Harmon on BPM: Two Types of Digital Transformation

I have argued elsewhere that the term “Digital Transformation” ought to be reserved for large scale process change. Improving existing processes is better termed “Process Improvement” or “Process Redesign.” Having said that, let me further distinguish between Digital Transformations that are, in fact, redesigns, and those that really involve creating a new process from scratch.

A group of guys get together and decide to create a new company that will offer customers tailored bicycles. One of them has figured out how to do it, another has arranged the initial financing and a third is preparing a marketing plan. The guy who is going to manage the operations of the organization talks about how the process will work. They will advertise in magazines, but take orders on-line from a new website being developed. As orders come in, via the website, they will be forwarded to… and so it goes. A new process is defined, starting from scratch. (In a literal sense, there is no trans-formation, as there was no process there to begin with.)

Now consider a new process transformation effort that I actually participated in. A major bank decided to install Automated Teller Machines (ATMs). This was in 1970, and at the time no one else in the State of California had ATMs. There were a few banks on the East Coast of the US that already had them, but, for Californian's it would be a major shift in how they experienced banking.

The effort began when a team appointed by the head of branch banking recommended the move – which was going to cost many millions of dollars – and senior management and then the board of the bank approved the move. IT set up a team to examine the ATM machines on offer and to select the type the bank would purchase.

I got involved when my company was hired by the head of branch operations to determine the impact of the transition. We conducted interviews within the bank and at two banks on the East Coast and drew up a list of the processes and the specific jobs that would be impacted. Tellers in the branches would have to know how to respond to customer questions about ATM transactions. So would branch managers. New teams would need to be created to move money to the machines or repair them when they broke down. Others would need to be hired to work in a Call Center to answer questions from customers calling by phone or from the machines. As the ATMs allowed people to transfer money between checking and savings or to pay loans, people in those various departments needed training in the changes ATM transactions would make. People in finance and bookkeeping would need some training as to the new account entries being made and what sort of transactions would be involved. As the roll-out involved people standing on the sidewalk to greet and explain ATM transactions to people, “Greeters” would need to be hired and trained to help customers. It turned out that some 22 jobs would be created or changed. Some 12 major bank processes used in 8 different functional units were involved.

Although not much was made of it at the time, for many customers, this was their first interaction with a computer. It was the beginning of the digitalization of the bank – it ultimately transformed the bank from a place you could visit during “banking hours” to an institution that that was available 24-7. That, in turn, meant that bank employees had to change their mindset about a whole range of things that they had previously taken for granted. The idea of the “banking day” disappeared as transactions became continuous.

The introduction of ATMs at the bank in question, and then at other banks in California, was the beginning of a major transition. Gradually, banking was moved out of the branch offices to ATMs, and then to home computers and smart phones. The number of tellers needed by branches dropped dramatically. Relationships that had previously been more personal became more distant. Customers reported that they preferred to use ATMs. (Tellers were still asking for proofs of security that ATM machines had dispensed with, and it took time to get the bank to be more consistent about what it accepted as proof.)

I've gone into a bit of detail to emphasize that the installation of ATMs at banks was a digital transformation. It installed computers and a network to support them and it digitalized many different operations at the bank. The roll-out of ATMs impacted people in many different departments and in many different business processes that crossed departmental lines. It significantly reduced some jobs and it created some new jobs. It significantly changed how customers interacted with banks, and it changed customer expectations.

I would not call the shift that occurred at the bank a “process improvement” or even a “redesign” because more than one business process was involved. We created some new processes – to handle ATM calls, to put money in the machines and to transfer checks, and so forth, and we modified several different existing processes.

To sum up, transformation comes in many different forms. It is more than just creating new business processes, or even redesigning a major business process, starting with a blank sheet of paper. Digital Transformation refers to a major change in the way an organization does business, and it typically involves changes in the way the organization uses computer and infrastructure technologies.

Paul Harmon

Paul Harmon

Executive Editor and Founder, Business Process Trends In addition to his role as Executive Editor and Founder of Business Process Trends, Paul Harmon is Chief Consultant and Founder of Enterprise Alignment, a professional services company providing educational and consulting services to managers interested in understanding and implementing business process change. Paul is a noted consultant, author and analyst concerned with applying new technologies to real-world business problems. He is the author of Business Process Change: A Manager's Guide to Improving, Redesigning, and Automating Processes (2003). He has previously co-authored Developing E-business Systems and Architectures (2001), Understanding UML (1998), and Intelligent Software Systems Development (1993). Mr. Harmon has served as a senior consultant and head of Cutter Consortium's Distributed Architecture practice. Between 1985 and 2000 Mr. Harmon wrote Cutter newsletters, including Expert Systems Strategies, CASE Strategies, and Component Development Strategies. Paul has worked on major process redesign projects with Bank of America, Wells Fargo, Security Pacific, Prudential, and Citibank, among others. He is a member of ISPI and a Certified Performance Technologist. Paul is a widely respected keynote speaker and has developed and delivered workshops and seminars on a wide variety of topics to conferences and major corporations through out the world. Paul lives in San Francisco. Paul can be reached at pharmon@bptrends.com
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  1. Rod Clark says:

    I have done a “digital transformation” by simply marking all the elements of a workflow chart as either automate or manual and recasting the chart putting all the automate in a box and all the manual outside the box and keeping the workflow lines between the elements. This defines what needs to be automated versus what will remain manual and then organizing the automated “inside the box” into a possible future database or requirements for an off the shelf solution. It worked well.

  2. Pat Tyre says:

    Paul,
    While I agree with you that Digital Transformation is being manifest in 2 ways, one must think more creatively about the impact of “digital” on a business.

    First, “digital” as an interface and probably the only interface to the customer is the most prevalent manifestation of “digital”. However, what many companies overlook in the transformation is the micro processes that must be considered when building website site, a payment system or a complaints process on line. First and foremost, mapping of the human brain’s expectations when interfacing with the site is critical. Documenting the pre-digital process before digitizing is important to assure that all nothing is missed in the automation. The customer is always going to want a confirmation of transaction, an expectation of service and a loyalty message. There are still some Voice of the Customer needs that digitization will never remove.

    Second is the digital transformation of data and the use of data. Machine learning advances the digital transformation another mile or more, except if the result if the customer behavioral predictions are met with the same old (and dare I say – obsolete) responses. Digitalized data science has the potential to capitalize on a customer’s signal for wants and desires. Too bad, most companies can’t or don’t leverage those signals for continuous improvement in support of new products/services for customers. In this case, the digital data is within reach, the transformation is how the business looks at it.
    .

  3. Main BPM works of digital transformation are done directly by computer and network specialists with functional analysis skills, not by BPM consultant – for our more great regret. If you arenot an IT “kernel” you don’t have the job…

    • It may be true that IT is doing most of the digital transformation work, but if it is, its unfortunate. It like letting IT start installing ERP systems without having a clear idea of the nature of the business processes to be automated. The process analysis function may be within IT, but it should be a separte function and focused on a more comprehensive view of what the organization is trying to accomplish.

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