Blog Posts Business Management Lean / Six Sigma / Quality

BPM and Blockchain, miles apart or closer than you think?

Blog: BPM Leader

As Business Process Management traditionally is seen as a method for a company’s internal process control and blockchain in general is only known by the people for Bitcoin, these two subjects look miles apart. However, if you look further than the traditional view of BPM or the most used functionality of blockchain, one can discover that these two can reinforce each other in the long run.

Business process management and Blockchain in short

Business Process Management (BPM) is the effective and efficient management of processes. Looking at BPM there are roughly 3 feedback or steering /management loops;

The operational loop, providing status information of a product and/or service and capacity information of the resources handling the products or services (giving information like “is a certain resource overflowing or standing still”, “how is the flow of production of the product/service going as we speak”).
The tactical loop, using the accumulated data of how your process is performing. This gives you information about how the process of a product or service is performing over time based on data provided by the product itself and/or the resources handling the product in various stages.
Strategic loop, in this loop the accumulated data is not so much used for process improvement purposes, but is used to analyze the product and services that are offered. Is there any demand, does the client want an alteration of the product or a no product at all.

Blockchain, worldwide mostly known for bitcoin, is a decentralized online ledger system without a centralized governance mechanism that has huge potential in the future. Amongst the most promising developments/products for the near future are;

Cryptocurrency. Here comes bitcoin again, but there are many more (600+), bitcoin is just the biggest around at the moment. Other examples are Ether, CXP, Coinye, Dashcoin, Dogecoin etc.
Going past the currency, this technology can also be used for trading stock and bonds in the future in a decentralized way, taking out the middlemen, marketmakers etc, highly reducing cost and increasing speed. Companies working on this are Counterparty and Symbiont, but also even the NYSE is working on this kind of platform.
The decentralized distributed ledger as a truth machine. As information is stored on nodes worldwide, it isn’t easily manipulated or corrupted. For example, a database with all classic cars registered in them, describing all specific details including owner. As this database is not stored in one place but across all the nodes of the network and all changes need to be approved by the majority of these nodes, chance of misuse or manipulation are minimized. Examples are Everledger or Coinspark.
Smart contracts, these are programmable self-executing contracts that execute themselves and pay out if the right conditions are met, using the blockchain technology as its basis. For example, someone files an insurance pay out request, signing a smart contract, this contract requires certain steps to be taken before it pays out, e.g. police statement, property valuation report etc etc. Once all this is received (which all can be automated and the information requests can be initiated by the smart contract, the insurance will pay out automatically, without further human interference). Examples of companies working on this technology are Lighthouse or Ethereum.

Blockchain and BPM, miles apart…….. or is it?

Although at first sight blockchain technology, that in essence is based on completely decentralized operations, and Business Process Management look miles apart. But if you look a bit closer, do a deep dive, you will see that in the end BPM and Blockchain, especially the smart contracts technologies (like Ethereum and Lighthouse are working with) can support and strengthen each other.

Important here is that one has to step away from the traditional way we visualize BPM: as the management of a series of processes that are performed in a line production environment or at least in (a series of) buildings by various departments completing one task after another and then handing it over to the next department. We need to focus on the process, the series of steps that are performed, regardless of the environment where it is done.

If we look at the potential of new blockchain technology, past the cryptocurrency, like smart contracts, we can see that a new world could emerge where all the operations are decentralized to numerous nodes worldwide. No more centralized offices and no more operational management as smart contracts take over the manual work, allowing fully automated operations in a decentralized environment.

But if we dive deeper into the concept of smart contracts, despite the decentralized character, so no more centralized operations where you can literally see the operational process in front of you, these smart contracts on their own will still follow the process as programmed in their algorithm. So despite the operations being decentralized to various nodes, the contracts will all undergo a series of steps, based on the algorithm and rules of the contract and the blockchain. Meaning that all individual smart contracts follow their own process!

And here it is where BPM can support and strengthen blockchain technology. As all smart contracts follow a certain process, you can apply various principles of BPM.

How BPM can support

As explained earlier in this blog, there are roughly 3 main feedback loops within BPM using the process data for operation, tactical and strategic steering of your process (and many hybrid forms).

With blockchain technologies, the need for operational steering (like continuous line balancing etc), will be the least interesting from a direct operational perspective. As operations is performed pretty much fully automated and due to the nature of blockchain, the likelihood for bottlenecks to appear is low as the process can be performed worldwide due the decentralized operational character.

It becomes even more interesting on the tactical and strategic level!

The tactical steering of your process is the process improvement feedback, (Lean, Six Sigma etc.). Based on the process information and preferably the feedback of the customer, you improve your process. Although smart contracts will be fully automated, even algorithms and preprogrammed processes can be improved. Based on the accumulated data of multiple smart contracts an algorithm can be improved and thus the customer experience could be improved. The smart contract should gather crucial process information (this can be any information deemed interesting, traditional like lead times etc, but also renewed parameters) and this information, together with a (automatically) visualized process, lean and six sigma techniques can be used to further optimize a process as programmed in the smart contracts or even the blockchain.

On the strategic level, no longer the process itself is under discussion, but the product that the smart contract represents is. Based on process usage information, in combination with customer feedback(!), a continuous analysis can be made if a certain product (smart contract) should still be offered to clients at all! Using smart contracts, it will be much easier to make the analysis if a certain product is used a lot and in the desired cycle times are met. Again, customer feedback is crucial as well, and this could be automated in the smart contract itself e.g. the final delivery of the product or a final payment is only completed once a small survey is filled in by the client. In this way, the product portfolio can constantly be monitored on high and low cycles and thus which one are interesting to put into the market and which ones are less interesting.

So as described above, although the world of BPM and blockchain look miles apart, they can both be connected and benefit from one another and thus are closer than you think!