It’s not always easy to be an optimist these days. Inflation is on the rise. There’s talk of a looming recession. Supply chains have gone haywire. The war in Ukraine and other global conflicts rage on. And the biggest threat of all is the one to our planet, which we can only save by drastically cutting CO2 emissions.
So, yeah… it seems like it’s all bad news. But then, you have the stories of the companies that have turned crises like these into opportunities for growth. From the 2008-2009 financial downturn, Uber, Airbnb, and Square emerged triumphant. During the pandemic, Zoom, Amazon, and Netflix saw explosive growth.
Some of this is being in the right place at the right time (with the right product). But luck aside, I believe that the companies that thrive through crises share a common trait. And no, it’s not the cliché ones we always talk about, like being “innovative” and “agile.” These standout performers share a deeper common thread: They understand the connection between process efficiency and business performance.
What is a business process and how do we mine them?
These days, most enterprises use more than 200 IT systems and applications to run their business. In a study Celonis conducted with Forrester earlier this year, we found that the average individual business process runs across more than 10 different systems. And yet, only 16% of companies said they have complete visibility into their processes.
The processes I’m talking about are the ones that are core to what every business does: buying things, selling things, making things, shipping things, billing customers, collecting money. In the business process world, they have names like Order-to-Cash, Purchase-to-Pay, and so on.
They’re the heart of any enterprise, running day in and day out, with millions of individual items flowing through them every day: invoices, purchase orders, payments, shipments, service cases. These processes operate on top of the systems at the center of a company’s tech stack: ERP, CRM, SCM, and all of our other favorite IT acronyms. Many of these systems have been in place for decades or more. While they do a fine job of storing process data, they were never designed to provide a complete, end-to-end view of a process — let alone the tools to optimize and improve process performance. Most business processes span multiple systems. So as we continue to add platforms on top of platforms over the years, process inefficiencies grow and hide in the nooks and crannies of these systems.
The fact that there’s hidden value in these processes isn’t a revelation to many of us. Large enterprises have long employed teams of people with titles like “operational improvement” or “process excellence,” tasked with continuously improving these processes. If you’ve ever heard of a Six Sigma black belt or methodologies like Lean and Kaizen, then you know what I’m talking about.
But in the past few years, a new technology has emerged that completely changes what’s possible in this arena.
It’s called process mining.
Process mining technology analyzes all of the data from your underlying systems to visualize your processes and help you start to pinpoint inefficiencies. I like to think of it as an X-ray of your business.
Just a few years ago, process mining was an academic concept that not many people knew about. The founders of Celonis, Alexander Rinke, Bastian Nominacher, and Martin Klenk, discovered it back in their university days, and they decided to start a company to turn process mining into enterprise software that companies around the world could use.
Process mining has come a long way since then — research shows that today, 61% of business decision-makers are planning to use or are evaluating process mining in the next 12 months.
What is an Execution Management System?
The potential of process mining alone is huge, but the true power comes when you combine process X-rays with the tools to fix the process issues that they uncover.
In 2019, Celonis began to move into a completely new frontier: combining the insight from process mining with cutting-edge technologies for action and automation. We called it the Celonis Execution Management System (EMS). And we set out to build the world’s first system for business performance, which brings data, intelligence, and action together in a whole new way.
If process mining is the X-ray that diagnoses your process problems, then the Execution Management System gives you the ability to write the prescription and administer the cure. By finding and fixing inefficiencies continuously and automatically across every process, we help our customers perform like never before.
It was this mission that inspired me to join Celonis. Throughout my career, I’ve always been drawn to technical challenges that are tough to tackle, but offer the promise of real, breakthrough change for businesses and society at large. Building and scaling the Celonis engineering team to support the needs of our rapidly growing customer base and driving value to organizations large and small across the plant is exactly that kind of challenge. My team is working on all kinds of exciting innovations within the EMS, including our core Process Mining Engine, our Action Flows for automation, our proprietary database known as SaolaDB, and the Process Query Language (PQL).
And our customers are doing incredible things with Celonis:
- HP uncovered up to $1 billion in cash flow potential across company-wide processes.
- Johnson & Johnson realized a 20% improvement in manufacturing lead time, a 30% reduction in throughput time, a 40% reduction in price changes and over 800K in inventory reduction.
- GE Healthcare was able to prevent 1,000 incorrect payments per week, despite a billing process with over 300 possible combinations.
- LinkedIn IT operations gave 300,000 hours back to employees.
- UPS cut SMB on-boarding experience from 10 days to 2 minutes.
Just to name a few.
So what do process inefficiencies have to do with inflation, supply chain disruption, and sustainability?
Fixing process inefficiencies helps companies improve their performance, but how does it help them react and adapt in the face of these volatile market forces?
Wil van der Aalst, Celonis’s own Chief Scientist, described it like this:
“Process inefficiencies are the silent killers in businesses, and they can't be seen without process mining. When process inefficiencies are seen and fixed, business performance increases, as well as the flexibility to react to business disruptions, inflation, pandemics and sustainability requirements."
Let’s get specific.
Inflation has skyrocketed to a 60-year high, is weighing on corporate results and has been a key topic on many first quarter earnings calls. Walmart CEO Douglas McMillon said inflation played a role in the company’s top and bottom line and that the pace of change had created a timing issue for the retailer in Q1. “We'll control what we can control, reduce our inventory level and keep prices as low as we can, especially on opening price point food items while improving our profit performance,” he said. Target CEO Brian Cornell said gross margins came in below expectations due to inflation as well as shifting consumer behavior. Johnson & Johnson CFO Joseph Wolk said the company is seeing inflation across the enterprise. "Mitigation efforts are underway, including cost improvement initiatives, strategic price increases and contract negotiations with external supply partners," he said. The list goes on and on.
At Celonis, we’re seeing leaders in shared services organizations harness the EMS to control their company’s cost exposure by identifying and reducing back-office process costs. And in procurement, they’re able to consolidate spending to increase purchasing power. At Merck, the fifth largest pharma company in the world, the GBS organization has unblocked $5 million worth of revenue and driven a 67% reduction in cycle times in their Order-to-Cash process.
Celonis executive Dave Peterson said it best at our recent World Tour event in New York: “Efficiency is the ultimate weapon against inflation.”
Supply chain volatility is not going away any time soon and was on the minds of executives during the recent Celonis Business Execution CEO Council roundtable. Panelists said supply chains must be redesigned to be more resilient, flexible and able to handle “Black Swan” events. The supply chain should be a board-level issue and the design process should include suppliers, production, sales and other corporate stakeholders, they said. This message was echoed by Julian Fischer, Partner at McKinsey & Company, at our recent Celonis World Tour event. “We have to rethink supply chain,” he said. “We have to rethink how we run our operations and how we serve our customers globally.”
Our customers are fighting back by improving delivery date prediction accuracy to set the right expectations with customers, and automating steps in the sales order entry process to free up resources. The team at L’Oréal USA, for example, was able to increase touchless orders by 700% with the Execution Management System.
Sustainability is top-of-mind for companies around the world — for good reason. According to Harvard Business Review, in addition to the moral case for developing sustainable business practices, “There are very real payoffs for focusing on ESG issues. And those extend beyond the benefits companies might enjoy because of productivity increases due to higher employee engagement, or sales increases due to more loyal and satisfied customers.”
Our customers are leading the way in transforming their processes to be more efficient and more sustainable. In processes like procurement, they’re selecting suppliers and materials based on sustainability data integrated into Celonis. And in the order management process, we’re working with customers to measure and reduce the average shipping emissions per order. ABB, for example, has calculated emissions for hundreds of thousands of individual orders and identified opportunities to reduce CO2 emissions by 8 percent.
Janina Nakladal, our Director of Sustainability, put it perfectly when she said, “Process Mining has never just been a technology to me, but a way of thinking. I am convinced this mindset will bring sustainable ideas to life – for our customers, society, the environment and us, the Celonis team.”
The bottom line is this: Whether it’s the climate crisis or the supply chain crisis, the companies that adapt their business processes fastest are the ones that will survive and thrive.
That’s how processes might just save the world.