Business Transformation
/
Business Process Reengineering
June 6th 11th, 2015
FORE School of Management
Prof Raman Sethi & Vineeta Kumar
1
Information Technology
The collection of computing systems used by an
organization Major Capabilities of Information System
Perform high-speed, high-volume, numerical computation.
Provide fast, accurate, and inexpensive communication within and between organizations.
Automate both semiautomatic business processes and manual tasks.
Store huge amounts of information in an easy-to-access, yet Store huge amounts of information in an easy-to-access, yet small space.
Allow quick and inexpensive access to vast amount of information, worldwide.
Facilitate the interpretation of vast amounts of data
Enable communication and collaboration anywhere, any time.
Increase the effectiveness and efficiency of people working in groups in one place or in several locations, anywhere.
Facilitate work in hazardous environment .
Changes in Work Rules Brought by IT
Old Rule Intervening Technology New Rule
Information appears in only one place at one time
Shared databases, client/server architecture, electronic mail
Information appears simultaneously wherever needed
Only an expert can perform complex work.
Expert systems, neural computing
Novices can perform complex work.
Managers make all Decision support systems, Decision making is Managers make all decisions.
Decision support systems, enterprise support systems, expert systems
Decision making is part of everyones job
Field personnel need offices to receive, send, store, and process information.
Wireless communication and portable computers, information highways, electronic mail
Field personnel can manage information from any location.
You have to locate items manually.
Tracking technology, groupware, workflow software, client/server
Items are located automatically
Plans get revised periodically.
High-performance computing systems
Plans get revised instantaneously whenever needed.
3
Changes in Work Rules Brought by IT
Old Rule Intervening Technology New Rule
Customized products and services are
CAD-CAM, CASE tools, online systems for JIT decision
Customized products can be made fast and inexpensively
People must come to one place to work together.
Groupware and group support systems, telecommunication, electronic mail, client/server
People can work together from different locations.
A long period of time is spanned between the inception of an idea and its implementation (time to market)
CAD-CAM, electronic data interchange, groupware, imaging (document) processing
Time-to-market can be reduced by 90 percent
and services are expensive and take a long time to develop.
systems for JIT decision making, expert systems
made fast and inexpensively (mass customization).
Work should be moved to countries where labor is inexpensive (off-shore production).
Robots, imaging technologies, object-oriented programming, expert systems
Work can be also done in countries with high wages and salaries.
4
IT in Integration
Functional Area Information TechnologiesMarketing Multimedia, Internet, database
Distribution Online Inventory and shipment controls, Internet, Database, Barcodig, satellite positioning
Accounting Computerized Data collection, shared Accounting Computerized Data collection, shared Database, Spread Sheets
Design & Engineering CAD
Purchasing Internet, Database, ERP
Production CAM, Database, Scheduling, barcoding, ERP, EDI
Maintenance Expert Systems, Scheduling
Digital Economy
An economy based on digital technologies,
including communication networks (the
Internet, intranets, and extranets), computers,
software, and other related technologies; software, and other related technologies;
also sometimes called the Internet economy,
the new economy,
or the Web economy .
6
The New Economy VS. The Old Economy
Example Old New
Buying and selling text book Visit the bookstore Visit web site for publishers and
retailers
Registering for classes Walk around campus to Departments,
Registrars office, etc.
Access campus web site
Photography Buy film, use camera, take picture, take Use digital cameraPhotography Buy film, use camera, take picture, take
it for processing
Use digital camera
Paying for Gasoline Fill up your car, go inside, pay cash or
credit card
Use speed pass token wave over
the sensor and go
Paying the Transportation Pay cash, metal tokens Metro cards electronic cards
Paying for goods Visit store, take the item, pay , go Use self service kiosks
Supplying commercial photos Use newspapers, paper, catalog or on
line
Use hub-like supply chain with
digitized picture
Conflict of New & Old
Old Economy
Bricks & Mortar
Product Driven
Tangible Assets
Infrastructure
Capital
Physical Resources
New Economy
Clicks & Mortar
Service Driven
Intangibles
Human Potential
Knowledge Capital
Goodwill & LoyaltyPhysical Resources
Standard Metrics
ROA
ROI
Rigid Structure
Diversification
Focus on Product Portfolio
Goodwill & Loyalty
New Metrics
Shareholder Value
Employee Productivity
Flexibility
Integration
Focus on Speed & Size
8
Role of IT
an initiator, a facilitator, or an
enabler
9
Role of IT - Initiator
Agent of change
New requirements
e.g. Imaging technology, Internet
An important technology first creates a
problem then solves the problem Hammer &
Champy
10
Role of IT - Facilitator
Make work/workload easier
e.g. Flow of Information
11
Role of IT - Enabler
this role of IT has received the most attention
Offers the ability/necessary assistance to accomplishsomething
When IT is to accomplish process innovation, IT serves as an enabler. as an enabler.
IT is designed to accelerate specific process steps and was viewed "as an enabler for working smarter and more productively
IT acts as "an enabler which provides rapid processing and analytical capabilities, parallel access and information capture. For example, networking enables both collection and dissemination of data.
12
Role of IT E-Commerce
Personalized service
Lower transaction & material costs
e.g. E-tickets
Save cost of print/mail Save cost of print/mail
Reduce need for telephone reservation staff
Reduced commission payable to travel agency
13
Role of IT - Coordination
Shared Databases
Information dissemination
Facilitate distribution
Networking Networking
Assists collection/dissemination
Rapid implementation of decisions
Telecommunication
14
Benefits of IT
Cost reduction
Time elimination
Error minimization
Enabling Paralelism Enabling Paralelism
Facilitating Integration
Enhancing decision Making
Minimizing Points of contact
15
Role of IT Examples
Dominant motivations for E-Commerce are improving customer service and cost cutting to be followed by building customer loyalty, boosting revenue and offering a new sales channel.
75 extranet projects in Boeing (expected to save millions) for such use as receiving $100 million in spare part orders from airlines through one Web site; sending documents to government.
50 percent of order time reduced in Adaptec Inc., from 16 weeks to 55 days; purchase orders processing fell from six days to minutes; suppliers do not need to manually re-enter faxed-orders; saved $1 million in costs and $9 million from work-in-process.million in costs and $9 million from work-in-process.
General Electric bought over $1 billion in goods and services via its Trading Process Network; estimated to save $500 million over the next three years.
Dell used the Internet for messages to suppliers and reduced inventory on hand to eight days (versus Compaq's 26 days).
Internet-based audio-video conferencing, integrating voice, data, and video over the network: Ford shares documents in real time; estimated to have shortened average car design time from 36 months to 24 months; L.L. Bean uses the network for customer service calls as well as customer Web browsing at the same time using the same line.
16
Role of IT
IT Changed Business Processes
Internet / Data Networks
EDI EDI
CAD/CAM
Expert Systems
Barcoding
Database
17
Power Sector Overview
The "democratization" of IT from the mainframe to the PC is "breaking down the communications barriers between corporate functions, suppliers, and even customers."
Hammer and Champy call this the "disruptive" power of IT.
This ability for information to be at many places at the same time -- which allows companies to reap the benefits of both centralization and decentralization -- is at the heart of BPR.
18
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
Information technology as the technology of sensing, coding, transmitting,
translating and transforming information
Information technology and BPR have a recursive relationship
IT capabilities should support business processes, and business processes
should be in terms of the capabilities IT can provide.
IT plays an important role by either enabling or constraining successful IT plays an important role by either enabling or constraining successful
BPR.
IT can also become an inhibitor of Reengineering if the organization's IT
Infrastructure is inadequate or inflexible.
The role of IT is to make a new process design possible.
If nothing changes about the way work is done and the role of IT is simply
to automate an existing process, then economic benefits are likely to be
minimal.19
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
The role of IT in Reengineering is not to automate the business process.
The application of IT to reengineering requires inductive thinking, which is
the ability to first recognize a powerful solution and then seek the problems
that it might solve.
A fundamental error that most companies commit when they look at A fundamental error that most companies commit when they look at
technology is to see how a new technology will help in solving problems in
their existing process.
The companies have to think how a technology can help them to do things
that they are not doing in the current process.
IT is focused increasingly on creating connections between employees,
across functions, with customers and between data and decision-makers.
20
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
The major advantage of IT in reengineering lies in its disruptive power. IT has
the power to break the rules and make people think inductively and give the
company a competitive advantage.
The company that used the disruptive power of IT to break all rules and gain
competitive advantage was Amazon.com. Amazon.com broke the existing
rules and sold books without a physical presence for its customers through rules and sold books without a physical presence for its customers through
Internet. Amazon.com in doing so has completely changed the book store
business and broke all the rules.
The key to the effective use of IT lies not in moving the information faster
but in doing right things with it.
IT has to be used to make proactive decisions to improve business
performance rather than report on it after the fact.
Supermarkets like Wall-Mart have used IT to drive their business. 21
The Role of Information Technology in implementation of
BPR Nandgopal Ramachandran
Capability of IT Organizational Impact of the Capability
Transactional IT can transform unstructured business process into
standardized transactions
Geographical IT can transfer information with rapidity and ease across
large distances, making business process independent of
locations
Automation IT can reduce human labour in certain process
ISP
Automation IT can reduce human labour in certain process
Informational IT can bring vast volumes of detailed information into a
business process
Analytical IT can bring complex analytical methods to bear on a
process.
Sequential IT enables changes in the sequence of tasks in a process,
often allowing multiple tasks to be worked on
simultaneously
The Role of Information Technology in implementation of
BPR Nandgopal Ramachandran
Capability of IT Organizational Impact of the Capability
Knowledge management IT allows the capture and dissemination of knowledge
and expertise to improve the process
Tracking IT allows detailed tracking of status, inputs and outputs
Reduction of IT can be used to connect two parties within a process
ISP
Reduction of
intermediaries
IT can be used to connect two parties within a process
that would otherwise communicate through
intermediaries
IT provides project management skills and experience, which is a key ingredient in
successfully implementing reengineering.
The IT group of the company has experience in large-scale project management as
they are exposed to the structured demand of large scale projects.
Reengineering in a company is and should be undertaken as a project.
The Role of Information Technology in implementation of
BPR Nandgopal Ramachandran
Reengineering Area Role of IT
Analysis phase Partnership with the Process owner, and team who are
responsible for implementing reengineering
Design phase Partnership with the Process owner, leader, and team
who are responsible for implementing reengineering
Implementation phase Partnership with the process owner, steering
ISP
Implementation phase Partnership with the process owner, steering
committee, leader, and team who are responsible for
implementing reengineering
Overall accountability
and leadership
Support; project management expertise, design
principles, key ingredient in the reengineered process
Reengineering plan and
implementation
Partnership with the leader, and team who are
responsible for implementing reengineering
The Role of Information Technology in implementation of
BPR Nandgopal Ramachandran
Reengineering Area Role of IT
Project management
expertise
Leadership; IT group should provide their project
management expertise m the implementation of
reengineering
Technology expertise Leadership; The technological capabilities should be
evaluated before implementing reengineering
ISP
Identifying the process
to be reengineered
Partnership with the leader, and team who are
responsible for implementing reengineering
Business vision Support; While defining new goals and vision- the
capability of IT has to be taken into account
In a study, 80 % of the CEOs said that the performance of IT in the reengineering
efforts of their company was poor. 48 % confirmed that the operational teams had
conflicts with the IT group. 46 % confirmed that IT and operational group had a
strained relationship.
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
Criticality of IT in Business Process
The criticality of IT in business process should be analyzed before embarking on the
reengineering project:
otherwise there will be a tendency to use IT for automating the business process,
which is not reengineering.
IT is the enabler, which will streamline business processes, reduce cycle times and
validate the performance improvements. validate the performance improvements.
IT will help standardize and simplify business processes across the various
dimensions of a business thereby bringing in efficiency gains in terms of time and
money.
More importantly, IT through the use of a databases can help in the vital area of
knowledge management by converting data from a common format manipulate it
and present it as information that is useful in decision making.
It can also consolidate and enrich data to create information that is not available
from a single source and can therefore act as a vital source of competitive
intelligence 26
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
The future role of IT have been identified into three main categories.
1. Participate as a member of the reengineering team but do not take control of
the project.
2. Define technology solutions to enable new business processes and take time
to educate operational managers about new technology.
3. Implement technology needed to support the new business processes.
IT managers and staff have to become business analysts, knowledgeable
of business needs and able to combine a business orientation with
technical expertise.
The advent of Internet and e-commerce, businesses are getting closer to
the customers.
In future Internet will change the way business is carried out.
E-commerce will affect reengineering more than present day IT.
E-commerce initiatives will be business led activities with an implicit
acceptance of process change 27
Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran
Conclusion
The role of IT in reengineering is not to automate the business process.
IT is not only an enabler for reengineering
IT has also become an essential and integral part of all reengineering efforts.
IT can become an inhibitor of reengineering if the organization's IT Infrastructure
capabilities are inadequate or inflexible.
IT capabilities of the organization should not directly influence the IT solutions
that are needed for the company.
In the design phase In the design phase
IT can be used to simulate a model of the design and there by validate the
new design.
The disruptive power helps organizations to break all the rules and think
inductively about the business that they are in to gain competitive
advantage.
In the implementation of reengineering
IT provides the skills and tools that are needed to effectively reengineer.
IT provides project management skills
IT supports redesigned business process and facilitates cross-functional
workflow.28
Power Sector OverviewThe Enabling Role of Information Technology - Kevin Lam
Information technology (IT) plays a crucial role in business reengineering
Essentially as an enabler.
Most people misuse the technology.
They look at the technology through the lens of their existing tasks
Information technology breaks conventional rules/assumptions of Information technology breaks conventional rules/assumptions of
processes - rules designed when the processes were created.
IT should not be involved in the redesign process
A specific IT solution should not be a constraint in the redesign stage in
reengineering.
Past investments in IT should not be allowed to constrain the redesign.
Reengineering is about reinventing processes. IT is just a tool. 29
Power Sector OverviewIs Information Technology an enabler or a bottleneck
Maureen Weicher, et al
Information technology plays a central role in reengineering - BUT
"the IS organization in many companies is unable to play."
This ineffectualness may be due to the historic inability of IS to do "anything big
quickly"
Since the IT group is not perceived as being part of the business process, they are
excluded from the reengineering team
"lacklustre" performance of many information systems in the past decades "lacklustre" performance of many information systems in the past decades
Never used to "challenge why things are done in a company, but instead justify the
way they are done."
Systems in the service sector have been used to generate more unneeded reports,
speed up superfluous work steps,
generate unnecessary information,
encourage shoddy thinking and misdirect attention to spurious details.
30
Power Sector OverviewIs Information Technology an enabler or a bottleneck
Maureen Weicher, et al
Despite studies that indicate over half of all reengineering efforts are initiated
"because of a perceived information technology opportunity...the actual
technological solution is far less important than educating employees to use IT
as both a strategic initiative and as a tool in the reengineering process."
Based on the above findings, some insist that when developing a reengineering
strategy, the best companies "ignore information technology."
Only after the strategy is complete should innovative IT applications be
benchmarked, since innovative applications often "stem from a combination
of breakthrough ideas and from modifying several best practices."
31
Power Sector OverviewIs Information Technology an enabler or a bottleneck
Maureen Weicher, et al
IT can prove useful in the reengineering analysis and design
process.
Graphics software and CASE tools can produce process maps;
spreadsheets and costing software allow for activity-based cost
analysis; databases can track customer satisfaction and
complaints; complaints;
"blind" e- mail bulletin boards can be used to capture
employee suggestions.
In addition e-mail and groupware can facilitate communication
and coordination across geographical and organizational
barriers.
32
Power Sector OverviewIT's Role in Business Process Reengineering Initiatives - William Ulrich
Radically altering business processes within highly automated work environments
typically requires modification to the information systems that support those
processes.
Information technology (IT) organizations have had significant difficulty meeting the BPR
challenge due to the inherent complexities involved in "retooling" complex legacy
environments.
In order to more effectively respond to BPR retooling demands, IT must play a more In order to more effectively respond to BPR retooling demands, 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.
33
BPR - The Enabling Role of Information Technology
The IT tools for BPR
Simulation and visual simulation tools - to support the
modeling activities of BPR
Flow diagrams - made by specialized BPR tools that are
usually integrated with other toolsusually integrated with other tools
Work analysis - accomplished with tools that conduct
forecasting, risk analysis, and optimization
Workflow software - places system controls in the hands
of end-user departments
34
Major Reengineering Activities
Redesign of processes
From mass production to mass customization
mass production
produces a large quantity of an identical, standard product
mass customization
produces large volumes, yet customizes the products to the produces large volumes, yet customizes the products to the
specifications of individual customers
increases with the spread of electronic commerce, which
transforms the supply chain from a traditional push model
to a pull model
35
Major Reengineering Activities (continued )
Cycle time reduction
IT makes a major contribution in shortening cycle times by
allowing companies to combine or eliminate steps, and to allowing companies to combine or eliminate steps, and to
expedite various activities in the business process
Cycle time reduction can result in gain a substantial market
share
36
Restructuring Entire Organizations
Customerdemographics
Checking Installment
Customer
Account manager supported by ...
Checking accounts
Installment loans
Savings accounts
Mortgage loans
Trusts Etc
Expert system
Statemen
t
Backed up by ...
Checking expect
Loanexpect
EtcConsolidated statement
Reengineered bank with integrated system
37
Restructuring Entire Organizations (continued )
Networked organization
resemble computer networks and are
supported by computerized systemssupported by computerized systems
away from the hierarchical organization toward
the networked organization due to the
evolution from an industrial-based economy to
an information-based economy
38
Restructuring Entire Organizations (continued )
Empowerment - the vesting of decision-making or approval authority in employees
in instances where such authority traditionally was a managerial prerogative
Empowerments relationship to information technology
the provision of right information, at the right time allows
employees to make decisions
enhances the creativity and productivity of employees, as well as enhances the creativity and productivity of employees, as well as
the quality of their work
training can be enhanced by IT
enables non-managers to make decisions
39
Hierarchical vs. Networked Organization
Formal
Highly structured
Manage
Hierarchical Organization
Informal
Loosely structured
Delegate/lead
Networked Organization
Control
Direct
Employees a cost
Informationmanagement-owned
Hierarchical organizations
Risk avoidance
Individual contributions
Ownership/participation
Empower
Employees an asset
Informationshared ownership
Flatter/ manageable organizations
Risk management
Team contributions 40
Power Sector OverviewThe Role of Information Technology - HBS
Early applications of information technology focused on automating tasks
with the objective of speeding up and improving the accuracy of work
performed given the traditional structure.
Yet organisations that wish to engage in BPR must view IT as an enabler for
business process change, not as an automation tool.
The fundamental error that most companies commit when they look at
technology is to view it through the lens of their existing processes
They ask How can we use these new technological capabilities to enhance
or streamline or improve what we are already doing?
Instead, they should be asking How can we use technology to allow us to
do things we are not already doing?
Reengineering, unlike automation, is about innovation. 41
Power Sector OverviewThe Role of Information Technology - HBS
Reengineering is about exploiting the latest capabilities of technology to achieve entirely new goals.
One of the hardest parts of reengineering lies in recognising the new, unfamiliar capabilities of technology instead of its familiar ones.
Information technology is usually a necessary but insufficient factor to achieving business process reengineering.
On one hand, IT has been described as both a strategic catalyst and an enabler of BPR.
On the other hand, managers have also described the absence of needed IT capabilities as a major inhibitor to BPR.
42
Power Sector Overview
The "democratization" of IT from the mainframe to the PC is "breaking down the communications barriers between corporate functions, suppliers, and even customers."
Hammer and Champy call this the "disruptive" power of IT.
This ability for information to be at many places at the same time --which allows companies to reap the benefits of both centralization and decentralization -- is at the heart of BPR.
43