Slide 1: Business Process Reengineering (BPR) EBUS 682 Enterprise Strategy and IT Istanbul Bilgi University Executive MBA Program
Slide 2: Organizational Change  Crisis driven  Reactive  Opportunity driven  Proactive
Slide 3: Risks and Returns of Change High RISK Low Low RETURN High
Slide 4: BPR   Definition: Fundamental rethinking and radical redesign of business processes. Purpose: Dramatic improvements     Quality Cost Speed Service
Slide 5: TQM-vs-BPR
Slide 6: 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.
Slide 7: Risks of BPR  Failure rate as high as 75-85% Improperly aligned BPR and IT Expensive Organizational resistance   
Slide 8: 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
Slide 9: 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
Slide 10: Need for Information Integration Vendors, Suppliers Distribution Purchasing Finance Organization R&D Production Sales Distribution Customers Logistics, Services Product development Order fulfillment Planning, resourcing, and control Customer service Business processes across functional areas and organizational boundaries.
Slide 11: 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
Slide 12: 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
Slide 13: 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
Slide 14: Architectural Characteristics: Level of Integration Levels  Mutual collaboration among tasks or processes Loose  Suboptimized processes   Moderate Tight    Complexity Conflicting interests Difficulty in analysis and modification
Slide 15: Architectural Characteristics: Five Dimensions of Integration  Common culture Common standards Information sharing Coordination Collaboration    
Slide 16: Architectural Characteristics - Five Dimensions of Integration: Common Culture Culture Understanding  Beliefs  Advantages Easy to work together  Easy to resolve conflicts 
Slide 17: Architectural Characteristics - Five Dimensions of Integration: Common Standards Standards   Terminology Procedures Advantages     Ease of interfacing Ease of maintenance Economies of scale Future integration possible
Slide 18: Architectural Characteristics - Five Dimensions of Integration: Information Sharing Information   Independent business processes Mutual access to data Advantages   Better decision making Increased responsiveness
Slide 19: 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
Slide 20: Architectural Characteristics - Five Dimensions of Integration: Collaboration Strongly interdependent or merging processes Advantages  Process results optimized with respect to organizational goals and objectives
Slide 21: 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
Slide 22: 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
Slide 23: Architectural Characteristics: Planning, Execution and Control Cycle Executing What to do How to do When to do Where to do Who to do Why to do Work standards What to do How to do When to do Where to do Who to do Why to do Work standards Performance information Progress information Performance feedback Planning Controling
Slide 24: Architectural Characteristics - Comparison: Planning, Execution and Control Cycle Step Planning Time Focus Future Information Requirement Past and present data Assumptions Models Procedures Problem identification Information collection Methods for replanning Motivation Real-time information Execution Present Control Past
Slide 25: Architectural Characteristics: Exceptions, Errors and Malfunctions Efforts to formalize handling cases TRADE OFF Efforts to work out each case Computerized Systems More structured Less flexible Manual Systems Less structured More flexible
Slide 26: Evaluating Business Processes Performance Indicators       Rate of output Productivity Consistency Cycle time Flexibility Security
Slide 27: Business Process Performance: Rate of Output Levels  Actual production in a given period Low   Unused capacity Low productivity   Moderate High   Higher error rates and rework Low productivity
Slide 28: Business Process Performance: Productivity Levels  Ratio of output to inputs Low   High costs Expensive output   Moderate High   Overemphasis on quantity Underemphasis on quality
Slide 29: 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
Slide 30: 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
Slide 31: 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
Slide 32: 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
Slide 33: 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
Slide 34: 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
Slide 35: 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
Slide 36: 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
Slide 37: Business Process Modeling      Process model Workflow diagram Data flow diagram Flowchart Structured English
Slide 38: Process Model and Workflow Diagrams  Process model     High-level activity modeling No subject performing activity No order No time perspective Situation Order of events Rules  Workflow diagram   
Slide 39: 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 Focus only on flows of information Ignore flows of materials, decision points, etc.  Limitations:   39
Slide 40: Elements of a DFD
Slide 41: Flowcharts and Structured English  Flowcharts   Diagrammatic Sequence and logic of procedures Declarative sentences Sequential Logic of procedure in detail  Structured English   
Slide 42: IBM Credit Corporation Reduced Cycle Time by 90%  The old process  took an average of seven days 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  The reengineered process   
Slide 43: IBM’s Old Process
Slide 44: IBM’s New Process
Slide 45: 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 45
Slide 46: Context Diagram for Ford
Slide 47: Ford’s Process Redesign
Slide 48: Level-0 Diagram for Ford
Slide 49: From Mass Production to Mass Customization  Mass production  a company produces a large quantity of an identical standard product a company produces large volumes, yet customizes each product to the specifications of individual customers  Mass customization 
Slide 50: Push -vs- Pull
Slide 51: 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
Slide 52: Before
Slide 53: After
Slide 54: Networked vs. Hierarchical Organization
Slide 55: From Hierarchy to a Network
Slide 56: BP Engineering
Slide 57: 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
Slide 58: Empowerment’s 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
Slide 59: 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
Slide 60: 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 opportunism trust technology – full utilization – lack of borders – adaptability to change
Slide 61: 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 other’s databases ERP software is extensively used to support standard transactions among business partners
Slide 62: Virtual Corporation
Slide 63: Buying and Selling Along the Supply Chain  Upstream activities       Bidding Consolidation of vendors’ catalogues in buyer’s site Onsite specialty stores Other purchases Buying knowledge Internal SCM activities Selling on your own web site Auctions on your web site  Downstream activities    Upstream and Downstream combined
Slide 64: 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