Business Process Reengineering

Presentation by:Eesha Mehta

Business Process Reengineering

Process

a collection of activities that takes one or more kinds of inputs and creates an output that is of value to a customer.

Business Process

a group of logically related tasks using the firm's resources to provide customer-oriented results to support organisation's objectives.

Definition of Process

A process is simply a structured, measured set of activities designed to produce a specific output for a particular customers or market.

-- Thomas Davenport Characteristics:

A specific sequencing of work activities across time and place A beginning and an end Clearly defined inputs and outputs Customer-focus How the work is done Process ownership Measurable and meaningful performance

Processes Are Often Cross Functional Areas“Manage the white space on the organization chart!”

M arketing& S ales

P urchase P roduc tion D is tribution A ccounting

C E O

Supplier

Customer/MarketsNeeds

Value-addedProducts/Services toCustomers"We cannot improve or measure the performance of a

hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."

What is Business Process Reengineering? An organizational change method used to redesign an organization

to drive improved efficiency, effectiveness, and economy. Organizational change tools may include:

Activity based costing analysis Baselining and benchmarking studies Business case analysis Functionality assessment Industrial engineering techniques Organization analysis Productivity assessment Workforce analysis Others, as needed (e.g., human capital tools)

Business Process Reengineering Business Process Reengineering DefinitionDefinition BPR first introduced in 1990 in a Harvard Business BPR first introduced in 1990 in a Harvard Business

Review article by Michael Hammer: Review article by Michael Hammer: Reengineering Work: Don't Automate, Obliterate. Reengineering Work: Don't Automate, Obliterate.

Hammer/ChampyHammer/Champy Reengineering the Corporation (1993)Reengineering the Corporation (1993)

Provided this definition:Provided this definition: ““Reengineering is the Reengineering is the fundamental fundamental rethinking and rethinking and radicalradical

redesign of redesign of business processesbusiness processes to achieve to achieve dramaticdramatic improvements in critical, contemporary measures of improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.”performance, such as cost, quality, service, and speed.”

Business Process Reengineering

“Reengineering is 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.”

Key Words

Fundamental Why do we do what we do? Ignore what is and concentrate on what should be. Need to understand why an organization does what it does – Need to understand why an organization does what it does –

question all of the rules and assumptions that exist question all of the rules and assumptions that exist Radical

Business reinvention vs. business improvement Radical redesign means disregarding all existing structures and Radical redesign means disregarding all existing structures and

procedures, and inventing completely new ways of procedures, and inventing completely new ways of accomplishing work. Reengineering is about business accomplishing work. Reengineering is about business reinvention, begins with no assumptions and takes nothing for reinvention, begins with no assumptions and takes nothing for granted. granted.

Key Words

Dramatic Reengineering should be brought in “when a need

exits for heavy blasting.” Companies in deep trouble. Companies that see trouble coming. Companies that are in peak condition.

Not looking for marginal or incremental improvements Not looking for marginal or incremental improvements or modificationor modification

Goal is dramatic improvements in performance. Goal is dramatic improvements in performance.

Key Words

Business Process a collection of activities that takes one or

more kinds of inputs and creates an output that is of value to a customer.

Focus on the way the organization adds value Focus on the way the organization adds value – through cross-functional business – through cross-functional business processesprocesses

Move away from function view; task based Move away from function view; task based thinking thinking

GOAL OF REENGINEERING

Reengineering is typically chartered in response to a breakthrough goal for rapid, dramatic improvement in process performance.

Continuous improvement activitiespeak; time to reengineer process

BreakthroughImprovement

Continuous improvementrefines the breakthrough

Competitive Forces Model

Threat of newmarket

entrants

Bargainingpower ofsuppliers

Bargainingpower of

customers

Threat ofsubstitute

products &services

The firmIntra-

industrycompetitors

Why BPR Is Necessary

The Virtual Organization: Three C’s Driving Change Customers take charge.

Mass market v. a “market of one” Backward integration Informed consumers Demanding Sophistication Changing Needs

Competition intensifies. More and different kinds Local Global Big is not better Technology changes the nature of competition.

Why BPR Is Necessary

Change becomes constant. reduced product cycles reduced time to develop new products more environment scanning Technology Customer Preferences

“Companies created to thrive on mass production, stability, and growth can’t be fixed to succeed in [such] a world.”

Integrate people, technology, & organizational culture to Respond to rapidly changing technical & business environment and customer’s needs to achieve Big performance gains

Customer Demands

expect us to know everything to make the right decisions to do it right now to do it with less resources to make no mistakes expect to be fully informed

Four Revolutions Affecting Business Today

NewCompetitors

New Rules ofCompetition

NewTechnologies

NewWork Force

The C’s related toOrganization Re-engineering Projects

The 3C’s of organization Re-engineering:

Customers Competition Change

The 4C’s of effective teams:

Commitment Cooperation Communication Contribution

Some of the BPR Objectives

Improve Efficiency e.g reduce time to market, provide quicker response to customers

Increase Effectiveness e.g deliver higher quality

Achieve Cost Saving in the longer run Provide more Meaningful work for employees Increase Flexibility and Adaptability to change Enable new business Growth

Spectrum of Change

Automation

Rationalization of

procedures

Reengineering

Paradigm shift

Spectrum of Change

Automation- refers to computerizing processes to speed up the existing tasks, improves efficiency and effectiveness.

Rationalization of Procedures-refers to streamlining of standard operating procedures, eliminating obvious bottlenecks, so that automation makes operating procedures more efficient,improves efficiency and effectiveness.

Spectrum of Change

Business Process Reengineering- refers to radical redesign of business processes.

Aims at eliminating repetitive, paper-intensive, bureaucratic

tasks reducing costs significantly improving product/service quality.

Paradigm Shift-refers to a more radical form of change where the nature of business and the nature of the organization is questioned, improves strategic standing of the organization.

RISKS & REWARDS

BPR is Not?

BPR may sometimes be mistaken for the following five tools:

1. Automation is an automatic, as opposed to human, operation or control of a process, equipment or a system; or the techniques and equipment used to achieve this. Automation is most often applied to computer (or at least electronic) control of a manufacturing process.

2. Downsizing is the reduction of expenditures in order to become financial stable. Those expenditures could include but are not limited to: the total number of employees at a company, retirements, or spin-off companies.

3. Outsourcing involves paying another company to provide the services a company might otherwise have employed its own staff to perform. Outsourcing is readily seen in the software development sector.

4. Continuous improvement emphasizes small and measurable refinements to an organization's current processes and systems. Continuous improvements’ origins were derived from total quality management (TQM) and Six Sigma.

Reengineering & Continuous Improvement--Similarities

16

Reengineering Continuous ImprovementSimilaritiesBasis of analysis Process ProcessPerformance measurement Rigorous RigorousOrganizational change Significant SignificantBehavioral change Significant SignificantTime investment Substantial Substantial

17

Reengineering & Continuous Improvement--Differences

Reengineering Continuous ImprovementDifferencesLevel of change Radical IncrementalStarting point Clean slate Existing processParticipation Top-down Bottom-upTypical scope Broad, cross-functional Narrow, within functionsRisk High ModeratePrimary enabler Information technology Statistical controlType of change Cultural and structural Cultural

Key Steps

Select The Process & Appoint Process Team

Understand The Current Process

Develop & Communicate Vision Of Improved Process

Identify Action Plan

Execute Plan

1. Select the Process & Appoint Process Team Two Crucial Tasks

Select The Process to be Reengineered

Appoint the Process Team to Lead the Reengineering Initiative

Select the Process

Review Business Strategy and Customer Requirements

Select Core Processes

Understand Customer Needs

Don’t Assume Anything

Select the Process

Select Correct Path for Change

Remember Assumptions can Hide Failures

Competition and Choice to Go Elsewhere

Ask - Questionnaires, Meetings, Focus Groups

Appoint the Process Team

Appoint BPR Champion

Identify Process Owners

Establish Executive Improvement Team

Provide Training to Executive Team

Core Skills Required

Capacity to view the organization as a whole

Ability to focus on end-customers Ability to challenge fundamental

assumptions Courage to deliver and venture into

unknown areas Ability to assume individual and collective

responsibility

Use of Consultants

Used to generate internal capacity Appropriate when a implementation is

needed quickly Ensure that adequate consultation is

sought from staff so that the initiative is organization-led and not consultant-driven

Control should never be handed over to the consultant

2. Understand the Current Process Develop a Process Overview Clearly define the process

MissionScopeBoundaries

Set business and customer measurements Understand customers expectations from the

process (staff including process team)

2. Understand the Current Process Clearly Identify Improvement Opportunities

Quality Rework

Document the Process Cost Time Value Data

Carefully resolve any inconsistencies Existing -- New Process Ideal -- Realistic Process

3. Develop & Communicate Vision of Improved Process

Communicate with all employees so that they are aware of the vision of the future

Always provide information on the progress of the BPR initiative - good and bad.

Demonstrate assurance that the BPR initiative is both necessary and properly managed

4. Identify Action Plan

Develop an Improvement Plan Appoint Process Owners Simplify the Process to Reduce Process

Time Remove any Bureaucracy that may hinder

implementation Remove no-value-added activities

4. Identify Action Plan

Standardize Process and Automate Where Possible

Up-grade Equipment Plan/schedule the changes Construct in-house metrics and targets Introduce and firmly establish a feedback

system Audit, Audit, Audit

5. Execute Plan

Qualify/certify the process Perform periodic qualification reviews Define and eliminate process problems Evaluate the change impact on the

business and on customers Benchmark the process Provide advanced team training

Common Problems with BPR

Process Simplification is Common - True BPR is Not

Desire to Change Not Strong Enough Start Point the Existing Process Not a Blank

Slate Commitment to Existing Processes Too

StrongREMEMBER - “If it isn’t broke …”

Common Problems with BPR

Process under review too big or too small Reliance on existing process too strong The Costs of the Change Seem Too Large BPR Isolated Activity not Aligned to the

Business Objectives Allocation of Resources Poor Timing and Planning Keeping the Team and Organization on Target

How to Avoid BPR Failure

To avoid failure of the BPR process it is recommended that: BPR must be accompanied by strategic planning, which

addresses leveraging Information technology as a competitive tool.

Place the customer at the centre of the reengineering effort, concentrate on reengineering fragmented processes that lead to delays or other negative impacts on customer service.

BPR must be "owned" throughout the organization, not driven by a group of outside consultants.

Case teams must be comprised of both managers as well as those who will actually do the work.

How to Avoid BPR Failure

The Information technology group should be an integral part of the reengineering team from the start.

BPR must be sponsored by top executives, who are not about to leave or retire.

BPR projects must have a timetable, ideally between three to six months, so that the organization is not in a state of "limbo".

BPR must not ignore corporate culture and must emphasize constant communication and feedback.

Case Example: Kodak In 1987

Kodak’s arch-rival, Fuji came up with a new 35mm single-use camera

Kodak has no competitive offering Kodak’s Traditional Product Development

ProcessSlow: would take 70 weeks to produce a

rival to Fuji’s camera! Result: the new process, “Concurrent

Engineering”Reduce turnaround time to 38 weeks

Case Example: Kodak Key Redesign Strategy

Apply innovative use of CAD/CAM + integrated product design database

Allow engineer to design at computer workstations

Database collect each engineer’s work and combines into overall design

Each morning, problems are resolved immediately

Manufacturing can begin tooling design just 10 weeks into product design instead of 28 weeks in the past

Ford Motor CompanyFord Motor CompanyAccounts Payable functionAccounts Payable function500 people500 peopleMost work on mistakes betweenMost work on mistakes between

PurchaseOrders

ReceivingDocuments Invoices

Ford (cont)Ford (cont)

Ford (cont)Ford (cont)

WHY DOES REENGINEERING FAIL?

Trying to fix a process instead of changing it Ignoring everything except the process design Quitting too early Reengineering from the bottom up Neglecting people’s values and beliefs Being willing to settle for minor results Assigning someone who does not understand

reengineering to lead the effort

FOUR STAGES OF CHANGE

Shock

Anger

Denial

Acceptance

Think about the transition from shock to acceptance and how an organization may overcome them.

Shock- usually the first reaction once a change has been announced. " Where in the world did this come from?" "Why?"

Anger- if change is viewed in a negative way, people may react in anger. They blame other persons and begin to not accept or support the change. "It wont work and I will not accept this." This can be very damaging to a process and needs to confronted.

Denial- this person begins to make excuses as to why he or she should not be held accountable for anything that may go wrong. " Dont blame me if this doesn't work, it wasn't my idea."

Acceptance- this is the goal an organization needs to get all employees to. This person has accepted the change and begins to invision his or her role in the new situation. "How can I help my organization in this process."

HOW TO IMPLEMENT

3 steps to transition of change

1. Discontinuation of the old way of doing business

2. Migration

3. Starting the new way of doing business

Conclusion

BPR is a multi-discipline approach for strategic change

Methodology provides missing “how to” that must follow the “why”

BPR must be managed as a project BPR must be owned by the organization, not

driven by consultants BPR requires constant communication and

feedback