Process Optimization Report
The Process Era is Here | IT Edition. How IT leaders are using processes as a lever for value and a driver for innovation
The 2023 Process Optimization Report The Process Era is Here IT Edition How IT leaders are using processes as a lever for value and a driver for innovation
Contents Introduction 3 Section 3 8 IT leadership in a time of Processes aren’t digital transformation running as they should Process optimization is being neglected Section 1 4 The process Barriers are getting in the way optimization imperative Businesses are paying a high price Harnessing AI and innovation Reducing costs and controlling Section 4 13 cash 昀氀ow Tech investment Adapting to change in the process era Process mining is gaining Section 2 6 traction Processes are the IT leaders are driving adoption lifeblood of organizations Process excellence is an The outcomes of process emerging discipline optimization Survey methodology 19 The Process Era is Here: IT Edition 2
Introduction IT leadership in a time of digital transformation Digital transformation is reshaping the role of enterprise IT. Whether it’s dealing with the latest cyber security threats or implementing emerging technologies, IT departments must adapt quickly to the latest developments. Keeping pace with rapid change IT leaders are pursuing process requires IT departments to optimize optimization to fuel innovation and drive real business value. They have their processes to maximize ef昀椀ciency and effectiveness. IT leaders understand a greater understanding of process this, with 84% seeing processes as their complexity than other functions, greatest lever for value and fastest lever and are the most likely to use tools for change, according to our research. such as process mining to unravel this complexity. Just how many are actually using that lever to its full potential is, of course, There’s still a long way to go, with another question. sub-optimal processes currently costing time, money, and employee We surveyed 300 IT and digital leaders from large enterprises in Europe and morale. But reassuringly, 87% of IT leaders the United States to discover how they say process excellence will emerge as a core business discipline within the next currently optimize their processes. This 昀椀ve years. This presents a signi昀椀cant report is largely based on the 昀椀ndings opportunity for individuals unwilling to of that survey. As the 300 responses formed part of a broader survey of over accept the status quo, and IT teams ready to improve how their organizations 1,200 business leaders from supply chain, work. The time for these visionary leaders process and operations, and 昀椀nance, as well as IT, we also highlight cross- to galvanize change and drive real business value is now, in this era, and functional trends where useful. The results reveal a sea change in processes are the lever to use to make the way enterprises create value. it happen. The process era is here: an era in which optimizing processes will be as foundational to business success as product development, 昀椀nance, or sales. IT leaders have a strong grasp of the importance of processes. In fact, a full 100% believe process optimization is important (or even essential) to meeting organizational objectives. The Process Era is Here: IT Edition 3
Section 1 The process optimization imperative IT leaders recognize the power of processes as a lever for value, with 88% saying process optimization can deliver bottom, top, and even green-line value at the same time. To better understand their priorities, we asked the 300 IT leaders who took part in the survey to identify the top 昀椀ve factors that will drive their need to optimize processes in the coming year. There’s a clear winner. Factors driving process optimization Interest in harnessing emerging technologies (AI) ESG demands IT 81% 62% All functions 70% 53% Cost reduction Complying with legislation or regulation 67% 61% 69% 64% Competitive pressure in our sector Supply chain disruptions 63% 52% 64% 57% Changing customer expectations Macroeconomic pressures 62% 48% 64% 57% Business leaders across IT, supply chain, 昀椀nance, and process and operations share a consensus on the main factors driving process optimization. But the extent to which IT leaders recognize the importance of optimizing processes to harness emerging technologies like AI is striking, with 81% placing it in their top 昀椀ve factors, compared with just 70% in the cross-functional survey. Keeping costs under control is their second process optimization priority, while responding positively to continually shifting circumstances (such as competitive pressures, changing customer expectations, and ESG demands) comes next. Let’s take a closer look at these three opportunities. The Process Era is Here: IT Edition 4
Harnessing AI and innovation IT leaders may be best placed to understand the enormous value AI can unleash 68% 94% for their organization. But they are also best placed to understand the foundations enterprises must lay before AI can truly deliver on its promise. As we’ve seen, 81% 94% of IT leaders are of IT leaders say interest in harnessing AI and other emerging technologies is already using or actively a major factor driving the need to optimize processes in the next 12 months. implementing AI There’s clear momentum around AI. In fact, the vast majority (94%) of IT leaders Of these, 68% are concerned process are already using or actively implementing AI, so they have 昀椀rst-hand knowledge shortcomings may of what is required for a successful implementation. And over two-thirds (68%) hold back further of these say they are concerned that process shortcomings may hold back implementation of further successful implementation of AI (as well as automation and other AI in the next two years emerging technologies) in the next two years. Reducing costs and controlling cash 昀氀ow Cutting costs is an inevitable priority across most industries and functions right 86% now. So it’s no surprise 67% of IT leaders put it in their top 昀椀ve factors driving process optimization in the year ahead. 86% of IT leaders feel process optimization grows in importance What’s more, 86% feel process optimization grows in importance during times of during times of economic instability. As we’ll see later, almost half of IT leaders feel cost reduction economic instability will be one of the top three outcomes of fully-optimized departmental processes alongside revenue growth. Adapting to change Many of the factors driving the need for process optimization relate to external 84% changes in the business environment. These include responding to competitive pressure, meeting changing customer expectations and ESG demands, and 84% of IT leaders say processes are their complying with regulations. greatest lever for value What’s more, two-昀椀fths (41%) say the 昀氀exibility to respond to change quickly will and their fastest lever for change be one of the top three outcomes of fully-optimized processes within their function. IT leaders clearly see process optimization as a route to increased 昀氀exibility, allowing businesses to seize opportunities in a continually changing environment. ESG is a big deal in EMEA Meeting ESG demands is seen as a more signi昀椀cant factor driving the need for process optimization by IT leaders in EMEA (68%) and the DACH region (64%) than by those in the US (54%). The Process Era is Here: IT Edition 5
Section 2 Processes are the lifeblood of organizations Considering how foundational processes are to anything an organization 83% does, it’s no wonder IT leaders think they’re important. More than four-昀椀fths (83%) agree processes are the lifeblood of their organization. of IT leaders say processes are the lifeblood of their But the extent to which IT leaders recognize the power of processes as a value organization lever is notable. A decisive 100% believe process optimization is important or even essential to meet organizational objectives, and 99% say the same about departmental objectives. Importance of optimizing processes To meet IT objectives Essential Important Not important 58% 41% 1% To meet organizational objectives 58% 42% The Process Era is Here: IT Edition 6
The outcomes of process optimization It’s clear IT leaders understand the need to optimize processes to meet their objectives, both at the function and organizational level. To get a deeper understanding of the speci昀椀c outcomes they’re achieving or believe can be achieved by using the process lever, we asked them to pick their top three. In the current economic climate, it’s no surprise that 昀椀nancial concerns such as revenue growth and cost reduction top the list, or that outcomes such as the 昀氀exibility to respond to change and reduced risk aren’t far behind. The top outcomes of optimized IT processes Revenue growth Employee satisfaction 51% 28% Cost reduction Exceptional customer experience 46% 28% Flexibility to respond to change quickly Optimize working capital 41% 25% Reduced risk ESG performance 31% 21% Fuel innovation 28% Processes fuel innovation in Europe IT leaders in DACH (38%), and the rest of EMEA (30%), are more likely to believe that optimizing processes will fuel innovation than those in the US (17%). Overall, enthusiasm for process optimization is high. But there are many obstacles in the way, causing businesses to pay a high price, as we’ll see in the next section. The Process Era is Here: IT Edition 7
Section 3 Processes aren’t running as they should IT leaders understand the critical role processes play in underpinning business performance in the digital world, and the appetite to use those processes as a lever for value is strong. But enthusiasm doesn’t necessarily translate into action. The reality is many businesses are struggling with sub-optimal processes, both within and across enterprise functions and departments. Improvements are proving elusive. On average, only one in two business-critical processes within the IT department are seen as fully optimized. That means around half of processes like IT service management or incident response are running in a sub-optimal way. And of course, there’s a high chance the 55% of processes that are seen as fully optimized could still be improved. Leaders’ perceptions of process performance within their departments don’t necessarily re昀氀ect the on-the-ground reality. Business-critical processes within IT 45% Sub-optimal 55% Fully optimized A question of process perception Only 53% of IT leaders in DACH consider more than half of their departmental processes to be fully optimized, compared with 75% in the rest of EMEA and 70% in the US. This may indicate process optimization is more advanced in some markets, or it may simply indicate a difference in how process effectiveness is perceived in these regions. The Process Era is Here: IT Edition 8
A similar picture emerges when considering cross-departmental processes, which is hardly surprising. If businesses have sub-optimal processes within individual departments, they’re unlikely to have harmonious processes running across multiple functions. When asked to describe the cross-departmental processes in their business, 60% of IT leaders say they are ‘somewhat aligned’ compared with just 37% who describe them as ‘perfectly aligned’. This view is broadly in agreement with that of the business leaders we surveyed across the supply chain, process and operations, and 昀椀nance functions. Cross-departmental process alignment 60% IT All functions 37% 3% Perfectly aligned, Somewhat aligned, Not aligned, perfectly harmonious somewhat harmonious not harmonious 5% 38% 57% The Process Era is Here: IT Edition 9
Process optimization is being neglected Overall, IT leaders appear to have a more forward-thinking and proactive approach to process optimization than peers in other functions. Almost half (46%) of the business leaders in the cross-functional survey say they don’t think about process performance until something goes wrong. But this 昀椀gure drops to 36% for IT leaders (and falls even further to 27% for IT leaders in the US). Process optimization is a relatively broad concept that means different things to different people. For this research, we de昀椀ne it as: “Pinpointing a business-critical process that needs improvement, identifying the root cause of the problem, and then taking effective, sustainable action to optimize that process to drive a high-performance outcome.” Having established this de昀椀nition, we asked IT leaders about the last time their department optimized a process. The results reveal IT leaders are process optimization 昀椀rst-movers when compared with other functions. As an example, 36% say they have optimized a process within the last six months compared with just 20% of 昀椀nance leaders. However, process optimization is still being widely neglected. Despite IT leaders’ emerging role as process pioneers, only 15% say they optimize processes on a continuous basis. Almost half (42%) haven’t optimized a process in the last year. Process optimization frequency Optimize processes 62% on a continuous basis Haven’t optimized a process in the last year All functions: 51% 54% 48% 42% 18% 15% 15% All functions: 14% 8% Finance / Supply Process / IT / Shared services chain Operations Digital The Process Era is Here: IT Edition 10
Barriers are getting in the way Even though IT leaders are more likely to improve processes than other functions, there is still a lot of ground to make up. So, why aren’t IT leaders making better use of the process lever when they so clearly understand its value? There are a signi昀椀cant number of barriers preventing IT from optimizing departmental processes. The top four are: the complexity of business processes, legacy technology, siloed data and teams, and dif昀椀culties in identifying opportunities for improvement. Barriers to optimizing IT processes Complexity of 56% Legacy technology 42% Siloed data 40% processes and teams Opportunities to 38% Poor data 33% Resistance to 31% improve are hard quality change within to identify the organization Lack of process 24% Not a priority as 22% Lack of executive 21% ownership we’re often in buy-in 昀椀re昀椀ghting mode These responses highlight an overall disconnect within these enterprises. Departments speak their own languages, systems don’t play well together, and processes are hard to see, which makes it dif昀椀cult to move forward with optimization initiatives. Complexity is a challenge for IT The barriers encountered by different functions across enterprises are largely similar. However, IT leaders see process complexity as particularly challenging, with 56% citing this as a barrier compared with just 45% in the cross-functional survey. The Process Era is Here: IT Edition 11
Businesses are paying a high price Process neglect, exacerbated by a variety of barriers, is resulting in sub-optimal processes. When these processes are viewed individually, the consequences may not seem that great. But, as we saw earlier, a signi昀椀cant 45% of business-critical IT processes aren’t running as well as they should. The cumulative effect is signi昀椀cant. Loss of time and productivity is currently seen by IT leaders as by far the biggest impact, across all regions and functions. Impacts of sub-optimal processes on IT Costs us time and reduces productivity Customer complaints and churn 61% 32% Lack of efficiency costs us money Low service quality 44% 28% Missed opportunities to capture value Prevents innovation 43% 27% Negatively affects employee morale Damages enterprise reputation 35% 22% Somewhat surprisingly, preventing innovation comes near the bottom of the list of current impacts. But this is unlikely to remain the case moving forward. As mentioned earlier, 68% of the IT leaders already using AI are worried process shortcomings may hold back further implementation in the next two years, so we’re likely to see preventing innovation rise up this list if process optimization is not prioritized. Missed value opportunities in DACH There are a number of differences in how IT leaders in different regions perceive the impacts of sub-optimal processes. For instance, 54% in DACH feel they result in missed value opportunities compared with just 29% in the rest of EMEA. And 34% of IT leaders in the US say sub-optimal processes result in low service quality, compared with just 18% in the DACH region. The Process Era is Here: IT Edition 12
Section 4 Tech investment in the process era Despite the barriers standing in their way, many businesses are already attempting to unlock the value opportunities in their processes and are investing in process optimization technologies. The majority of IT leaders say their organizations are either using process optimization tools or are planning to use them in the near future. More than half (53%) are already investing in process optimization technologies, while a further 31% plan to invest in the next three years. Process optimization tech investment 31% Plan to invest in the next 3 years 53% 16% Already No plans to invest investing in the next 3 years Alignment between IT and business has traditionally been tough so, as part of the cross-functional survey, we asked business leaders from supply chain, process and operations, 昀椀nance, and IT whether IT investments are fully aligned to business outcomes. The response is positive, with 72% agreeing and only around a quarter believing 81% IT investments could be better aligned. What’s more, a convincing 81% say IT is able to support the business at the speed required, indicating the central role IT of business leaders say IT is equipped with the tools now plays in supporting transformation. to fully understand and So, what types of tools and techniques are being used to identify and act on support the business value opportunities within existing business processes? The Process Era is Here: IT Edition 13
With more than three-quarters (78%) of IT leaders saying a lack of visibility is the biggest enemy to process excellence, the tools and tactics businesses are using today tend to focus on increasing visibility across processes so they can be optimized. Business Intelligence (BI) tools are most commonly used, especially in the US, while Robotic Process Automation (RPA) and Business Process Management (BPM) are also popular. Process mining tools are currently least likely to be used but they are an emerging technology and, as we’ll see later, a signi昀椀cant proportion of businesses are exploring their use. Techniques used for process visibility Business Intelligence (BI) tools 69% Business Intelligence: software that ingests business data and presents it in user- friendly formats such as reports or dashboards Use external consultants 56% Robotic Process Automation (RPA) 54% Robotic Process Automation: automation technologies that mimic back-of昀椀ce tasks such as extracting data, 昀椀lling in forms, and moving 昀椀les Business Process Management (BPM) Business Process 49% Management: a method for visually representing work昀氀ows, designed to help businesses model and understand Process mining tools processes more clearly 36% Process mining: a technology that discovers, monitors and improves actual processes by leveraging real-time and historical data Map them out internally using standard office software e.g. Excel for business processes and operations 34% The Process Era is Here: IT Edition 14
Process mining is gaining traction Process mining is relatively low on this list of tools used for gaining visibility into business processes, but it’s gaining traction. Its importance as a key enterprise technology is highlighted by the fact that Gartner® published its 昀椀rst Magic Quadrant™ for Process Mining Tools in 2023. Although 36% of IT leaders say they use process mining tools speci昀椀cally for gaining visibility, even more (46%) say they use the technology in some form, (with the majority doing so as part of an integrated tool or software suite rather than a stand alone technology). A further 34% of IT leaders are already evaluating process mining. Familiarity with process mining 5% 46% 6% 38% Currently use process mining Have evaluated or 15% 24% are currently evaluating process mining Know a little about it but IT All functions not evaluated in detail Have heard of it but don’t know much about it 34% 32% The Process Era is Here: IT Edition 15
IT departments are far more likely to be using process mining than other functions. This may indicate an increased understanding within the IT team of the role process mining plays in addressing many of the common challenges they, and their organizations, face. Process challenges faced by IT leaders Very challenging Challenging Not so challenging Challenge How process mining helps Understanding how The latest iteration of process processes interact mining, object-centric process mining, allows organizations to visualize 17% 43% 40% how processes interconnect across operations Identifying and de昀椀ning opportunities Process mining provides an MRI of 昀椀nance processes for improvement within a process to rapidly uncover hidden value opportunities 17% 41% 42% Process mining continuously Analyzing how to optimize the process observes how processes are performing, and recommends 14% 42% 44% the right actions to capture value Orchestrating improvements across Process mining layers on top people, processes, and technologies of existing systems to allow businesses to look holistically across processes and take an 17% 38% 45% end-to-end approach to improvements Process mining supports each Migrating systems system migration phase, from standardizing processes pre- 15% 39% 46% migration to maximizing value post go-live Process mining extracts data Understanding how processes actually run from business systems to accurately visualize 昀椀nance 15% 38% 47% processes as they actually run Process mining quanti昀椀es Measuring how a process currently performs the impact of process performance on speci昀椀c KPIs 15% 37% 48% The Process Era is Here: IT Edition 16
IT leaders are driving adoption The IT function is often driving the process optimization agenda forward. Even though they are most likely to see process complexity as a barrier to optimization, they are still pushing ahead and 昀椀nding value opportunities in those processes. As part of the cross-functional survey, we asked business leaders which departments they see as actual or potential change makers in their organization. IT and digital teams are most likely to be to be seen by their colleagues as the ones setting an example when it comes to process excellence. They are followed by operations (including process excellence), and supply chain. We also asked which departments respondents consider to be process laggards. The top three answers are 昀椀nance, compliance, and product development. Process changemakers and laggards Changemakers Laggards IT & Digital Compliance Finance Operations Supply Chain, Product, Procurement Service and Logistics development The Process Era is Here: IT Edition 17
Process excellence is an emerging discipline As digital technologies fundamentally reshape enterprises, IT leaders are becoming ever more central 昀椀gures in their organizations. And they’re excited about the possibilities process optimization opens up to unlock innovation and harness emerging technologies such as AI. Ultimately, IT leaders are spearheading process optimization. They believe process excellence will emerge as a core business discipline in which they could take leading roles, setting their organizations up to succeed in an unpredictable digital world. Get in touch to 昀椀nd out more about how to use process mining to prepare for change, unlock innovation, and create value. Let’s talk The Process Era is Here: IT Edition 18
Survey methodology The research was conducted by Insight Avenue, an independent, third-party, specialist B2B and technology research consultancy. 1,217 interviews, with around 400 in each of three regions and 300 in each of four job functions, were conducted during August and September 2023. Business leaders were interviewed from organizations with revenue of $500m+ across a range of sectors Country 33% 19% 17% 10% 7% 7% 7% US Germany UK France Spain Switzerland Austria Region 34% 33% Rest of EMEA US UK / France / Spain 33% DACH Germany / Austria / Switzerland The Process Era is Here: IT Edition 19
Job function Operations, Process improvement, Process excellence IT, Digital Supply chain, Procurement, Demand planning, Logistics, Order management Finance, Shared services 25% 25% 25% 25% The base data for this edition Seniority Board, C-level Head of department, Director Senior manager 5% 58% 37% Revenue $500 million - $2 billion $2 billion - $10 billion More than $10 billion 15% 80% 5% The Process Era is Here: IT Edition 20
Industry sector Utilities 14% Retail 13% Manufacturing 12% IT / Technology 9% Banking 8% Insurance 7% Automotive 6% Public sector 6% Oil and gas 5% Chemicals 5% CPG / FMCG 5% Logistics 4% Pharma 3% Life sciences 3% The Process Era is Here: IT Edition 21
Since 2011, Celonis has helped thousands of the world’s largest and most About Celonis esteemed companies yield immediate cash impact, radically improve customer experience, and reduce carbon emissions. Its Process Intelligence platform uses industry-leading process mining technology and AI to present companies with a living digital twin of their end-to-end processes. For the 昀椀rst time, everyone in an organization has a common language for how the business runs, visibility into where value is hiding, and the ability to capture it. Celonis is headquartered in Munich, Germany and New York City, USA with more than 20 of昀椀ces worldwide. Find out more at celonis.com
