Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

It has been about 20 years since Business Process Reengineering first came into vogue. Celent and TCS believe that a new synthesis of technology and process will generate significant value for insurance carriers, who continue to battle process complexity amidst renewed cost concerns.

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

About the Authors

Donald Light Donald Light, based in Celents San Francisco office, is a Senior Analyst in the firms insurance group. Mr. Lights research focuses on claims, underwriting and policy administration, reinsurance, product life cycle management, business process and rules solutions, and accounting. He is the author of reports on policy administration, claims, underwriting, product development, insurance accounting solutions, fraud mitigation technology. His recent consulting work includes developing a strategic IT plan for a specialty insurer, a build vs. buy analysis, and vendor strategy. Mr. Light has been widely quoted in the press and media, including The Wall Street Journal, The New York Times, Financial Times, The Economist, NBC and CBS Evening News, CNBC, National Public Radio, Business News Network (Canada), Bloomberg TV and Radio, USA Today, Reuters, AP, CNN Money, Dow Jones, and Bests Review. He has written columns for Insurance Networking News and Insurance & Technology. He is a frequent presenter at industry conferences including those sponsored by ACORD LOMA, IASA, and ISOTech. Prior to joining Celent, Mr. Light was a consultant with Sapient and for his own firm Donald Light Consulting, where he advised senior managers at major insurers and other financial institutions. He has been a research associate at the Allstate Insurance Research and Planning Center. Mr. Light has a B.A. cum laude in economics from Princeton University, and an M.B.A. from the University of California, Berkeley. He is a CPCU and has served as Chair of the National Societys Research Committee.

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

Raja Shanmuganandam Raja Shanmuganandam is a Senior Strategy and Solution Consultant with over 15+ years of Insurance Industry experience at Tata Consultancy Services (TCS) and is based in the firms Bangalore office. He has extensive experience in consulting and provided solutions that has helped multiple Insurance companies across the globe achieve their business objectives. He has specialized in the areas such as Solution Simplification, Business Process Re-Engineering, and IT Strategy & Outsourcing. He has sound knowledge in major Insurance Lines of business such as P&C, L&A and holds Insurance certification from CII, UK and quality certification from QAI, USA. He has extensive experience in using tools/frameworks such as PO Matrix, CID, SEDAC, Lean Six Sigma and Blue Ocean Strategy in his consulting engagements. Raja earned his Bachelor of Engineering Degree from Guindy Engineering College, Anna University in Chennai, India.

Srinivas Nayak Srinivas Nayak is a Solution Architect/Consultant at the Insurance Practice of Tata Consultancy Services (TCS) and is based in the firms Bangalore office. His focus areas include Application Rationalization, Process Transformation, Business Intelligence, Master Data Management, Reporting and Analytics. He has been closely involved with development of tools and frameworks for TCS in the areas of Analytics, Process Modelling, Tool Adoption and Application Rationalisation. Srinivas holds a Bachelor of Engineering degree. In his 10 years of experience at TCS he has worked in various roles such as Lead Consultant, Solution Architect and Business Analyst for various consulting and delivery engagements of TCS.

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

Table of Content
1. History of Business Process Reengineering.. 2. Evolution of Business Process Reengineering. 3. Business Process Management. 4. Trends in Business Process Reengineering... 5. Benefits from Business Process Reengineering 6. Exploring Business Process Reengineering.. 4 4 5 6 6 7

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

History of Business Process Reengineering

As an engine for business transformation, Business Process Reengineering (BPR) has had a mixed history. When it made its first appearance in the early 1990s, it was fundamentally a response to a widely held perception that a lot of the work done in large enterprises was slow and/or inefficient and/or of poor quality. In its earliest days, BPR focused on eliminating non-value adding activities or steps within processes. At the same time it attacked the approach of simply automating existing, unchanged processes as paving the cow paths (i.e. executing a meandering, inefficient process faster, rather than focusing on what the process should be if done in a more direct and efficient manner.) While the desirability of both goals seemed obvious, in fact, they begged some important questions. For example, value (which is added or not-added) can have very different meanings, depending on who is making the judgment call. Do process steps which meet Sarbanes-Oxley mandates add value to the customer, or to the operations group doing the process, or to the CEO? How and by whom are competing perspectives balanced? Similarly if a cow path is not simply to be paved, who will decide on the route and carrying capacity of a new road or superhighwayor whether a fixed rail system would be a better and more planetarily-friendly alternative. Even worse than these conceptual difficulties, BPR in actual practice became strongly associated with significant reductions in staffing levels. While there is nothing inherently wrong with one-time or continuous reductions in cost structures; the other benefits which BPR could produce (e.g. improvements in quality, or customer retention) received less attention as drivers to undertake BPR projects vis-a-vis simply reducing headcounts.

Evolution of Business Process Reengineering

As the 1990s rolled toward and into the new millennium, several related methods for achieving strategic change and performance improvement gained some level of prominence and following. These include total quality management (TQM), continuous improvement, lean, just-in-time, and six sigma. Some originated in the world of manufacturing and required modifications to work in a service delivery environment. Others fit directly into a service model. What they all had in common was a tendency to look at process first, organization and people second, and technology third. Even though technology during the same period was going through its own set of transformations (client server architecture, thin client, internet, SOA, cloud computing, et. al.); neither BPR nor its cousins took full advantage of how technology itself could play a central role in either enabling change or even initiating change. However, the development of business process management (BPM) solutions (largely since 2000), has done much to provide a way for technology to create and power a next synthesis BPR. (Celent has written about the emergence and growth of BPM solutions in several reportssee for example, Insurance Business Value from Business Process Management & Business Rules Engines, or Business Process Management Solution Vendors for Insurers 2007.)

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

Business Process Management

Celent and TCS define a complete business process management (BPM) solution as one that enables the design, integration, execution, monitoring and optimization of workflows among people and applications. It explicitly recognizes three kinds of paired workflow interactionsperson:person, person:system, and system:system. A complete BPM solution has six elements: process design and integrated development environment (IDE); process repository and management; process execution engine; monitoring and management; execution history; analytics, modeling, and optimization.

Process Design & Devel.Environ.

Process Repository

Process Execution Engine

Execution History

Analytics, Modeling & Optimization

Monitoring & Management

? Process Design and Development Environment enables the creation of processes and workflows in a point-and-

click graphic environment, the integration of those processes and actors with other applications and databases, and the code that the process engine will execute. Typically a business-side manager or analyst will design a process, and an IT developer will specify how the process is integrated. Often the BPM solution itself will generate program code automatically in the background. ? Process Repository and Management provides version control and contains a complete set of prior and current processes. The record for each process should contain information about authors, dependencies/interactions with other processes, and other searchable information. ? Process Execution Engine: the execution engine runs the code created in the design element. It controls and directs the flow of work among processes and end users. It follows designated rules to make decisions. It also orchestrates calls to other applications, databases, and users; maintains task queues; and passes results onward in predetermined paths. ? Execution History is a database containing a record of all executed processes. Records can be viewed by managers or analysts or auditors. ? Monitoring and Management (sometimes called a dashboard or a business activity management [BAM] component) allows managers to view status and state, activities, and productivity by: process, end user, other staff, group, or location. There should be some ability to make real time resource and flow changes.
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Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

? Analytics,

Modeling, and Optimization permits the analysis of actual and alternative processes in order to improve performance. The alternative processes may be designed by human judgment, or sometimes by optimization algorithms. For example, managers may wish to understand when and why bottlenecks or excessively long duration processes occur; and to test the cost and performance impacts of changing resources or the process steps. Successfully tested processes can then move into production. Developing alternative processes can be done internally, or through the use of tools and methodologies provided by consultants.

Trends in Business Process Reengineering

What is now available to insurers is a new synthesis BPR, which incorporates BPRs original insights (the need to redesign processes based on explicit criteria, and the imperative to use technology in a way that enables the achievement of business objectives). The new synthesis BPR may also deploy elements from the related methodologies such as lean, six sigma, and TQM. Most of all, the new synthesis BPR draws on the elements of BPM solutions to provide a middleware layer that includes three critical elements: l ability to design all workflow interactions among persons and systems The l A way to enforce consistent execution of tasks and activities within processes lcapacity to record, analyze, model, and improve processes An

Benefits from Business Process Reengineering

Since insurance is a process-centric business, there is no shortage of places where the new synthesis BPR can add value. These include: l new business process (especially when multiple source of information must be gathered and analyzed from The internal and external sources) l Policy assembly and issue l Policy service (premium- or non-premium bearing changes and endorsements) l Reviewing and changing investment choices in variable life products l Cancellations and reinstatements l Renewal (once again gathering information from multiple sources) l Audits l notice of loss First l Correspondence and communications during claim adjudication l Salvage and subrogation l Litigation management l Repair, restoration, and rehabilitation supply chain management

Beyond the Cow Paths: A New Synthesis for Business Process Reengineering

Planning and executing a new synthesis BPR project is a large undertaking, including several key elements: l Identifying the business unit(s) and process area(s) that will be the focus of the effort l Confirming the availability of the required BPM or other technology solutionsor some cases choosing a vendor and solution l Choosing the BPR methodology that will be deployed l Developing a business case (including both operational and IT components) l Marshalling support at the appropriate executive and management levels

Exploring Business Process Reengineering

A few insurers (mostly the very largest) may have internal resources (or even dedicated units) with adequately deep and broad BPR resources. Many others will look to outside consultants or IT services providers for assistance. As always when selecting an external partner, it is important to consider each candidates BPR approach, resources, and track record.

About Insurance Solution Unit

TCS has over 30,000 person years of experience working with over 90 active insurance clients. Our dedicated insurance practice offers a powerful combination of domain experts and consultants that provide a combination of experience and expertise to building smart and innovative solutions for our insurance clients. To learn more about our solutions for the insurance industry, visit www.tcs.com/insurance.

About Tata Consultancy Services (TCS)

Tata Consultancy Services is an IT services, business solutions and outsourcing organization that delivers real results to global businesses, ensuring a level of certainty no other firm can match. TCS offers a consulting-led, integrated portfolio of IT and ITenabled services delivered through its unique Global Network Delivery ModelTM, recognized as the benchmark of excellence in software development. A part of the Tata Group, Indias largest industrial conglomerate, TCS has over 143,000 of the world's best trained IT consultants in 42 countries. The company generated consolidated revenues of US $6 billion for fiscal year ended 31 March 2009 and is listed on the National Stock Exchange and Bombay Stock Exchange in India. For more information, visit us at www.tcs.com.

About Celent
Celent is an international consulting and advisory firm dedicated to helping financial institutions create and sustain competitive advantage. Celent assists firms in defining both business and new technology strategies. Our consultants have advised many of the largest financial institutions in the world. Celent was recently acquired by Oliver Wyman Financial Services. Oliver Wyman Financial Services is a strategy consulting firm focused entirely on the Financial Services sector. Our clients include 75 of the top 100 global financial institutions. We have more than 1000 professionals around the globe with an unparalleled understanding of the market structure, economics, and possible future development of the segments of the financial services industry. Our distinct approach is characterized by deep specialization, rigorous fact-based analysis, and pragmatic and high impact solutions. For more information on Celent visit www.celent.com.
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provide TCSs clients with the combined insights of both firms. Feedback is welcome to the authors at dlight@celent.com & insurance.practice@tcs.com

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