Business Engineering and Service Design, Second Edition, Volume I

Oscar Barros

• Publisher: Business Expert Press
• Year: 2016
• ISBN:
  9781631575693
• Topic: Business
• Subtopic: Service Industry
• Index: Business

This book provides the foundations of BE, reviews the disciplines integrated within its methodology, and presents plentiful evidence of its power by giving detailed application cases, including impressive results in private and public situations.

CHAPTER 1

Introduction

Ever since the idea of Service Science was proposed,¹ several lines of work in what is now called Service Science, Management, and Engineering (SSME) have been put forward.² In the Prolog, we linked our work to a framework related to SSME, developed by Spohrer and Demirkan, for “Service Systems and Innovation in Business and Society,” and concluded that our proposed approach is congruent with their ideas.

This book reports our research and development work in the engineering part of SSME, and in particular, the design of the components of service systems. As stated in the Prolog, our main source of inspiration is Business Engineering, which not only shares the ideas and principles of SSME, but also tries to cover a larger domain, including any type of business. The value we add, as compared to SSME, is the emphasis on making operative the disciplines’ integration it proposes, by introducing Strategy and Business Models as the starting point to define the design scope in a precise way; services Enterprise Architectures (EA) and processes, including the ones that “produce” the service, as the object of design; general patterns as a mean to facilitate the designs; Analytics embedded into EA and processes to make them truly intelligent in trying to optimize design performance; evaluation criteria to decide on designs; and a well-founded and defined methodology to perform the design.

Our approach is based on the following ideas that have not been fully exploited yet in service design.

First, we want to assure that service design is explicitly aligned with Strategy³ and Business Model;⁴ to accomplish this, we propose the methodology of Business Engineering in performing such design.⁵

Then, in making service design explicit at a high and systemic level, we use a service EA based on Architecture Patterns;⁶ this approach has been extensively tested in many real cases in health service design and other business sectors.⁷

Finally, in doing detail service design, starting from an EA, we use general process patterns that provide predefined solutions for such design;⁸ these patterns also consider the introduction of intelligence embedded into their components as Analytics-based business logic. Here, we are aligned with the proposals of Davenport and Harris⁹ of using Analytics (e.g., Business Intelligence, optimization, and Machine Learning) in making enterprises more competitive. As a tool to define how intelligence can be integrated into the design, particularly at the level of EA, several structures are presented in Chapter 4, which show alternative ways to do this.

These ideas and the experience generated by applying them across various domains, such as manufacturing, distribution, bank services, retail, and hospitals,¹⁰ have enabled us to propose the conceptual model (Ontology) in Figure 1.1, which formalizes such ideas. According to this model, designs are based on the Strategy and the Business Model that an organization wants to put into practice. But no Strategy or Business Model specifies how the positioning and the value will be actually delivered in operational terms. This is what a Business Design will detail, starting with Business Capabilities necessary according to the Strategy and Business Model. This must be complemented with the design of processes, systems, organizational and information technology (IT) support that make the Business Capabilities fully operational, giving rise to the other architectures included in Figure 1.1

1. Process Architecture, which establishes the processes necessary to implement the Capabilities and Business Design, the relationships that coordinate the processes, the business logic—algorithms, heuristics, rules, and in general, procedures—that automate or guide such processes and their connection to IT support.
2. Organization Architecture, which is related to the common organizational charts and defines how work will be structured—who will do what—and the relationships among them—who will respond and relates to whom. Such architecture is much related to the Process Architecture, since, as we will detail and exemplify in Chapter 5, process design determines, in many cases, peoples’ roles.
3. Systems Architecture, which defines the Information Systems that exists in an organization, their relationships, and the support they give to processes. Again there is a close relationship between this architecture and Process Architecture, since the system support should be, according to our proposal, explicitly defined in the process design, which can be given with current, modified, or new systems that change the architecture.
4. Information Architecture, which shows the structure of the Information Systems’ data, and for the same reasons as in (3), is also related to processes.
5. Technical Architecture, or the contents and structure or the hardware and nonapplication software on which data resides and systems are run, which are obviously related to all the aforementioned architectures.

Figure 1.1  Ontology for a Business Design

Notice that the conceptual model suggests a design methodology, to be detailed in Chapter 5, which we now apply to a much-simplified reallife example of a private hospital that has defined a Strategy of providing the most advanced services in its market in terms of medical practices and supporting technology. The Business Model then is to provide high-value services to patients, which increases the probability of patients’ well-being, and for which they are willing to pay premium prices. Then, the hospital needs Capabilities and a Business Design that are able to generate such services. The Capabilities are, in this case, the abilities necessary to innovate in medical practices and the knowledge of new technology that supports such practices, which implies the redesign of the medical services to be provided; the Business Design is a structure of components that delivers the Capabilities. In this case, a new component that performs a new service development, another that is able to put the new services into practice and one that can do associated marketing and selling. Since the hospital does not have these components, new processes that enhance the current architecture to make such components operational should be designed. Among others, a process for a new service development should include the definition of actors’ role in the process, which can be a new group created for this purpose or a group comprising the existing people in hospital operations that, with adequate support, form an innovation team that produces new medical services. Clearly, there are different organizational structures for the aforementioned alternatives, and this shows the relationship between a process and organization design. Then process design will determine system support, for example, for new service development planning and tracking, and data, software, and hardware needs related to the other architectures, as illustrated in Figure 1.1.

These general ideas of Business Engineering are applicable to service design in any domain, as we show in Chapter 5, and in particular, to health services, which is dealt with in a follow-up volume: Service Design with Applications to Health Care Institutions.

The Business Engineering methodology for service design to exploit the previous ideas, applied to hundreds of real-life cases, has allowed us to propose a hierarchy of design levels, detailed in the following sections, which allows performing the complex, systemic problem of overall business (service) design in a sequence of related, coherent, and smaller pieces. We outline such levels as follows and exemplify them with various cases:

1. Business Design delivers the structure of components—production, management, supporting, and others—and their relationships, together with the interaction with the environment that generates a Business Capability, which provides a service with value for customers in accordance with the Strategy and Business Model. It represents what a business should do and does not map to an organizational unit, area, or product. A case of this type is the private hospital we just presented, which shows that the Business Model of leading on medical treatments and technology requires new Capabilities in the form of new activities that discover and manage innovations of this type to provide value for customers. Another case is a financial credit card data-processing organization that gives services to several banks, which is using Analytics applied to customer data, both internal and external big data, to develop new services; it has used such data to model customer behavior and discover new business opportunities for the banks it serves, such as campaigns for credit card use and to avoid churn; this case will be detailed in Chapter 5. This level includes designing the service in itself (product) and its production; for example, in the case of the private hospital, new medical practices with renovated equipment to perform medical services is the final result sought with this type of design.
2. Business configuration and capacity design includes the determination of the Process Architecture that should be present to assure that the service defined in (1) is provided in an effective and efficient way. In addition, what capacity should each process provide to be able to meet the demand according to the desired Service Level Agreement. For example, hospitals’ emergency services may have different configurations in terms of its processes, among others: (a) use of a Triage (patient routing), (b) a fast-track line, and (c) several different lines of service. Once the components are defined, capacity must be determined in order to have a desired patient average waiting time. This problem is relevant only when the demand behavior changes or there are possible innovations in service technology, and it is usually related to strategic investment issues.
3. Resource management process design is the management of people, equipment, and supplies that are necessary to provide the capacity established in (2). For example, in the credit card transaction case in (1), the structure of the group that will generate and execute campaigns for banks and the number of people necessary in each part of the process. Such processes are executed with regular frequency depending on demand dynamics.
4. Operating management processes design provides processes necessary for day-to-day scheduling of demand over the resources in order to assure the required level of service and optimize their use. For example, production scheduling processes in a paper plan to assign order to machines in such a way that customer’s orders are processed on time and production is maximized.

Design levels are applied according to the situation under study; thus, new businesses or new variants over an existing one imply performing all the levels; for example, in the case of the financial credit card data-processing organization outlined earlier, the new service to banks implies starting with a Business Design as defined earlier, including design of the new service (product) and its production, and then applying all the other levels to define how such design will be operationally implemented. When more marginal innovations are performed, only lower levels may apply; for example, changing the scheduling method for patients over surgical facilities to improve waiting time for surgeries and better using the resources means application of only design level 4. We will present several real-life cases in Chapter 5, which show how the different levels apply in particular cases.

The innovative design approach we propose to solve the aforementioned problems in an integrated way is based on explicit and formal general business, architecture and process models, called Business Patterns (BPs) and Business Architecture and Process Patterns, which enable the definition of service design options and analytical methods that allow customer characterization and resource optimization in designing and operating the service. This is complemented with modeling of the processes with Business Process Management Notation¹¹ and a technology that facilitates the process execution with Business Process Management Suites tools and web services over service-oriented architecture.¹² In summary, we integrate a business and process design approach with analytics and supporting IT tools, as shown in the following chapters.

We have applied the design approach to many types of services, and we will present cases from many industries. Further, in a follow-up volume, Service Design with applications to Health Care Institutions, we will present the results of a large-scale project we are developing for the health system in Chile.

The next chapter reviews the relevant literature, emphasizing the related work in SSME, Systems Science, and EA. The following chapter presents a summary of the relevant concepts in the disciplines of Strategy and Business Model, Modularity and Platform Design, Evaluation Theories and Methods, and Business and Process Intelligence that will be integrated in our approach. Then, we will present the framework behind our service design proposal, including the constructs that support the methodology used: Intelligent Design Structures, BPs, Process Architecture Patterns and Process Patterns. Finally, the design methodology is presented and applied to several cases validating our proposal, including the results generated; also, final conclusions are summarized.

CHAPTER 2

Review of Relevant Work

In this chapter, we review proposals that have a similar purpose to the design approach outlined in the previous chapter.

Service Science, Management, and Engineering

This work is related to the proposals on Service Science, Management, and Engineering (SSME),¹ with which we share the same design objective, but propose a different approach and other tools. In particular, our emphasis is on the design of the different types of processes that are needed to make a service operational. A proposal in the spirit of this work is the one by Tien and Berg² on service engineering. They propose a systems approach and show how different disciplines can contribute to it. They mention, among others, design and analytics (Operations Research and Management Sciences), but do not give methodological details on how to proceed; this book focuses on providing such details based on the...