Business Process Reengineering

(BPR)

EBUS 682
Enterprise Strategy and IT
Istanbul Bilgi University
Executive MBA Program
Organizational Change

Crisis driven
Reactive

Opportunity driven
Proactive
Risks and Returns of Change
High

RISK

Low

Low High
RETURN
BPR
Definition:
Fundamental rethinking and radical
redesign of business processes.
Purpose:
Dramatic improvements
Quality
Cost
Speed
Service
TQM-vs-BPR
 The Need for BPR
Three Cs
Customers today know what they want, what they
are willing to pay, and how to get products and
services on their own terms.
Competition is continuously increasing with respect
to price, quality, selection, service, and promptness of
delivery.
Change continues to occur. Markets, products,
services, technology, the business environment, and
people keep changing, frequently in an unpredictable
and significant manner.
Risks of BPR

Failure rate as high as 75-85%

Improperly aligned BPR and IT

Expensive

Organizational resistance
Problem of the Stovepipe
Stovepipe because of lack of
cooperation between functional
areas (vertical dimension)
Business process reengineering
(BPR)
undertakes a fundamental change in
specific business processes
integrates information required for good
decision making
Two Choices
Idealized business process the way the
process is supposed to work
Assumes that the participants follow the rules

Workaround a divergence
Necessary when the rules built into the system
become an obstacle to getting the work done
May indicate a poor design or that an external
change has occurred
 Need for
Information Integration
Vendors,
Suppliers Organization Customers
Logistics,
Distribution Purchasing Finance R&D Production Sales Distribution Services

Product development

Order fulfillment

Planning, resourcing, and control

Customer service

Business processes across functional areas and

organizational boundaries.
Architectural Characteristics of
a Business Process
Degree of structure
Range of involvement
Level of integration
Complexity
Degree of reliance on machines
Attention to planning, execution and control
Treatment of exceptions, errors, and
malfunctions
Architectural Characteristics:
Degree of Structure
Input predetermines output

Levels
Structured
No use of judgement
Monotonous or routine work environment
Semistructured
Unstructured
Errors due to lack of algorithms or heuristics
Inconsistent outputs
Architectural Characteristics:
Range of Involvement
Organizational span of people

Levels
Few participants
Narrow or personal approaches to organizational issues
Suboptimized processes with respect to organizational
goals
Several participants
Too many participants
Slow work
Burocratism
Architectural Characteristics:
Level of Integration
Mutual collaboration among tasks or processes

Levels
Loose
Suboptimized processes
Moderate
Tight
Complexity
Conflicting interests
Difficulty in analysis and modification
Architectural Characteristics:
Five Dimensions of Integration
Common culture
Common standards
Information sharing
Coordination
Collaboration
Architectural Characteristics - Five Dimensions of Integration:

Common Culture
Culture
Understanding
Beliefs

Advantages
Easy to work together
Easy to resolve conflicts
Architectural Characteristics - Five Dimensions of Integration:

Common Standards
Standards
Terminology
Procedures

Advantages
Ease of interfacing
Ease of maintenance
Economies of scale
Future integration possible
Architectural Characteristics - Five Dimensions of Integration:

Information Sharing
Information
Independent business processes
Mutual access to data

Advantages
Better decision making
Increased responsiveness
Architectural Characteristics - Five Dimensions of Integration:

Coordination
Responsiveness of a process to another
Needs of the other process
Limitations of the other process

Advantages
Establishing common objectives
Reducing suboptimization
Architectural Characteristics - Five Dimensions of Integration:

Collaboration

Strongly interdependent or merging processes

Advantages
Process results optimized with respect to

organizational goals and objectives

Architectural Characteristics:
Complexity
Number of elements consisting of a system and
interactions among these elements

Levels
Simple
System unsuitable to deal with different cases
Moderate
Complex
Difficulty in understanding the process
Difficulty in analysis and modification
Architectural Characteristics:
Degree of Reliance on Machines
Division of labor between people and machines

Levels
Manual
Suboptimal productivity
Inconsitent output
Hybrid
Fully-automated or mechanized
People disengaged from work
Decreasing personnel skills
Overestimating machine capabilities
 Architectural Characteristics:
Planning, Execution and Control Cycle

Executing

What to do
How to do What to do Progress Performance
When to do How to do information feedback
Where to do When to do
Who to do Where to do
Why to do Who to do
Work standards Why to do
Work standards
Planning Controling
Performance
information
Architectural Characteristics - Comparison:
Planning, Execution and Control
Cycle Step Time Focus Information Requirement

Planning Future Past and present data

Assumptions
Models

Execution Present Procedures

Problem identification
Information collection

Control Past Methods for replanning

Motivation
Real-time information
 Architectural Characteristics:
Exceptions, Errors and
Malfunctions

Efforts to formalize TRADE OFF Efforts to work

handling cases out each case

Computerized Systems Manual Systems

More structured Less structured
Less flexible More flexible
Evaluating Business Processes
Performance Indicators
Rate of output
Productivity
Consistency
Cycle time
Flexibility
Security
Business Process Performance:
Rate of Output
Actual production in a given period

Levels
Low
Unused capacity
Low productivity
Moderate
High
Higher error rates and rework
Low productivity
Business Process Performance:
Productivity
Ratio of output to inputs

Levels
Low
High costs
Expensive output
Moderate
High
Overemphasis on quantity
Underemphasis on quality
Business Process Performance:
Consistency
Same technique applied in the same way
produce identical results

Levels
Inconsistency
Excessive variations in output
Perceived lack of quality by customers
Partial consistency
Consistency
Inflexibility
Inability to customize output
Business Process Performance:
Cycle Time
Length of time between the start and end of a
process to produce one unit of product

Levels
Short
No compromise between customer specs and cycle time
Moderate
Long
Excess costs and waste due to delays
Lack of responsiveness to customer
Business Process Performance:
Flexibility
Responsiveness to change in customer needs
and business conditions

Levels
Inflexible
Inability to customize output
Inability to modify process
Moderately flexible
Flexible
Excessive variations in output
Perceived lack of quality by customers
Business Process Performance:
Security
Protection against unauthorized use, sabotage
or criminal activity

Levels
Insecure
Security breaches
Moderate
Secure
Excessive barriers to access
Indirect access to information
Work slowdown
 The Enabling Role of IT in BPR
Shared databases, Internet client/server
architecture, intranet
AI, expert systems, neural computing
Telecommunication and networks:
client/server intranet
DSS, enterprise support systems
Wireless communication and portable
computers, the web, e- mail
Interactive videodisk, desktop
teleconferencing
 The Enabling Role of IT in BPR
Tracking technology, groupware, workflow
software, search engines
High-performance computing systems,
intelligent agents
Groupware and GSS, telecommunication
CAD/CAM, CASE tools, online systems for JIT
decision making, expert systems
CAD/CAM, EDI, imaging processing
Robots, imaging technologies, OOP, GIS
 Retooling of IT for BPR
Get a good understanding of the current
installed base of information systems
applications and databases
Understand the existing infrastructure in
terms of computing equipment, networks,
and the like, and their relationships to the
current available software, procedures,
and data
Tools for BPR
Simulation and visual simulation tools
Flow diagrams
Work analysis
Rapid application development
Other tools (e.g. CAD/CAM, imaging
technologies, EDI, IOS and expert
systems)
Integrated tool kits
Workflow software
The Web
Business Process Modeling
Process model
Workflow diagram
Data flow diagram
Flowchart
Structured English
Process Model and Workflow Diagrams
Process model
High-level activity modeling
No subject performing activity
No order
No time perspective
Workflow diagram
Situation
Order of events
Rules
Data Flow Diagrams (DFDs)
Represent the flow of data between different
processes within a system
Simple & intuitive, not focusing on details
Describe what users do, rather than what
computers do
Limitations:
Focus only on flows of information
Ignore flows of materials, decision points, etc.

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Elements of a DFD
Flowcharts and Structured English
Flowcharts
Diagrammatic
Sequence and logic of procedures
Structured English
Declarative sentences
Sequential
Logic of procedure in detail
 IBM Credit Corporation Reduced
Cycle Time by 90%
The old process
took an average of seven days
The reengineered process
a simple DSS provides the deal structurer with the
guidance needed
the program guides the generalist in finding
information in the databases, plugging numbers
into an evaluation model, and pulling
standardized clauses - boilerplate-from a file
electronic communication and collaboration
IBMs Old Process
IBMs New Process
Ford Reengineers Its Payables Process
Old process:
The receiving department accepted orders that did
NOT match the purchasing order
Lots of overhead to reconcile the inconsistencies
New process:
ONLY shipments that match the purchase order are
accepted
The information is entered into a shared database

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Context Diagram for Ford
Fords Process Redesign
Level-0 Diagram for Ford
From Mass Production
to Mass Customization
Mass production
a company produces a large
quantity of an identical standard
product
Mass customization
a company produces large volumes,
yet customizes each product to the
specifications of individual
customers
Push
-vs-
Pull
 Reengineering Organizations
An Example - Bank
Customer deals with a single point of contact, the
account manager
Account manager is responsible for all bank services,
and provides all services to the customer, who receives
a single statement for all accounts
IT provides account manager with expert advice on
specialized topics, such as loans
By allowing easy access to the different databases, the
account manager can answer queries, plan, and
organize the work with customers
Before
After
Networked vs. Hierarchical
Organization
From Hierarchy to a Network
BP Engineering
Empowerment
The vesting of decision-making or
approval authority in employees
Giving permission to the workforce to
unleash, develop, and utilize their skills
and knowledge to their fullest potential,
for the good of the organization as well
as for themselves, and providing the
framework in which this can be done
 Empowerments Relationship to IT
IT provides the right information, at the right
time, at the right quality, and at the right cost
IT provides tools that will enhance the
creativity and productivity of employees, so
they can make self-decisions, as well s the
quality of their work
IT provides online training, uses multimedia,
and even apply intelligent computer-aided
instruction to employees who need more skills
and higher levels of skills
 Teams
Types of teams
permanent or work group teams
problem-solving teams
quality circles, participating teams
management teams
virtual teams
IT plays a critical role in empowering team
members and providing the necessary
communication links among teams
 Virtual Corporations
Virtual corporation is an organization
composed of several business partners
sharing costs and resources for the purpose
of producing a product or service
Major attributes
excellence full utilization
opportunism lack of borders
trust adaptability to change
technology
 How IT Supports
Virtual Corporation
IT allows communication and collaboration
among the dispersed business partners
Standard transactions in the interorganizational
IS are supported by EDI and EFT
The Internet is the infrastructure for these and
other technologies
Modern database technologies and networking
permit business partners to access each others
databases
ERP software is extensively used to support
standard transactions among business partners
Virtual Corporation
 Buying and Selling
Along the Supply Chain
Upstream activities
Bidding
Consolidation of vendors catalogues in buyers site
Onsite specialty stores
Other purchases
Buying knowledge
Internal SCM activities
Downstream activities
Selling on your own web site
Auctions on your web site
Upstream and Downstream combined
Implementing EC Solutions
Along the Supply Chain
Build in yourself, in house
Outsource the job
Integrate EC with ERP
Integration with CRM and DSS
Componentization