Process Innovation Reengineering Work through Information Technology Thomas H. Davenport wt & Conte for Infor Harvard Business Schoo! Prose Boston, MesachusettsChapter 2 Selecting Processes for Innovation ‘Process innovation must begin with a survey f the process land. scape to identity processes that are candidates for innovation, Both the overall isting of proceses and the foeus on those re ‘guiring immediate innovation initiatives are eracial to thes ‘vet of innovation efforts The selection process establishes the ‘boundaries ofthe process that are tobe addressed, enabling 8 firm to feus on the most in need of radical change, "The principal activities in the selection process sre listed in Figure 2-1. The first isto identify the major proceses In the ‘onganieation. An informed selection can be made only when al ‘ofthe organieatio'sprocesies are known. A survey aleo serves to determine process bundaries that help etablich the scope of Initiatives for individual proces, ENUMERATE MAJOR PROCESSES Considerable controversy revolves around the number of rae: esses appropriate to a given organization. The dificult derives from the fact that processes are almost infinitely divisible; the Figure 241 Key Acs i seri Processes fo vaon + Render highlevel judgments af the “hel” of ech proce + Quay the car and politi of ach prose2s Soloting Paces for Inceation sctivites involved in talking and falling a cstomer ender, for ‘example, cam be viewed as one process oF hundreds. The “pro priate” number of processes hasbeen peed at from two to more ‘than one hundred. The three major proceses identified by Rockart and Short developing new praducts, delivering produets a eus- tomers, nd managing customer rlatonship'—are themselves highly interdependent: snd Harvard researchers working on oF er management issues have argued fr only two processes 1) ma “aging the product line and 2) managing the order exe A wel [known management consulting Grm has asserted that there are nly three or four “core” process, though not al busines ett tien are part ofthese processes Finally atleast one fim, Xerox Corporation, has identiid a larger number of processes, but he focused ite change efforts om those i considers most eiial core IBM, which inthe 1980s had defined at least 140 processes facros the corporation, is today working with 18 much broader pracese. "The objective of process identification is key to making these definitions and determining their implications. Irthe objective is Incremental improvement, it issuficient to work with many na rowly defined processes, asthe vsk of failure is relatively low, ‘paruculerly if those responsible for improving m proces ae leo ‘eeponsible for managing nd executing it But when the objective is radical process change, a process must be defined as broadly aspimibe. A hey source of proces benefit is improving hands Between functions, which can oour only when processes are broadly defined. Moreover, ifa proces output i minor, radically hanging the way its produced i lkely to result in suboptims tation o, at bast oly minor gains ‘Ax noted eave, most of the compenies that have identified ‘ele processes in tho context of process innovation have ent: aerated between 10 and 20, Key proceses identified by IBM, ‘etox, and British Telecom! are presented in Table 2-1. The ap. Droprinte number of proceses reflect «trade between man fging proces interdependence and ensuring that process scope is ‘manageable. Th lever and broader the processes, the greater the pony o innovation through process integration, and the seater the problems of understanding, measuring and changing the process (Our experince leads us to st the appropriate number for ‘major processes at between 10 and 20. Within this range—which “able 2.4_Key Busnes Processes of Lexan Conan [aw Hews epirman che etn and | Devoe prose Declan of ‘Techonogy managomant | Pov personne! ‘Stoner | Hamar ae" | Opeth ae leaves us with some cros-prosessativity, but renders each proc: ‘ss mall enough to be underatood~—change management is only ‘very dlieut, rather than impossible. Cnstrieting the range sa permits uso identity both operatonaland management poceaes land to find diffrent approaches to redesigning each type. Thi oes not mean tha all ofthe identified proesses mill be of the same importance, or even that innovations wll be identified for Allo them, Some fms may wish to maintain both broad and narrow raceses, While addressing broad processes in an innovation co text, they may lap he working on narrow proceses fom an im provement canter. In order ta avoid confusion, some mapping of 920 Selecting Proce for Inova narrow processes o brood process shouldbe developed, Tati ‘bond process ke order management shouldbe broken down into its constituent processes (or subprocess, i that isthe pre- ferred terminology). The mapping need not be prlat—a nara proces, for example could et across two broader processes Ft should provide some orientation fr all participants in process ‘management initiatives. Among the firms oe have researched, nly British Telecom has developed such a hierarchy of broad and ‘arrow processes, ‘Whatever the number of proses identified, the identifica tion process shouldbe understood to be exploratory and iterative, ‘As a process becomes the focus for innovation or improvement forts ite boundaries and relative importance became much ‘learer. Most companies that have worked on their processes for ‘number of years have revised thei original lists Certain strategic planning and systems planning approaches ‘that ve business proceas perspective may be wef fo den ‘fying procescs, For example, Porter's framework for organizing ‘company’s business atvities emphasizos the usefulness of den {iying and exploiting linkages in the value chain as a means of leniying both competitive portunities and high level poe ‘ses and Ives and Learmonth have developed a generic es tome.resurce life cjele Usstdeseribes the process by which @ customer acquires uses and disposes of esources asa vehicle for identiying strategic information eystems.® Neither of these ap- proaches describes explicitly how a company should define these Tramemarks fr is own i, Tn the context of business process improvement, Harrington suggests having executives ot down the processes for which they fare responsible and analyzing and distiling thelr lists to arrive tt the cmpany’ slate of process. This top-down approach, guided by our rule of thumb of 10 to 20 major processes ex be fairly effective. A major manufacturing concern used similar approach to define ite key processes, A candidate et of processes ws de- ‘eloped by the corporate procssinnovaton staff and external fontulants and presentd to senior executives, who refined end revloed the proces list during a facilitated workshop discussion. DETERMINE PROCESS BOUNDARIES, (Once the processes have been identified at high evel, the ‘heundarien between those proceases need to be managed. Because ‘Awe Siti Relevance roves definition is more art than sence, boundaries ate ari tery. A umber of uetina may ep to dfne oundaron nog + When shoul the ron owners anern with he pres begin and end? ad + When shoud process castomen’ involvement begin and end? + Whore do subproesses begin and end? + Is the proces fully embedded within another process? + Are performance benefit likely to result fom eombining the process with other processor subprocess? Inuumuch a he en fay presi the beponingo an ether ithe ith route th ogeniatin, pres oe en wl etn retin shane atte and downto rues Conary, poss anager bet eed {iterative city in which sbsquen nnvatn one se {Sivertson et ae ASSESS STRATEGIC RELEVANCE Having identified the boundaries of its major processes, « ‘ompany must seleet individual processes for innovation, Our experince surest that the sepe ofthe innovation effort should be based on an organization’ capabilites and resourses TBM has novation initiatives under way inal 1 fits key proceaes at ‘nce, but most companies eannet sucessfully dea! with innova tion on such a scale. Even given a clear noed to redesign, most onganications would lack sufficient resource people, fund, and time—to do so. Beyond resoures, mst organizations cou not endure the magnitude of organizational change that innovating all proceses simultaneously would preiptate. An organization ‘ust understand the level of change and upheaval it can endure and must use that knowledge to determine how many process it ean mieesfilly innovate, ‘Moreover, simultancous change in multiple procestes canbe dificult to coordinate. Because redesigned processes must ill imtarace with upstream and downstream process, roves own ers oF managers must communicate fequent about directions and interface points. Ifchanges in one proses mast henge tenetSeeing Pres or Innovation with changes in say, 27 others, it willbe wery dificult to make ich headway "Nevertheless, sme firms find that they must work on groups ‘of procees to sve particular busines problems, Xerox, for e finple found that to afet the ie It take to bring products to market it had to address net only it product design and engi- heering process, but lap processes such a manufacturing, ser¥~ iceandlogistin Similarly, IBM discovered that to speed delivery trcastambult products to customers, t had to addres the pro Auction, logistics, ad eustomer fulfillment processes. ‘Most companies chose to addres a small st of business processes inorder to gain experience with innovation initiatives, Sand they focus their resources on the most critical proceses, Each feces initiative becomes « mode for fture efforts, We have denied our vitor that might guide proces selection: (1) the proces centrality to the execution of the firm's business strat (2) process health (8) process qualifiation, and (2) menage thle pret spe, Ideally, al four fetors should favor te selection ‘oa particular proces In practice, results are often ambiguous, td differential weighting ofthe factors must be applied ‘The most obvius aproach o process selection iso selet the roceses most central to accomplishing the organizations strat tay this presumes thatthe organization haa a wellrticulated ‘Srategy). Many firms’strategie, for example, oeu on improving Felatonships with customers, One aspect of customer focused “irategy is the provision of superior customer service at every point at which customer and enterprise moot. uch eompani re likely to elect fer innovation processes at Ue customer in- terface, such as order management and customer srvice. In & tnore formal spproach, the associations between business tnd business proceees are identified and some sort of priorit tation i done, based, for example, onthe number and importance of goals the process supports. This approach to press selection {s prt ofa number of planning and improvement methods” ‘Selection on the basis of heath targeta redesign processes that are currently problematic and in abvious need of improve: tment. Among the many symptoms af unealthy proses isthe txstenc of mltiple bufes, reflected in work-in-process queuing pat each stop, One study fide versus processing time for work process revealed thst, fr the average process, actual working tine comprises only 05% to 8% of total lapsed time. IBM Credit Assess Strate Reece Comorian dscrre, fr example that valunaed tine fr thefirancing-aproval poet smote ton tas oat fate taf efetine Wehe sen cerns companies in which the tine spent ately pcan ado erriting an insurance policy ws only two or thee hours fn {mover procs jl far than 29d: Prseafe ‘ao spctifs proces crencr any unton andnvlve ey ‘arow ined bs or has no Sear omer a ease. Go indctrs bre are fv oe gets at when the res rot in hts er ever bags oS ie mar worse whey de Glace oented roceshelh anon at Cg aed by «prac n- sorain group created by the nse company tet teas unt infer proven innovation els Upon eeving reas om a sins nit, the group snd air yo ‘valle opportune or prices proven. The rv then ‘Sve thebsinearunit wether proceed th he novi» ‘tong the ra roses Cg ected fr nnevaion were in ‘sinnrance,«rltively wall bien in which wae ing fron living ht the vn ae cnet fo pr ‘ail change the hed fhe xine ul or mploece “tfwe scent lof wl no lnger hae» third Ite a nme ao Tren ar pce proce a en cde enterprise smst define the proces ins way that rats n a manageable Innovation preset Sn he common wos of ening the procs ry eoraphy by proc ne. Goe manufac {arrange the profit velop rca desl team ont mat potable pra lin After acheing a tate ofr hs po, the ext sep was ogi ne ‘Rein the ober proc tothe now poe ‘tol yin rogerding precession rule to proces “uation” an tity we Sbcred nnery every company in'whih we shred proc fonoration The primar) al af proce alien negate clr en pale mae {ta tanga rca, A proteus “conta ey rele disused in ater chapter kenge to sls ory greases that have 1 mmited spor and exhibit peng bines need or inprovenent. Where comminnt i kewarm rte bees tea! low than dramatic the comant would be ened to ‘in agin stenting proces InneratonSetting Proesesfr Iocan ‘The determination of hihpeoriy proces often iri stvnas,Ae Continental lank hese he re had ced hea "om tuling bal ean wih crt ocr he ‘Satnahp management roe wes nator place to ars IeBotahe Stel the proceso chouling a caste order {tothe production schedule wos han and inefficient dfn ich cntomerdcatiaaton and sls free rustration. There- toate omer wrvie pros, bh need profactin ‘eRelng was ean lotion, When Federal Moguls Cassis int isson analy bse, vests ocd tha rule to deliver now ped prttypes quel mas amar impediment to increased sale. Applying radia change fo this rocat was then iil doxon. agar af how muh care i aken ithe ienication and selection of rece, the proce andcape wil losin. {blr change mi ine end experience. The rms we have sta {Spon several yar eling the process innovation pathy {Be Sure which ost changed the number of proces they {sed the boundaries tdi! processes, andthe relative Shores of proses scanddntes Innovation iiatives ‘THE PATE OF PROCESSES NOT SELECTED Prete not sled for early innovation initiatives must ati boaddene. Recogiing that ca oy be approxima, Schnee in hg uy ante sues ‘Erase imoveton may ie end fal unpredictably, we aise ‘Seating 1 tmeble fr nating innovation efforts We donot STEM entendng wich a fmetabl over more han three JIS" Gince beyond this ped pedetons of busines pity Tedrecuresevelikely tte poor, nally novation iiatves Should be undoriaen son ner detailed pcr qualieation seit since management commitment ad proces api ‘Sew are lo volatile vera peril of everal years. “Sther ternative, decuced inthe previous cape, so sly proce improvement to prcese bt seleced far inna Ten Thin cn tn probleme, One proces improvement relies Si nmplccy erent et of nthids and appronces. And vo, id Git apply incremental improvement to process AG only or purposes acheving rede! change Decause the Eihomup partyin nature proces improvement prosues proces that workers at lower levels in the ongnization can get their arms around, it may be necessary to breakup the process inta les untleldy subproseaes, Should it later become a cand date for an innovation initiative, the paces can be attacked in its broaer form, [Atleast oe fim, IBM, i pursuing improvement efforts con currently with process innovation within the same process, The Innovation efforts focus on broad processes, the improvement ef forts os narrower constituent subprocesses, But it net elear to ‘many lower-level IBM proceee-improvement teams how their ef farts vlate tothe enterprise level process innovation initiatives. Although the notion of conducting top-down Innovation and bottm-up improvement atthe same time might seem sppealing, rach f the proces improvement activity key to be for nah, Inasmuch a8 teams might sive ta improvenarrow processes tha do not even exist in the new process design. Whenever those activities are tobe atompted simultaneously, it should be made lear to all parties that the improvement are likey tbe short lived and should therefore be implemented guicy if they are to eld any Benet SUMMARY enifying and selecting processes for innovation is an im portant prerequisite t proses change, But this sep ie also nifleant in town right. Without some focus on ertcal processes, an organization's energles, resources, and time wl be disputed Especially during the early phases of process innovation, i = Important that an orgenization demonstrate some successes, I an do so only if itis eolective inthe process it chooses to ‘Aller process has been selected for innovation, a firm ean bogin to think about how it will reate quantum improvements Jn the process and what change tools i€ will employ. "The next three chapters addres the isue o how radical change in process designs is enabled. Bach considers a diffrent enabler of process ‘change. Chapter 3 begins this dscusion with an indepth anal Ys ofthe rae played by information tecinology in proces ovation. Chapters 4 and 5 address the enabler af iafrmation ‘and humanvorganizationelfetars 3536 Selecting Processes for Innoston Notes Ermatan Syatums Reseach, Sees " "on Sit cen dnd gaps aot ea ressation nena Young, Ober 190 note pln Ln ar "ores Ren” Mine Qu "ent iamer oonz “ee Banter gre Se Coto 0 Re “Pofrmonct Mew York Poe Pres, 1985) . : a omnia othe ACM rena 198 1189-8 “marge Rig hee Hane, ‘ouage Sty an Thomas Mat, Camping Agi Toe New Yr ‘soe Ams etn, ec ian pens Cin ee fe Fre on ecient Trams, Cambrage Mass, Oa