The practice of IT cost optimization combines knowledge from different parts of an organization and is a financial exercise that requires technical expertise while also putting user interests at the forefront, thus helping to reduce barriers to digital change management implementation.

Digital adoption in business is a key concept in IT cost optimization, as the flexibility of new technologies makes it easier to find ways to reduce costs.

IT cost optimization’s outcomes might lead to vendor changes or the elimination of redundant apps. But they could equally emphasize the value of digital adoption projects for achieving efficiencies in digital resources.  For example, by providing employees with the necessary training and tools to optimize their use of technology, a company can reduce its overall IT costs while improving the user experience and productivity.

This article will support anyone seeking to optimize costs in their organization. It will explain IT cost optimization before offering a complete set of ideas about how a business can get the most value out of its IT resources.

IT Cost Optimization Explained 

IT cost optimization is a strategic business process that seeks to drive spending and cost reduction to maximize the value obtained from business services. 

IT costs can be a huge part of operating expenses. As such, strategically optimizing IT costs helps to realize long-term business goals. The process will often include the following: 

• Attention to the procurement of IT services, ensuring that the company obtains the best pricing possible; 
• analysis of pricing models and subscriptions; 
• careful monitoring of all IT costs; 
• seeking to standardize software provision arrangements, wherever appropriate; 
• the removal of redundant technology and half-baked implementations; 
• evaluating the ROI on IT services across different business units; 
• where inefficiencies are found, advising on alternative solutions, including automation; 
• finding ways to introduce new IT innovations and strategies. 

The optimization process should start with implementing IT solutions for a business. It then continues for the duration of a company. Unlike cost-cutting, optimizing costs does not conclude. 

Effective IT cost optimization finds ways to link the day-to-day experience with the impact of a particular strategy and connect engagement with the operational or financial outcomes that matter to any business.  

Two types of cost savings: Cost-Cutting and Cost Optimization 

Cost-cutting and cost optimization may sometimes lead to similar outcomes, but they are fundamentally different processes. 

A cost-cutting exercise is a one-time event, mainly driven by budget constraints. Cost-cutting is always unpopular, even if it is necessary. The thing is that cost-cutting can hold a company back for years. Reduced IT infrastructure will make it harder to achieve stable growth. And once IT resources are removed, company leaders will be reluctant to reinstate them later. 

By contrast, cost optimization seeks the best business value. Reducing costs might turn out to be a convenient by-product. But the goal is clearly on the efficiency of essential IT resources. 

Cost optimization should be conducted on an ongoing basis. A recent Gartner report showed that over 40% of managers did not achieve their optimization goals within the first year. This reminds us that managers seeking cost savings need to set out with the best possible strategies; and that they need to wait to see results. 

IT Cost Optimization: Creating Inherent Value

IT costs can be challenging to monitor. They can easily get out of control: and that’s why it’s so important to use optimization strategies to eliminate redundancy, excess expenses, and needless features. 

It’s natural to think about reducing the cost of IT resources as efficiency. However, another way to think of the difference between cost cutting and cost optimization is through the overall value that IT resources off to a business’ services. 

Cost optimization techniques lead to the creation of more value for a company’s overall operations. After all, the IT services the business provides can be improved. And with those improvements, the cost of doing business can be far cheaper. 

The end product or service can be sold at a higher margin. As such, efficiency is only the short-term goal of cost optimization. Creating value for the company is the more important goal. 

IT Cost Optimization Principles

Some basic underlying principles support cost optimization. In particular, three areas should be a priority for the optimization process: transparency, the human side of the process, and finding ways to continually monitor the systems. 

Financial Transparency

First, IT cost optimization and financial transparency goes hand-in-hand. 

IT managers should not be defensive when IT services are threatened with budget constraints. Instead, they can use great optimization strategies to illustrate and explain their needs. 

Creating complete transparency is enough to prove the business value of the money spent everywhere. If C-suite staff understand the importance that’s coming out of their IT vendor investments, the chances of maintaining a reasonable budget improve. 

People and Processes 

When businesses decide to go through a digital transformation of their processes, innovative technology is only part of the solution. It takes the right people to operate and connect with new technologies. In other words, IT processes don’t make sense without the staff implementing and using them. 

So, people should be an essential focus of the process, too. Reducing staff numbers is an incredibly worrying decision. Implementing software that streamlines accounts, finance, or dispatch is great. But those units will struggle to adapt without well-trained staff who understand their area exceptionally well. 

Good recruitment, training, and deployment practices will ensure that the new technologies in a business have the experts to go with them. IT cost optimization is a long-term strategy, not a one-off event. Like any long-term strategy, it’s essential that staff can change with the new demands of the company.

Business Process Management (BPM) Tools

Business process management (BPM) tools are another important part of IT cost optimization, as these can help businesses automate their processes and improve efficiency. Furthermore, IT cost optimization is often a strategic decision that requires buy-in from all levels of an organization, so it’s essential to involve everyone in the planning process.

BPM is a software solution that automates tasks, manages processes, and handles process logic. It is geared towards large businesses but can also be used by smaller ones. BPM systems optimize and accelerate processes, increasing efficiency. Business process automation keeps work organized and streamlined so your team can focus on more important tasks, resulting in a higher value of work.

BPM tools are being utilized more and more in today’s digital workplaces. They can help businesses streamline their processes and increase efficiency, which is a key part of IT cost optimization. Additionally, IT cost optimization often involves strategic decision-making that requires input from all levels of an organization. Therefore, it’s important to involve employees and managers throughout the planning process to ensure everyone is aligned and on board with the changes.

Optimize costs with Continuous Monitoring 

Monitoring is at the heart of any ongoing cost optimization project. 

In some respects, cost monitoring is highly technical. It will take a specialist to understand what parts of the system need monitoring and the overall price of services. Fortunately, extensive cloud services now provide cost dashboards to monitor and control spending. 

But even with the most efficient structures in place, monitoring is a matter of people management. Monitoring requires that people use packages effectively – for example, using the appropriate tags in Azure. 

Continuous monitoring has a prominent link to the principle of financial transparency. When every user knows the cost of the services they are using, they will be better placed to consider the best way to achieve a good ROI. 

12 IT Cost Optimization Techniques

Once a company understands the basic cost efficiency principles, it can apply specific cost optimization strategies. The following twelve ideas will help with any cost optimization initiative.  

1. Rationalize Enterprise Technology Portfolio

A good initiative can start with a transparent audit of all the technology that the company currently uses. It can be as simple as a spreadsheet listing all the applications used within the organization, detailing the features, costs, and intended users.
An essential application for one business unit may be completely unheard of elsewhere. As such, keeping a clear eye on all the subscription-based applications within an origination can be difficult. Rationalization means that you know what’s going on and where. 

2. Leverage Shared IT Services

Once an organization knows its IT resources, it can decide how to share its subscriptions more effectively.
When services are used across different business units, a business can make sure that they are pursuing a shared procurement and subscription package. This can lead to surprising cost savings through more competitive pricing models. 

3. Opt For Cloud Services

Cloud resources are now one of the dominant ways of bringing technology into a company. It would be challenging for some applications to mobilize a genuine site-based option.
Cloud-based software is itself a great cost optimization technology.

Cloud-based software can often be more flexible than existing systems, making it easier to adapt the service over time. With that functionality, cloud transformation can more rapidly lead to business innovation. 

4. Integrate and Modernize Data Centers

A data center is one of the most vital parts of IT infrastructure, even though many users will never think about it. A report from McKinsey suggests that better data management can reduce costs without negatively impacting business processes: “for example, by offloading historical data to lower-cost storage, increasing server utilization, or halting renewals of server contracts.”

As data needs grow with a company, so will its storage needs. Bringing every storage provision into one data center will inevitably reduce costs and maintain the simplicity of operations. 

5. Re-evaluate IT Asset Management and Operating Costs

IT asset management monitors all aspects of IT infrastructure. It provides a detailed understanding of the specific items held by a company. That will include detailed information on servers, printers, and computers; the software running on particular machines; and networked devices.

On a day-to-day basis, good asset management helps to support customers. For cost-saving purposes, it can help set a budget for future years. If the organization’s hardware is entirely up-to-date, they know they can avoid upgrade costs in the next few years.
But if some terminals require an upgrade, asset management software can quickly identify the scale of investment costs. 

6. Improve IT Budget Transparency [JH adapted] 

Managers can achieve cost savings simply by understanding full information about their current spending on IT. A full overview of the company’s IT spending means that excess spending can be easily identified and quickly cut back. 

7. Increase IT Demand-side Spending

Businesses may lead some IT resources with supply-side spending. In other words, if a particular package is offered to staff, they can use it.
However, demand-side spending can lead to far more efficient deployments of technology. More demand-side spending means new apps and functions are offered when required. 

8. Exploit Robotic Process Automation and Artificial Intelligence

There’s now a wide choice of software available to help automate simple tasks in an organization. Those include the routine aspects of accounting, payroll, and workload management and even extend to parts of training and e-commerce. Automated processes are efficient and reliable, often offering an excellent ROI and overall cost savings. 

9. Evaluate Digital Business Transformation Ideas

Companies that want to go further with process automation and AI can start to consider a full-scale digital implementation strategy.

A large-scale digital adoption policy can lead to major savings in how a company works.  Digital transformation is a business-wide transformation project that uses digitalization to achieve business growth.

Applying digital solutions to business processes can lead to highly effective savings in the long term. 

10. Optimize Workforce Management (WFM) 

WFM covers many areas of business operations, including forecasting, scheduling, timesheets, payroll, compliance, and more. While it is not only about IT, WFM is almost totally automated now. A well-running set of WFM software will lead to savings in all other parts of the business. 

11. Improve Data Transparency

Shared knowledge of data holdings can improve many organizational working practices. When staff can identify information about data, they will find it easier to build collaborations between business units instead of re-collecting data in any form. 

12. Organizational Discipline and Digital Adoption Training

Finally, it’s worth remembering that staff are at the heart of good IT cost optimization work. Cost savings should not make their job more complex or confusing. Excellent training ensures that the company’s application portfolio is used effectively by staff. Good digital adoption ensures that companies optimize existing assets’ value using new methods.

How To Build A Fool-Proof IT Cost Optimization Strategy

On top of the strategies described above, three major areas can help to make cost optimization effective. 

Outsource Specialist Staff

Getting the most out of internal IT resources may involve long-term employees. However, for more specialist work, outsourcing can be highly cost-effective. Outsourcing helps bring specialist knowledge into a company, even without a permanent workload.

Hybrid Cloud and Multi-Cloud Adoption

With this strategy, a company’s IT infrastructure comprises private and public cloud services alongside on-site storage. Cloud solutions make it far easier for a company to pay for the IT resources they need without a bloated application portfolio that doesn’t fit their needs. A hybrid system enables a company to use the best cloud systems for whatever applications are required. 

Virtualization

A wide-scale virtualization program is a convenient way of rationalizing platforms used by a company. When every application needs a dedicated physical server, each server will likely be significantly underused. With virtualization, one centralized set of computing resources is used to create virtual servers and operations that can be rolled out as appropriate. 

Virtual servers are far easier to create than physical servers and help reduce downtime risks. 

The Complete IT Optimization Framework: Obtaining Great Business Value 

As previously mentioned, it’s too easy to mistake optimization and cost-cutting. Short-term thinking can lead to long-term problems that hinder a company’s growth. In terms of missing out on digital investment opportunities, reducing overall organizational efficiency, and stifling innovation. 

Given the managerial difficulties of the process, a company may use its staff to seek continuous improvement in its IT efficiency. However, many businesses benefit from using outsourced cost optimization services, either as a one-off consultancy or on an ongoing basis. 

A cost optimization framework should be practical across the company’s operating expenditure. But the scale of IT services means they have a vital role in cost savings. 

The post 12 Proven IT Cost Optimization Methods For Public and Private Sector Enterprises appeared first on Digital Adoption.

Digital transformation is crucial for the ongoing effectiveness of vendor management because the world is becoming increasingly digital. Businesses need to stay competitive by leveraging technology and IT services, which can be difficult without the right expertise in place.

With the pressure to succeed in today’s business world, many enterprises are outsourcing a wide range of IT services. This allows them to focus on their company’s essential functions. You can take a more comprehensive approach to vendor management when you bolster your IT ecosystem with tools such as digital procurement and sourcing contracts.

Reliable relationships with B2B vendors are crucial for the smooth running of any organization. Furthermore, it’s now common for companies to work with multiple vendors, each of which has its strengths, weaknesses, and needs.

 So, building an effective process for procuring and managing vendors is essential. Vendor management software can often solve inefficient business processes and help businesses achieve total digital adoption. 

Yet the implementation of vendor management systems is not always a priority. A recent Statista report noted that only 12% of global companies actively planned to revitalize their vendor management systems.

This article will explain why vendor management is worth investing time and money in. It will also define vendor management, how it can help save a company money, and how to implement a strategic process to ensure a great relationship with each vendor. Whether not a company goes through a digital transformation to deal with these issues, an efficient vendor management process is fundamental to sustained growth.

What Is IT Vendor Management?

The term “vendor management” refers to how companies procure, monitor, and evaluate vendors to help achieve their business objectives. In large companies, a separate team will deal with procurement, as it is one of the most important steps in the life cycle of a relationship with a vendor,

In practical terms, vendor management occurs with every interaction between a company and its vendors. That might include update meetings, informal conversations, and shared reports. However, good vendor management relies on acquiring robust vendor data. A vendor management system (or VMS) ensures businesses are making excellent decisions around vendors.

IT vendor management is a specialist area of vendor management. The vendor procurement and management process for digital services can be slightly different from general vendor management. Software and hardware capabilities are constantly changing, requiring specialist knowledge from vendor management staff. Furthermore, data around IT processes can be far more vulnerable than others.

As such, a global increase in IT outsourcing has led to more demands on IT vendor management. So although IT vendor management now has its own specialists, in many cases, the best practices within vendor management, in general, do apply to IT.

Benefits of an Agile IT Vendor Management Process

Businesses will implement a formal vendor management process to achieve one or more of the following aims:

• Improved vendor selection
• Cost savings
• Efficient vendor onboarding
• Reliable risk assessment systems
• Predict supply chain problems
• Improved ability to negotiate
• Better vendor relationships

Even with poor records of vendor information, a small business with superficial vendor relationships may be able to handle these areas. But as a company grows in scale and vendor contracts become more complex, it’s important to keep track of progress and create a vendor offboarding checklist. 

The agile approach to project management can bring many benefits to a company. It’s well known that Agile management begins with a simple set of priorities, including:

• Regular face-to-face interactions between individuals
• Producing workable solutions on short timescales
• Collaborating closely with customers and other stakeholders
• Responding positively to change at any stage of a project

Agile working is more popular now than it has ever been. And in a world beset by radical changes, this makes sense: Agile makes organizations highly resilient and capable of swift changes.

Managing vendors with Agile will not always be simple, even in the best circumstances. The client and vendor must have closely aligned principles. Both sides must be ready for daily communication, regular negotiation, and iterative deliverables. Buy-in and commitment will be essential. If a vendor’s business model is not agile, then the partnership would need to take a different direction.

Vendor management software can be beneficial for Agile working environments. It will automatically keep tabs on key performance indicators and all vendor-related information.

The Challenges of IT Vendor Management System

One of the central aims of proper vendor management is reducing vendor-related risks. However, good VMS systems can have challenges and problems that need to be addressed from the outset. 

Here are some examples of issues that may arise from vendor management systems:

• Staffing and personnel. Does the business have well-trained staff responsible for maintaining the vendor relationship? Without a solid vendor management team, you may run into problems.
• Executive investment. As with any digital system, a VMS for IT suppliers will struggle without management consistently supporting the package.
• Multiple vendors operate in different ways. Over time, good vendor management software will naturally help to standardize and streamline processes across the dozens of vendors in a business. But initially, how different vendors handle contracts, invoices, and compliance, can be a real mess.
• Balancing risks from multiple vendors. Even with a great vendor management process, risks will not go away. A VMS can help mitigate risks, but it will not make them disappear.
• Cost management. The price of running an effective VMS should help to ensure that your relationships work effectively. However, the prices of the right staff and software can be high. A complete evaluation before implementation can identify problems.
• Data security. Vendor management software is handy for consolidating and standardizing data. However, it’s important to remember that these systems make data vulnerable to attack. A survey by Statista showed that 50% of companies had seen increases in cyberattacks in 2021. As such, businesses that are serious about their vendor management system also need to be serious about protecting their data.

By keeping these areas in mind, the vendor management team will help to mitigate risks while continuing to meet company objectives.

It’s also worth remembering that the exact implementation of a vendor management system can be challenging. After all, a VMS will aim to solve problems that may have been embedded in a business for a long time.

Before the roll-out of a VMS, a business may have poor control over vendor data, no consistent understanding of vendor risks, and erratic relationship management with suppliers. A vendor management team must carefully plan its digital adoption strategy for companies like this.

The Six-Stage Vendor Management Process

An effective vendor management process ensures that every stage of the vendor relationship is handled carefully. Although a poor management process can cost a company money, there are opportunities for efficiencies and savings at every step of the journey. From initial procurement to offboarding, an active approach with the right vendors can help directly to fulfill business objectives.

1. Establish Business Goals

The first step of vendor management is understanding the current needs and aims of the business. This step underpins every other step in the process. Vendor management is far easier for companies with an apparent core mission.

In this step, the team will eventually decide what solution they are looking for. That might be a new cloud ERP, an outsourced helpdesk, or a new supplier of hand soap for the bathrooms.

But this step is also a time to remember the business’s core purpose. Is it to deliver excellent value retail products, best-in-field digital solutions, or to ensure a harmonious workplace? If a company knows what goals they are addressing in a particular project, all the specifics will be easier to decide.

2. Locating and Selecting The Right Vendor

Some niche services are so specialized that there will be very few vendors to choose between.

However, a business will have many suitable vendors in most areas.

A project with clear business goals will find it easy to determine vendor selection criteria. From there, the project team can undertake market research, make a shortlist of vendors who meet their needs and request proposals from those that seem most appropriate.

For large projects or searches for the most critical vendors, it may not be easy to see which is the most appropriate candidate. Evaluating proposals on a points system can often bring clarity to the process.

This step will function best when the business goals are clear.

3. Initial Risk Assessment 

Having made a choice, it’s time to subject the selected vendors to a full risk assessment.

Some aspects of the assessment will be outside the selected vendor’s control. Problems like price instability, supply chain disruption, and inaccurate market forecasts may have a similar impact on all players in a particular field. A vendor can still explain what they are doing to control any problems in their sphere of work.

Other parts of the assessment will address the project and the vendor. Have they performed adequately in the past? Is their sourcing of labor and materials ethical? Could there be problems with overspending?

In this complex area, it’s possible to work with a risk mitigation consultant to understand how to minimize these problems. This step may be costly, but it increases the chance of a positive working relationship between a vendor and a customer.

4. Contract Negotiation

Although contract negotiation will have a noticeable impact on the project’s costs, this step may still change the nature of the service provided by the vendor. Negotiation is all about giving and taking. Customers who already understand their business goals will be able to adapt to the needs of the vendor.

Negotiation is a specialist skill. It doesn’t come naturally, although it can be learned. For negotiators, skills in empathy, clear communication, and rapport-building are more important than sticking to a hard line.

Both sides have already invested a lot of resources in the process. So it’s in everyone’s interests to work things out for the benefit of both parties.

5. Supplier Onboarding

Onboarding for vendors is an essential administrative procedure. During onboarding, the client company will receive full information about the supplier. Depending on the industry, this may include insurance certificates, bank account details, compliance information, and clear contacts. 

It’s common to leave this information out of the tender process. However, if a supplier can’t provide complete documentation at this stage, they may lose the contract. 

Businesses should expect the supplier to be helpful and considerate. However, just because they are struggling to get their data all lined up doesn’t mean that they are necessarily awful to deal with

An online vendor portal can be a valuable way of collecting this data. It is automated, cost-effective, and more reliable than sending information by mail, email, or fax. 

6. Risk Mitigation and Management

Once the vendor is on board, the risk assessment will operate more continually. As the relationship develops, the risks associated with the vendor will change. A continual understanding of potential problems needs to be sustained.

How can agile working change this process? 

An Agile mentality won’t work with every vendor procurement moment. If a business is working together for specific outcomes, on a strict timetable, or under the watchful eyes of industry regulation, the adaptability of agile thinking could cause problems.

But some vendor relationships will be improved through Agile practices.

An Agile procurement process allows business objectives to change, even while a vendor search is underway. And once the right vendor has been chosen, an agile approach would place less emphasis on a comprehensive contract at the outset of your relationship. Both sides must understand that needs will change and that the vendor and customer will find ways to communicate those needs.

Agile can be a way to secure positive long-term vendor relationships – but it is not the only way. 

The Vendor Life Cycle 

For large companies, vendor relationships can often go on for an extended period. Once a crucial vendor is embedded in a business, no one wants to change without good reason. But the ongoing importance of the relationship means more to come. 

The procurement team evaluates vendor performance and ensures their contractual obligations are met. A business’s vendor management framework is equally important at the end as it is at the beginning. 

IT Vendor Management vs. IT Vendor Procurement

Vendor management and vendor procurement seem similar. They share the goal of controlling costs to fulfill business objectives. However, they are involved with different aspects of the life cycle of a vendor relationship.

A procurement team focuses on all the tasks around vendor selection and onboarding. Procurement takes the time to review all the potential vendors that may do business with the company, seek out the best possible price, and ensure that contracts are favorable to the business in the long term.

A vendor management team will take a much broader view. They are not only interested in securing the cheapest possible price. They are much more interested in managing all the risks involved through ongoing risk reporting. 

The Importance of IT Vendor Relationship Management

Vendor relationship management puts control in the hands of the purchasing company. The process assumes that vendors are keen to offer their services and will work effectively to ensure productive outcomes. 

The client’s control over the relationship is especially important for IT vendor management. The client may need a series of complex integrations that could involve major risks around supply chain disruption, user experience, and data security. Bringing all of that information into one place is vital. 

10 Steps To Building A Strategic IT Vendor Management Process

Improving a company’s overall vendor management takes serious time and effort. It will work much better if the process is strategic – underpinned by long-term goals. 

Gartner has enhanced evaluation criteria for IT vendor selection. Achieving high marks in the evaluation criteria will improve a company’s chances of winning a deal.

IT vendor selection is important for any company looking to stay competitive in the fast-evolving tech landscape. In recent years, Gartner has significantly enhanced the criteria used to evaluate vendors and assign them ranking scores in its Magic  Quadrant report.

This enhanced evaluation process is designed to help companies make more informed decisions when choosing a vendor for their IT needs. It considers factors like the vendor’s market share, competitive positioning, and product quality.

To achieve high ranks in Gartner’s evaluation criteria, vendors must demonstrate a robust product roadmap and commitment to innovation. They must also provide reliable customer support and maintain a solid reputation in the industry.

1. Build A Vendor Management Strategy 

Strategic vendor management takes active control of the full process. With a good strategy, a vendor manager can look at a vendor’s overall contribution to the company.

Whereas procurement teams mainly exist to control costs, a practice of strategic vendor management will comprehensively assess quality and reliability. A good vendor management strategy will consider a potential vendor’s full-service package.

Some organizations invest in a Vendor Management Office (a VMO) to ensure that their strategy is effective. VMOs are especially useful for managing complex IT relationships. 

2. Determine Criteria For Selecting The Right Vendor

The criteria for assessing a vendor will vary, but a formalized approach will ensure that vendor selection can occur quickly.

One simple (but effective) model for vendor evaluation is the ’10 Cs’ model produced by Roy Carter. The 10 Cs remind companies to consider financial information alongside the more comprehensive value a vendor may bring.

3. Source Your Vendors

For niche IT services, even shortlisting appropriate vendors can be difficult. A company that does not understand the market well may employ an IT consultant to ensure they have the most up-to-date market knowledge.

4. Prioritize and Compartmentalize Your Vendors

Vendor segmentation helps to assess vendor performance against the most relevant criteria. Some critical vendors will be a vital part of a company’s growth, making them strategic partners.

Other suppliers will be less crucial but difficult to change. And another group of vendors will be transactional, providing necessary goods and services that would nonetheless be replaceable.

The expectations and risks around each of these groups should be different. Strategic vendors are essential for their overall contribution to the business (not just price). However, this may be the main criteria that would apply to transactional vendors.

5. Assess Contractual Obligations

Vendor contract management will change according to the culture of the company. An Agile organization may focus more on short-term goals and outcomes. While more traditional methods will consider the needs for years to come. Either way, having a standardized contract for suppliers can make onboarding significantly easier.

6. Prepare For Vendor Onboarding

As mentioned earlier in this article, a solid vendor portal is an excellent step toward effective onboarding, monitoring, and reporting on progress and development. Problems can still arise at this stage, so it is essential to sort them out as soon as possible. 

7. Nurture Vendor Relationships

There are plenty of ways a business can enhance its relationship with vendors. Even though the vendor management process often deals with large companies and impersonal transactions, taking a “personal touch” can go a long way.
This may involve check-in phone calls, thoughtful meetings, and corporate gifting. Vendor relationship management is an integral part of the overall strategy.

8. Assess Vendor Performance Routinely

A positive relationship benefits both vendor and client.

However, it’s still necessary to keep a close eye on the performance of each vendor. To do so, effective and reliable data tracking is a crucial tool. With real-time data monitoring, it’s then possible to track vendor performance over time: both here and now, at quarterly intervals, and annually.

If a vendor falls short on its key performance indicators, it’s essential to take action as soon as possible.

9. Undertake Vendor Risk Assessments

With a vendor comfortably on board, it may be easy to forget the risks that may still emerge from the relationship. However, the risk management process must constantly assess the success and dangers of an IT vendor’s contribution to the business.

A 2022 Gartner report suggested that perceived and actual risks differed. While 22% of companies experienced problems with compliance (the most common risk), only 10% believed it to be the most significant anticipated risk. Vendor management professionals know the real dangers and learn how to tackle them. 

10. Learn From Previous Experience

Even the best vendor management processes will never be perfect. With all the expertise and experience, the world is constantly creating new problems for a stable supply chain. 

Best Practices For Effective Vendor Management

A new vendor management strategy can accelerate innovation, enhance organizational resilience, cut costs, reduce managers’ workloads, and more. The three-step process to digital transformation in vendor management is crucial for a working, cross-functional vendor management approach. The benefits of good vendor management will be measured over years of success. 

Using a software solution is one of the simplest ways to ensure vendor management best practices across an organization. With well-trained staff and management buy-in, vendor management can be an excellent opportunity to showcase the power of digital transformation to a company. 

A central reference point for all information makes it far easier to manage risks and secure data. 

Vendor Management Helps to Achieve Business Goals

Vendor Management is a niche area of business expertise. Most of the complex labor goes on behind the scenes, away from end-users eyes. 

But the goals of vendor management are fundamentally simple: making the most informed business decisions to help produce high levels of customer satisfaction. The best practices in the field may be challenging to come by. Once they are embedded, they can make business much easier to do. 

The post How To Build An Effective Procurement and Vendor Management Process appeared first on Digital Adoption.

But what is business process management? What are BPM tools, and why is automation a large part of the way companies use these tools? And how can you choose the best BPM tools for your company’s business processes? We will explore all of these questions, beginning with the definition of BPM.

What Is Business Processes Management?

Business process management is the skill of finding, designing, measuring, improving, and optimizing business processes. 

BPM uses these processes to ensure that companies coordinate every employee in the organization, systems, information, and technology to ensure the organization performs at the highest level to produce the best business outcomes. BPM is crucial to the alignment of OT and IT strategic business investments.

What Are Business Process Management Tools?

Companies use business process management (BPM) tools to find, design, measure, and optimize business processes and Statista predicted that BPM tools will be worth 14.4. billion U.S. dollars by 2025. 

The business processes involved in BPM drive the behaviors of employees, business systems, data, and equipment to create strategic business outcomes and improve business processes. Business processes are often repeatable or structured but can also be variable and unstructured. But what are the three types of BPM tools?

The Three Types Of Business Process Management Tools

BPM tools fall into three categories:

• Integration-centric: Business process management embeds BPM software tools throughout the company’s business processes.
• Human-centric: These processes relate to employee-driven workflows.
• Document-centric: This category is concerned with organizing all digital and physical assets.

IT teams commonly use integration-centric tools as they are responsible for software solutions and integration. IT teams often integrate large enterprise-level systems such as CRMs and ERPs to boost cross-functional team productivity using complex coding or APIs.

On the other hand, document-centric tools involve creating a document after several different staff members have contributed and approved it. Contracts and legal documents are examples of the output of this process which occurs in contract management, law, and procurement departments.

Human-centric tools require human input rather than wholly automated processes, balancing aspects of automation with human intervention. Workflow management software solutions are human-centric BPM tools and usually have a visual user interface to help employees understand, interact with and act on business processes.

Staff uses human-centric BPM tools to plan daily meetings and online chats. This category is the most important for managers as it allows analysis and improvement of how the staff interacts. It is complex and has the most significant impact on business outcomes, as people are the core of any organization.

What Are The Benefits Of Using BPM Tools?

There are many benefits to using BPM tools to optimize processes, starting with improving output consistency and quality.

Improve output consistency and quality

BPM tools allow companies to improve their consistency of output and the quality of products and services, especially when utilizing process automation.

Lower rate of failure

Another advantage of automated process management bpm tools is a reduction in the failure rate, increasing the bottom line.

Reduce your costs

Completing tasks more efficiently reduces costs as the team gains time to focus on more complex tasks, improving service quality using the same resources to boost revenue.

Optimize time usage

Every dedicated staff member feels like they’re working against the clock to complete projects. But BMP tools can automate many processes to unlock resources to be spent on more demanding tasks.

The Six Lifecycle Stages Of Business Process Management Tools

The BPM tools lifecycle is in six stages, and managers use it to ensure that their company is investing in the right tool for the purpose. The first stage in the lifecycle is the design stage.

1. Design

Define the business processes the organization needs to improve.

2. Model

Consider the best approach to improving processes.

3. Execute

Carry out the new business processes within a small group to test their effectiveness.

4. Monitor

Develop KPIs to measure the success of each business process improvement.

5. Optimize

Continuously monitor the improved business processes.

6. Review

Review the business processes at six to twelve months intervals and adjust your digital toolset as necessary.

Frameworks For Improving Business Process Management

Companies use frameworks within BPM to guide performance and process optimization. Lean, Six Sigma, and TQM are some frameworks organizations utilize as part of BPM.

Six Sigma

Motorola created Six Sigma to improve its services and products and has evolved to include Lean principles, and many large organizations now utilize it. Six Sigma is a rigorous and systematic routine that has provided many companies with a BPM framework to improve products and services, increasing customer satisfaction and revenue.

Six Sigma involves data collection, analysis, and analytics, providing solutions to business process issues. The Six Sigma framework contains four elements: Philosophy, the toolset, methodology, and metrics.

• Philosophy: Six Sigma states that all work processes can be defined using DMAIC: Define goals and boundaries, Measure the current situation, Analyze the cause of obstacles, Improve the situation with solutions, and Control by reviewing and adjusting based on analysis. When a company controls inputs, they control outputs.
• Methodology: Six Sigma’s methodology is the DMAIC approach explained above.
• Toolset: Six Sigma includes qualitative (experience-based) and quantitative (number data) to optimize the improvement of processes. Process mapping and effects analysis (FMEA) are examples of this.
• Metrics: The metrics aspect of Six Sigma involves math to explain the chance of success and includes the reason the framework is called Six Sigma. Six Sigma quality performance equals 3.4 defects for every million opportunities, which signifies a 1.5-sigma shift within the mean.

Six Sigma is often used with the Lean framework to get the best results.

Lean Six Sigma

Lean Six Sigma incorporates the Lean framework and is similar to Six Sigma, using similar means to achieve its aims. However, Lean Six Sigma emphasizes defect prevention through reducing waste, which is the emphasis of Lean, meaning thin and efficient, rather than Six Sigma alone, which focuses on defect detection.

TQM

Total Quality Management (TQM) is a framework that encourages the belief that all employees at every level can drive performance improvement to benefit their organization.

The principles of TQM are called the PDCA (Plan, Do, Check, Act) or the Deming Cycle, named after the man who developed TQM in the 1920s. 

These principles include strong leadership, driving out fear of failure, on-the-job training, focusing on non-numerical goals, and implementing a program of self-improvement, which could be attributed to the CPD framework today.

TQM differs from Six Sigma as it emphasizes organizational responsibility for improving processes. And although TQM focuses on operations, like Six Sigma, it represents a move away from over-reliance on statistical data and a more cohesive approach to continuous improvement of processes. In contrast, Six Sigma lends itself to an intensively short period of activity. So what examples of BPM tools can we see in use today?

Five Examples Of BPM Tools

BPM tools are essential for any business today, tracking processes and streamlining workflows. Looking at five BPM tools and platform examples will help you decide the best one for your business.

1. Adonis

Adonis is a business process management platform designed for all BPM process management. It contains a process modeling assistant which gives business users the right tools to develop processes quickly and easily. It also features an analytic BPM tool that simplifies the execution and monitoring phases.

2. Asana

Asana is a human-centric BPM tool familiar to most office employees for its enhanced collaboration capabilities. This BPM tool aims to streamline task management as all team members receive a unified flow of information without being informed individually. Asana contains customizable lists so teams can be aware of all meetings in real time.

3. BIC Process Design

BIC Process Design specializes in one of the most popular processes management bpm tools, giving a complete overview of operations and flagging which need attention or improvement. BIC Process Design also contains workflow and analytical features to make it a useful general BPM software.

4. Bpanda

The Bpanda BPM platform specializes in planning and visualizing BPM process management using a UI designed for less experienced business users. Bpanda helps create workflows to communicate BPM visions to teams and motivate them to begin a project.

5. FlowRight

FlowRight is a BPM platform that focuses on improvement by business process automation. (BPA) FlowRight uses graphical workflow automation visualizations and business intelligence metrics to drive process improvement. FlowRight is flexible and customizable, capable of being used as a cloud-based solution, .Net hosted environment, or on-premise.

When choosing a BPM tool, it is also worth considering a business process management platform with a drag-and-drop interface for easy navigation.

Why Do Companies Need To Automate Business Processes?

Automated workflows allow technology to carry out repetitive tasks to free up time so that staff can spend on more complex business processes that robotic process automation cannot achieve, increasing efficiency and reducing errors. 

Automation also improves the employee experience, as it removes the need for staff to complete the repetitive tasks that lower wellbeing. Examples of processes that companies should automate are data entry and simple help-desk queries.

When a company automates business processes, it creates time to review existing processes via process mapping. This action ensures that process management becomes part of the daily philosophy involving constant improvement in every task. So automation is a large part of BPM improvement, but what other features help companies get the best out of BPM?

Which Additional Features Do You Need Within Your Business Process Management Software?

Several features are essential to companies looking to improve their process management via BPM tools.

Cloud-based deployment

Cloud-based deployment is ideal for BPM software solutions as it is scaleable and adaptable, and suppliers can alter the price easily per changing company needs.

Visual process modeling and diagramming tool

There are four process flow diagram categories, and choosing the right one for your business needs is essential. The No-Modeling Tool utilizes coding to implement the process. The Data Collected Through UI Forms provides data about the business process by capturing it through forms. The Visual Interface Based On Activity option maps out the BPM process, including dealing with defect exceptions and rejections at each level. 

The final option is the Visual Interface Based On Business Steps, which is similar to the third option but doesn’t alert the users to the corner case representations. It instead allows users to focus on the main path of a specific business process and automates exception paths.

McKinsey reports that batch production industries such as pharmaceutical companies often use process modeling. The reason is that the operational processes conducted by the equipment which produces products in large quantities can be adjusted to raise revenue or increase product and service quality.

Low-code/no-code tools with an intuitive drag-and-drop interface

A low code platform is a simple BPM feature that uses a drag-and-drop interface to condense and speed up the process, allowing staff to capture and edit data. Companies can customize a low-code platform for power users to enable more advanced features.

Collaboration tools

Collaboration is the core of BPM, so investing in the most appropriate collaboration tools for your business is essential. Asana and Slack are collaboration tools that require a fee, and Microsoft Teams is a free option.

Process analytics data and process performance

BPM systems need excellent reporting features above simple workflow management software. Analytics processing for data and process performance should allow users to:

1. Calculate the average time to complete specific ‘step’ and ‘complete’ items
2. A snapshot containing all open items
3. Information on how frequently an item is rerouted or rejected.

Although it is often not the case for BPM tools, reports and analytics features should be highly customizable and have the option not just to export as CSV files. The best BPM software solution will allow users to create custom graphs and charts.

API connector and integrations with third-party applications

BPM tools coordinate all organizational processes, so if a BPM software solution does not fit with all the tools used for collaboration and analysis within your existing business processes, it will not offer the best investment.

BPM tools must integrate with other popular applications for companies to feel the most significant benefit. Comprehensive API support is essential to integration, webhooks, and REST APIs.

Role-based user access control

Often it is essential to safeguard the most sensitive information. A role-based user access control feature informs which users can access certain information based on their role. Sections of information can be hidden from certain users using field categories or groups.

Data and document management functionality

Document-centric BPM tools and features are essential for communicating ideas for how to improve processes. Documents can go back and forth between staff several times, so functionality must ensure edits are easy to make and the software saves them properly before the document goes to the next staff member.

Project management integration

Teams are essential in mixing perspectives to get the most out of performance management projects. BPM projects can take long periods and are an ongoing process, so project management integration is an essential feature of any BPM platform.

Workflow automation

All BPM tools must contain features to automate business processes efficiently. Automation increases employee productivity and efficiency, reducing human error in data entry.

Now that you have established the important features of your next BPM tool let’s look at the best way to choose the most appropriate tool for your business needs.

Considerations: Choosing A Business Process Management Tool

BPMs represent a significant investment, so it makes sense to take the time to choose the best one for your needs. The best place to begin research is customer testimonials.

Customer testimonials

It’s always best to start by reading other users’ experiences with a BPM tool to ensure you get the best investment. Check websites that feature customer experiences to ensure that a BPM tool’s claims are justified.

Features

Thoroughly research the features of BPM software suites to understand what you are getting and whether it fits your business needs. Splitting up the BPM tools into the three categories of integration-centric, human-centric and document-centric will help you to decide which features you require so you can tick these off as you select a BPM tool.

Technical and user support

Support is essential to staff getting the most out of BPM platforms and tools. Ensure that the type of support is needed, as 24/7 support may be worth the investment for an SME with no IT department but may be unnecessary for large enterprises. Check that a BPM platform comes with user support and if an extra fee is involved.

Check the quality and appropriateness of BPM tools before investing to ensure that the digital tool meets your needs.

Which 4 BPM tools are best suited for small and medium-sized enterprises (SMEs)?

Many low-cost and freeware BPM options are available to meet the needs of SMEs looking to improve process management. The first of these is a freeware BPM tool named Bizagi.

1. Bizagi

Bizagi Modeler is a free BPM workflow management software solution that supports users in creating, optimizing, and publishing workflow diagrams to boost efficiency and maintain governance. The collaborative software allows users to produce and record business processes on a central cloud repository to optimize organizational productivity. Bizagi offers scalability as SMEs can upgrade to the paid version when they scale up.

2. Camunda

Camunda is open source, meaning programmers can legally alter it to custom specifications. Camunda offers workflow and decision automation tools that improve scalability, business resilience, and visibility.

3. Wrike

Wrike systematically maps and automates internal processes. This BPM tool helps companies set up the best workspaces and boost optimization speed using pre-packaged templates for all process modeling needs. Wrike allows collaboration by eliminating workflow bottlenecks and silos, making processes transparent and accessible for all users of different roles.

4. Zoho One

Zoho One offers over fifty business applications in one software solution to cover every stage of the BPM process. ZohoOne offers business process management tools for process modeling, analytics engines, and an intuitive interface to collaborate with colleagues on project work.

Many paid and free options exist for SME companies, but ensure that you are aware of the lack of user support and potential lower level of security that may come with open source freeware.

The Future of BPM Tools

BPM is already used a lot in business, so what form will it take in the future? The automation component of BPM tools will likely become more prevalent, complex, and powerful and be combined with AI to allow BPM tools to carry out more sophisticated tasks and adaptive automation.

Future BPM tools will build on the existing capabilities to provide staff with collaborative, social tools and performance optimizing features to create constantly reviewed and improved processes to widen success opportunities for growth and expansion.

Get The Best Out Of Your BPM Tool

BPM tools allow managers to track tasks, analyze processes and optimize workflows faster than ever. Efficiency is a high priority for companies of any size today. BPMs using automation are at the core of ever-changing methods for creating efficiency to reduce errors and optimize staff processes.

Many BPM tools are available, and researching your needs and the features required will allow the best investment. When you have purchased your new BPM, you will equip yourself to optimize processes, making your business resilient, sustainable, and agile, increasing revenue and securing success.

The post A Complete Definition of Business Process Management Tools (BPM) appeared first on Digital Adoption.

But how can you build the most robust CFO-CIO partnership? What should this relationship prioritize? And what digital initiatives and outcomes should result from this relationship? These questions will be explored, starting with enterprise-wide digital investments as the basis for the CEO-CIO relationship.

How To Maximize Enterprise-Wide Technology Investments 

Today’s economy fluctuates wildly, and the current age of business involves constant technological disruption, which will increase in the coming years. However, due to many factors, such as the cost of living increases, funding becomes more challenging despite the growing need for technology in business.

The need to make technology investments knowing they are the right decisions at the best time, results in more ROI than ever. Chief Financial Officers are responsible for financial management and organization vision. Chief Information Officers coordinate all data systems across departments to ensure the IT team utilizes data to achieve the organization’s vision. CFOs and CIOs create the best investments during collaboration.

Collaboration between these roles makes sense as the CIO can advise the CFO on the information to make the best investment decisions for technology and other areas. But this is often not the case. For collaboration to occur, the two roles need to speak the same language.

Funding for digital initiatives increases with a CFO-CIO solid relationship in place. But the relationship is absent or weak in many organizations. Gartner research shows that only 30% of CFO-CIO partnerships represent solid digital relationships. Effective communication can be challenging for this relationship due to the difference in priorities between the two roles.

CFO-CIO Priorities

CFO-CIO relationships must prioritize certain areas to ensure the relationship can help achieve a successful digital transformation. The first of these priorities is data analytics.

1. Data Analytics 

CFOs in larger companies can make decisions about digital initiatives to the value of billions of dollars in a single week. Financial analytics can reduce the risks of significant investments by showing that certain tech investments are likely to give ROI quickly or via long-term value creation for shareholders.

CIOs articulate this analytical data to the CFOs to ensure they have all the information needed to make the best decision for the long-term resilience of their organization. CIOs present this data to CFOs using digital capabilities such as visualization tools and reporting. CFOs can keep up to date with market trends and business processes.

CFOs and CIOs tend to see their roles as separate, as Gartner identifies. “80% of CFOs believe they understand how financial management needs to adapt to support enterprise digitalization, but only 55% of CIOs agree”. However, CFO-CIO solid partnerships lead to effective communications about data integrity and processes, producing accurate data and digital investment success.

2. Enhancing Financial Processes 

Often, there is a disconnect between the more traditional cultures of finance teams and IT departments’ innovative, tech-focused aims. However, these differences must be addressed by the two c-suite roles together to achieve the optimal CFO-CIO partnership.

The first step in this process is that the CFO and CIO look at the processes and procedures of the finance department to establish what they are and how they work. The second step is to innovate the tools used by the finance department using technology adoption. 

CIO skills learned in IT, such as utilizing an automation strategy and artificial intelligence, are communicated to the CFO. The CFO then uses their knowledge of finance processes to integrate these new technologies to improve efficiency, measured with operational metrics.

3. Driving Employee Engagement 

The Covid-19 pandemic highlighted the need for staff engagement. There are many benefits to the cohesion afforded to teams when all staff works within one office. Organizations can take this for granted, but the pandemic changed everything as there were periods of nearly all employees working from home. New employee onboarding was taking place over video-conference apps such as Zoom, and new employees did not meet their colleagues in person until the pandemic impact was reduced.

The changing structure of the team made organizations reflect on how individuals form the backbone of an organization. Out of this, companies began to perceive employee experience and engagement differently. From this point forward, senior staff began to pay more attention to ensuring staff felt valued throughout their entire employee lifecycle.

The CFO-CIO partnership can drive a company-wide emphasis on accessible, comprehensive onboarding for new employees, training, and extra rewards for overtime and offboarding. These efforts can use the partnership to promote and maintain a culture of cohesion and inter-departmental collaboration between staff of finance, IT, and other teams in the organization as all staff feel valued.

This partnership can spearhead a digital initiative for employee engagement to drive workflow enablement by building a digital workflow system accessible across the company.

The Key To A Successful CIO-CFO Relationship

The biggest obstacle to a robust CFO-CIO relationship is understanding each other’s priorities. CIOs work primarily with innovative processes, while CFOs use more established techniques. All business markets are in flux, characterized by technological disruption, so innovation and digital transformation are always in demand. This concept is not the approach with which CFOs are familiar.

The key to unlocking the strong CFO-CIO relationship becomes how to convince CFOs that continuous innovation is the only approach to building organizational resilience. So how is this achieved?

A Framework To Strengthen The CFO-CIO Relationship 

Strengthening the CFO-CIO relationship begins with achieving a mutual understanding between both roles that a relationship is needed to enhance the organization’s processes.

1. Achieving A Mutual Understanding 

CFOs and CIOs can collaborate more quickly when they see similarities in the operations of their roles. CFOs can see that they have a similar mandate to CIOs at the micro and structural level, ensuring the efficiency of business processes while building and positively influencing organizational strategic growth plans.

The Four Faces framework is structured to help staff understand their communication styles and behaviors. CFOs can use the framework to identify CIO responsibilities and see the parallels to their own, reducing the gap between roles.

• Catalyst: How is the IT team identifying and investing in future business growth?
• Strategist: What part does technology play in the company’s vision for expansion?
• Operator: Is the IT team producing up-to-date, accurate data designed to support the delivery of easily predicted deliverables and insights about earnings, market share, profits, and costs?
• Steward: What does the IT team do to manage security and safeguard core assets? Is adequate governance in place for investments in technology?

CFOs can use the Four Faces framework to answer these questions, helping them to see that their role is not dissimilar to the role of the CIO. This framework provides a strong foundation for the CFO-CIO partnership to begin.

2. Build Communication Using The Business Chemistry Model

Common issues that arise in the attempts to establish effective communications and relationships between CFOs and CIOs are that there are often personality clashes or a lack of understanding of the languages used in IT and finance.

Identifying their behaviors and communication styles can help CFOs and CIOs agree on specific areas. The Business Chemistry framework facilitates this process using four Working Styles.

Pioneer

• Pioneers are creative, spontaneous, and imaginative. 
• Pioneers are open-minded to new possibilities.
• Pioneers tend not to follow the rule book.
• Pioneers enjoy risks. 

Driver

• Drivers are logical, quantitative thinkers. 
• Drivers enjoy challenges and decision-making.
• Drivers don’t like rules and can appear apathetic.

Guardian

• Guardians like stability and structure.
• Guardians are methodical, meticulous, and practical.
• Guardians are reserved and loyal.
• Guardians are often poor communicators.
• Guardians are usually skilled with data.

Integrator

• Integrators value connections.
• Integrators enjoy team-building and strong relationships.
• Integrators are empathic and meditative.
• Integrators do not like making decisions.

When CFOs and CIOs view these categories, they may fall into more than one type. Whatever type each role associates with can help each other communicate by understanding their communication style.

CIOs are usually Pioneers or Integrators, and CFOs more often identify as Guardians and Drivers. In viewing each other’s varying values and ways of communicating, CFOs and CIOs can locate each other’s strengths and weaknesses, reaching a point of understanding and empathy. This process can lead to differences becoming strengths as the roles reach understanding and communication styles are adjusted to strengthen the relationship.

3. Drive Value Through Collaboration

Without working on projects together, communication and understanding are of little value. CFOs and CIOs can collaborate on technology investment initiatives that facilitate shareholder value via revenue growth, asset efficiency, and operating margin.

This activity allows both c-suite roles to engage in a task from different perspectives for the same goal of using IT systems to create shareholder value.

Taking these three steps of achieving mutual understanding, building communication, and finally driving value through collaboration strengthens the CFO-CIO partnership. These steps offer a structured way to build a relationship that can promote cooperation and augment the approach to investment in digital initiatives for future growth.

Digital Initiatives Strengthen The CFO-CIO Partnership

According to Gartner, digital initiatives are imperative to ensuring that digital funding does not fall behind. And with 78% of CFOs planning to maintain or increase digital enterprise initiatives in the next two years, digital initiatives will always be a core function of the CFO-CIO relationship and the critical business processes they work to streamline.

To add to this argument for CFO-CIO relationships, Gartner’s research shows that 30% of these relationships are digital partnerships. This figure is surprising and highlights the lack of cohesion between CFOs and CIOs in many organizations.

Business Strategy Success: Operational And Strategic Benefits

A strong CFO-CIO relationship can form the heart of all layers of operations and strategy. This fact is mainly due to c-suite executives holding a large amount of knowledge, experience, and influence over their organization.

When CFOs and CIOs collaborate effectively, the power of the collaboration becomes much greater than the sum of the individual roles in a world where digital spending is increasingly essential. This relationship makes it 51% more likely to get digital investments funded easily.

Differences Can Become Strengths

The relationship between the CIO and CFO within an organization must be created and strengthened for any large enterprise to remain resilient. Frameworks and models such as the Four Faces framework and the Business Chemistry model can help this relationship become an efficient cross-functional team.

Human relationships are complex, and so it can be trial and error whether two c-suite colleagues will work effectively together or not. While working toward seeing commonalities of each other’s roles can be helpful, it can also be useful to praise each other’s differences in approach during this major challenge.

This attitude of celebrating differences and similarities can lead to a strong relationship as collaboration becomes promoted by championing different ways of attacking tasks. Risk appetite can also improve as the CFO and CIO share knowledge, experience, and responsibility.

Strong CFO-CIO partnerships lead to more digital spending as the relationship makes it more efficient to find funding. Companies that invest in new technologies remain resilient and improve intended business outcomes, boosting business performance.

The post How CIO-CFO Partnerships Create Successful Enterprises appeared first on Digital Adoption.

But what do sustainable business strategies aim to achieve? Why are they important? And what benefits do they have to the business and the environment? We will answer all these questions to discover how to build a sustainable business strategy. We will begin with a definition.

What Is A Sustainable Business Strategy?

Business models today incorporate more responsibility than ever before. Beyond profits, more prominent and small organizations are attempting to use sustainable business practices for environmental and social responsibility to the planet and employees.

A sustainable business strategy interweaves environmental, social, and economic considerations into an organization’s practices, policies, and processes. This strategy ensures long-term value for the company and the employees it is composed of by protecting and sustaining natural resources, working toward an output of net zero emissions.

The Value Of Sustainable Business Practices

Environmental and social issues can seem at odds with business, as generating maximum profits is sometimes challenging with ethics as the focus. However, being mindful of social issues ensures high employee experience levels and team cohesion. Taking part in awareness-raising projects for environmental problems can also be used as a team-building exercise that improves employee productivity and gives a competitive advantage.

A recent Gartner study found that customer engagement is at the heart of corporate incentives to engage with sustainability issues. Gartner found that in 2020 63% of sustainable companies felt that customers were their most powerful reason for sustainability actions. As a result of this sustainability drive, 92% of organizations in the study said they are increasing spending on sustainability as part of their company strategy.

Why Sustainable Business Strategies Are Important

Business has a huge impact on the environment and many social implications. Sustainability initiatives to reach zero emissions, such as solar panels or glass, help achieve a company’s commitment to preserving the environment. But renewable energy efficiency doesn’t just save the environment; it also reduces the operational costs of organizational infrastructure.

Advertising long-term sustainability targets to tackle climate change and taking a stand on this issue enhances a company’s image. Customers are at the heart of all business practices, so a sustainable business strategy can help ensure existing customers keep returning and new customers feel a sustainable company is attractive to them and use their services.

The Benefits of Launching A Sustainable Business Strategy

The benefits of using a sustainable business strategy are multi-faceted. The first of these benefits involves building communities. These benefits affect employees, the organization, and many environmental and social factors of the planet we share.

1. Community-Building

Sustainable business strategies can help nurture positive internal communities and make links with existing external ones. Efforts to conserve the environment and work toward addressing social inequalities can help large enterprises form relationships with charities, boosting morale and improving their image.

Such partnerships with altruistic agencies can create a sustainable and vibrant work culture within an environment that is:

• Lively and inclusive for everyone.
• A place where employees and customers feel safe.
• Carbon emissions neutral.
• Where staff and customer disadvantages are supported.
• Where vulnerable people are empowered and protected.
• Where people feel proud to work.

This vision of a sustainable business is positive for the environment, employees, and customers. Such a culture also improves financial performance.

2. Improve Financial Performance

It is an easy argument to suggest that any sustainability strategy will reduce profits as it is not focused on increasing revenue. However, this is not the case. Sustainable business strategies lead to streamlined processes as part of strategic planning. Waste management increases financial waste reduction as part of a culture of turning off lights and not printing off documents unless it is essential.

These actions have a knock-on effect from an environmental and a business perspective. Key stakeholders feel proud of a company when it is reaching sustainability goals. And this translates into investments, increasing shareholder value chain, and boosting business value.

There is also a competitive advantage when businesses operate this way, as higher investment improves company image and confidence within the market.

3. Enhance Company Culture

Business leaders often emphasize the environmental aspects of a sustainability strategy and forget that they also need to include social factors. A positive company culture supports and empowers more vulnerable or differently-abled employees and educates all employees on a variety of social needs. All employees are equipped with the knowledge to support and empower differently-abled customers, improving customer satisfaction.

Orienting company culture toward environmental issues also helps them comply with government regulations. These are legal obligations designed to protect a state’s environmental and social fabric. By voluntarily incorporating a sustainability strategy into a company’s culture, employees will already have received training in achieving environmental government regulations as part of strategic planning.

Sustainable strategies can also improve employee well-being, leading to improved employee retention.

4. Protect The Environment

Sustainability issues’ number one concern is to protect the environment, no matter what positive implications this might have for a business. Companies can use new technologies to engage in sustainability activities, such as providing lightning-fast Electric Vehicle (EV) charging points charged by solar panels on company buildings.

Other ways to protect the environment with sustainable business strategies are renewably powered delivery robots to cut CO2 and replacing harmful plastics like Styrofoam with sustainable packaging. Companies can also improve energy efficiency by enrolling in Energy as a Service (EaaS) programs which support the installation of renewable energy sources and only charge for energy on units used, rather than a rolling monthly amount.

These initiatives can help reduce environmental degradation as part of sustainable practices.

5 Key Steps To Planning A Sustainable Business Strategy

Sustainable business strategies are significant undertakings requiring detailed planning and ongoing review to achieve goals. The first step is to create goals that staff can easily action.

1. Implement Actionable Goals

At the core of successful sustainability strategies are actionable goals. Achieving this involves asking what resources a company has, what they want to achieve, and the time to complete it. If organizations do not fulfill plans, they can be reviewed and rewritten. But without actionable goals in the first place, a sustainable business strategy will have no direction and will not succeed.

2. Assess For Operational Weaknesses

An excellent place to begin when planning a sustainable business strategy is to identify operational weaknesses in your business. How much water is wasted by employees when they use the restroom? What food packaging does the office cafeteria use, and could catering staff take steps to replace this with an eco-friendly alternative? Could solar panels allow the entire office building to be self-sufficient for electricity usage?

Assessing these weaknesses creates a foundation for understanding what the organization can do to reduce the impact on the environment and the operation costs of a company’s infrastructure.

3. Leverage Executive and Employee Support

Successful sustainable strategies have the support of high-level executives and all employees. Companies face an uphill battle without executive support to change the culture toward sustainable outcomes.

Presenting the business case for sustainable business strategies to executives using visualization and sustainability reports is an effective way of accomplishing this. When executives understand the benefits of sustainable business strategies and how they can begin creating long-term value for external stakeholders, company culture can change from the top down.

4. Ensure Organizational Transparency 

Reputational risks exist when customers feel that a company is engaging in a sustainable business strategy for the wrong reasons. PR and reputation improvement alone are not reasons for sustainable business strategies. Publishing monthly or annual sustainability reports and consumption patterns show the public that a company is delivering on its promise to be sustainable with a positive environmental impact.

5. Communicate The Value and Benefits of The Strategy

Maintaining the momentum of sustainable business strategies can be challenging as enthusiasm can taper off with time. Communicating the value and benefits of sustainability practices should be an ongoing HR and PR collaboration to ensure that employees and customers are aware that the strategy is for life, not just a temporary measure for short-term gain.

Putting Sustainable Business Models Into Action

Sustainable business models depend on changes in culture. It is essential to ensure that executives fully understand the values, objectives and what part the sustainable business model plays in the company’s vision before implementing it.

Every organization operates differently depending on size and type, influencing operations and processes. Companies must carry out sustainable business models like successful business models in the past. Learn from past successes and incorporate sustainability practices into the model in the same way you would any other values-based business model.

Companies can use five steps to ensure sustainable business practice success:

• Step 1: Roll out the plan and create and communicate new practices and policies.
• Step 2: Utilise a sustainability measuring tool service to measure your sustainability level.
• Step 3: Analyse sustainable business strategy results against benchmarks.
• Step 4: Praise staff and communicate achievements.
• Step 5: Become sustainability certified or continue to review the strategy.

Following these steps ensures a structured approach to actioning a sustainable business strategy.

Building Sustainable Strategies That Last

Other factors to consider to increase your chances of success in your sustainable business strategy. The first of these involves new technology adoption.

1. Adopt New Technologies

As in every other aspect of business, innovation in sustainability means technology adoption.

New technologies to improve business sustainability include:-

• Electric and public transport.
• LED lighting.
• Carbon capture and storage technology.
• Solar power.

But it’s not just the purchase of new technology that affects sustainability. Electronic waste (E-waste) is one of the most effective forms of poor sustainability practices in business. This waste comes from older, inactive technologies that IT teams replace with newer versions. IT departments can recycle obsolete equipment for components. So it is important not only what new technologies are adopted but also how companies dispose of the old devices.

Technology adoption involves constant research to be aware of how to continue to grow.

2. Identify and Capture Opportunities For Growth

The core of growth and strategic opportunities is research. CIOs must continuously research new technologies for sustainability. And companies can hire an external sustainability consultant to ensure that sustainability practices are planned, implemented, and maintained within a robust strategy.

3. Deploy Financial Risk Assessments 

Financial risk is one of the predominant hesitations that prevent companies from engaging in a sustainable business strategy. Finance teams must carry out comprehensive risk assessments to ensure that every aspect of a sustainable business strategy is costed and clear deliverables can be recorded by staff using metrics. CIOs can collaborate with CFOs to provide the best analytics drawn from risk assessments to optimize any sustainability strategy.

Planning For Tomorrow

Sustainability is the motto for corporate transparency, ethics, and forward-thinking. All companies of any size must consider a sustainable strategy to align with consumer trends and expectations. But beyond this self-interested business case is the outward-facing attitude toward the future, ensuring a brighter, greener tomorrow for the benefit of employees, shareholders, and customers.

The post How To Build A Sustainable Business Strategy appeared first on Digital Adoption.

But what are the details of a modern corporate strategy? What role do corporate strategists fulfill? And what are the six pillars of corporate strategy? We will answer all these questions and many more to give a clear and structured approach to forming your modern corporate strategy.

What Is A Corporate Strategy? 

Many organizations today have extensive portfolios of companies and businesses varying in size and type. It is essential to coordinate the decision and judge the risk involved in these decisions in a standardized way as much as possible. Doing so increases the success rate and boosts revenue, ensuring growth and securing a sustainable competitive advantage.

According to Statista’s 2021 research, 51% of companies are not increasing their workforce to adapt to the current environment as part of a corporate strategy. This statistic highlights the need for companies to consider corporate strategies to increase adaptability in an increasingly volatile market.

The role of the corporate strategy is buying and selling companies and business units for an organization’s portfolio. Risk management is a large part of developing corporate strategy and is one of its most challenging aspects because it is difficult to judge. Yet huge risk can lead to a high yield of success, making risk essential to the corporate strategy process.

What Is The Difference Between Corporate Strategy And Business Strategy?

Whatever a company’s size, it must have a corporate strategy. However, the same cannot be said about business strategies, as larger organizations only need them. The business strategy is part of grounding the corporate strategy in reality. This stage ensures it is practical and will work on a functional level.

The best way to view this difference is that corporate strategy is abstract, and business strategy is concrete. Both are needed first to create a vision (corporate strategy), then ground it in reality (business strategy), so the ideal works.

The Six Pillars Of Corporate Strategy

Organizations use the six pillars of corporate strategy to guide decisions about acquisitions and selling. The first step is to create a corporate strategic vision.

1. Creating A Vision

Strategic planning should begin with defining the central components of the vision. This process involves the organization establishing the company’s objectives, mission, and potentially corporate values. The visioning aspects created by leadership help leaders develop essential skills needed for the future.

Visions should look 3-5 years into the future and include as many key staff members as possible for the optimal strategic mix of perspectives. The central vision is to create a blueprint for the desired position the leadership wants the organization to be in the future.

2. Resource Allocation 

We can divide the resource allocation for organizations into two resources: Capital and people. Both human and capital resources have advantages and disadvantages, but both are critical components for a successful strategic planning process.

The most efficient allocation is only possible with the consideration of the critical factors of each type of resource:-

Capital resources

• It is best to allocate resources across businesses to optimize the risk-adjusted return.
• Leaders can use capital resources to analyze external opportunities such as mergers and acquisitions.
• Organizations should distribute capital resources between internal projects and external opportunities.

People-based resources

• People-based resources involve positioning leaders where they provide the most benefit and value.
• People maintain an adequate supply of talent for all businesses within the organization.
• People-based resources define core competencies and support appropriate distribution across the organization.

Follow the functions of people and capital resources as a guide to ensuring optimal use of resource allocation across businesses in an organization’s portfolio.

3. Setting Functional Objectives

Visioning aspects created need to be transformed into functional objectives. These objectives must be clear and easy for the staff at all levels to follow. Objectives must be reviewed as part of a continuous process to ensure success.

4. Organizational Design 

The organizational design must be structured to allow several functions to take place effectively. This process involves frequent reporting of quality, delegation, and structural aspects:-

• Formulate centers of excellence.
• Establish structures for governance.
• Set up reporting structures, such as military, top-down, or matrix reporting.
• Define appropriate ways to delegate authority.
• Allocate separate responsibilities to different roles to balance risk and return generation levels.
• Integrate business units and purposes using mergers to eliminate redundancies.
• Create a system for significant commitments and initiatives to be broken down into smaller projects.
• Establish whether decisions will come from the bottom up or the top down.
• Establish how much each business unit can maintain authority over its decisions.

Organizations must consider all of these aspects to ensure an effective organizational design.

5. Portfolio Management 

Portfolio management involves an organization looking at the portfolio and deciding how business units interact and which businesses the organization will enter or leave.

The specific details of portfolio management include:-

• Creating strategic planning for future opportunities may lead to significant investments.
• The company assesses the marketplace to support the best ‘plays’ for competitive advantages and ensure portfolio balance.
• Making decisions about which business units should receive investment.
• Using diversified companies for risk management prevents these risks from being transferred to other businesses.
• Establishing the level of vertical integration the organization should have.

When corporate strategists follow these principles of portfolio management, portfolios remain balanced.

6. Strategic Trade-offs 

Strategic trade-offs serve three functions: to create incentives, generate cash, and manage risk. Incentive structures serve a significant role in managers’ risk and return levels. The best approach is to separate risk management responsibilities and return generation to allow staff to conduct each at the appropriate level for long-term success.

Return generation involves higher risk strategies for higher rates of return. True product differentiation and cost leadership are examples of high-risk and high-return plays. However, these depend on structured plans and successful execution.

Risk is a huge component of corporate strategy. Risk is involved in every organizational play and every corporate strategist decision. Business units’ level of autonomy is crucial in managing risk. But it is also essential for business units to communicate their risks, so risk management strategies are comprehensive.

Some plays, such as true product differentiation, are high-risk strategies, leading to market leadership or collapse. This potential outcome is why many organizations emulate what other companies are doing to avoid risk and adjust it to create feasible opportunities.

The Three Levels Of Corporate Strategy 

Three levels of corporate strategy represent the purpose of the new strategy. Whether an organization intends to improve customer engagement of a targeted customer base or make a play in a new market, the corporate strategist must choose the corporate strategy level carefully.

1. Corporate Level Strategy

The corporate strategy level involved decisions made from the top down, influencing the primary goal of the business and the goals of lower levels.

Corporate strategy-level decisions include forward or backward integration, managing the degree of diversification, and geographic scope. Nike has retail stores globally, while Macy’s department store mostly has stores in the US only, showing differences in geographic area and strategic decisions at the corporate level.

2. Business Level Strategy

Business strategy-level decisions involve gaining a competitive advantage within a chosen market. For organizations with many business units in different markets, such as Amazon, goals and objectives must be allocated based on each unit’s needs and fulfilling overall goals at the corporate level.

An example of a business strategy-level decision is how Apple gains a competitive advantage over other tablet manufacturers. Apple gains this edge through the recognition of the Apple brand and the exciting and positive image the brand has maintained.

3. Functional Level Strategy

Every functional area of a business, such as the finance department, IT, HR, or sales, needs to utilize a functional level strategy. Functional level strategies guide a department of a business unit to achieve its goals, augment operations and ensure the company meets the organization-level strategic goals.

Production, research and development (R&D), and financial strategies operate at the functional strategic planning level.

A corporate strategist must be aware of all three levels of corporate strategy. This awareness ensures a comprehensive approach and the best strategy for the right decision, as all decisions impact all business units within an organization.

The Benefits Of A Corporate Strategy 

There are many benefits to a well-designed and executed corporate strategy, which increase in size as the organization grows. Today, even SME-sized new businesses need to consider investing in a corporate strategy to receive its essential advantages.

Strategic Direction

Corporate strategies allow organizations to make abstract needs into concrete and achievable goals. Corporate strategists achieve this direction by aligning the three corporate strategy levels, allowing each business unit to fulfill core competencies and realize goals.

Adaptability 

Adaptability is key to remaining resilient in a business world characterized by technological disruption. Corporate strategists achieve optimal performance when utilizing and constantly developing a corporate strategy to fit the threats and opportunities of a constantly changing business landscape.

In embracing adaptability within their corporate strategy, 65% of Statista-surveyed companies in 2021 utilized an automation platform to modernize legacy business practices.

Targeted Decision-Making 

Corporate strategy can motivate employees, significantly improving the employee experience to desired levels and raising employee retention. When staff follows a corporate strategy, they are focused on moving forward with clear direction as part of a dynamic team achieving consistent overall growth.

How To Implement A Corporate Strategy  

Any new business must ensure a corporate strategy is built and implemented as soon as possible to meet the dynamic needs of the marketplace. Implementation of a corporate strategy is split into three classes using external and internal capabilities to characterize each class.

Growth

Growth strategies help grow a business in a particular direction to improve value creation. Examples are: using backward or forward integration or entering new markets.

Stability 

Stability strategies strengthen the position of a company by increasing flexibility. Stability strategies can use this flexibility to engage in future retrenchment strategies. Stability strategies are more conservative, investigating strategic opportunities for the future and prioritizing profit preservation.

Retrenchment

Retrenchment strategies are employed when profits are negatively affected by a business outcome. A retrenchment strategy is needed when the organization eliminates a poorly selling product line or business units become unprofitable.

The corporate strategist can use these three classes appropriately to ensure success as part of broader, overarching corporate strategic objectives.

How To Measure Your Corporate Strategy

When success is measured, planning and implementing your corporate strategy will have far more value. Corporate strategists can formulate metrics in collaboration with CIOs to achieve this task, but the CIO must consider the many changing variables.

Begin by listing metrics to track. Metrics can be split into milestones to record the completion of a project by a specific date, like launching a website or investing in a new piece of technology. The corporate strategist can use Key Performance Indicators (KPIs) to record the success of more quantitative objectives, like profit growth and revenue.

To ensure success, align KPIs with strategic objectives, make them clear and straightforward for staff to follow, ensure data is updated frequently and incorporate KPIs into workflows for easy access.

Planning, Adaptability, Success

Corporate strategies are essential for every organization of any size. The benefits of corporate strategies increase with time, giving high ROI when planned and executed well. The keys to a successful corporate strategy are robust planning and adaptability.

Corporate strategies implemented early on can also reduce redundancies. 71% of Statista surveyed companies reduced staffing ‘aggressively’ or ‘somewhat’ to adapt to a changing business environment. Companies might have avoided these redundancies if they had acted sooner with a coordinated, more aggressive corporate strategy, increasing growth with greater people-based resources.

In today’s volatile market, technological disruption is constant. The adaptability provided by corporate strategies allows resilience through structured decisions on digital adoption. The third element of any successful corporate strategy is measuring success from start to finish through carefully chosen metrics and KPIs. When an organization considers planning, adaptability, and success, it can feel the benefits for years to come as they thrive into the future. 

The post The Four Essential Elements Of A Modern Corporate Strategy appeared first on Digital Adoption.

But to determine how profitable the investment will be, then you also consider the EV/EBITDA ratio. It’s a more reliable ratio for determining when to expect your ROI compared to the Profits-to-Earnings ratio.

This article will teach you how to calculate enterprise value, what it tells you, and its limitations. 

Read through to the end because we’ll also introduce you to the EV/EBITDA ratio. 

But first,

What is enterprise value?

Enterprise value refers to the overall market value of a firm. It is the minimum amount of money a party could pay to purchase a firm based on its assets.

While you could calculate a firm’s value by adding up the market value of each of the firm’s assets, the enterprise value is a more straightforward and equally accurate approach. 

So, instead of looking at the assets, an analyst would look at how the assets were paid for.

Generally, the funding for a company’s assets comes from shareholders and lenders.

Therefore, to determine how much a company is worth, you’ll sum up the shareholders’ and lenders’ contributions.

But instead of adding the debt as is, you’d have to adjust the debt against any cash sitting in the balance sheet.

Why?

Let’s consider a firm with $505 million debt collected from lenders. And at the same time, the firm has $300 million cash.

If the firm wanted to, it could use the cash to pay part of the debt.

So, in theory, the firm has a net debt of $205 million ($505 million – $300 million).

The enterprise value is an accurate way to determine how much value an investor would place on a company at the date of calculating the EV.

But then the firm does not only collect money from the shareholders and lenders; it also makes a profit.

And that’s where the EV/EBITDA ratio comes in – more on this later.

Follow through to learn how to use various business data to determine a company’s market value, through easy-to-follow and straightforward procedures and formulas.

Let’s get into it.

How do you calculate enterprise value?

To calculate enterprise value, add the business’ market capitalization to the outstanding debt and subtract the cash and cash equivalents (CCEs).

Put in a formula:

Enterprise value = Market Capitalization + market value of debt- cash and cash equivalents.

Market capitalization (market cap) is the value of a firm’s total shares. It is calculated by multiplying the current price of a stock by the total number of outstanding shares.

The market value of debt is the total amount that investors are willing to pay to acquire a firm’s debt, which is not in line with the balance sheet value.

On the other hand, Cash and Cash Equivalent (CCES) refers to a company’s assets that are Cash or can be converted into cash immediately (Cash Equivalents).  

To get the total value of the cash and cash equivalents (CCE), add the total amount of money a company has at hand and its cash equivalents. 

CCE is the most liquid (readily usable) form of a company’s assets and is thus indicated at the top line item of a firm’s balance sheet.

In theory, the enterprise value is calculated as:

EV = Common stocks + Preferred stocks + Market Value of Debt + Minority Interest – Cash and Equivalents

But using the market value might prove to be a lot of effort.

So in practice, analysts use this simple formula:

EV = Market cap (No. of outstanding shares x share price) + Net debt (long-term + short-term debts – cash in the balance sheet)

Let’s explore these components.

The components of enterprise value

Market capitalization

Market cap refers to the total number of outstanding preferred and common shares. It is the value of equity contribution from shareholders.

How to calculate the market cap?

Multiply the total shares issued by the company by the share price.

For example, if a company has issued 5,500 million shares, and each share is worth $3, then the market cap is (5500 million x $3) = $16,500 million.

The market cap represents a firm’s funding from the stakeholders.

Total debt

Total debt makes up the interest-bearing liabilities and includes both the firm’s short-term and long-term debts. It is the contribution from the creditors and financial institutions.

Net debt refers to the total debt minus the cash and cash equivalents.

Cash and cash equivalents

As explained earlier, CCEs refer to the total value of assets that are cash and those that can be liquified immediately or on short notice.  

They include treasury bills, treasury notes, commercial paper, cash management pools, certificates of deposit, and money market funds.

Non-controlling interest

Non-controlling interest, or minority interest, is the subsidiary owned by a shareholder who has no control over decisions and owns less than 50% of the total outstanding shares. 

The company includes 100% of the revenue expenses and cash flows, even though it owns less than 100% of the subsidiaries.

Preferred stocks

Unlike common stocks, these are stocks that grant high-priority rights to shareholders. These stocks possess higher dividend payments and a higher claim to assets in liquidation. 

Preferred stocks can be calculated as debt if they must be redeemed at a predetermined date and price. 

Why is debt added to equity value?

Since debt holders possess a higher claim of the company’s assets and value than equity holders, debt has to be added to the company’s equity to get the enterprise value in case of liquidation.

Higher debts mean higher enterprise value since anyone who wants to buy a given firm has to clear its debts to own it fully.  

How to calculate enterprise value (examples)

Below are different ways to calculate the enterprise value.

1. Calculating enterprise value from the balance sheet

To calculate the enterprise value from the balance sheet, sum up (the firm’s market capitalization, the outstanding debt, minority interest, and the preferred stock), and then subtract (the cash and the cash equivalents) on the balance sheet.

That is: 

Enterpise value= Market Capitalization+ Outstanding debt + Minority Interest + Prefered Stock – Cash & Cash Equivalents.

• To find out the Market Capitalization, take the number of outstanding shares from the balance sheet and multiply it by the current price per share from the stock market.

I.e., Market cap = Total outstanding shares × Current price per share.

• To get the current outstanding debt balance, add short-term and long-term loans like bank loans.
• Read the minority interest as indicated on the balance sheet.
• For the value of the preferred stock, multiply the number of outstanding preference shares with the stock’s par value.

I.e., Preferred stock = Outstanding number of preference shares × Stock par value.

• Read the cash and cash equivalents from the balance sheet.

For example, if a company has the following financial information on the balance sheet:

• Outstanding shares: 5 million
• Current share price: $5
• Cash and cash equivalents: $3 million
• Total debt: $4 million
• Preferred stock: $0 
• Minority interest: $0

Then,

Market capitalisation: 5 million × $5 = $25 million

And,

Enterprise value = $25 million + $4 million – $3 million + $0

                           = $26 million

2. How to calculate enterprise value from free cash flow

To calculate enterprise value from free cash flow, subtract the cost of maintaining the asset base (capital expenditure) from the total free cash flow before the interest payments to the debt holders.

Free cash flow refers to a firm’s money after clearing its operational and capital expenditures. The more free cash flow a company has, the more cash it has to pay back its stakeholders. 

3. Calculating the enterprise value of a private company

There are several methods you can use to calculate the enterprise value of a private company.

These methods include:

• The comparable company analysis approach
• Estimatimating discounted cashflow
• Private equity evaluation metrics 

The comparable company analysis approach

For this approach, you search for public companies within the same industry, age, size, and growth rate as the target firm, traded publicly within the recent future. You can check in your industry’s directory.

Once you’ve identified a few such companies, go ahead and calculate their enterprise values, EV/EBITDA, etc. Ensure that you use values from the last fiscal year for updated information.

If four similar companies have enterprise values between $100 million and $300 million, you can estimate that the private company’s enterprise value is within that range. 

Using equity evaluation metrics

This method involves using a firm’s metrics such as price-to-earnings, price-to-cash flows, price-to-book, and price-to-sales to determine the enterprise value. 

If the company you’re aiming for has gone through a recent merger or acquisition, you can use the information from the transaction to calculate the firm’s enterprise value.

Since the parties involved in the transaction will have laid out the enterprise value of the firm’s competitors, looking into the financial information they worked with could lead you to a more accurate valuation. 

Estimatimating the discounted cash flow

To evaluate the enterprise value of the target firm, you study the discounted cash flow of other similar private companies within the same peer group as the target firm. 

• For a start, calculate the average growth rate of the companies in the same peer group to establish the estimated revenue growth of the target firm.
• Gather information from companies with similar growth cycles and management principles as the firm you target, as these will give you more accurate data on the estimated revenue. 

• With a revenue estimate, you can estimate the changes in operational costs in the target firm.
• You can then calculate the free cash flow, which will lead you to the operating cash after subtracting the capital expenditures.

Free Cash Flow = cash from operations – capital expenditure

The free cash flow helps determine the amount of money available to give back to the shareholders.

4. How to calculate enterprise value from market capitalization

Market capitalization refers to the value of all outstanding shares of a company’s stock — the share price multiplied by the number of outstanding shares.

To calculate the enterprise value from market capitalization, add its total debt (both short and long term) to its market cap, and then subtract the cash and cash equivalents. 

5. Calculating enterprise value using DCF

Discounted Cash Flows (DCF) is a method of determining the value of a business by evaluating the company’s projected cash flows. The method aims at establishing the present value of a company based on the amount of money the firm is deemed to generate in the future.

To calculate a company’s enterprise value from the discounted cash flows, take the company’s forecasted cash flow over a set period and divide it by (1+r)＾n, where ‘r’ is the interest rate is, and ‘n’ is the set period in years. 

Since inflation erodes money’s value over time, a dollar earned today is not equivalent to a dollar earned after two years. That’s because you can’t invest next year’s money today.

Therefore, the method stipulated above aims to reduce the company’s future earnings to be equivalent to today’s money, which is referred to as discounting. 

For example, suppose the company generates annual revenue of 200 million and is estimated to generate the same revenue for the next six years, and the interest rate is at 10%. 

In this case, you can calculate its enterprise value, by applying the above formula, that is:

Year 1= 200 million x 1/(1+10/100) 

= 200 mil x 1/1.1 (or 200 mil ÷ 1.1)

=$181, 818, 181.8 

Year 2= 200 mil x 1(1/1.1)^2

= $165, 289, 256.2 

Year 3= 200 mil x (1/1.1)^3

= $150, 262, 960.2 

Year 4= 200 mil x (1/1.1)^4

=$136, 602, 691.1 

Year 5= 200 mil x (1/1.1)^5

=$124, 184, 264.6 

Year 6= 200 mil x (1/1.1)^6

=$112, 894, 786 

So the net present value of the 6 year cashflows in today’s money is;

= $181, 818,181.8 + $165, 289, 256.2 + $150, 262, 960.2 + $136, 602, 691.1 + $124, 184, 264.6 + $112, 894, 786 

= $8, 7110, 521, 39.9

To calculate what each share would cost if the company issued, say 200 million shares, you divide this net resent value by the total shares.

= $8, 7110, 521, 39.9 ÷ 200 million

≈ $4.355

So, each share is worth ≈ $4.355

6. How you can calculate enterprise value in excel

When calculating enterprise value in excel, fill in the required information, i.e., market capitalization, outstanding debt, and cash and cash equivalents, in respective cells as shown in the example below. 

Sum up the market capitalization and Market value debt values and subtract the cash and cash equivalents.

Let’s say a company XYZ has a market capitalization of $70,000,000, a Market value debt of $5,000,000, and a Cash and Cash equivalent value of $8,000,000.

Using the formula: 

Enterprise value = market capitalization + market value of debt – cash and equivalents.

The enterprise value can be calculated as follows on Excel:

Therefore the enterprise value of company XYZ is $67,000,000

What does the enterprise value tell you?

• Enterprise value shows the total amount of money you would require to purchase a given company.  
• An enterprise value gives you a more accurate reflection of a company’s value than market capitalization.
• Enterprise also helps in the comparison of different companies with diverse capital structures.
• An enterprise value helps investors determine whether a given company is undervalued or not. It is useful for calculating other ratios like EV/EBITDA, EV/Sales, and EV/Free Cash Flow for comparable analysis.

What is EV/EBITDA?

EV/EBITDA is a ratio of the enterprise value (EV) to the earnings before interest (on loans), taxes (corporate tax), depreciation and amortization (EBITDA). It’s ratio of a firm’s market value to the profits. 

So it shows the profitability of the company. And therefore, it tells an investor whether a share is cheap or expensive. 

Let’s consider a firm with an enterprise value of $700 million and EBITDA value of $100 million today

To calculate the EV/EBITDA ratio, we’ll divide EV by EBITDA.

EV/EBITDA = $700 million ÷ $100 million 

= 7

So if you bought this firm’s shares today, you could expect your money back in 7 years.

EV/EBITDA is one of the most comprehensive and reliable ratios for determining a company’s profitability. 

Compared to the Profit-to-Earnings ratio, the EV/EBITDA is more comprehensive because it includes the lender’s contribution. 

It is also a more reliable figure for the profit because it considers the earnings before stripping out taxes.

However, you can’t rely on the EV/EBITDA alone to determine profitability. 

What is a good enterprise value?

A good enterprise value (EV) is interpreted against the EBITDA. If the EV/EBITDA ratio is 10, then it implies that if an investor buys the company at the current share price, it’ll take about 10 years to get their money back. So, the lower the EV/EBITDA, the sweeter the investment.

Limitations of the enterprise value

Enterprise value includes a firm’s total debts. Thus, companies with huge debts appear to have higher enterprise value than those with little or no debts, even though they may be of similar size and stature.

When used in a sales firm to measure the firm’s worth, an enterprise value may be deceptive since a higher ratio may not necessarily signal an overvalued company. 

A high enterprise value-to-sales ratio may signify investors’ positive belief in the company’s sales increase in the future. 

The post How to Calculate Enterprise Value appeared first on Digital Adoption.

And when the changes begin, businesses risk losing their best employees.

To materialize the potential synergies and efficiency, set up the integration’s direction upfront, open two-way communication lines, and manage the integration separate from the day-to-day business operations. 

Most importantly, focus on driving value from the deal soon after Day 1.

If you’re looking for best practices for a successful post-merger integration, read on!

This article has important PMI tips for CEOs.

Let’s dive in.

1. Set the direction of the integration early and upfront

Successful post-merger integration depends on the solid foundation built before the merger because all the planning needs to start pre-merger. Additionally, a well-laid PMI plan ensures that the integration happens quickly.

A solid foundation typically includes the business processes, configuration, and systems’ application data.

So, the PMI lead, functional team leads, the team members, and the executives need to know why the businesses are doing the merger to get everyone in the same thought that “we’re in this together.”

Getting all the stakeholders in the same boat depends on the activities done before closing the deal.

Here are our tips for setting the direction of a PMI

• Clearly define the objectives of the merger, the philosophy “narrative,” and the PMI plan. Then communicate these to all the affected stakeholders to achieve the desired post-merger synchronization. 

Departments that do silo tasks without understanding the complete picture may prioritize the wrong tasks, assign resources to the wrong task, or even work on the wrong project. 

It results in integration delay, which is why some mergers fail to extract the merger’s value. 

• Design a clear picture of the future state operations of the combined business during the due diligence phase. The end state will guide all the actions post-merger.
• Articulate the right PMI plan with specific tasks and timing. The right plan is easily explained and communicated to all the stakeholders.
• Create a roadmap that clearly defines the specific outcomes (results) that must happen in every milestone with clear financial or other deliverables. The focus is not on the steps but rather on the end goals.
• Based on the due diligence data, define ballpark figures of the potential cost, revenue, and financial synergies. 

The figures will depend on your business and the target business regarding existing processes, proficiencies, and capabilities. You may also do a SWOT analysis against the industry’s best practices to determine capabilities.

Have a proforma on the expected financial situation of the organization. It will become the business case that the integration management office (IMO) will test in the first 100 days.

• Articulate the key performance indicators (success factors) that will mark the integration and the combined organization. 

These could be:

• The organization’s stability
• Employee retention and wellbeing
• Maintaining customer focus
• Profitability
• Integrating the businesses’ cultures
• Maintaining and increasing value

• Communicate everyone’s role and responsibilities and make sure they understand these in addition to the integration’s mission.
• Address concerns about job security on the get-go. So you’ll need to identify the best performers you want to keep (these are usually the first to leave). Then make sure that they know how you value them and their future career path after the integration. 
• Get all the key stakeholders excited about the integration. You can only do this if you involve them all through the integration planning. You could also throw a kick-off party.
• Identify key risks and develop mitigation strategies. For example, the IMO may realize that the integration could distract resources from the daily operations of the two businesses. In that case, they’ll have to communicate how the functional teams should prioritize duties.

Set up the governance aligned around the goals of the integration 

At the beginning of the integration, assign management roles to clarify who the people should follow and specify who’s accountable for what. Selecting the leaders early also prevents the uncertainty of mergers and acquisitions.

The most important element of the PMI is leadership. You need a disciplined, focused, organized, and decisive PMI leader. One with the ability to make decisions and have people follow him/her through the challenging time.

But because of politics, you can’t pick a PMI leader from either company. It’ll be challenging to get everyone on board if you do so. 

Instead, you may hire a PMI consultant who will focus on the core business operations and a transaction/private equity firm to handle the financial and legal matters.

2.  Have two-way communication systems with the internal and external stakeholders

Consistent and clear communication before, during and after the post-merger integration maintains stability. So, the best practise is to set up a dedicated communications team. And communicate a lot.

Mckinsey clearly depicts what the level of communication would look like throughout the integration (image below).  Besides the announcement day, there’s a spike in Day 1 and never-ending consistency after the deal is closed.

Source

On Day 1, redeployed employees need to know their roles and responsibilities. They want to know who their new bosses are and the new business processes. 

And son after close, you need to gather feedback as you test and refine the business case.

Besides announcements and formal messages, you also need to keep the employees motivated and energized.

Read through these tips for effective post-merger communication

• Besides the general story, address the questions that directly affect the stakeholders personally. For example, is there a new boss to report to?
• Use all available channels to address all the key stakeholders and ensure that the message is reinforced. Besides project management tools, you could use social media to reach customers and employees.
• Recruit ‘influencers” in the organization to gather feedback and even communicate it. Well-respected employees could easily get raw feedback from the employees and the rumors of, for example, key personnel thinking of leaving the organization.
• Use feedback collection tools like surveys, focus groups, town halls, email, etc., to get feedback on the employees’ states. After receiving this feedback, the communication and IMO will analyze and act on it. 
• Supervisors should have honest conversations with the employees to minimize friction. They also need to be more personable, inviting, and responsive.

Need more information on leadership?

Check out the role that leadership plays in organizational change.

3. Manage the integration separately from the day-to-day running of the organization

You may consider outsourcing the back-office integration so that your employees focus on their jobs, and at the same time, you’ll give full focus on the integration. Doing this will allow the business to derive the value of the deal.

Though outsourcing integration will require a cash outlay, your business will realize the following benefits, which offset the initial costs.

Benefits of outsourcing integration

• You’ll leverage the third party’s expertise in integration. Though your internal teams can achieve some synergies, leaving cash on the table is easy because of unrealized opportunities. 

A PMI expert is more experienced in realizing synergies and responding to the inevitable obstacles that will come up.

• The organization will give the integration the laser focus it demands by hiring someone who is managing the integration full-time. 
• Avoid prolonging the integration, which may lead to unrealized synergies.
• A third party will ask the tough questions that people are afraid to ask. 
• The expert will help determine realistic timelines for realizing synergies and identify risks and dis-synergies.

If the organization chooses to hire an integration director, they should be involved right from the beginning of the deal. 

And you should support them to be the best set of eyes and ears for the integration.

How to support the integration manager

• Trust the manager and give them access to executive-level information.
• The integration manager should have the authority to lead discussions and enforce decision-making.
• He/she should have the authority to assemble resources as need be. The CEO can clarify that the integration manager is authorized and capable of making critical decisions in the IMO.
• The CEO can encourage the integration team to support the manager’s decisions. 

4. Focus on driving value from the deal 

At the end of the first 100 days, the business should operate effectively. The priority here is achieving the synergies. And the driving factors are the key performance indicators.

Here are some high-level milestones to drive value from the integration

Between day 1- day 30

• Complete employee onboarding and training
• Send out the first post-onboard employee survey
• Send out the first post-close customer survey
• Conduct your first Record to report (R2R) cycle
• Kick off the sales transition calls

Between day 31 and day 60

• Conduct the second R2R cycle
• Analyze the post-close customer survey
• Analyze the post-onboard employee survey
• Have the most-promising attendees in the sales transition calls

Between day 61 to day 100

• Conduct the third R2R cycle
• Send out the Day 100 post-close customer survey
• Send out the Day 100 post-onboard employee survey
• Finish migrating data from all the retiring systems

Check out these important tips for deriving value from the merger

• Focus on the most promising customers and reallocate resources to profitable accounts
• You may major defer changes in support functions like sales to avoid disrupting income flow
• Focus on winning big transactions that will act as “proof of concept” to drive momentum and enthusiasm.
• Focus on selling easy-to-sell products from both companies.
• Constantly revisit the explicitly defined cost and revenue synergy targets, refine them and track against them.
• Remove redundancies to maximize cost synergies.
• Involve customers in the post-merger integration process to retain them
• The businesses may operate separately until all systems are ready to achieve the synergies fast.

Once you know where the big value areas are, you can then organize the PMI teams to mirror those value drivers.

5. Spend time and effort in building the organization

The new organization should be built from a people, process, and technology standpoint. Overall focus on the customer and employee experience. Then use technology to enable an efficient business architecture.

The organization will not be efficient if you fail to integrate the culture, maximize cost synergies, and retain customer value.

So, the organization needs to allocate time and resources for post-merger culture integration.

Our tips for building the organization post-merger

• Track and report synergies daily. It would be nice to have a dashboard that shows you where the organization is every day.
• Have weekly synergy meetings and establish a rhythm of regular reviews of the progress of each key workstream
• Select, retain and develop the best talent, i.e., people who do the best job while supporting the organization’s mission and culture.
• Clearly define the desired behavior and the key role models (ideally, the leaders should be the role models). For those who achieve the desired behavior, recognize their efforts with incentives (monetary and non-monetary).

The Human Resource department will play a key role in cultural integration. The gap between the starting point and the target culture helps identify the practical things to do.

• Finally, overcommunicate and keep the feedback lines open.

6. Support employees to create value from the change

Change management is important to align and motivate people to deliver the integration’s objectives after day 100. But integrations might fall short of expectations with a fragmented approach, lacking concrete and actionable items, or addressing some but not all drivers.

Without clearly defined processes and effective communication, speculation and rumors could result in high turnover. So, HR might be the most fragile function in an integration. 

Additionally, frustration with the new systems (due to limited training) and technology resistance could make your business lose high-value employees.

The first step, which should happen pre-merger, is creating the change management plan and integrating it into the merger process. You may also consider having the change management leader instead of leaving it all to HR.

Check out these change management tips after closing the merger

• Deploy resources for employee training. Identify all the areas that will change (and need integration training), then develop the programs to train the affected employees.
• Have a clearly defined future state to put an end to speculation. And have a process in place to address any concerns among your teams.
• Assign your functional teams their responsibilities unambiguously. Let them know what decisions they own and those they’ll need to share with other leaders.
• Clearly define the new policies and processes that will guide the combined company’s new way of doing business. Then communicate these to the employees to ensure that everyone understands fully.
• Encourage two-way communication to keep up with how the changes affect the employees and determine the best corrective actions.
• Track the progress of executing the change management program. For example, pulse surveys and one-on-one interviews can help gather employees’ views on the changes. 

But to track progress properly, use organizational-health indicators like absenteeism, attrition, inbound job applications, and recruiting referrals. 

• Organize town hall meetings 6 months after closing to discuss unresolved issues.
• Have an intranet site to share announcements and FAQs and gather employee feedback.
• Send out a 1-year employee survey to determine the success of the merger. Then discuss any lessons and the way forward. And document these (on the intranet), including best practices. 
• Remember to celebrate successes.

Find out more ways to involve employees in the change management plan in this guide.

The post 6 Critical Tips for Post Merger Integration appeared first on Digital Adoption.

Below, we will look at process mapping in detail, what it is, why it matters, and different types of process maps.

What Is Process Mapping?

In business, process mapping is the practice of creating detailed visual diagrams of business processes. 

These process maps can be used to gain insights into:

• The steps involved in a business process. Each business process map will typically outline the individual actions taken in a workflow or process. 
• Resource utilization. The resources used in a process can include human labor costs, material resources, equipment usage, and more. That information, intern, can help managers better optimize their processes in order to increase efficiency, cut costs, and improve productivity.
• Process timelines. As we will see below, every process map is different. Many, however, include information about the time it takes to complete a process. For managers and business leaders taking a high level view of business process management, this information can be critical when designing time-sensitive business processes.
• Process costs. Costs are another important factor to consider when modeling business processes. Process mapping enables process managers and analysts to gain deep insights into the various factors that contribute to a process’s costs, which can help when calculating the costs of business projects, programs, operations, and so forth.

Different process maps offer different insights into business processes. 

Some are high-level and offer only conceptual understanding of processes. Others go into great detail and offer granular insights into costs, resource utilization, and more. Some focus specifically on the steps involved in a process, while others focus on the entire value stream, and others emphasize the roles and responsibilities of those involved in a process.

Let’s look at a few examples now.

Examples of Business Process Maps

Common types of business process maps include:

• Flowcharts. A process flow chart is a flow chart that diagrams the individual steps in a process, focusing on events and decisions. Maps are so simple, they can provide a straightforward overview that anyone can understand. On the other hand, they do lack detail, which limits their usefulness. 
• Swim lane diagrams. Swimlane diagrams look like flowcharts, but they break down a process into “lanes” that correspond to the departments who perform the process. This can be useful for designing processes that span multiple departments.
• Value stream maps. Value stream maps focus on the value chain, or the complete set of roles and steps needed to create value for customers. Although these are more complex, they go into greater detail than flowcharts, making them more useful when analyzing the resources used in a process.

These are just a few examples of the types of process mounts that are used.

Larger organizations will go into far greater detail, utilizing even more sophisticated systems such as Business Process Model and Notation (BPMN) and business process management software (BPMS).

Next, we’ll see how business process maps are used in conjunction with these types of tools and approaches.

How Process Mapping Is Used

Business process mapping is often used as part of a business discipline, such as:

• Business process management (BPM). Business process management is dedicated to managing, optimizing, improving, designing, and redesigning business processes. Business process maps are a standard tool in this discipline. 
• Business process optimization (BPO). Business process optimization can be thought of as a sub-discipline up business process management. As the term suggests, its aim is to optimize processes by improving efficiency, productivity, and other key metrics. 
• Business process design (BPD). Designing business processes from scratch, or redesigning existing processes, is common during organizational reorganization, restructuring, or growth. As with the other disciplines and practices covered here, business process designs rely heavily on process maps to create processes that are efficient and cost-effective.

Today business process maps are designed and optimized through tools, such as BPMS tools, as well as platforms such as:

• Process mining platforms. A process mining platform is designed to analyze a process through software logs. This information focuses on the back end of a process, allowing process managers to better understand how processes are actually performed, where waste is occurring, and how to improve efficiency.
• Task mining platforms. While process mining focuses on back end data, task mining focuses on front end data. That is a task mining software will extract users’ interaction with software and analyze it, providing process managers with the insights they need to improve digital workflows.
• Workflow management tools. Workflow management tools, like task mining tools, are designed to analyze and improve front end workflows. Their entire purpose is to help managers and employees create workflows that are more efficient and more effective. Tools such as digital adoption platforms, for instance, enable employees to design and optimize their own workflows. 
• Automation platforms. Automation platforms often include features such as task mining and software analytics, but their emphasis is naturally on automating business processes. Using these tools, managers can both gain insights into what’s working and what isn’t, while also enabling businesses to perform certain tasks with machines.

Process mapping, in short, is far more than simply the diagrams used to visually depict a process. From business process standardization to business process optimization and design, process mapping is a tool that can be used across an organization to generate significant performance improvements.

The post Process Mapping 101: What Is Process Mapping? appeared first on Digital Adoption.

In this article, we’ll look at a definition of business process management software, different tools, and how to use them.

What Is Business Process Management Software (BPMS)?

Business process management revolves around discovering, modeling, analyzing, and improving business processes. This differs from task management, which focuses on individual workflows. It is also different from other related disciplines such as program management and project management, which focused more on the managerial side of business initiatives.

Despite the distinctions in these definitions, business process management software often refers to tools that perform a range of functions, including:

• Project management. Project management is a discipline focused on the execution of business projects. These projects include multiple business processes, and although the discipline is technically different from business process management, many project management tools are included under the same category.
• Task management. Task management software refers to tools that manage the individual tasks within a workflow. While project management tools take a high level view of projects and processes, task management tools focus on the individual steps needed to complete a workflow or process.
• Business process modeling. Business process modeling refers to the mapping out of business processes. This type of software is used by business process managers and designers. It focuses on high-level design of business processes and differs in nature from the other tools listed here. Examples of this type of software can include flow chart software or BPMN software.
• Automation. Automation platforms perform tasks that are normally done by humans. These tools can include robotic process automation tools, business automation tools, cognitive automation tools, and more.

Typically, the business process management software application will involve several steps:

• Designing processes. Designing processes can involve redesigning existing processes or engineering new ones from scratch. When redesigning an existing process, it is important to engage in tasks such as process mapping and analysis. Business disciplines such as business process management, business process design, and business process reengineering are useful in this respect. That information can then be fed into new process designs, which will involve mapping out each task in a process.
• Process modeling. Process models, or process maps, are visual diagrams of business processes. These can include flowcharts, swimlane diagrams, value stream maps, and similar graphical representations. Modeling a process can help managers understand timelines, resource usage, labor costs, and so forth.
• Implementation. Once new processes are designed with the software, they can be rolled out. Depending on the process, rollouts may be all-at-once or phased. The larger the process, the more important it is to pilot test the process.
• Analysis. Over time, managers will analyze the process to determine how efficient and cost-effective it is. That information can then be used to improve the process or redesign it as needed.

Naturally, the situation in question will determine exactly what type of software to use and it will also impact the way that the software is used. In general though, many tools will follow a similar approach to the one listed above.

Why Use Business Process Management Software?

The benefits of the software will differ depending on the circumstances.

That being said, a few benefits of using business process management software can include:

• Increased efficiency. Business process management aims to improve processes by shortening timelines, decreasing costs, lowering resource usage, and so forth. 
• A better employee experience. Better business processes typically make employees happier. Business processes, after all, are smoother, which can reduce friction in workflows, improve employee productivity, add enhance the work environment.
• Increased organizational agility. The more quickly an organization can redesign its business processes and introduce new ones, the easier it will be to implement organizational change and stay agile. In today’s disruptive, digital world, this agility can translate into a competitive advantage.
• A lighter burden on IT departments. When business process management software is used to streamline and automate processes, through tools such as no-code platforms, IT staff can spend less time on automation and other tasks related to business process management.
• More data-driven insights. Today, data has become central to the way organizations operate. Business process management software often uses techniques such as process mining to gather data, which data can be used to gain insight into processes and improve them. Leveraged properly, that data can also be applied to other business areas.

The benefits above can all translate into a number of other benefits, ranging from a better customer experience to improve profit margins.

Further Reading

For more insights into business process management software, it is useful to read up on topics such as:

• The disciplines of business process management, business process design, and business process optimization
• Process mapping
• Business process model and notation
• Automation
• Process mining
• Business process improvement methodologies

All of these topics are closely related to business process management software and can help you choose the right program for your needs.

The post Business Process Management Software: A Quick Guide appeared first on Digital Adoption.