Bpr - Notes 5e415w

Explain BPR? When to take BPR ? Davenport&Short (1990) define business process as “a set of logically related tasks performed to achieve a defined business outcome. Hammer (1990) has defined Business Process Reengineering “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed”. This definition comprises four keywords: fundamental, radical, dramatic and processes. Keyword 1: Fundamental Understanding the fundamental operations of business is the first step prior to reengineering. Business people must ask the most basic questions about their companies and how they operate: “Why do we do what we do?” and “Why do we do it the way we do?” Asking these basic questions lead people to understand the fundamental operations and to think why the old rules and assumptions exist. Often, these rules and assumptions are inappropriate and obsolete. Keyword 2: Radical Radical redesign means disregarding all existing structures and procedures, and inventing completely new ways of accomplishing work. Reengineering is about business reinvention, begins with no assumptions and takes nothing for granted. Keyword 3: Dramatic Reengineering is not about making marginal improvements or modification but about achieving dramatic improvements in performance. There are three kinds of companies that undertake reengineering in general. First are companies that find themselves in deep trouble. They have no choice. Second are companies that foresee themselves in trouble because of changing economic environment. Third are companies that are in the peak conditions. They see reengineering as a chance to further their lead over their competitors. Keyword 4: Processes The final keyword “Process”, though the most important in the definition, is the one that gives most corporate managers the greatest difficulty. Most business people are not process-oriented; they are focused on tasks, on jobs, on people, on structures, but not on processes.

BPR is done by 1. Companies at its declining stages. 2. Companies in its stable stages. 3. Companies in their peak stages.

Difference between continous improvement and BPR Continuous improvement is an approach to improving the competitiveness, effectiveness and flexibility of a whole organization. It is essentially a way of planning, organizing and understanding each activity, and depends on each individual at each level. CONTINOUS IMPROVEMENT involves placing the customer as the focal point of operations. Its aim is to continuously improve process performance in order to satisfy customer requirements. At the center of TQM is the concept of the management of processes, and the existence of internal suppliers and customers within organizations. BPR also emphasizes focus on the process. However, BPR is much more radical than CONTINOUS IMPROVEMENT. Quality approaches concentrate on improving existing processes; process reengineering starts from scratch to create new processes without the constraints of existing methods, people, technology, management systems, or organizational structures. The major differences between Quality Improvement and Process Reengineering approaches are provided by Chang (1994) in the following table:

Differences Between Quality Improvement (TQM) and Process Reengineering (BPR) Quality-Improvement Major Factor

Approach

Reengineering

Senior-

Hands-on

Approach Hands-on, active involvement throughout the

management

becoming

involvement Intensity of team-

reinforcement-oriented Ongoing involvement on an

Ongoing involvement for a specified duration

member

as-needed, part-time basis

on a full-time basis

involvement Improvement goals

Focus

initially,

and more

on

effort

incremental Focus on dramatic improvements in a short

improvements over a period of time frame time Emphasis

Implementation approach Magnitude

of

on

improving Emphasis on creating new ways of doing

current work processes things Limited disruption to existing Radical changes to existing systems and

organizational

systems and structures

change Breadth of focus

Addresses narrowly defined Addresses processes that span entire business

Use of benchmark

work processes Used after

data Dependence

improvement, to compare data selection Information systems used for Information systems used as a central enabler

on

information

data

collection

systems

interpretation

structures

units process Used on front end, to assist with process

and with on-line access

Quality specialists tend to focus on incremental change and gradual improvement of processes, while proponents of reengineering often seek radical redesign and drastic improvement of processes. On the other hand, Davenport&Short (1990) suggest that CONTINOUS IMPROVEMENT and BPR can -and should- form an integrated strategic management system within organizations.

Relationship Between BPR and Information Technology Information Technology (IT) refers to “the capabilities offered by computers, software applications, and telecommunications”. (Davenport&Short, 1990) Hammer (1990) considers IT as the key enabler of BPR, which he considers as "radical change." He prescribes the use of IT to challenge the assumptions inherent in the work processes that have existed since long before the advent of modern computer and communications technology. Davenport&Short (1990) argue that BPR requires taking a broader view of both IT and business activity, and of the relationships between them. IT and BPR have recursive relationship. IT capabilities should business processes, and business processes should be in of the capabilities IT can provide. Davenport&Short (1990) refer to this broadened, recursive view of IT and BPR as “the new industrial engineering”. In order to more effectively respond to BPR, IT must play a more active role throughout a BPR project. IT must: •

Increase their level of participation in all areas of a BPR initiative;

•

Provide key information regarding automated processes to business analysts;

•

Build a transition strategy that meets short and long-term retooling requirements;

•

Enforce the integrity of redesigned business processes in the target system;

•

Reuse business rules and related components that remain constant in a target application.

Factors driving a BPR project can include improving customer service, streamlining processes to cut costs, or addressing inefficiencies in other high impact areas. For example, customers frustrated with having to speak to multiple individuals regarding an insurance claim may switch to the competition. To address this problem, an insurance provider determines that service functions must be consolidated to one point of . The underlying systems that manage claims handling do not single point of processing. In this case, legacy systems have become a barrier to the success of the BPR initiative. The relationship of BPR analysis and IT is reciprocal because business and technical analysts must devise a continuous communication loop for projects to work. This is particularly critical because current systems analysis helps articulate the as-is business model while the redesigned business model dictates the

impact BPR has on existing information architectures. Once this reciprocal cycle is in place, IT can determine exactly how to upgrade, redesign, or replace selected systems in order to implement reengineered business processes. Figure one highlights key steps in a retooling strategy. Finally, Attaran (2003) categorizes IT roles in BPR into three phases: Phase 1: Before the process design (as an enabler)  Create infrastructures and manage information that evolving organization  Foster process thinking in organizations  Identify and select process for redesign  Participate in predicting the nature of change and anticipate the information needs to that change  Educate IT staff in non-technical issues such as marketing, customer relationships, etc.  Participate in deg measures of success/failures of reengineering

Phase 2: During the process design (as a facilitator)  Bring vast amounts of information into the process  Bring complex analytical methods to bear on the process  Enhance employees’ ability to make more informed decisions with less reliance on formal vertical

information flows  Identify enablers for process design  Capture the nature of proposed change and match IT strategy to that change  Capture and disseminate knowledge and expertise to improve the process  Communicate ongoing results of the BPR effort  Transform unstructured processes into routinized transactions  Reduce/replace labor in a process  Measure performance of current process  Define clear performance goals and objectives to drive the implementation  Define the boundaries and scope of the process

Phase 3: During the implementation (as an implementer)  Create a digital loop  Establish resources for critical evaluation of the reengineered process

 Improve IT processes to meet increasing needs of those divisions that have gone under reengineering

processes  Institute a program of ‘‘cleanup’’ and damage control in case of failure  Communicate ongoing results of the BPR effort  Help to build commitment to BPR  Evaluate the potential investment and return of reengineering efforts

Reengineering Success Factors More than half of early reengineering projects failed to be completed or did not achieve bottom-line business results, and for this reason business process reengineering "success factors" have become an important area of study. Success factors are a collection of lessons learned from reengineering projects and from these lessons common themes have emerged. The success factors that lead to successful outcomes for reengineering projects include: 1. Top Management Sponsorship (strong and consistent involvement) 2. Strategic Alignment (with company strategic direction) 3. Compelling Business Case for Change (with measurable objectives) 4. Proven Methodology (that includes a vision process) 5. Effective Change Management (address cultural transformation) 6. Line Ownership (pair ownership with ability) 7. Reengineering Team Composition (in both breadth and knowledge) Top Management Sponsorship Major business process change typically affects processes, technology, job roles and culture in the workplace. Significant changes to even one of these areas require resources, money, and leadership. Changing them simultaneously is an extraordinary task. If top management does not provide strong and consistent ,

most likely one of these three elements (money, resources, or leadership) will not be present over the life of the project, severely crippling your chances for success. Strategic Alignment You should be able to tie your reengineering project goals back to key business objectives and the overall strategic direction for the organization. This linkage should show the thread from the top down, so each person can easily connect the overall business direction with your reengineering effort. You should be able to demonstrate this alignment from the perspective of financial performance, customer service, associate (employee) value, and the vision for the organization. Business Case for Change In one page or less you must be able to communicate the business case for change. Less is preferred. If it requires more than this, you either don't understand the problem or you don't understand your customers. The business case for change will remain the center piece that defines your project, and should be a living document that the reengineering team uses to demonstrate success. Financial pay back and real customer impact from major change initiatives are difficult to measure and more difficult to obtain; without a rigorous business case both are unlikely. Proven Methodology The previous module presented several BPR methodologies, and it is important to note that your methodology does matter. Seat-of-the-pants reengineering is just too risky given the size of the investment and impact these projects have on processes and people. Not only should your team understand reengineering, they should know how to go about it. In short, you need an approach that will meet the needs of your project and one that the team understands and s. Change Management

One of the most overlooked obstacles to successful project implementation is resistance from those whom implementers believe will benefit the most. Most projects underestimate the cultural impact of major process and structural change, and as a result do not achieve the full potential of their change effort. Line Ownership The line operation probably cannot heal itself when it comes to major business re-design. Staff and consultants have no lasting ability for the solution, and never succeed at forcing solutions on line organizations. You need both. You need the line organization to have the awareness that they need help, to contribute their knowledge, and to own the solution and implementation. At the same time you need the expertise and objectivity from outside of the organization. Building this partnership is the responsibility of the line organization, stakeholders and re-design team. No group is off the hook. Reengineering Team Composition The reengineering team composition should be a mixed bag. For example, •

some who don't know the process at all,

•

some that know the process inside-out,

•

include customers if you can,

•

some representing impacted organizations,

•

one or two technology gurus,

•

each person your best and brightest, ionate and committed, and

•

some from outside of your company.

FACTORS DETERMINED TO HINDER REENGINEERING SUCCESS Fear of job loss Somewhere during this century, reengineering became synonymous with down sizing and worker layoffs. However, many of the early corporate projects did not include such drastic measures. Unfortunately, when companies take on a project that will cost extremely large amounts of capital, senior management wants to see some hard evidence that there will be a huge savings some where. One of the easiest ways to provide a cost/benefit to a BPR project is cut the workforce. Many cases have shown this only reduces the available talent pool of an organization. Fear and anxiety fill the hearts of those workers remaining. Down sizing can profoundly affect the lives and productivity of individuals, whether they leave the organization or survive the down sizing Therefore, BPR drives fear into the organization and destroys the to entire social segment of the socio-technical system which produces the product or service Inadequate skills of workers An organization can be categorized by people into three categories; eager adopters, prove-its, and resisters. Only about 10 to 15 percent of people are considered eager adopters. These people like technology and are stimulated by learning how to use it. The other 85% probably don't have the skills for BPR with IT, but may not it to it. No reengineering effort will succeed without first reeducating and retraining the people who will ultimately work with the new process The focus needs to be on the people not on the processes. Lack of management BPR became the method to wipe the slate clean and start over with business processes. However, far too often this was applied to employees and middle managers. Senior management sometimes felt it was not necessary for them to also change with IT. However, when employees found out the CEO has his secretary retrieve and sends his E-mail; credibility for a new system project was lost. Management often allows money to be thrown around purchasing technology, but then overlook financing training of people necessary to infuse or utilize the

IT. Strong leadership is necessary if BPR projects are not to be ruined by psychological and political disruptions that accompany change Change of organizational structure and culture Human ions and emotions react strongly when the prospect of change intrudes on their familiar working and living patterns. It is believed that the necessary cooperation to achieve success will not occur unless people are assured they will not be working themselves out of a job. .

What is a Business Process? Davenport&Short (1990) define business process as “a set of logically related tasks performed to achieve a defined business outcome”. In their view, processes have two important characteristics:  They have customers, that is, processes have defined outcomes, and there are recipients of the

outcomes.  They cross organizational boundaries, that is, they normally occur across or between organizational

subunits. On the other hand, Hammer&Champy (1993) define business process as “a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer”. Examples of processes include: developing a new product; ordering goods from a supplier, creating a marketing plan, processing and paying an insurance claim, etc. Davenport&Short (1990) have categorized business processes according to three dimensions:  Organizational entities or subunits involved in the process (Interorganizational, Interfunctional, and

Interpersonal Processes)  The type of objects manipulated (Physical and Informational Processes)  The type of activities taking place (Operational and Managerial Processes)

Different process types require different levels of management attention and ownership, need different forms of IT , and have different business consequences.

A business process or business method is a collection of related, structured activities or tasks that produce a specific service or product (serve a particular goal) for a particular customer or customers. It often can be visualized with a flowchart as a sequence of activities. The core business of an organization is an idealized construct intended to express that organization's "main" or "essential" activity. The corporate trend

in

the

mid-20th

Century

of

acquiring

new

enterprises

and

forming conglomerates enabled corporations to reduce costs funds and similar investment vehicles, and sometimes the following of a popular trend among corporate management seeking to appear current and impress investors. Core business process means that a firm's success depends not only on how well each department performs its work, but also on how well the company manage to coordinate departmental activities to conduct the core business process, which is; 1. The market-sensing process Meaning all activities in gathering marketing intelligence and acting on the information. 2. The new-offering realization process Covering all activities in research, development and launching new quality offerings quickly and within budget. 3. The customer acquisition process all the activities defining the target market and prospecting for new customers 4. The customer relationship management processes all the activities covering building deeper understanding, relationships and offerings to individual customers. 5. The fulfillment management process all the activities in receiving and approving orders, shipping out on time and collecting payment. To be successful, a firm needs to look for competitive advantages beyond its own operations. The firm needs to look at the competitiveness value chain of suppliers, distributors and customers. Many companies today have partnered with specific suppliers and distributors to create a superior value delivery network.

Task and sub-process A business process is mainly formed by activities that need to be performed to complete the process. There are two kinds of activities - task and sub-process. A task is an atomic activity which represents work that cannot be broken down. On the contrary, sub-process represents work that can be broken down to a finer level of detail.

Flow Chart A flow process chart is a diagram that utilizes both text and symbols to show the actions required to complete a given process. This type of chart lays out each step in chronological order, with symbols indicating the beginning and ending of the process as well as decisions and actions that occur along the way. A flow process chart is useful for visualizing the procedure in question and identifying areas of weakness. Process flow symbols typically include three distinct shapes. An oval is used to signify the beginning and ending points of the process. A rectangle indicates actions, and a diamond indicates a decision. Each shape is connected to other shapes by an arrow, which leads the viewer from one process to the next. Each shape contains words describing that step of the process. A flow process chart typically has a single start point. This may be labeled "Start" or it may indicate the purpose of the chart, such as "Customer Service Call." From this point, arrows will lead to possible actions or decisions. Continuing with the previous example, a flow process chart on dealing with customer service calls may include questions that the caller should be asked, such as "What system are you operating on?" Each question will branch out to possible answers. These answers may lead to another question to further clarify the problem, or a solution which will effectively achieve the goal of the call. After a series of decisions and actions, the flow process chart will ultimately lead to an end point. Some charts will have a single beginning and end, while others can result in multiple conclusions. A customer service call could end with a variety of solutions fitting for the problem. The chart may end there, or point each solution to another action, such as a prompt to complete a survey on the effectiveness of the service. Actions or decisions that apply to more than one scenario will not appear multiple times on a flow process chart. The unifying process will appear once with multiple arrows leading up to it. If the final goal of the flow chart is

the same regardless of the process, the oval signifying the end point of the chart may be traced back to multiple actions or decisions. A flow process chart is a useful tool for businesses, as it can provide a visual of the actions that are taken throughout the course of a process. If the process seems overly complicated, this chart will help identify weak points where it can be clarified or improved. A flow process chart is also useful for making decisions. It can provide easy-to-read instructions for following the correct procedure in a variety of situations.

Process

- Activity or function that s the day-to-day operations of an organization, such

as ing, communications, maintenance, sales.