MG423 Electronic Journal
Business Process Reengineering: The IT Connection
Definition of Business Process Engineering
Definition of Information Technology or IT
Whenever the Twain Shall Meet
Two differing Roles of IT in BPR
Information Technology as a Tool
Providers of IT services
Conclusion
Definition of Business Process Reengineering
The man
spearheading the reengineering movement, Michael Hammer, defines reengineering as
“the fundamental rethinking and radical design of business processes to achieve
dramatic improvements in critical, contemporary measures of performance, such as cost,
quality, service and speed” (Hammer 30). Business Process Reengineering or BPR
can be defined as an approach to improve operating productiveness through redesigning
critical business processes and supporting business systems, rather than the traditional
method of incremental improvement. It is a transformation of vital business processes that
involves examination of the fundamental process itself. It dissects the process, such as
why the work is done, who does it, where is it done and when. By shifting the focus to
examining the process of producing the output, it is an examination of the process's
capability to add value.
This
doesn’t sound like a novel idea in this day and age, but when you take into account
that American businesses manufactured goods and services utilizing the same techniques for
fifty years without implementing any significant change, it becomes easier to understand
why this has been dubbed reengineering. The concept of BPR came about in 1990,
however it has been mistakenly associated with downsizing, client/server computing,
quality, TQM and other management quick fixes that have come and gone. Nothing could
be further from the truth. BPR is a concept that is forcing once complacently
comfortable organizations to radically rethink the way they operate in order to gain and
keep a global competitive advantage.
Definition of Information Technology or IT
IT typically refers to equipment such as computers, data storage devices,
networks, and also communication devices. It also is used to categorize applications
or software and services like end user computing, help desks, and applications
development, that are used by organizations to transfer data, information, and knowledge
to individuals and processes. The profit return ratios of IT are rapidly improving
and their positive impact offers more potential benefit to the BPR effort than in the
past. IT affords more strategic planning value to an organization by shoring up support to
the administrative infrastructure, business processes, and operational skills of the human
resources. It is incorporated to reduce costs, set products apart, improve the quality of
the end product or service, increase interaction between customers and suppliers to create
cohesiveness, and creating new business opportunities.
“Davenport & Short (1990) argue that BPR requires taking a broader view of both
IT and business activity,
and of the relationships between them. IT should be
viewed as more than an automating or mechanizing
force: to fundamentally reshape the way business is
done. IT and BPR have recursive relationship. IT capabilities should support business
processes, and business processes should be in terms of the capabilities IT can provide (The)”.
This
leads us to look at a more business specific aspect of IT, which is the information system
or IS. IS refers to a system that accepts data from its environment in the form of
input and manipulates that data or processes it, to produce information, commonly known as
output. The components of an IS include people, procedures, data, software and
hardware. An information system comes about for several reasons. Technology
push describes how new technology can be a catalyst in systems development. As new
technologies make possible new, more effective and efficient ways of doing business, many
organizations fund development projects to exploit these opportunities. Strategic
pull describes how an organization’s objectives and strategies can be an impetus for
systems development. Changing strategies “pull” an organization into developing
systems that support these strategies and help the organization to stay competitive
(Dewitz, 16). New uses of IT will eventually result in many firms developing new and
innovative uses that will enable them to coordinate activities not thought possible in the
past. Before beginning an analysis of BPR it is important to have an understanding
of the capabilities of IT and the impact and benefit of IT on the organization.
Whenever
the Twain Shall Meet
There
once was a time when a company’s competition was the business directly across the
street. As the country, and eventually the world, became more mobile, competition
went from local, to regional, to national and finally to global. Gone are the days
when spies working at Gimbals would check out the merchandise and floor layout of Macy's
as a means of garnering information about competitors. It is now necessary for
organizations to employ methods of data gathering that will result in a compilation of
information that is timely and accurate and to do so on a regular basis.
Information is the lifeblood of BPR. More importantly information technology is the
tool of choice when reinventing a company’s way of doing business.
IT has become a field unto itself, but largely because of the demand created by BPR.
The need to think in larger contexts because of larger markets has forced business to
realize the importance of having pertinent information and acting upon it
immediately. “IT capabilities should support business processes, and business
processes should be in terms of the capabilities IT can provide” (Malhotra). The incorporation of IT in
the revolutionary concept of BPR is not cut and dried. IT can serve to facilitate
this process on many fronts but finds itself most noticeably applied in one of two
capacities.
Two
differing Roles of IT in BPR
First and
foremost, IT plays the role of an enabler in the BPR process. That is to say the
organization is able to reinvent its processes because of the functionality that
information technology affords it. Michael Hammer compares the atomization of
ongoing business practices to “paving cowpaths” and suggests that information
technology should be used to renovate business processes (Hammer, Ch. 5).
The other role IT plays in the BPR process is that
of implementer or facilitator. There are several key activities where IT can play a
facilitation role (Davenport):
Identifying and selecting
processes for redesign
Identifying enablers for
process design
Defining business strategy and
process vision
Understanding structure and
flow of current process
Measuring performance of
current process
Designing and prototyping the
new process
Implementing and
operationalizing the new process and associated systems
Communicating ongoing results
of the BPR effort
Building commitment to BPR
Information
Technology as a Tool
“The most effective use of IT to enable business process re-engineering,
will often require EDI technology to be used in conjunction with the varied technologies
of electronic commerce such as document imaging, workflow management, bulletin boards,
email etc” (Flight).
One success story is that of CIGNA Corporation, a
provider of insurance and financial services. CIGNA won the first prize in the
Society for Information Management's 1994 Annual Paper Awards Competition. “Between
1989 and 1993, CIGNA completed over 20 reengineering initiatives, saving more than $100
million. Each $1 invested in reengineering has ultimately brought $2-3 in returned
benefits (Caron, 234)”.
However, utilizing BPR and IT can be more blunt and direct as in the case of AppliedAccess
and FarmWarehouse. “The first site, AppliedAccess offers products such as
bearings, motors, belts, and hydraulic pumps to more than 150,000 customers in large and
small manufacturing companies. Customers will pay through their existing channels with the
company. In an attempt to expand its online business by selling to family farmers and
ranchers, Applied also launched FarmWarehouse. The site sells components and lubricants
for farm equipment and is geared toward farmers who perform their own vehicle and tool
maintenance. FarmWarehouse customers will pay online by credit card (Wilder)”. Both
AppliedAccess and FarmWarehouse radically changed the way they business in that the farmer
no longer had to go to the store location to obtain replacement parts, they instead took
the store to the farmer. This opened up a plethora of opportunities and markets
previously unavailable to them. Still other examples exist that illustrate the
success involved in coupling BPR with IT.
WAL-MART is an example of combining goods with
service in the form of a retail store. No one entity has had the results or impact
that they have achieved by reengineering the way retail stores are run. The
operational managers hired by Sam Walton realized that too much overhead cost was built
into the traditional acquisition and distribution process of large retail merchandisers,
including WAL-MART. The entire process was reengineered. Information is now
available to the right people at the right time and the entire process has become faster
and more error free. A corporate wide information system was developed that directly
connects all retail locations, distribution warehouses, and major suppliers. The suppliers
are given daily information regarding product turnover at all stores and thus have the
ability to adjust their own production schedules to accommodate the product
movement. The suppliers are able to issue their own purchase orders without having
to wait for them to be generated by Wal-Mart. Inventory turnover occurs at a much
faster rate and therefore the amount of inventory can be kept lower resulting in lower
overhead costs, which are then passed on to customers. An added benefit is the fact
that the chances of a WAL-MART or their suppliers being saddled with obsolete products is
greatly reduced. This radical new process is only possible because of IT.
Wal-Mart makes extensive use of a satellite system for transmitting data between sites. By
making their suppliers part of the process, the scope of the process becomes
interorganizational. IT has a greater impact on BPR with interorganizational
scope and this fact helps to give WAL-MART a considerable advantage over their
competitors.
Providers of
IT services
Companies that provide IT services or tools that help to enhance and expedite
the BPR process are growing in number as business seeks the rewards of BPR. These
new ventures can take many shapes and forms and the field has seen a strong increase in
the number of consulting firms in the field. These firms provide services ranging
from provision of a full range of IT services, including implementation and installation
of software and how to use it, to finding the BPR path that is tailored to a particular
company.
Of course some tools are designed so that the current employees of the firm may enhance
their performance and shorten the time of project completions. “As the
reengineering discipline moves further down into organizations, rank-and-file workers are
demanding more tools to get the job done (Barrett)”.
One common type of tool is software. CASE tools or
computer-aided systems engineering, have been growing in popularity since the fourth
generation language tools have become accepted (The).
One provider of such software, Applied Data Resource
Management, claims to be the leader in development and marketing industry-specific
Enterprise, Data Warehouse, Decision Support and Business Area design and information
models to clients throughout the world.
Another service provider is the consulting firm that provides custom-made software.
There are far too many to list them all, suggesting that the demand for such services is
truly on the rise. This indicates that business realizes the importance of BPR and
the assurance of failure without it. “Process Strategies, Inc. specializes in
helping software engineering and information systems organizations improve their software
development and maintenance processes”. PSI provides their customers with the
tools that will enable a firm to foster BPR without assigning IS personnel the task of
developing such software.
Some tools come in the form of consulting companies. These organizations are
experienced in the methodologies necessary to implement BPR. Because of their
experience, they can complete the process far more efficiently than a novice corporation
new to the concept. Business Architects is a
company that specializes in information technology and business processes. “Our
mission, our purpose for existing, is simple: To deliver business results rapidly through
innovative business process designs and the strategic use of information
technology." As you can see they are dedicated to helping others successfully
implement BPR through IT.
Will the need for BPR lessen; is it just a flash in the pan? Hardly! As global
competition heats up and more players enter the game, business will be forced to radically
redesign itself in order to stay a full stride ahead of the competition. A mere step
ahead will no longer suffice, given the speed at which technology is moving. BPR by
its very nature is finite in each successive project but the actual practice must be
infinite. It is no wonder that many people find it to be synonymous with continuous
improvement. The deciding factor will be whether or not the players cash into
IT. Throughout history, the weaker of opposing forces have often won battles based
upon superior decisions made because the faction had superior information. Companies
such as WAL-MART and CIGNA will only continue to excel, unless they become complacent in
their competitive advantage. This appears highly unlikely given the fact that they
fully realized the need to utilize IT when reengineering the way they do
business. The fact that information needs to be timely, accurate and in a
multitude of places at the same time to facilitate better decision making, indicates that
industry must forge ahead in developing new ways to gather and compile data into
information, establishing correlations that in turn enable management to make better
decisions.
Bibliography
Michael Hammer and James Champy, Reengineering the
Corporation: A Manifesto for Business Revolution (New York: Harper Business, 1993),
p. 30
Business Process Reengineering: Business process
reengineering is all the rage, but workable tools are only starting to emerge from the
software foundries. By Lee The
http://www.datamation.com/PlugIn/issues/1995/march1/03aev100.html
Dewitz, Sandra Donaldson. Systems Analysis and Design and the Transistion of Objects. New York:McGraw-Hill, 1996.
Dr. Yogesh Malhotra, 1998, On the Future Evolution of @BRINT) http://www.brint.com/papers/bpr.htm
Davenport, Thomas H. and Short, James E. "The New Industrial Engineering: Information Technology and Business Process Redesign", Sloan Management Review, Summer 1990, pp. 11-27.
Bob
Roberts
& Gregg Flight
Kingston
University GE Information
Services http://infosys.kingston.ac.uk/isschool/Staff/Papers/Roberts/EDI_BPR.html
Caron, M., Jarvenpaa, S.L. & Stoddard, D.B. (1994, September). "Business Reengineering at CIGNA Corporation: Experiences and Lessons Learned From the First Five Years," MIS Quarterly, pp. 233-250.
Industrial Goods Online, Applied aims sites at
manufacturing, agricultural users
By Clinton Wilder
http://www.informationweek.com/742/applied.htm
Chasing the BPR Tool Market: User Demands Driving
Better, Cheaper Software
By Randy Barrett
http://www.reengineering.com/articles/mar96/erspot.htm
http://www.process-strategies.com/
Check out these sites for more on companies specializing in BPR
Business Guide to Reengineering Books - a guide to business process reengineering (BPR) and changemanagement books and publications.
Business Re-Engineering Group - provides education, training, methodology, knowledge transfer, project facilitation to help companies successfully conduct business reengineering projects.
Business
Xtensions, Inc. - BXI helps you solve process re-engineering and
systems engineering problems and it
provides related
training.
Process Advantage
Technology - PAT's services support business process change and
improvement through
benchmarking, assessment, process definition and maintenance, and TQM.
Business
Enterprise Mapping - business mapping and process improvements.
Third Millennium Business Systems, Inc. - specializing in helping clients automate business operations.
Benchmark
Business Strategies, Inc. - helping small businesses make successful
use of the Internet.
Business Design
Associates - international management consulting firm.
MG 423 Summer 1999 website http://academic.emporia.edu/smithwil/s99mg423/index.htm