Every Manager's Guide to Business Processes:

Clearly, many processes are integral and inherent to an industry. A bank without ATM machines is not a bank. But do ATMs represent a core banking process? Viewed as "automated teller machines," they do. Solicit ideas for new uses for ATMs and the suggestions will invariably be cast in terms either of financial services or purchase of paper-based products: mutual funds and insurance or theater tickets and stamps.

Step back, though, and one can begin to see in the ATM a process infrastructure, a general-purpose access point for electronic services dispensed on the basis of customer identification by a card. Maryland's department of social service is using ATMs to electronically manage benefits (welfare and food stamps), New Jersey to process automobile registrations, and some colleges to handle class registration. Each of these applications uses banking's existing process infrastructures to render a new service at low cost. Business Process Investment terms this value builder "importing" a process; importing the ATM infrastructure in the service of its own processes did not make the State of Maryland a bank, but did transform its welfare payment processes.

Processes can be exported, too. A firm can use its own core process to offer, at low incremental cost, another industry's services. Thus, Fidelity Investments, a securities industry firm, and USAA, an insurance company, both exploit telephone-based service infrastructures and information technology capabilities to provide banking services with no physical branches.

Industry labels mean less and less in a process-driven world. Ford and General Motors are in the auto industry. Or are they? General Motors offers credit cards to customers and non-customers alike; purchases accumulate credit toward the purchase of a GM car. Taken together, GM and Ford are the largest private holders of consumer credit in the United States. GM earns more from financing than from making automobiles in some years. Of the top three firms in credit cards, AT&T, Sears, and Citibank, only the latter is a true "bank."

To think in terms of the core processes of an industry is to be bound by self-limiting paradigms. All processes are not created equal; one insurance firm will handle claims processing as background, another will make it its identity process. A process predator will include another industry's basic processes in its own aggressive portfolio of innovations (which is how AT&T and Sears moved to leadership in credit cards, a "core" banking process). Customers don't care about industry boundaries; they won't decline British Airways' offer to make an international hotel reservation on the grounds that they have some moral duty to respect the hotel industry's core processes.

Within industries, the same process can assume different levels of importance in constituent firms' business vision and strategic focus. Insurance companies' process infrastructure includes underwriting, claims processing, customer service, and marketing. All are core processes, but not all are key to all insurance providers. Consider four of the industry's leaders. 

• UNUM, the industry leader in disability insurance, defines itself in terms of its processes for pricing risk. These are its identity asset processes. UNUM boasts that it can distinguish the relative risk of left-handed from right-handed New Jersey doctors who drive Volvos. Whether true or not, it makes the point that pricing is UNUM's key process. Branding is not. Whereas Prudential ("You own a piece of the rock") and State Farm ("State Farm is there") make branding central to their marketing, UNUM, because it sells through brokers, may not even be known to its customers.
  
  
• Progressive Insurance, a specialist in high-risk car insurance that accepts customers other providers avoid-drivers with histories of accidents and traffic offenses (it does not, of course, exclude drivers with unblemished records)-has used claims processing to become one of the most profitable firms in the industry. Its claims adjusters operate out of vans equipped with cellular communications links and computer workstations. Driving around their assigned territories, they may arrive at accident scenes before the police. Claims are often processed on the spot, sometimes even to the point of issuing a check before having the vehicle towed.
  
  
• State Farm's emphasis on branding relies on characterizing its network of agents as individuals. Pricing is very much by the book, State Farm having sufficient customer volume to spread actuarial risk and price by category.
  
  
• USAA, perhaps the pinnacle of service in the industry, has made the customer contact process its principal asset. USAA prides itself on presenting a "single company image" and being easier to deal with than a next door agent. One telephone call gets a customer answers to just about every conceivable question and every available access to service. The company is the world's largest user of toll-free telephone numbers, by which it dispenses the bulk of its customer service. 

All of these companies have the same overall mix of processes, but a different process is key to each. USAA's emphasis on its customer contact processes is appropriate to its core customer base: military and former military officers who represent a stable group of long-term reliable, trustworthy customers. Similarly, Progressive's emphasis on claims processing matches its predominant customer profile.

All of these companies are outstanding in the industry, each for a different reason. The notion of core processes tells one nothing about the differences, about how each company has created its own process advantage. Business processes are more usefully considered in terms of what Business Process Investment refers to as their salience, that is, their link to strategic intent and core competencies. BPI defines identity, priority, background, and mandated processes. Claims settlement is Progressive's identity process, USAA's priority process, and many insurers' background process.