SaaS Notes

Leadership - Benefits of Virtual Business Processes

The concept of virtualization needs to be clarified.  On the one hand there is hardware virtualization.  Hardware virtualization includes servers, desktops, storage, data centers, etcetera – the physical components of the network infrastructure. Virtualizing at the physical level is a tactical maneuver.  It is not a competitive differentiator, nor does it provide a long term, sustainable competitive advantage. On the other hand there is process virtualization. Process virtualization is strategic to a company. Improved business processes offer companies a highly sustainable competitive advantage by allowing firms to improve quality and productivity, lowering costs and freeing up resources to focus on innovation and adding value. Business process virtualization (BPV) also unifies the focus of the firm, whether the focus is on creating profit, monitoring and fulfilling consumer needs, growing the business or all of these areas.

Business process virtualization forces a firm to closely examine all of its business processes and how they inter-relate.  BPV starts, then, with business process management (BPM). BPM provides the ability to gain visibility and control over information flows or transactions that span multiple applications and people. When a firm is hypersensitive to the inter-relationship of its core processes it becomes nearly impossible for any team to introduce an incompatible rogue process. When processes interact smoothly, there won’t be a need for subgroups to look around for a better way of handling the transaction.

The point of process management applied to process virtualization is to streamline and standardize business processes, data, and IT infrastructure.  For example, it is not unusual for companies to have different ways of handling customer orders depending on whether the order came in over the web, the phone, in the mail, in a store, or through a sales associate. This creates an inconsistent customer experience, potentially negatively affecting customer satisfaction and retention. From the business perspective, the inconsistency makes it difficult for the company to quickly gauge customer response to new items or sale pricing, making it nearly impossible to create a just-in-time inventory management system run by the company suppliers. Without process management, the drawbacks cascade from the customer experience through the company out to the supply chain.

When BPM is used to implement process virtualization the firm achieves consistency and predictability of outcomes. The four primary beneficiaries of process management applied to virtualization are:

Customers – The transactions and transaction times become predictable.  Product and service deliverables become consistent.

Employees – Well-designed processes help ensure efficiency and quality of outcomes. In addition, improved processes free up time for employees to pursue creative work that adds value.

Partners – Virtual processes coupled with process management streamlines transactions and makes them more predictable, improving partner profitability and loyalty.

Shareholders – Efficient processes drive productivity for growth and lower costs, improving greater profitability and enhanced leverage of existing resources.

Virtualizing business processes provide firms with an opportunity to streamline the business, increase the number of transactions, improve customer and partner satisfaction and loyalty, and free up time for employees to explore adjacent market opportunities. Virtual business processes can be implemented incrementally, providing exponential value up and down the business chain. With each new virtualized process, the speed of business transactions increases providing a differentiated, sustainable competitive advantage.