INTRODUCTION TO BPR FOR e-BUSINESS 1-1: INTRODUCTION 1-1-1 Whatis BPR 1-1-2. What is BPR for e-Business? 1-2: THE CONTEXT OF BPR FOR e-BUSINESS 1-2-1: The Leavitt Diamond: Understanding Organizational Adaptation 1-2-2. The Evolution of Bpr 1-3: HOW DOES A BPR PROJECT WORK 1-3-1: The Phases of BPR"in-the-BIG 1-3-2: The Participants in a BPR Project 1-3-3: Cross-Enterprise BPR for e-Business 1-4: THE PROCESS REDESIGN PHASE OF BPR: A DESIGN FOCUS 1-5: REDESIGNING BUSINESS PROCESSES 1-5-1: The Properties of Business Processes 1-5-2: Three Generic IT-Enabled Ways for Redesigning Busines Processes 1-6 THE LEARNING BLOCKS OF BPR FOR e-BUSINESS WHAT CHAPTER 1 IS ABOUT The chapter starts by introducing BPR and e-business and their relationship to how business enterprises go through organizational change. It outlines the phases ofa The chapter then introduces the key properties of business n phase in particular BPR project while focusing on the business process redesi ses and outlines three different types of redesign heuristics while illustrating the role of information
1 INTRODUCTION TO BPR FOR e-BUSINESS 1-1: INTRODUCTION 1-1-1: What is BPR? 1-1-2: What is BPR for e-Business? 1-2: THE CONTEXT OF BPR FOR e-BUSINESS 1-2—1: The Leavitt Diamond: Understanding Organizational Adaptation 1-2-2: The Evolution of BPR 1-3: HOW DOES A BPR PROJECT WORK? 1_3_1: The Phases of BPR "in-the-BIG" 1-3-2: The Participants in a BPR Project 1-3-3: Cross-Enterprise BPR for e-Business 1-4: THE PROCESS REDESIGN PHASE OF BPR: A DESIGN FOCUS 1-5: REDESIGNING BUSINESS PROCESSES 1-5-1: The Properties of Business Processes 1-5-2: Three Generic IT-Enabled Ways for Redesigning Business Processes 1-6: THE LEARNING BLOCKS OF BPR FOR e-BUSINESS WHAT CHAPTER 1 IS ABOUT The chapter starts by introducing BPR and e-business and their relationship to how business enterprises go through organizational change. It outlines the phases of a BPR project while focusing on the business process redesign phase in particular. The chapter then introduces the key properties of business processes and outlines three different types of redesign heuristics while illustrating the role of information
PART A: UNDERSTANDING BPR FOR e-BUSINESS hnologies with examples. The chapter ends with a reiteration of the learning blocks required for acquiring skills in BPR for e-business and describes how this ok provides them 1-1: INTRODUCTION Sometime in the late 1980s there was a wave of disenchantment with the return on in- vestment in information technology(IT)in much of corporate America. Why had huge investments in IT throughout the 1980s not resulted in corresponding increases in pro- ducti There were many explanations given. One set of explanations centered around faulty measurements. They claimed that productivity measurements were too narrowly de fined and were flawed when applied to a service economy. They also claimed that the effects of IT on performance improvement were lagging and would take many more years to show up at the aggregate level. A second set of explanations blamed IT itsel and how it was being implemented; the culprits included user-unfriendly software, lechnophobic managers who did not understand IT, technocentric information systems professionals who did not understand business, and faulty IT implementation. A third set of explanations, however, provided a startling(but obvious)revelation: Perhaps it was not that information systems were not user-friendly but rather that organizational processes, structures, and designs were not"work-friendly"! It was not possible to take advantage of It to improve business performance with rigid hierarchical structures and complex procedures designed for the functionally oriented command-and-control cor- porate environments of the 1960s. Those antiquated organizational designs had become a drag and often a complex mess. In fact, information systems were making things worse by cementing-in complex structures through automation. We were automating the mess The pressure for faster cycle times, cost cutting, and better customer responsiveness intensified with accelerating global competition in the late 1980s. There was a crying need to find new ways of doing business that would yield quantum leaps in perform- ance. That could only be done by both radically rethinking how to do business and by aking advantage of the capabilities ofIT. The fire of business process reengineering had been ignited In 1990 two articles that emanated from the practices of the Index Consulting Group (now part of Computer Sciences Corporation) appeared simultaneously: one by Thomas Davenport and James Short in the Sloan Management Review, a second by Michael Hammer in the Harvard Business Review. Both brought into focus the importance of business processes and explained how It could innovate and radically transform busi- ness processes. The Davenport and Short article brought to light the recursive relation- ship between IT and business process redesign. Not only could information technolo- gies support business processes, they could also be used to transform those processes and enable new ones. Thus the real power of IT was its capability to enable us to carry out things in ways that were never before possible. Davenport and Short called it the new industrial engineering and process innovation. The Hammer article made the same argument from a much more radical perspective: Obliterate, don't automate"was
PART A: UNDERSTANDING BPR FOR e-BUSINESS technologies with examples. The chapter ends with a reiteration of the learning blocks required for acquiring skills in BPR for e-business and describes how this book provides them. 1-1 INTRODUCTION Sometime in the late 1980s there was a wave of disenchantment with the return on investment in information technology (IT) in much of corporate America. Why had huge investments in IT throughout the 1980s not resulted in corresponding increases in productivity and performance improvement? There were many explanations given. One set of explanations centered around faulty measurements. They claimed that productivity measurements were too narrowly defined and were flawed when applied to a service economy. They also claimed that the effects of IT on performance improvement were lagging and would take many more years to show up at the aggregate level. A second set of explanations blamed IT itself and how it was being implemented; the culprits included user-unfriendly software, technophobic managers who did not understand IT, technocentric information systems professionals who did not understand business, and faulty IT implementation. A third set of explanations, however, provided a startling (but obvious) revelation: Perhaps it was not that information systems were not user-friendly but rather that organizational processes, structures, and designs were not "work-friendly"! It was not possible to take advantage of IT to improve business performance with rigid hierarchical structures and complex procedures designed for the functionally oriented command-and-control corporate environments of the 1960s. Those antiquated organizational designs had become a drag and often a complex mess. In fact, information systems were making things worse by cementing-in complex structures through automation. We were automating the mess. The pressure for faster cycle times, cost cutting, and better customer responsiveness intensified with accelerating global competition in the late 1980s. There was a crying need to find new ways of doing business that would yield quantum leaps in performance. That could only be done by both radically rethinking how to do business and bytaking advantage of the capabilities of IT. The fire of business process reengineering had been ignited. In 1990 two articles that emanated from the practices of the Index Consulting Group (now part of Computer Sciences Corporation) appeared simultaneously: one by Thomas Davenport and James Short in the Sloan Management Review; a second by Michael Hammer in the Harvard Business Review. Both brought into focus the importance of business processes and explained how IT could innovate and radically transform business processes. The Davenport and Short article brought to light the recursive relationship between IT and business process redesign. Not only could information technologies support business processes, they could also be used to transform those processes and enable new ones. Thus the real power of IT was its capability to enable us to carry out things in ways that were never before possible. Davenport and Short called it the new industrial engineering and process innovation. The Hammer article made the same argument from a much more radical perspective: "Obliterate, don't automate" was
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 5 Disenchantment with return or ting global competition with investment in It in late 1980s sified pressure for speed by U.s. corporations processes, structures and designs were not " work-friendly trane of BPR as a major business Emergence sformation perspective FIGURE 1-1 The historical triggers of BPR Hammer's message. Blow up your old processes, throw away your old rules, start with a clean slate, and then use it to radically change the way business processes are carried out. Hammer called it business process reengineering(BPR)and it started to gain pop- ularity as a fresh business transformation perspective. y 1993 the appeal of BPR had started to spread widely. That year, Michael Ham mer and James Champy published a book on BPR titled Reengineering the Corpora- tion: A Manifesto for Business Revolution. It hit a nerve with managers all over the world; in the few years that followed over 2 million copies of the book were sold in 17 different languages. The message of that well-timed book appeared to please managers and many began to perceive BPR as the possible savior and remedy for the performance ills of large corporations. The book made them feel good about themselves: It was those antiquated processes and functional structures and complex rules that were the culprits, not those hardworking flexible managers and professionals. The folksy style of the Hammer and Champy book made understanding how to use information technologies for business transformation easy to grasp by managers. Information technologies seemed easier to take advantage of than they had previously believed. The message hit home, and BPR was on a rampant path to becoming an official acronym and overused management buzzword The hype around BPR subsided about three years later and in the late 1990s became a healthy balanced business practice 1-1-1: What Is BPR? The selling of BPR that emerged around the time of the Hammer and Champy book was accompanied by new armies of management consultants. At this writing, almost every major management consulting company has a BPR practice. Furthermore, many IT ven- dors have grown their own BPR practice divisions, as have companies in the systems inte- gration business. They too have realized that the redesign of business processes is inti mately linked to the technologies they are selling. with this blossoming of BPR consultants and accompanying hype, BPR has evolved into a practice with many variants and flavors Common to all these variants, however, is a focus on redesigning business processes
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS Disenchantment with return on investment in IT in late 1980s by U.S. corporations Accelerating global competition with intensified pressure for speed and customer responsiveness Realization that existing organizational processes, structures and designs were not "work-friendly" Emergence of BPR as a major business transformation perspective for the 1990s FIGURE 1-1 The historical triggers of BPR Hammer's message. Blow up your old processes, throw away your old rules, start with a clean slate, and then use IT to radically change the way business processes are carried out. Hammer called it business process reengineering (BPR) and it started to gain popularity as a fresh business transformation perspective. By 1993 the appeal of BPR had started to spread widely. That year, Michael Hammer and James Champy published a book on BPR titled Reengineering the Corporation: A Manifesto for Business Revolution. It hit a nerve with managers all over the world; in the few years that followed over 2 million copies of the book were sold in 17 different languages. The message of that well-timed book appeared to please managers and many began to perceive BPR as the possible savior and remedy for the performance ills of large corporations. The book made them feel good about themselves: It was those antiquated processes and functional structures and complex rules that were the culprits, not those hardworking flexible managers and professionals. The folksy style of the Hammer and Champy book made understanding how to use information technologies for business transformation easy to grasp by managers. Information technologies seemed easier to take advantage of than they had previously believed. The message hit home, and BPR was on a rampant path to becoming an official acronym and overused management buzzword. The hype around BPR subsided about three years later and in the late 1990s became a healthy balanced business practice. 1-1-1: What Is BPR? The selling of BPR that emerged around the time of the Hammer and Champy book was accompanied by new armies of management consultants. At this writing, almost every major management consulting company has a BPR practice. Furthermore, many IT vendors have grown their own BPR practice divisions, as have companies in the systems integration business. They too have realized that the redesign of business processes is intimately linked to the technologies they are selling. With this blossoming of BPR consultants and accompanying hype, BPR has evolved into a practice with many variants and flavors. Common to all these variants, however, is a focus on redesigning business processes
6 PART A: UNDERSTANDING BPR FOR e-BUSINESS Business Process Reengineering(BPR)is in essence a performance improvement philosophy that aims to achieve quantum improvements by primarily rethinking and redesigning the way that business processes are carried out The above definition of BPR does not tell the whole story behind this performance improvement philosophy, which can be better understood by examining the implicit as- sumptions surrounding the B, the P and the r in BPr The P in BPr A primary focus on essential processes that deliver outcomes is le signature ofall variants of BPr rather than a focus on static organizational struc tures. The BPR perspective looks primarily at flows that move, rather than at organiza- tional structures that sit. It cuts across departmental boundaries and is thus typically cross-functional in scope within an enterprise. It can also cut across different enter prises when a business process is partly executed by one enterprise and partly by an- other as together they deliver an outcome. The B in BPR The focus in BPR is on end-to-end business processes that extend all the way to a customer who receives some value from the process. The customer can be external or internal to the organization. The BPr perspective definesthe boundaries ofa process in a way that makes sense in terms of business value: the coordination ofensembles oftasks performed by many people rather than narrow tasks performed by one person. The B in BPR brings with it the primacy of effective activity coordina- tion over individual task efficiency. This is what ultimately creates value for a customer, BPR is an outside-in perspective that defines a business process through the eyes of the customer of that process The R in BPr The R in BPR carries several implicit assumptions about the extent of performance improvement due to reengineering and how the reengineering is caried First, BPR searches for quantum improvements rather than incremental ones (even though that may not al ways be possible. This mindset encourages people to find innovative out-of-the-box solutions rather than just improving efficiencies through minor streamlining. To illustrate, there is usually enough"fat"in a process that a lOper- cent reduction in cycle time can be achieved without any major structural change. How ever, a 90 percent reduction in cycle time will probably need a more creative solution That does not mean we have to obliterate the existing process and start from a clean slate, nor does it mean we will not value incremental improvements in process per formance. It does mean that we will constantly be looking for opportunities for quan- um improvements in process performance A second assumption that comes with the r is that any BPR effort will try to use IT to enable the process to be done in new ways that are qualitatively different. IT is very good at changing the rules of space, time, and boundaries. Thus it is quite likely(but not necessary) that quantum performance changes will be enabled through the innova- tive use ofIT. It is also quite likely that IT will be used for more than just automating
PART A: UNDERSTANDING BPR FOR e-BUSINESS Business Process Reengineering (BPR) is in essence a performance improvement philosophy that aims to achieve quantum improvements by primarily rethinking and redesigning the way that business processes are carried out. The above definition of BPR does not tell the whole story behind this performance improvement philosophy, which can be better understood by examining the implicit assumptions surrounding the B, the P and the R in BPR. The P in BPR A primary focus on essential processes that deliver outcomes is the signature of all variants of BPR rather than a focus on static organizational structures. The BPR perspective looks primarily at flows that move, rather than at organizational structures that sit. It cuts across departmental boundaries and is thus typically cross-functional in scope within an enterprise. It can also cut across different enterprises when a business process is partly executed by one enterprise and partly by another as together they deliver an outcome. The B in BPR The focus in BPR is on end-to-end business processes that extend all the way to a customer who receives some value from the process. The customer can be external or internal to the organization. The BPR perspective defines the boundaries of a process in a way that makes sense in terms of business value: the coordination of ensembles of tasks performed by many people rather than narrow tasks performed by one person. The B in BPR brings with it the primacy of effective activity coordination over individual task efficiency. This is what ultimately creates value for a customer, BPR is an outside-in perspective that defines a business process through the eyes of the customer of that process. The R in BPR The R in BPR carries several implicit assumptions about the extent of performance improvement due to reengineering and how the reengineering is carried out. First, BPR searches for quantum improvements rather than incremental ones (even though that may not always be possible.) This mindset encourages people to find innovative out-of-the-box solutions rather than just improving efficiencies through minor streamlining. To illustrate, there is usually enough "fat" in a process that a 10 percent reduction in cycle time can be achieved without any major structural change. However, a 90 percent reduction in cycle time will probably need a more creative solution. That does not mean we have to obliterate the existing process and start from a clean slate, nor does it mean we will not value incremental improvements in process performance. It does mean that we will constantly be looking for opportunities for quantum improvements in process performance. A second assumption that comes with the R is that any BPR effort will try to use IT to enable the process to be done in new ways that are qualitatively different. IT is very good at changing the rules of space, time, and boundaries. Thus it is quite likely (but not necessary) that quantum performance changes will be enabled through the innovative use of IT. It is also quite likely that IT will be used for more than just automating an existing process
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 7 a third assumption that comes with the r is that there is afocus on maximizing the value-adding content ofa process and minimizing everything else. BPR aims to slash e non-value-adding parts of a process and en A fourth assumption is that the definition of value can have many forms that c he measured through surrogate performance measures such as speed, cost, quality learning, and return on investment Finally, a fifth assumption that comes with the r is that the work environment(peo- ple skills, organizational design, organizational structure) will also have to be con- currently changed to fit the reengineeredprocess Taking these sets of assumptions into account gives a clearer picture of the com- monality that underlies BPR in all its various approaches. Each approach differs in the way it emphasizes its favorite aspect. Some(like Hammer)tend to emphasize the i portance of a clean slate approach. Others(such as system integrators) tend to empha- size the use of TT. Still others(such as organizational change specialists) have empha- sized the people aspects. Despite the difference in relative emphasis, however, the ommon to all of the 1-1-2: What Is BPR for e-Business? The Internet brings with it ubiquitous connectivity, real-time access, and a simple uni- ersal interface provided by Web browsers. Traditional enterprises are transformin processes to take full advantage of the capabilities of the Internet. The Internet allows an enterprise to communicate instantly with customers, suppliers, and partners. It changes business transac- tions are carried out, and the way relationships are nurtured and maintained. These new conditions enable new ways of creating value that take advantage of the effects of real time network connectivity BPR for e-business is more than Web-enabling. It involves redesigning enterprise rocesses across entire supply chains, whether they be front-office processes that inter- face with the customer(such as sales, marketing, and customer service)or back-office processes(such as order processing, inventory management, and manufacturing)or how back-office and front-office processes are connected together. When enterprises can exchange information easily in real time, work can be performed where it is done best across a supply chain. Furthermore, expertise and economies of scale can be ex ploited in new and different ways. BPRfor e-business involves rethinking and redesigning business processes at both the enterprise and supply chain level to take advantage of Internet connectivity and new ways ofcreating value. It is important to note that e-business is much more than electronic commerce. E-business involves changing the way a traditional enterprise operates, the way its physical and ele transforms the entire supply chain and, consequently, the enterprises that comprise e tronic business processes are handled, and the way people work. BPR for e-business volves rethinking and redesigning business processes based on a new business model tha
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS A third assumption that comes with the R is that there is a focus on maximizing the value-adding content of a process and minimizing everything else. BPR aims to slash the non-value-adding parts of a process and enhance the value-adding parts. A fourth assumption is that the definition of value can have many forms that can he measured through surrogate performance measures such as speed, cost, quality, learning, and return on investment. Finally, a fifth assumption that comes with the R is that the work environment (people skills, organizational design, organizational structure) will also have to be concurrently changed to fit the reengineered process. Taking these sets of assumptions into account gives a clearer picture of the commonality that underlies BPR in all its various approaches. Each approach differs in the way it emphasizes its favorite aspect. Some (like Hammer) tend to emphasize the importance of a clean slate approach. Others (such as system integrators) tend to emphasize the use of TT. Still others (such as organizational change specialists) have emphasized the people aspects. Despite the difference in relative emphasis, however, the above implicit assumptions are common to all of the variants. 1-1-2: What Is BPR for e-Business? The Internet brings with it ubiquitous connectivity, real-time access, and a simple universal interface provided by Web browsers. Traditional enterprises are transforming themselves into e-businesses by reinventing the way they carry out their business processes to take full advantage of the capabilities of the Internet. The Internet allows an enterprise to communicate instantly with customers, suppliers, and partners. It changes the way information can move across enterprises, the way business transactions are carried out, and the way relationships are nurtured and maintained. These new conditions enable new ways of creating value that take advantage of the effects of realtime network connectivity. BPR for e-business is more than Web-enabling. It involves redesigning enterprise processes across entire supply chains, whether they be front-office processes that interface with the customer (such as sales, marketing, and customer service) or back-office processes (such as order processing, inventory management, and manufacturing) or how back-office and front-office processes are connected together. When enterprises can exchange information easily in real time, work can be performed where it is done best across a supply chain. Furthermore, expertise and economies of scale can be exploited in new and different ways. BPR for e-business involves rethinking and redesigning business processes at both the enterprise and supply chain level to take advantage of Internet connectivity and new ways of creating value. It is important to note that e-business is much more than electronic commerce. E-business involves changing the way a traditional enterprise operates, the way its physical and electronic business processes are handled, and the way people work. BPR for e-business involves rethinking and redesigning business processes based on a new business model that transforms the entire supply chain and, consequently, the enterprises that comprise it