8 PART A UNDERSTANDING BPR FOR e-BUSINESS Take, for example, the case of how a business customer buys personal computers through a supply chain that has taken advantage of the capabilities of the Internet. In- gram Micro, a distributor, and Solectron, a contract manufacturer, have reconfigured the supply chain and their roles in it. They have also come up with a system that will allow them to build computers to order, cut costs, and reduce cycle time substantially. a busi ness customer places an order with a reseller through the Web and the order goes elec- tronically to Ingram. The system analyzes the order and sends it via the Internet to the Ingram or Solectron factory most appropriate for the order. Ingram now has changed its role to an assembler, rather than just a distributor. Parts that are not in stock are auto- matically ordered from suppliers. The custom-built personal computers are built in the factories and shipped direct to the customers or to the resellers. The flow of informa tion is continuous and the customer is kept updated throughout the process. Further more, the Ingram system provides the personal computer manufacturer(say Compaq) with information about the order and with customer information. Furthermore. Web links between Solectron and the personal computer manufacturer allow easy collabora- tion on product design. Thus enterprise roles have changed; the order fulfillment, sales, and product development processes have been transformed; and information flows are dramatically changed. Business processes have been redesigned for e-business for the entire supply chain that comprises Ingram, Solectron, personal computer manufactur- ers. resellers and business customers 1-2. THE CONTEXT OF BPR FOR e-BUSINESS BPR does not happen in a vacuum. BPR is carried out in an organizational context that has people, technologies, and organizational form and structure. Thus BPR occurs within the larger context of organizational change. BPR is also carried out within the context of a process-centered approach to organizational change of which there many flavors 1-2-1: The Leavitt Diamond: Understanding Organizational Adaptation In order for BPr to be successful it is not sufficientjust to redesign business processes The work environment around the business process may also need to be adjusted in order for the newly designed process to be executed effectively. As in any other or- ganizational change effort, a variety of organizational elements must fit together in a balanced way. The Leavitt diamond shown in Figure 1-2(the name is attributed to Harold J. Leavitt and to its diamond shape)is an intuitive conceptual framework that shows how we can think of the dynamics of this balance The Leavitt diamond shows four sets of organizational variables information tech- nology use, organizational form, requisite people skills, and business processes. When any one of those is changed, the other three need to be adjusted accordingly so that the diamond remains in functional harmony. If a new information technology is introduced into the organization, business processes may need to be changed in order to take ad- vantage of the technology. The use of the new information technology and the newly designed process may require new people skills to match, and perhaps a new organiza
8 PART A: UNDERSTANDING BPR FOR e-BUSINESS Take, for example, the case of how a business customer buys personal computers through a supply chain that has taken advantage of the capabilities of the Internet. Ingram Micro, a distributor, and Solectron, a contract manufacturer, have reconfigured the supply chain and their roles in it. They have also come up with a system that will allow them to build computers to order, cut costs, and reduce cycle time substantially. A business customer places an order with a reseller through the Web and the order goes electronically to Ingram. The system analyzes the order and sends it via the Internet to the Ingram or Solectron factory most appropriate for the order. Ingram now has changed its role to an assembler, rather than just a distributor. Parts that are not in stock are automatically ordered from suppliers. The custom-built personal computers are built in the factories and shipped direct to the customers or to the resellers. The flow of information is continuous and the customer is kept updated throughout the process. Furthermore, the Ingram system provides the personal computer manufacturer (say Compaq) with information about the order and with customer information. Furthermore, Weblinks between Solectron and the personal computer manufacturer allow easy collaboration on product design. Thus enterprise roles have changed; the order fulfillment, sales, and product development processes have been transformed; and information flows are dramatically changed. Business processes have been redesigned for e-business for the entire supply chain that comprises Ingram, Solectron, personal computer manufacturers, resellers, and business customers. 1-2: THE CONTEXT OF BPR FOR e-BUSINESS BPR does not happen in a vacuum. BPR is carried out in an organizational context that has people, technologies, and organizational form and structure. Thus BPR occurs within the larger context of organizational change. BPR is also carried out within the context of a process-centered approach to organizational change of which there are many flavors. 1-2-1: The Leavitt Diamond: Understanding Organizational Adaptation In order for BPR to be successful it is not sufficient just to redesign business processes. The work environment around the business process may also need to be adjusted in order for the newly designed process to be executed effectively. As in any other organizational change effort, a variety of organizational elements must fit together in a balanced way. The Leavitt diamond shown in Figure 1-2 (the name is attributed to Harold J. Leavitt and to its diamond shape) is an intuitive conceptual framework that shows how we can think of the dynamics of this balance. The Leavitt diamond shows four sets of organizational variables: information technology use, organizational form, requisite people skills, and business processes. When any one of those is changed, the other three need to be adjusted accordingly so that the diamond remains in functional harmony. If a new information technology is introduced into the organization, business processes may need to be changed in order to take advantage of the technology. The use of the new information technology and the newly designed process may require new people skills to match, and perhaps a new organiza-
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 9 echnology Busir processes form FIGURE 1-2 The Leavitt diamond: A conceptual framework for balancing IT-enabled tional form(more centralized, or team-based with a different reward system, for exam- ple). In an effective organizational change effort this mutual adaptation is planned ahead of time and managed so that the resultant balance of the Leavitt diamond is one that is conducive to effective organizational functioning. If not managed. some mutual adaptation will occur anyway and the Leavitt diamond may end up in a position that is functional. In a BPR effort, not only do the business processes need to be reengi- peered but also the information technology infrastructure, the skills needed by the peo- ple, and the organizational form may need to be redesigned as well. It is the balance of all these elements in a viable combination that is organizationally effective that makes for a successful organizational change, rather than changing any single one of them They must work together well for BPR to be successful Different perspectives of organizational change and transformation have tended to emphasize one of the four sets of variables in the Leavitt diamond. The IT-driven per- spective has emphasized the importance of integrated IT architecture for the enterprise Organizational design perspectives have focused on finding new organizational forms The human resource perspective has emphasized empowerment, reward systems, and training. The process-centered BPR perspectives have focused primarily on business processes. For any of these approaches to organizational change to be successful, they must take into account the other three sets of variables the leavitt diamond is a sober ing framework that prevents us from going overboard on any one set of variables while neglecting the others 1-2-2: The Evolution of Bpr The emphasis on processes as a focus for improving an organization,'s performance has gone through a number of phases in the last 20 years(see Figure 1-3). First, there was the Total Quality Management phase led by the Japanese, peaking in popularity in the early 1980S, that focused on continuous incremental improvement. Then came BPR in the early 1990s with its espoused radical"blow it all up"approach. By the mid-1990s first-wave BPR started to mellow, acknowledging that a combination of incremental and radical change was best. While BPR gained the most notoriety in the early 1990s there were several other BPR-like business transformation movements taking place that also took advantage of the growing capabilities of information technologies. One of the
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSIN ESS 9 FIGURE 1-2 The Leavitt diamond: A conceptual framework for balancing IT-enabled transformation tional form (more centralized, or team-based with a different reward system, for example). In an effective organizational change effort this mutual adaptation is planned ahead of time and managed so that the resultant balance of the Leavitt diamond is one that is conducive to effective organizational functioning. If not managed, some mutual adaptation will occur anyway and the Leavitt diamond may end up in a position that is dysfunctional. In a BPR effort, not only do the business processes need to be reengineered but also the information technology infrastructure, the skills needed by the people, and the organizational form may need to be redesigned as well. It is the balance of all these elements in a viable combination that is organizationally effective that makes for a successful organizational change, rather than changing any single one of them. They must work together well for BPR to be successful. Different perspectives of organizational change and transformation have tended to emphasize one of the four sets of variables in the Leavitt diamond. The IT-driven perspective has emphasized the importance of integrated IT architecture for the enterprise. Organizational design perspectives have focused on finding new organizational forms. The human resource perspective has emphasized empowerment, reward systems, and training. The process-centered BPR perspectives have focused primarily on business processes. For any of these approaches to organizational change to be successful, they must take into account the other three sets of variables. The Leavitt diamond is a sobering framework that prevents us from going overboard on any one set of variables while neglecting the others. 1-2-2: The Evolution of BPR The emphasis on processes as a focus for improving an organi/ation's performance has gone through a number of phases in the last 20 years (see Figure 1-3). First, there was the Total Quality Management phase led by the Japanese, peaking in popularity in the early 1980s, that focused on continuous incremental improvement. Then came BPR in the early 1990s with its espoused radical "blow it all up" approach. By the mid-1990s first-wave BPR started to mellow, acknowledging that a combination of incremental and radical change was best. While BPR gained the most notoriety in the early 1990s, there were several other BPR-like business transformation movements taking place that also took advantage of the growing capabilities of information technologies. One of the
0 PARTA UNDERSTANDING BPR FOR e-BUSINESS IT enablement Web-enabled e-business First-wave BPR Total quality Second-wave BPR management business transformation FIGURE 1-3 Waves of business process improvement most potent of these approaches was time-based competition(or fast response manage- ment)in which business process redesign for faster cycle times, flexibility, and cus- tomer focus was linked directly to corporate strategy Then the Internet and the World Wide Web phenomenon took off in 1995 and eventu- ally provided a ubiquitous IT internetworked infrastructure that enabled electronic com- merce and new forms of Web-based business processes. Enterprises started to redesign their business processes to take advantage of the Internet all throughout the value chain from suppliers to distributors to resellers to end customers. This coming together of tra- ditional physical value chains and electronic commerce became known as e-business in 1998. Business processes were redesigned across enterprises to take increasing advantage of the capabilities of the Internet. As we enter the year 2000, there is another concurrent approach to business process improvement taking shape based on more effective knowl edge management around business processes. In knowledge-based business transforma- tion, a large portion of the business process change is brought about by changing the knowledge-creating capability of the business process and its environment Together, all these business process improvement approaches are starting to combine into what could be called second-wave BPR. Second-wave bpr has richer dimensions than first-wave BPR. It is more closely linked to strategic dimensions; it is more fo- cused on cross-enterprise e-business; it takes much greater advantage of capturing and creating new knowledge around business processes; and it takes greater advantage of the Internet. Table l-l compares the different waves of business process improvement The mad scramble by enterprises to move quickly to e-business has caused this second wave of bpr to be internet-centered. The use of the Web IT infrastructure has opened up many new opportunities for exchanging information and creating knowledge around supply chain processes that have triggered new ways of adding value and new business models. The centrality of BPr for increased enterprise and supply chain ef- fectiveness has never been greater than it is now in this era of e-business. The best of BPR is yet to come as second-wave BPR takes shape
10 PART A: UNDERSTANDING BPR FOR e-BUSINESS Degree of IT enablement Knowledge management Web-enable^d e-busines ^s Second-wave BPR Richness of business transformation FIGURE 1-3 Waves of business process improvement most potent of these approaches was time-based competition (or fast response management) in which business process redesign for faster cycle times, flexibility, and customer focus was linked directly to corporate strategy. Then the Internet and the World Wide Web phenomenon took off in 1995 and eventually provided a ubiquitous IT internetworked infrastructure that enabled electronic commerce and new forms of Web-based business processes. Enterprises started to redesign their business processes to take advantage of the Internet all throughout the value chain from suppliers to distributors to resellers to end customers. This coming together of traditional physical value chains and electronic commerce became known as e-business in 1998. Business processes were redesigned across enterprises to take increasing advantage of the capabilities of the Internet. As we enter the year 2000, there is another concurrent approach to business process improvement taking shape based on more effective knowledge management around business processes. In knowledge-based business transformation, a large portion of the business process change is brought about by changing the knowledge-creating capability of the business process and its environment. Together, all these business process improvement approaches are starting to combine into what could be called second-wave BPR. Second-wave BPR has richer dimensions than first-wave BPR. It is more closely linked to strategic dimensions; it is more focused on cross-enterprise e-business; it takes much greater advantage of capturing and creating new knowledge around business processes; and it takes greater advantage of the Internet. Table 1-1 compares the different waves of business process improvement. The mad scramble by enterprises to move quickly to e-business has caused this second wave of BPR to be Internet-centered. The use of the Web as an IT infrastructure has opened up many new opportunities for exchanging information and creating knowledge around supply chain processes that have triggered new ways of adding value and new business models. The centrality of BPR for increased enterprise and supply chain effectiveness has never been greater than it is now in this era of e-business. The best of BPR is yet to come as second-wave BPR takes shape
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 11 TABLE 1-1 WAVES OF BUSINESS PROCESS IMPROVEMENT Second-wave BPR Total quality Time-based Neb-enabled Knowledge management First-wave BPr Reduction of Obliteration of Transfomation Cross-enterprise Expanding the process change variability and old task-oriented of process flows internet defects in and organization processes with creation process outputs replacement to be fast with radical focused. and customers. an innovated partners processes business Continuous Espoused Cycle time used Collaborative magnitude of incremental radical change- as a diagnostic business change creates organizational improvement although often for strategic with incremental redesign around for boti hang cross-enterprise improved and electronic Associated Era 1980s Early 1990s 1990s and Late 1990s and 2000 and beyond beyond Role of T Minor ro Critical enable Enabler of fast leb-based IT data collection f new ways of executing nables ney new knowledg processes Execution Bottom-up Top down and Top down and Cross ss roots mostly one-shot comprehensive Enterprise ot necessarily Slash and bum Not linking cycle Few Confusing aspects or bad strategic time reduction standardized practices to strateg artner interface information and Time frame of Continuing Short-term L Short-term and Long-term target focus ce focus focus performance focus 1-3: HOW DOES A BPR PROJECT WORK? BPR does not happen in an unstructured manner. It must be driven by a vision that has the support of top management; it must be planned and managed through a systematic methodology; and the organization must be mobilized for effectively carrying out both the design and the implementation. For BPR to be successful, it must be organized like a project that has assigned teams, targets, budgets, tools, milestones, and deadlines
CHAPTER 1: INTRODUCTION TO BPR FOR e-BUSINESS 11 TABLE 1-1 WAVES OF BUSINESS PROCESS IMPROVEMENT Signature of process change Nature and magnitude of organizational change Associated Era Role of IT Execution Approach Dysfunctional aspects or bad practices Time frame of target focus Total quality management Reduction of variability and defects in process outputs Continuous incremental improvement 1980s Minor role in data collection and analysis Bottom-up grass roots Not necessarily strategic Continuing First-wave BPR Obliteration of old task-oriented processes and replacement with radically innovated business processes Espoused radical change — although often with incremental implementation Early 1 990s Critical enabler of new ways of executing processes Top down and mostly one-shot Slash and burn downsizing Short-term performance focus Time-based Competition Transformation of process flows and organization to be fast, focused, and flexible Cycle time used as a diagnostic for strategic organizational change 1990s and beyond Enabler of fast response Top down and comprehensive Not linking cycle time reduction to strategy Long-term performance focus Second-wave BPR Web-enabled e-business Cross-enterprise internet processes with suppliers, customers, and partners Collaborative business process redesign around cross-enterprise electronic interfaces Late 1 990s and beyond Web-based IT infrastructure enables new supply chain processes CrossEnterprise Partnering Few standardized partner interface processes Short-term and long-term performance focus Knowledge management Expanding the knowledge creation capacity of business processes Knowledge change creates competencies for both improved and new processes 2000 and beyond Triggers the shaping and synthesis of new knowledge Middle-LlpDown Confusing knowledge with information and data Long-term potential focus 1-3: HOW DOES A BPR PROJECT WORK? BPR does not happen in an unstructured manner. It must be driven by a vision that has the support of top management; it must be planned and managed through a systematic methodology; and the organization must be mobilized for effectively carrying out both the design and the implementation. For BPR to be successful, it must be organized like a project that has assigned teams, targets, budgets, tools, milestones, and deadlines
12 PART A: UNDERSTANDING BPR FOR e-BUSINESS Business strategy Information system FIGURE 1- The design mindsets of BPR While idealistically we like to believe that process management and improvement is a continuous activity that is part of a business professionals job, we are not at the stage where that has been systematized as part of management. For now, BPR is best carried out though a project structure A BPR project is a form of organizational change project that ideally brings together three design mindsets: business strategy, business processes, and information systems (see Figure 1-4). While the bulk of the exposition in this book focuses on the reengi- eering of business processes, this does not mean that the link to corporate strategy and the implementation of related information systems is any less important. The three per- spectives are linked together in practice 1-3-1: The Phases of BPr"in the BIG" For purposes of explanation, we distinguish between the larger BPR project that in- cludes design, implementation, and maintenance from the design portion of it(which is the focus of this book) by naming the larger project"BPR in-the -BIG. There are a va- iety of descriptions of how BPR can be systematically carried out in practice and what the phases of a BPR project are. Drawing on the publicly available literature and from the practices of several consulting companies with prominent BPR practices, this book has come up with a five-phase approach to BPR in-the - BIG as shown in Figure 1-5 Phase 1: A BPR project starts with some sort of trigger such as a performan lem, a competitive e-business move, or pressure from a supply chain partner also be driven primarily by a value creation opportunity or an executive vision a particular aspect of the company(say customer service) should be. Deliberation and discussions take place and go-ahead
1 2 PART A: UNDERSTANDING BPR FOR e-BUSINESS FIGURE 1-4 The design mindsets of BPR While idealistically we like to believe that process management and improvement is a continuous activity that is part of a business professional's job, we are not at the stage where that has been systematized as part of management. For now, BPR is best carried out though a project structure. A BPR project is a form of organizational change project that ideally brings together three design mindsets: business strategy, business processes, and information systems (see Figure 1-4). While the bulk of the exposition in this book focuses on the reengineering of business processes, this does not mean that the link to corporate strategy and the implementation of related information systems is any less important. The three perspectives are linked together in practice. 1-3-1: The Phases of BPR "in the BIG" For purposes of explanation, we distinguish between the larger BPR project that includes design, implementation, and maintenance from the design portion of it (which is the focus of this book) by naming the larger project "BPR in-the-BIG." There are a variety of descriptions of how BPR can be systematically carried out in practice and what the phases of a BPR project are. Drawing on the publicly available literature and from the practices of several consulting companies with prominent BPR practices, this book has come up with a five-phase approach to BPR in-the-BIG as shown in Figure 1-5. Phase 1: A BPR project starts with some sort of trigger such as a performance problem, a competitive e-business move, or pressure from a supply chain partner. It can also be driven primarily by a value creation opportunity or an executive vision of how a particular aspect of the company (say customer service) should be. Deliberations and discussions take place and proposals are made. Then top management gives the go-ahead