Enterprise Value Architecture
• Business Process Management
• SAP LEAD Enterprise Architecture program and
certification
• SAP BPX certification for associate and professional level

Author
• Numerous publications
in the area of Business
Model Management,
Business Process
Management, Business
Value Management &
Sustainability
• Co-author of Applying
Real-World BPM in an
SAP Environment, SAP
Press

2007: Current Recession
Cost Model, Service Model, Revenue Model, Performance
Model, Value Model, Operating Model
Leading and Best Practice Research, 2011/2012
Scope: 1765 CEO’s and 2936 business leaders representing all major countries and industries

Lessons Learned around Business Model Innovation &
Transformation

Lessons Learned around Business Model Domain
Operating Model

Business Model Domain
Innovation

Business Model Domain
Transformation

Cost Cutting examples will be done around a
Government Business Model

Findings around which modelling principles where
used for their Innovation & Transformation initiatives

Findings around which Cost Cutting Projects where
Most applied Cost Cutting projects:
• Cost Cutting initiatives based on organizational strategies
• Transformation projects based on rethinking business
• Operational driven optimization projects (BPR)
• Identifying waste and non-value creating aspects (LEAN, SS)

Findings around which Cost Cutting areas where used
for their Innovation & Transformation initiatives
• Duplication of resources (management and delivery)
• Repetition of business functions in different BU/departments/teams
• Reappearance of business services in different BU/departments/teams
• Recurrence of business processes in different BU/departments/teams
• Replication of information/data
• Not uses SW licenses/modules/functions and systems

Findings around which Cost Cutting Strategies where
Cost Efficiency
Cost Reduction
Lower Risk (Cost Governance and
Compliance)
Optimize Cost
Strengthen Growth (increase profit)

LEADing Practice Material available around cost cutting:
1. Cost Cutting Strategy Map including strategies by business area and
executive roles involved
2. Cost Cutting Balance Scorecard by business area and executive
roles involved
3. Cost Cutting Performance Map including Cost Cutting CSFs linked to
KPIs
4. Cost Cutting Process Map linking LP cost cutting KPIs to process
(Level 1-4)
5. Cost Cutting Reporting Map linking LP cost cutting KPIs to process
(Level 1-4) and to cockpits or dashboards
6. Cost Cutting Application Map linking to main applications (ERP,
CRM, SCM, BI etc)
7. Cost Cutting Categorization Map - categorizing the above 7 points
into strategic, tactical and operational aspects
Findings around most common mistakes around Cost
Cutting Transformation initiatives

E
Demo: IGrafx Strategy Modeling
(Enterprise Modeler)
Cost Efficiency
Cost Reduction
Compliance)
Optimize Cost
Strengthen Growth (increase profit)

Cost Efficiency
Reduce Sales Costs
Efficient Cost Utilization
Improve Cash Flow
Cost Reduction
Reduce Administration Costs
Reduce Service Center Operations Cost
Reduce Operations Cost
Compliance)
Ensure Cost Compliance
Ensure Compliance
Optimize Cost
Optimize Sales Costs
Optimize Onboarding/Sales Costs to other departments
Strengthen Growth increase profit) Increase revenue through cost optimization

Cost Efficiency
Reduce Sales Costs
Efficient Cost Utilization
Improve Cash Flow
Cost Reduction
Compliance)
Ensure Cost Compliance
Ensure Compliance
Optimize Cost
Optimize Sales Costs
Optimize Onboarding/Sales Costs to other departments

Optimize Operational Cost (COO)

Government XYZ Cost Cutting Opportunities

Demo: IGrafx Measurement Modeling

Demo: IGrafx Process Modeling

Innovation & Transformation Example:
Government XYZ-Call Center

Government XYZ-Call Center activities
Critical Success Factors Key Performance Indicators
Average fixed costs per incoming phone
call
Optimize Onboarding/SalesCosts to
other departments
Increase Internal Rate Of Return (IRR)
with onboarding other departments
Reduce Operations Cost Cost per minute of handle time
Estimatedcost savings of employer by
having employees telework
Optimize Sales Costs Pre-taxReturn on Equity (ROE)
Average estimated cost savings of
employees that are teleworking
Average variable costs per incoming
phone call
Reduce Operations Cost Cost per client
Reduce Operations Cost Policy Premium to Personnel Cost
Optimize Sales Costs Number of budget deviations
Reduce Operations Cost Average cost per lost time claim
Average non-employee costs per
incoming phone call
Average value of T&E expenses per
expense claim
Ratio employee costs versus non-
employee costs per incoming phone call
Reduce Operations Cost Average value of expense claims
Reduce Administration Costs Overtime labour cost ratio

Critical Success Factors Competency Name Key Performance Indicators Activity Name Activity #
Reduce Service Center Operations CostCommunications Average fixed costs per incoming phone call Automated greeting 1
other departments
Solution & Service Delivery
Increase Internal Rate Of Return (IRR)with onboarding other
departments
Ask permission to survey 2
Reduce Operations Cost Call processing Cost per minute of handle time Call enters 3
Reduce Administration Costs Communications
Estimatedcost savings of employer by having employees
telework
Customer and agent discuss issue 4
Optimize Sales Costs Communications Pre-taxReturn on Equity (ROE) Agent consults decision table 5
Reduce Administration Costs Issue Management
Average estimated cost savings of employees that are
teleworking
Agent logs resolution and authority level 6
Reduce Operations Cost Call processing Average variable costs per incoming phone call Auto log call abandon 7
Reduce Operations Cost Call processing Cost per client Pass call to loan office queue 8
Reduce Operations Cost Solution & Service Delivery Policy Premium to Personnel Cost Enter extension 9
Optimize Sales Costs Call processing Number of budget deviations Call loan officer 10
Reduce Operations Cost Issue Management Average cost per lost time claim Officer resolves issue 11
Reduce Operations Cost Issue Management Average non-employee costs per incoming phone call
Officer logs resolution and authority
level
12
Reduce Operations Cost User Awareness Management Average value of T&E expenses per expense claim Voice mail activated 13
Reduce Operations Cost User Awareness Management
Ratio employee costs versus non-employee costs per
incoming phone call
Auto log that no message was left 14
Reduce Operations Cost User Awareness Management Average value of expense claims Customer leaves message 15
Reduce Administration Costs User Awareness Management Overtime labour cost ratio Survey customer 16

Government XYZ-Call Center BPMN view

ACTIVITY # COMPETENCY NAME ACTIVITY NAME
1 Communications Automated greeting
2 Solution & Service Delivery Ask permission to survey
3 Call processing Call enters
4 Communications Customer and agent discuss issue
5 Communications Agent consults decision table
6 Issue Management Agent logs resolution and authority level
7 Call processing Auto log call abandon
8 Call processing Pass call to loan office queue
9 Solution & Service Delivery Enter extension
10 Call processing Call loan officer
11 Issue Management Officer resolves issue
12 Issue Management Officer logs resolution and authority level
13 User Awareness Management Voice mail activated
14 User Awareness Management Auto log that no message was left
15 User Awareness Management Customer leaves message
16 User Awareness Management Survey customer

ACTIVITY # Critical Success Factors Key Performance Indicators
1 Reduce Service Center Operations Cost
Average fixed costs per incoming phone
call
2
other departments
Increase Internal Rate Of Return (IRR)
with onboarding other departments
3 Reduce Operations Cost Cost per minute of handle time
4 Reduce Administration Costs
Estimatedcost savings of employer by
having employees telework
5 Optimize Sales Costs Pre-taxReturn on Equity (ROE)
6 Reduce Administration Costs
Average estimated cost savings of
employees that are teleworking
7 Reduce Operations Cost
Average variable costs per incoming
phone call
8 Reduce Operations Cost Cost per client
9 Reduce Operations Cost Policy Premium to Personnel Cost
10 Optimize Sales Costs Number of budget deviations
11 Reduce Operations Cost Average cost per lost time claim
Average non-employee costs per
incoming phone call
Average value of T&E expenses per
expense claim
Ratio employee costs versus non-
employee costs per incoming phone call
15 Reduce Operations Cost Average value of expense claims
16 Reduce Administration Costs Overtime labour cost ratio

ACTIVITY # COMPETENCY NAME ACTIVITY NAME Critical Success Factors Improve Business WorkFlow
Conduct Consultation
Activities
2 Solution & Service Delivery Ask permission to survey Improve Client Satisfaction
3 Call processing Call enters Monitor Client Interaction
Activities
Activities
6 Issue Management
Agent logs resolution and authority
level
Activities
7 Call processing Auto log call abandon Monitor Client Interaction
8 Call processing Pass call to loan office queue Monitor Client Interaction
9 Solution & Service Delivery Enter extension Improve Service Delivery
10 Call processing Call loan officer Monitor Client Interaction
11 Issue Management Officer resolves issue Improve Client Satisfaction
12 Issue Management
level
Activities
13
User Awareness
Management
Voice mail activated
Activities
14
User Awareness
Management
Auto log that no message was left Monitor Client Interaction
15
User Awareness
Management
Customer leaves message Monitor Client Interaction
16
User Awareness
Management
Survey customer Improve Client Satisfaction

Activities
2 Solution & Service Delivery Ask permission to survey Improve Client Satisfaction Service Design & Development
3 Call processing Call enters Monitor Client Interaction Performance Management
Activities
Value Management
Activities
6 Issue Management
Agent logs resolution and authority
level
Activities
7 Call processing Auto log call abandon Monitor Client Interaction Performance Management
8 Call processing Pass call to loan office queue Monitor Client Interaction Performance Management
9 Solution & Service Delivery Enter extension Improve Service Delivery
10 Call processing Call loan officer Monitor Client Interaction
11 Issue Management Officer resolves issue Improve Client Satisfaction Process Management
12 Issue Management
level
Activities
13
User Awareness
Management
Voice mail activated
Activities
14
User Awareness
Management
Auto log that no message was left Monitor Client Interaction Workload & Performance Management
15
User Awareness
Management
Customer leaves message Monitor Client Interaction
16
User Awareness
Management
Value Management, Service Design &
Development

Government XYZ-new Call Center workflow
23, 7 8
4,16
14
2 Solution & Service Delivery Ask permission to survey Improve Client Satisfaction Service Design & Development
3 Call processing Call enters Monitor Client Interaction Performance Management
Activities
Value Management
7 Call processing Auto log call abandon Monitor Client Interaction Performance Management
8 Call processing Pass call to loan office queue Monitor Client Interaction Performance Management
11 Issue Management Officer resolves issue Improve Client Satisfaction Process Management
14
User Awareness
Management
Auto log that no message was left Monitor Client Interaction Workload & Performance Management
16
User Awareness
Management
Value Management, Service Design &
Development
11

Main Discussions Points - Conclusions

• Best way to go about Cost Cutting is from the top, linking the Cost
Cutting strategies, identifying your specific critical success factors,
and how to relate them to your business areas and processes
•

• The biggest source for cost cutting is:
• Redundancy of information/data

• How to identify opportunities for cost-reduction by identifying
duplication of business functions/tasks, resources and services
through a process view

• How to identify opportunities for cost-reduction by identifying
duplication of business functions/tasks, resources and services
through a process view
• How to set up cost-reduction measures in real-time through
dashboards & cockpits (KPI's and PPI's)

LEADing Practice Material used
1. Cost Cutting Strategy Map including strategies by business area and
executive roles involved
roles involved
3. Cost Cutting Performance Map including Cost Cutting CSFs linked to
KPIs
4. Cost Cutting Process Map linking LP cost cutting KPIs to process
(Level 1-4)
CRM, SCM, BI etc)

LEADing Practice Material you can
receive at request
1. Cost Cutting Strategy Map including strategies by business
area and executive roles involved
roles involved
3. Cost Cutting Performance Map including Cost Cutting CSFs
linked to KPIs
4. Cost Cutting Process Map linking LP cost cutting KPIs to
process (Level 1-4)
CRM, SCM, BI etc)

Want more info?
Mark von Rosing
Email: mvr@LEADingPractice.com
LEADing Practice Conference: 26 September 2013 Utrech, NL
Academic BPM/SOA course based on LEADing Practice principles:
http://compsci.cofc.edu/academics/GlobalUniversityAlliance.php

• www.igrafx.com
• Custom Demonstration
• Process Program Assessments
www.igrafx.com/contact
503-404-6050
Want more info?

LEADing Practice & IGrafx S.W.A.T offer
Offer :
1. Singing & Dancing Team (Gretchen & September)
2. Self Destruction Team (Mark & Mark)
3. Haia Kiri Team (Ken & Ed)
4. Salvation Army Team (Taito & Mike)
5. ……any other suggestions????????????????

What’s up next?
Next in the iGrafx Executive Webinar Series:
Achieving Cost Reduction with Standardization
(Cost Model)
Operating Model
Performance Model
Transformative
Focus:
Revenue Model
Service Model
Value Model
Targeting
Innovation:

Achieving Cost Reduction through Business Transformation

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