INFO245 - Business Process Reengineering

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INFO245

Business Process ReengineeringBusiness Process Reengineering


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ObjectivesObjectives

Explain what business process reengineering is Explain what business process reengineering is and why it is importantand why it is important

Present different options that organizations can Present different options that organizations can use to reengineer processes within their use to reengineer processes within their organizationsorganizations


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BPR OverviewBPR Overview

http://www.youtube.com/watch?v=Wi-BmxkA7YU

How does Reengineering differ from ‘quick hits’ How does Reengineering differ from ‘quick hits’ and ‘incremental improvement’?and ‘incremental improvement’?

Impact on an organization?Impact on an organization? How is organization likely to react?How is organization likely to react?


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Why Reengineer?Why Reengineer?

Historical ‘reality’ for organizations:Historical ‘reality’ for organizations: High level of demand: organizations are order takersHigh level of demand: organizations are order takers Management (and IT!) focus – efficiency and control Management (and IT!) focus – efficiency and control

of operationsof operations Modern ‘reality’ since 1990s:Modern ‘reality’ since 1990s:

Hyper-competiveness Hyper-competiveness GlobalizationGlobalization Very demanding customersVery demanding customers Management and IT focus: Innovation, Management and IT focus: Innovation,

responsiveness/speed, quality and service.responsiveness/speed, quality and service.


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What is Reengineering?What is Reengineering? Business Process Reengineering (BPR) is a Business Process Reengineering (BPR) is a management

approach aiming at improvements by means of elevating approach aiming at improvements by means of elevating efficiency and effectiveness of the efficiency and effectiveness of the processes that exist within that exist within and across organizations. It is a fundamental and radical and across organizations. It is a fundamental and radical approach by either modifying or eliminating non-value adding approach by either modifying or eliminating non-value adding activities. (Wikipedia)activities. (Wikipedia)

Reengineering can be accomplished through the Reengineering can be accomplished through the implementation of ERP systems…..but is this the best implementation of ERP systems…..but is this the best approach?approach?


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Business Process Reengineering DefinitionBusiness Process Reengineering Definition

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.”


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Business Process Reengineering DefinitionBusiness Process Reengineering Definition FundamentalFundamental

Need to understand why an organization does what it does – question all Need to understand why an organization does what it does – question all of the rules and assumptions that exist of the rules and assumptions that exist

Radical Radical Radical redesign means disregarding all existing structures and procedures, Radical redesign means disregarding all existing structures and procedures,

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

Dramatic Dramatic Not looking for marginal or incremental improvements or modificationNot looking for marginal or incremental improvements or modification Goal is dramatic improvements in performance. Goal is dramatic improvements in performance.

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

business processesbusiness processes Move away from function view; task based thinking Move away from function view; task based thinking


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Ford Motor CompanyFord Motor Company

Accounts Payable functionAccounts Payable function 500 people500 people Most work on mistakes betweenMost work on mistakes between

PurchaseOrders

ReceivingDocuments Invoices


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Ford (cont)Ford (cont)


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Texas Instruments, 1990sTexas Instruments, 1990s

Long cycle times, declining salesLong cycle times, declining sales Applied BPR to create cross-functional teams supported Applied BPR to create cross-functional teams supported

by functional units for product developmentby functional units for product development Cross-functional teams control all aspects of product Cross-functional teams control all aspects of product

development design – production - marketingdevelopment design – production - marketing First pilot teams failedFirst pilot teams failed

Sabotaged by existing organization…. Sabotaged by existing organization…. Why?Why? TI Reorganized around teamsTI Reorganized around teams

Cut launching time by one-halfCut launching time by one-half more profitmore profit 4 times the ROI4 times the ROI


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Risks in BPRRisks in BPR

Advocates report failure rates of 50% to 70%Advocates report failure rates of 50% to 70% Sutcliffe [1999] reviewed difficultiesSutcliffe [1999] reviewed difficulties

Employee resistance to changeEmployee resistance to change Inadequate attention to employee concernsInadequate attention to employee concerns Inappropriate staffingInappropriate staffing Inadequate technologiesInadequate technologies Mismatch of strategies used and goalsMismatch of strategies used and goals Lack of oversightLack of oversight Failure of leadership commitmentFailure of leadership commitment


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BPR best practicesBPR best practices Combine multiple tasks and assign a single point of Combine multiple tasks and assign a single point of

contact for each process. EMPOWERMENTcontact for each process. EMPOWERMENT An important feature of BPR is integrating activities and An important feature of BPR is integrating activities and

assigning business process responsibility to one individual – assigning business process responsibility to one individual – a ‘generalist’.a ‘generalist’.

Allow workers to make decisions. Avoid decision Allow workers to make decisions. Avoid decision hierarchies that require workers to go through layers of hierarchies that require workers to go through layers of management for decisions about the work they are management for decisions about the work they are doing.doing.

Perform process steps in their natural order. Rather Perform process steps in their natural order. Rather than following a linear sequential set of tasks, perform than following a linear sequential set of tasks, perform process activities as needed, sometimes in parallel.process activities as needed, sometimes in parallel.


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Reengineering TenetsReengineering Tenets

Do a cost/benefit on controls and other checks. Do a cost/benefit on controls and other checks. Only use those checks and controls that are cost-effective.Only use those checks and controls that are cost-effective.

Business process (physical flow) and Information Business process (physical flow) and Information Systems development (information and document Systems development (information and document flow) done at the same time (concurrently)flow) done at the same time (concurrently)

Centralize data “one version of the truth”. This Centralize data “one version of the truth”. This allows companies to capture and store data only allows companies to capture and store data only once, yet disperse as needed. once, yet disperse as needed.


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How do you figure out what processes to How do you figure out what processes to reengineer?reengineer?

What’s broken the most?What’s broken the most? What process has the greatest impact on the What process has the greatest impact on the

customer?customer? Which of the processes are most susceptible to Which of the processes are most susceptible to

successful redesign? (feasibility and scope)successful redesign? (feasibility and scope)


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How do you know if it’s broken (or at least in How do you know if it’s broken (or at least in major trouble?)major trouble?) Extensive information exchange, data redundancy, Extensive information exchange, data redundancy,

and re-keying of data into multiple systemsand re-keying of data into multiple systems Excessive inventory, buffers, and other assetsExcessive inventory, buffers, and other assets High ratio of checking and control to value addingHigh ratio of checking and control to value adding Reworking and iterationReworking and iteration


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IBM CreditIBM Credit

What were the fundamental issues with the What were the fundamental issues with the IBM Credit process?IBM Credit process?

How did IBM figure out what the right solution How did IBM figure out what the right solution was for the credit process?was for the credit process?

What was the assumption about the process What was the assumption about the process that proved to be false?that proved to be false?

What was the key feature of the reengineered What was the key feature of the reengineered process?process?


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What are the choices?What are the choices?

What are the advantages / disadvantages of each?What are the advantages / disadvantages of each?

Who should or does use which? Who should or does use which?

Reengineering/Redesign ChoicesReengineering/Redesign Choices


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Technology Enabled (Constrained) ReengineeringTechnology Enabled (Constrained) Reengineering Choices are a direct function of the softwareChoices are a direct function of the software Not altering software makes time and cost lowerNot altering software makes time and cost lower Also called “Concurrent Transformation”Also called “Concurrent Transformation”

Clean Slate ReengineeringClean Slate Reengineering ““Start from scratch” with no structures or documentsStart from scratch” with no structures or documents Software must be made to fit the “needs” of the firmSoftware must be made to fit the “needs” of the firm Costs in terms of time and dollars is generally greaterCosts in terms of time and dollars is generally greater

Reengineering/Redesign ChoicesReengineering/Redesign Choices


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Technology Enabled (Constrained) Technology Enabled (Constrained) Reengineering Reengineering A particular technology (or portfolio of A particular technology (or portfolio of

technologies) is chosen as a tool to facilitate technologies) is chosen as a tool to facilitate reengineering.reengineering. Thus, reengineering choices are a function of the Thus, reengineering choices are a function of the

technologies chosen.technologies chosen. The technology drives the reengineering.The technology drives the reengineering.


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Technology Enabled (Constrained) Reengineering Technology Enabled (Constrained) Reengineering Advantages (cont)Advantages (cont) ERP provides the tool and structure to facilitate ERP provides the tool and structure to facilitate

changechange Proven and based on best practicesProven and based on best practices Forces change to happenForces change to happen ERP bounds the designERP bounds the design Design is feasible and we know it works (it’s been Design is feasible and we know it works (it’s been

proven – in other companies)proven – in other companies) Cheaper than clean slate Cheaper than clean slate Designs likely can be implemented in a timely Designs likely can be implemented in a timely

mannermanner Less riskyLess risky


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Clean Slate ReengineeringClean Slate Reengineering

Process design starts with a clean slateProcess design starts with a clean slate Also referred to as “starting from scratch” or Also referred to as “starting from scratch” or

green field.green field. Theoretically, no limits Theoretically, no limits


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Provides freedom from tools constraintsProvides freedom from tools constraints Avoids tool biases by using a portfolio of toolsAvoids tool biases by using a portfolio of tools Not limited by the constraints of a single software packageNot limited by the constraints of a single software package

Provides freedom from predefined structuresProvides freedom from predefined structures Can develop own unique, leading-edge processesCan develop own unique, leading-edge processes Not limited to the ‘configuration options’ within a single software Not limited to the ‘configuration options’ within a single software

packagepackage Separates BPR and technology implementationSeparates BPR and technology implementation

Clearly defines costs as one or the otherClearly defines costs as one or the other Permits immediate use of new technologyPermits immediate use of new technology

Don’t have to wait for the software company to ‘catch up’ with an Don’t have to wait for the software company to ‘catch up’ with an advanceadvance

Advantages of Clean Slate Advantages of Clean Slate


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Advantages of Clean Slate (cont)Advantages of Clean Slate (cont)

Competitive advantage:Competitive advantage: Allows an organization to develop innovative Allows an organization to develop innovative

software that is not available through existing ERP software that is not available through existing ERP softwaresoftware

May be the only option:May be the only option: For some firms in ‘niche’ industries, clean slate For some firms in ‘niche’ industries, clean slate

reengineering is the only optionreengineering is the only option


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Need for BPRNeed for BPR

O’Leary [2000] survey of SAP R/3 usersO’Leary [2000] survey of SAP R/3 users Technology enabled strategy dominatedTechnology enabled strategy dominated Prior to ERP implementation, 16% thought BPR Prior to ERP implementation, 16% thought BPR

needed prior to SAP implementationneeded prior to SAP implementation> 33% thought BPR unnecessaary33% thought BPR unnecessaary

After ERP implementation, 35% thought BPR needed After ERP implementation, 35% thought BPR needed prior to SAP implementationprior to SAP implementation

> 10% thought BPR unnecessary10% thought BPR unnecessary

So BPR seems to be a useful exerciseSo BPR seems to be a useful exercise


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Comparison: Comparison: Clean Slate vs. Technology Enabled Clean Slate vs. Technology Enabled AdvantagesAdvantages

Clean SlateClean Slate Technology EnabledTechnology Enabled

Not constrained by toolNot constrained by tool Focus on ERP best practicesFocus on ERP best practices

Not limited by “best practices” as Not limited by “best practices” as defined by vendor defined by vendor

Tools help structure reengineering Tools help structure reengineering processprocess

Retain competitive advantagesRetain competitive advantages Tools focus reengineeringTools focus reengineering

Not subject to vendor changesNot subject to vendor changes Process bounded, thus easierProcess bounded, thus easier

May be only way to implement May be only way to implement advanced technologyadvanced technology Know design is feasibleKnow design is feasible

May have unique features where best May have unique features where best practices inappropriatepractices inappropriate

Greater likelihood that cost, time Greater likelihood that cost, time objectives metobjectives met

AgilityAgility Software availableSoftware available


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Which Firm Should Use Which Approach?Which Firm Should Use Which Approach?

Depends onDepends on Firms SizeFirms Size Available ResourcesAvailable Resources Time PressureTime Pressure Strategic GainStrategic Gain Uniqueness of solutionUniqueness of solution


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Large FirmsLarge Firms

Have the resources to do clean slateHave the resources to do clean slate Are often industry leaders and thus, generally Are often industry leaders and thus, generally

have timehave time Are likely to use processes as a competitive Are likely to use processes as a competitive

advantageadvantage Are more likely to need a unique solutionAre more likely to need a unique solution


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Firms with Deep PocketsFirms with Deep Pockets

Clean slate requires substantial resourcesClean slate requires substantial resources In some cases, clean slate will lead to many In some cases, clean slate will lead to many

starts and stops before the “final” design is starts and stops before the “final” design is foundfound


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Firms with TimeFirms with Time

Clean slate takes longer so only firms that have Clean slate takes longer so only firms that have the time can really do clean slate approaches.the time can really do clean slate approaches.


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Firms for which Processes are a Strategic Firms for which Processes are a Strategic AdvantageAdvantage

The more unique a firm is in terms of its The more unique a firm is in terms of its industry, processes, customers or other factors, industry, processes, customers or other factors, the more likely that they see their specific the more likely that they see their specific processes as a competitive advantage and thus processes as a competitive advantage and thus use some clean slate approach.use some clean slate approach.


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Firms that Seek a Unique SolutionFirms that Seek a Unique Solution

Technology enabled approaches are easily Technology enabled approaches are easily copied and diffusedcopied and diffused

Clean slate approaches are not as rapidly or as Clean slate approaches are not as rapidly or as easily copied.easily copied.


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Blend - Somewhere Between the TwoBlend - Somewhere Between the Two

The approach claimed to be used by most firms is The approach claimed to be used by most firms is Technology Enabled ReengineeringTechnology Enabled Reengineering, simultaneous , simultaneous with ERP software implementationwith ERP software implementation..

In actuality, there are few projects that are In actuality, there are few projects that are “purely” clean slate or technology enabled“purely” clean slate or technology enabled

More of a spectrumMore of a spectrum

TechnologyEnabled

CleanSlate

MOST FIRMS


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Whose Business is Business Improvement?Whose Business is Business Improvement?

Read the case. Read the case. Form small groups (2-4)Form small groups (2-4) (My) Left side of room:(My) Left side of room:

Business should lead – justify!Business should lead – justify! (My) Right side of room:(My) Right side of room:

IT should lead – justify!IT should lead – justify!

INFO245 - Business Process Reengineering

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