Process First, Technology Second

Business process management (BPM) is one of the hottest technology disciplines in today’s economy. Industries ranging from retail to financial services to manufacturing are implementing BPM approaches and systems to boost productivity and identify bottlenecks in how they do business. In fact, research company Gartner Inc. estimates that the worldwide BPM software market grew 15%-20% last year and exceeded US$518 million in sales volume. In addition, Gartner predicts it will grow to close to US$600 million in sales volume over the next two years.

Never heard of it? Confused by what it means to your insurance organization? You are not alone. According to Gartner, there are now more than 100 vendors in the industry, all claiming to offer BPM as a “cure all” for technology and efficiency woes that plague private industry. Trouble is, few are specific about what their technology does and, perhaps more importantly, how it specifically relates to the insurance business.

So what exactly is it? BPM is the discipline of modeling, automating and optimizing business processes to increase profitability. With BPM, the focus starts with the end-to-end process, not the automation of a functional area, such as payroll or billing. A BPM solution should be able to define, automate and improve any kind of business process, crossing technology applications, company boundaries or manual interactions. Depending on the process, this focus will improve organizational productivity, reduce costs or errors and accelerate cycle times.

DRIVING FACTORS

What is driving BPM? There are many pressures prompting companies to focus more on their processes. These include improving customer service, bringing new products to market, eliminating cost inefficiencies and conforming to new regulations. Increasingly, companies are realizing that understanding and revamping their business processes are fundamental sources of competitive advantage.

Clearly, every company has business processes. For example, when a broker inputs a policy change for a customer, this triggers a series of processes at the insurance company. However, processes are often implicit within an organization, buried in a network of people and systems that has evolved over years. As such, they are often difficult to draw out and define. Some business processes are complex and can span multiple applications or people in one or more companies.

Companies have already created process management systems – to varying degrees. Earlier attempts may have involved combinations of workflow, document management, imaging or systems automation, typically with large amounts of custom coding needed to round out the capabilities. Yet this approach has often left companies with large functional gaps and added complexity. With the technology available today, new software solutions are available that make strong foundations for business process management a reality. In fact, a BPM platform will use various technologies, such as portals, rules engines, imaging, document management and workflow, to serve business and customer service processes across all back-office functions.

SINGLE PLATFORM

BPM is a convergence of a number of existing technologies and approaches, especially workflow tools that derive from process modeling, application integration, process monitoring and rapid application development tools. However, BPM is not just a sum of these parts. It brings together all these technology elements into a single “platform” that manages the lifecycle of a process from definition through design and improvement.

A BPM platform can also act as a critical independent layer or “management console” in modeling and improving business processes. This is a key difference from many software solutions of the past, in which business processes were embedded within technology applications. If you wanted to change the process, you had to change the technology. In contrast, a BPM platform allows processes to be modeled and then dynamically maintained as business requirements are refined or modified.

There are three particular areas of insurance company operations poised to benefit enormously from a BPM platform – exception-based underwriting, claims and data management. It also holds great promise for “cross-functional processes” that involve brokers (or other suppliers) and insurance companies.

If you are thinking insurance distribution, claims and policy management, this is where the rubber really hits the road. The BPM platform can provide an environment where agents, brokers, supply partners and customers have access to online user interfaces, independent of core legacy systems, to speed up transactions.

The expectations for BPM are indeed high, yet there are ways to fail. Companies should avoid the most common caution signs – technology-driven thinking only, lack of business-driven methodology, slow development in building functionality from scratch, and complex data integration between a variety of technologies.

LEAD POINTERS

So how can insurance companies navigate successfully through the caution signs? While BPM strategies would need to be tailored to individual firms, there are some basic steps to follow:

* Process definition and modeling;

* Process design and automation; and

* Process improvement and optimization.

In the first instance, insurers have to put resources into pinpointing the current situation around business processes including people skills and aptitude, systems usage and workflow. This is often the biggest challenge in BPM efforts for a number of reasons. Since business processes often emerge over time on an ad-hoc basis, there is seldom any real definition to them. Business needs are also constantly evolving, requiring the processes to change and adapt quickly.

In the second instance, insurers must turn to meaningful design and analysis. This should encompass not just the visible process flows and interaction, but the supporting and managing frameworks. The automation tools for much of the BPM platform already exist in the form of portals, rules, workflow engines, imaging, document management solutions and data integration technologies. But the actual implementation has to move beyond the technology-driven automation and include such aspects as people skills development and utilization of best practice approaches to achieve “intelligent processes”. Technologies that support business-driven methodologies have shown to yield the greatest return on investment.

In the last instance, a BPM platform has to take into account integration with existing applications, such as legacy systems. This may involve a “re-platforming” of legacy systems, system consolidation or the movement of core systems to external outsourcing providers. One of the strengths of a full life cycle BPM platform approach is its ability to include existing ways of working and at the same time migrate to compelling new ways of working. Deploying industry specific solutions with market ready best practice functionality can ensure processes are redesigned, and improved, quickly in response to external changes in business or regulatory environments.

CAUTIOUS VIEW

Much of the growth in BPM over the next year or so is expected to come from “generic” vendors – those committed to selling process management to the widest possible range of clients in different industries. They may offer interesting technology yet understand very little about the intricacies of insurance. For companies that have lived through the pitfalls of acronyms like CRM, they are looking toward business-driven insurance specific solutions with pre-integrated and open source (i.e. XML) technologies.

BPM is a discipline that is taking off in many sectors of the economy. It puts the emphasis for efficiency on business process, rather than just technology. After all, automating a poor process will not do much for a
n insurance company – it will actually result in greater costs and less efficiency. BPM sends out a simple but powerful message – process first, technology second.