BIG CHANGE

VIA BUSINESS PROCESS

REENGINEERING
Daniel F. Duran
Whittier College
Operations 342

What BPR Is: Two Parallel

Definitions

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 It
is more than automation.
BPR is a performance improvement philosophy that aims
to achieve quantum improvements by primarily rethinking
and redesigning the way that business processes are
carried out.
(Omar. A. El Sawy, Redesigning Enterprise Processes for
e-Business, McGraw-Hill, NY, 2001)

Fundamental

Must ask Why do we do what we do?

(steps)
Question the tacit rules and assumptions
underlying the organizations culture.
Begin with logical specification of what a
company must do. (Again goals and
steps)
Then specify the physical design of how to
perform these activities better and simpler

Radical

Must examine the root of business

processes, structures, and policies.
Dont fiddle with the old; cast it
away and begin anew. (rethink
rather than only change)
Reengineering is reinvention, not
modification or enhancement.

Dramatic

Not small, incremental

improvements; BPR seeks order of
magnitude improve-ments in cost,
quality, service, and speed. Use of
IT to assist in these.
Redecorating v. demolition and
reconstruction!(an analogy)

Dramatic: Who Undertakes

BPR?

Companies in deep trouble -- need

order of magnitude improvements!
Companies who foresee trouble -an ounce of prevention ....
Companies in peak condition who
want to further their competitive
advantage.
Very similar to reason why Systems
Analysis Project Originate

Processes

a collection of activities that takes one or

more kinds of inputs and creates an output
that is of value to the customer.
Collection of activities -- the P of the IPO;
related by common goal.
Inputs -- raw material to be processed.
Output -- something that has value to the
customer.
Customer -- internal or external.
Information Systems Data converted to
Information that is useful to customer

Process Integration: Value Chain

Management & Administrative Services

Human Resources Management

Support
Activities

Technology Development
Procurement of Resources

Primary
Activities

Inbound
Logistics

Operations

Competitive
Advantage
Outbound
Logistics

Marketing
& Sales

Service

Process Integration

Two forms:
within

a single organization
between two or more organizations

Avoids over-the-wall thinking and

silo-opia (Common in Legacy
systems or old organizational
structures)

What BPR Is NOT

Although BPR may cause or involve

aspects of all of the following, it is
NOT
NOT
NOT
NOT
NOT

downsizing
restructuring
paving cow paths
reorganizing, delayering, ....
TQM ...

BPR Is NOT TQM

Degree of Change

Process Improvement
(TQM)
Incremental

Process Innovation
(BPR)
Radical

Starting Point

Existing Process

Clean Slate

Frequency of Change

Continuous

One-Time

Time Required

Short (weeks-months)

Inception/Participation

Top-Down/Bottom-Up

Medium to long (depending

on scope of BPR effort)
Top-Down

Scope

Broad; Process-oriented

Risk

Narrow; Task- or Functionoriented

Moderate

Primary Enabler

Statistical Control

Information Technology

Type of Change

Cultural

Cultural and Structural

Source: Adapted from [Davenport 1993]

High

Why BPR Is Necessary

The Virtual Organization: Three Cs

Driving Change
Customers

take charge.

Mass market v. a market of one

Backward integration
Informed consumers

Competition

intensifies.

More and different kinds

Big is not better
Technology changes the nature of
competition.

Competitive Forces Model

Threat of
substitute
products &
services

Threat of new
market
entrants

The firm

Bargaining
power of
suppliers

Intraindustry
competitors

Bargaining
power of
customers

Why BPR Is Necessary

The Three Cs (continued)

Change

becomes constant.

reduced product cycles

reduced time to develop new products
more environment scanning

Companies

created to thrive on mass

production, stability, and growth cant be
fixed to succeed in [such] a world.

Four Revolutions Affecting

Business Today
New
Technologies

New
Competitors

New
Work Force

New Rules of
Competition

How the Information Age is Changing

Business

Organization: Breaking down old corporate barriers,

allowing critical information to be shared instantly.
Operations: Using IT to shrink cycle times, reduce
defects, cut waste, streamline ordering and
communications.
Staffing: Eliminating management layers and cutting
employment levels; creating virtual offices.
New Products: Collapsing development cycles.
Customer Relations: Tapping into companywide
databases to solve callers demands instantly

Info Technology = Enabler

Old Rule
Information must be
processed
sequentially.
Only experts can
perform complex
work.
Business must
choose a centralized
or decentralized
structure.
Only managers have
access to
information.

Technology
Shared databases
& imaging
technology
Expert Systems
Telecomm
networks

New Rule
Information can be
processed
concurrently.
A generalist can do
the work of an
expert.
Businesses can reap
the benefits of both
structures.

Decision support Decision making is

tools
part of everyones
job.

Info Technology = Enabler

Old Rule
Technology
Field personnel
Wireless data
need offices to send communications &
and receive
portable computers
information.
The best contact is
Interactive
personal contact.
videodisc & WWW
You have to find
out where things
are.

New Rule
Field personnel can
send and receive
information from
anywhere.
The best contact is
effective contact.

Automatic identifi- Things tell you

cation & tracking where they are.
technology

SUPPLY-CHAIN MANAGEMENT & Porters

Value Chain

CUSTOM ERS

MARKETING
& SALES

PRODUCTION
PLANNING

CUSTOMER
SERVICE

PROCUREMENT
INTRANET

ACCOUNTING &
FINANCE

SHIPPING &
DISTRIBUTION

INVENTORY

PRODUCTION &
MANUFACTURING

BPR and E-Business

E-Business is a facilitator and an

enabler.
EC is more than just automating
existing processes.
EC creates new business models
e.g. Dell Computers

PARADIGM SHIFT

PARADIGM IS A COMPLETE MENTAL MODEL

OF HOW A COMPLEX SYSTEM FUNCTIONS
A PARADIGM SHIFT INVOLVES RETHINKING
THE NATURE OF THE BUSINESS, THE
ORGANIZATION; A COMPLETE
RECONCEPTION OF HOW THE SYSTEM
SHOULD FUNCTION

BPR Objectives

Streamline remove waste, consolidate

Lose Wait squeeze out delays
Orchestrate let the most able enterprise
execute, outsource
Mass Customize any time, any place,
any way
Synchronize both the physical and
virtual parts of the process, real time
processing of data

BPR Objectives

Digitize and Propagate capture

information digitally at the source and
propagate it through the process
Vitrify provide glass like visibility of the
process
Sensitize fit the process with sensors and
feedback loops for prompt action
Analyze and Synthesize generate added
value by enhancing the process, constant
improvement and iteration.

RISKS & REWARDS

High

RISK

Low
Low

RETURN

High

BUSINESS
REENGINEERING STEPS:

1. Develop business vision, process

objectives
2. Identify process to be redesigned
3. Understand, measure performance of
existing processes
4. Identify opportunities for applying
information technology
5. Build PROTOTYPE of new process

FEASIBILITY

TECHNICAL: Assess hardware, software,

technical resources
ECONOMIC: Will benefits outweigh costs?
OPERATIONAL: Is solution desirable within
existing conditions?
INFORMATION REQUIREMENTS: Detailed
statement of new system needs

Characteristics of Reeng. Processes

Several jobs are combined into one.

Compress

the organization horizontally

and vertically.
Replace several task specialists with one
case worker.
Group task specialists into case teams.
Benefits: improves efficiency, reduces
errors and administrative overhead, and
increases accountability.

Characteristics of Reeng. Processes

Workers make decisions.

Compress

organization vertically to
reduce chain of command.
Tie decision making to getting the work
done: Those who do the work make
the decisions.
Benefits: reduces delays, lowers
overhead, provides better customer
response, empowers workers.

Characteristics of Reeng. Processes

The process steps are performed in

a natural order.
Eliminate process linearity and
sequence where possible.
Perform

tasks concurrently to reduce

process cycle time.

Characteristics of Reeng. Processes

Processes have multiple versions.

Standardization is dead: One size does
NOT fit all.
Create multiple versions of the same
process, each tuned to meet the needs
of different inputs, situations, or
markets.
Benefits: eliminates complexity and
exceptions that must be incorporated in
a standardized process.

Characteristics of Reeng. Processes

Work is performed where it makes the

most sense. (Manufacturing Example)
$100

in internal costs to purchase $3

worth of batteries or supplies!!!
Accountants buy their own pencils;
customers repair their own equipment;
spare parts are stored at the customer
site.
Benefits: eliminates administrative costs,
reduces process cycle time, improves
customer service.

Characteristics of Reeng. Processes

Checks and controls are reduced.

(Tricky)
Checks

and controls dont add value;

use them only when they make
economic sense.
Tolerate limited, modest abuse to
reduce costs of prevention.
Provide effective systems for detecting
abuse, e.g., audits.

Characteristics of Reeng. Processes

Reconciliation is minimized.
(Carefully)
Reconciliation

doesnt add value.

Benefits: reduce number of external
contact points for each process,
thereby reducing the likelihood of
inconsistent data.
Fords accounts payable process:
eliminated vendors invoice.
WalMarts PO-less purchasing system.

Characteristics of Reeng. Processes

A case manager provides a single point

of contact. (Loans or other service)
Acts

as a buffer between a complex,

multistep/multiperson process and the
customer.
Accepts responsibility as though s/he were
performing the whole process.
Requires access to process-related data and
effective communication with process
workers.

Characteristics of Reeng. Processes

Hybrid centralized/decentralized
operations are prevalent.

Reap the advantages of both operating

modes!
Operate as though units were autonomous
(decentralized), yet enjoy the economies of
scale that centralization creates.
Notebook equipped sales force; software
imposes controls to prevent unreasonable
quotes or promised delivery dates.

People Issues

Fear of change
Emphasis on Team work
Viewing Big Picture rather than a
job or step in a process
IS designers to act as facilitators

Technology Issues

Careful use of unproved technologies

Quick deployment of cost effective
technologies
Resistance to Change from Old
technology; Why change when
NOT Broke
Dealing with legacy systems
Changes in Information Systems
Architectures.

Organizational Issues

Top Management Champion

High visibility and High Expectations
Structural and cultural changes
Problems
Moving Decision Making and Control
points; may lead to replacement of
organizational units