Business Process / Enterprise (Process Oriented) Systems

Information, Organizations, Processes and Control Hierarchical organizations of past years Today Process-oriented, Learning, Team-based, and Fast- cycle organizational models Flat, flexible, focused on core competence Inside, empowered, interfunctional teams of knowledge workers are reengineering and continually improving core business processes. Think globally and act locally

Flattening the Organizational Structure

 To accomplish the organizations of the year 2000 and beyond firms must change the way they are organized, and employees at all levels must become information literate - not just computer literate. Information, Organizations, Processes and Control

 Transforming an Organization Requires more than just Changing the Structure. True change occurs deep within the organization as individuals and work teams redefine the way they work and the values that guide decision making and action. Managers need to rethink the nature of control and authority Smashing together the features of the hierarchy with features of an entrepreneurial firm will not work. Work must change and people must change New knowledge and skills are needed Creating the Information Age Organization

Business Process / Enterprise (Process Oriented) Systems  Business process systems are cross- functional that is, the system boundaries are not within a single function but actually go across boundary lines

BPR  Business Process Redesign The fundamental rethinking and radically redesign of business processes to achieve dramatic improvement in critical, contemporary measures of performance such as cost, quality, service and speed. The implementation of deliberate and fundamental change in business processes to achieve breakthrough improvements in performance. Enabled by IT

 Business Process Redesign Also known as Reengineering or Process Innovation is offered as an enabler of organizational transformation. Organization embrace a BPR approach when they believe that a radical improvement can be achieved by marring business process, organization structure, and IT change. BPR

 Hammer and Champy It is an all-or-nothing proposition that produces dramatically impressive results. Most companies have no choice but to muster the courage to do it. For many, reengineering is the only hope for breaking away from the ineffective, antiquated ways of conducting business that will otherwise destroy them. BPR

 BPR Objectives: To dramatically reduce cost Reduce time To dramatically improve customer services or to improve employee quality of life To reinvent the basic rules of the business e.g.  the airline industry  taco bell from Mexican food to fast food to feeding people anywhere, anyhow. Customer satisfaction Organizational learning BPR

 Change: To transform an organization, a deep change must occur in the key behavior levels of the organization:  jobs, skills, structure, shared values, measurement systems and information technology.  Role of IT BPR is commonly facilitated by IT e.g.  Organizational efficiency  Effectiveness  Transformation BPR

 Efficiency Applications in the efficiency category allow users to work faster and often at measurable lower cost  Mere automation of manual tasks, resulting in efficiency gains (least deep)  Effectiveness Applications in the effectiveness category allow users to work better and often to produce higher quality work.  Requires changes not only in technology, but in skills, job roles, and work flow (deeper). BPR

 Transformation Applications in the the transformation category change the basic ways that people and departments work and may even change the very nature of the business enterprise itself.  A major change in the organization, including structure, culture, and compensation schemes (deepest). BPR

 Process A process is set of logically related tasks performed to achieve a defined business outcome A collection of activities that, taken together, create value for customer e.g. new product for customer. This tasks are inter-related tasks BPR

Business Function --  Business Function -- A group of similar resources that perform similar activities or tasks.  This is also called a task-oriented approach where the emphasis is placed on perfecting the execution of individual tasks. Functional IS Systems -- also known as "silo" systems supported one business function

BUSINESS FUNCTION IS SYSTEM Logistics Procurement Production / Operations Material Resources Planning Finance / Accounting Accounts Payable Human Resources Payroll Sales / Marketing Sales Order Management When information from one IS system was needed by another business function, then periodically information would pass from one IS system to the other.

 How can Companies Identify their Business Processes. Examples Manufacturing: As the procurement-to- shipment process Product development as the concept-to- prototype process Sales as the prospect-to-order process Order fulfillment as the the order-to- payment process Service as the inquiry-to-resolution process Business functions Business Processes BPR

Advantage of a business process  The inherent advantage of a business process is that its performance can easily be measured against the attainment of the goal.  Looking at the business function systems -- how is performance measured?

Business process  IT Systems organized around business processes: Enterprise Resource Planning (ERP) or Business Engineering (BE) or ENTERPRISE SYSTEMS (ES)  Packaged, application software (modules) designed to address common business processes (across industries and business functions)  Evolved, in part, from MRP (Materials Resource Planning) concepts, thus the 'rp' in erp and mrp  Typically, vendors assume some customization and integration will be required -- but customization will NOT be to the core  Vendors also assume system infrastructure exists (including: RDB, client, servers, browsers, network, etc.)

Common Features:  On-line system with no traditional batch interfaces  One database for all data  Clear definition of every data items  Efficient support of back-office transaction processing; weaker in decision support and analytical support but improving  Templates for processes of best practices  Client/server computing, network infrastructure, RDB, GUI, Web Enablement  Proprietary language and tools (e.g. ABAP/4 for SAP R/3)

Advantages:  Tight integration among all modules  Single view of the business -- same db, consistent reporting and analysis  Process orientation: streamline processes  Rich functionality : templates & reference model  Flexibility: current and new environment  Scalability: small group vs. enterprise  Expandability: modular vs. total systems  Interoperability with 3rd party solutions  Rapid implementation: "vanilla" version

Challenges:  High cost with low payoff is the norm when vanilla version not implemented  Difficult to change /test all aspects that are affected simultaneously  Difficult to design a new process that's an improvement (particularly when the organization's structure is an issue)  Difficult to find/build software for new process.  Difficult to change all aspects simultaneously  Learning Curve Realities  Idiosyncratic support needs are the norm

 How can Companies Identify their Business Processes. Dysfunction: Which process are in the deepest trouble Important: Which process have the greatest impact on customer Flexibility: which process are the most susceptible to redesign. BPR- How can Companies Identify their Business Processes

Increasing operating performance Maintain Advantage Catch up Increase flexibility, responsiveness Differentiate product and services Manufacturing gap versus industry leader Services / Marketing gap versus industry leader Low High Different competitive investment strategies facing industry players as they consider there position versus industry leaders.

 Embarking on Re-engineering Persuade people to embrace or at least not to fight -the prospect of major change by developing the clearest message on: 1: A “case for action”- Here is where we are as a company and this is why we can’t stay here  show your balance sheet  show competitors balance sheet 2: A “vision statement” - This is what we as a company need to become BPR

 Simple Rules Start with a clean sheet of paper.  With my current experience what can I do today  If I were to re-create this company today, given what I know and current technology, what would it look like.  How will I be focusing, organizing and managing the company?  Transition from a vertical functional departments to one that is horizontal, CUSTOMER focused and process-oriented? BPR

 Simple Rules Listen to customer Enhance those things that bring value to the customer or eliminate those that don’t Be ambitious, focus your commitment to radical change on the process BPR

 Process Improvement and redesign Process MagnitudeIncrementRadical Improvement 30-50%10x-100x Sought Starting baseExisting ProcessBlank skeet Top managementRelatively lowHigh commitment Role of ITLowHigh RiskLowHigh Improvement Innovation/Reengineering BPR

Magnitude of Change Source: Adapted From O'Hara, Watson and Kavan

The Seven Phases of Process Re-generation  1. Strategy Linkage kicks off project secure management commitment discover process opportunities identify IT enabling opportunities align with corporate strategy and select BPR project  2. Change Planning inform stakeholders and organize re-generation team prepare project schedule and set performance goals  3. Process Pathology document existing process uncover process pathologies

The Seven Phases of Process Re-generation  4. Social Re-Design Technical Re- Design (reiterative until satisfied) explore alternative designs design new process design HR architecture (x-func/multi-discipline) select IT platform prototype holistic process

The Seven Phases of Process Re-generation  6. Process Re-Generation implement HR changes develop & deploy IT support -- tug of war game -- forces towards catastrophe and towards the ideal re-organizing:  teams  jobs  training top management communication and persuasion critical here  7. Continuous Improvement measure performance link to quality improvement

The Seven Phases of Process Re- generation  1. Strategy Linkage a. kicks off project b. secure management commitment c. discover process opportunities d. identify IT enabling opportunities e. align with corporate strategy select BPR project  2. Change Planning a. inform stakeholders organize re-generation team b. prepare project schedule set performance goals  A. Imperative "Prove the need" Positive ("this change" is a big chance to grab it all) Negative (without "this change" we will die)  B. Leaders Instigate and Sustain the change "Walk the talk" and "Block escape" brave fearless communicative

The Seven Phases of Process Re- generation  3. Process Pathology a. document existing process b. uncover process pathologies  C. Levers the tools-- changed processes, people, technology, environment "Power the transition" and "Demonstrate new reality" rewards/punishments peer pressure forced environmental/technological changes -- "no going back" stakeholder feedback

The Seven Phases of Process Re-generation  4. Social Re-Design Technical Re- Design (reiterative until satisfied) a. explore alternative designs b. design new process c. design HR architecture (x-func/multi-discipline) d. select IT platform e. prototype holistic process  D. Affected Agents all those affected by the change "Segment them" -- "Strategy and communication tactics for each" customers suppliers strategic partners stockholders community neighbors

 6. Process Re-Generation a. implement HR changes b. develop & deploy IT support -- a tug- of- war game on forces aimed towards catastrophe and the ideal c. re-organizing:  teams  jobs  training d. top management communication top management persuasion ( critical here)  7. Continuous Improvement a. measure performance b. link to quality improvement  E. Buoys Stabilizers ( life preservers) for affected agents Exploit camaraderie consistency core competencies cultural values strategic relationships