Business Process Reengineering

1. Business Process Reengineering Nikki Vuxta IST 402

2. Introduction • Idea started in late 1980s • By 1995, it had grown to a $51 billion industry • Related to ERP: in order for ERP to be beneficial, some business processes must change • Reengineering has become a word that stands for restructuring, layoffs, and failed changed programs • The phrase “massive layoffs” was never part of the early vocabulary

3. What are Business Processes? • set of activities that transform inputs into outputs (goods or services) for another person or process using people and tools • what the organization does to get its work done

4. What is Business Process Reengineering? • BPR – analysis of the set of tasks making up a business process with the intent of identifying the best way of doing things • In the extreme, it assumes that the current business process doesn’t work • Purpose: to “make all your processes the best-in-class” • Echoes the classical belief that there is one best way to conduct tasks

5. History • BPR predates the popular phase of ERP • 1980s – mainly consisted of massive layoffs aimed at short term cost savings • Early BPR: managers were experimenting with new uses of IT to link processes that cut across functional boundaries

6. History: Reengineering Concept • Brought together three components: • Technology – “value of computing was not simply in doing work more efficiently, but in changing how work was done” • Business processes • Clean-sheet-of-paper change program • “Big companies with big problems were eager for Big Change”

7. History: Industrial Complex • Reengineering Industrial Complex • Triangle of powerful interest groups: • top managers at big companies • big-time management consultants • big-league information technology vendors

8. History: Impact (1990s) • Managers • viewed it as a way to get their projects approved and financed, as well as the efficiency it delivered • Consulting firms • repackaged their expertise • versions of reengineering • continuous improvement, systems analysis, industrial engineering, cycle time reduction)

9. History: Impact (1990s) • Executives • used it to show financial benefits • fastest way to show results was to reduce headcount with cutbacks and layoffs • headcount reduction gave reengineering a financial justification • Computing Industry • businesses were already buying $1 trillion of computer products every decade • reengineering merely justified this spending and promised to increase it

10. Implementation • Clean Slate Reengineering • Technology Enabled Reengineering

11. Clean Slate Reengineering • Everything is designed from scratch • Reengineering followed by selection of a software package that best suits the new system design • Allows designers to disassociate themselves with the current process and focus on new methods

12. CSR: Pros & Cons • Pros: • no predefined constraints • enables optimal design of the system • more responsive to organizational needs • offers a way to retain competitive advantages • Cons: • more expensive • slower and harder to apply

13. Technology-Enabled Reengineering • Also called constrained reengineering or concurrent transformation • System is selected before reengineering begins • Designs system based on the capabilities of the vendor software

14. TER: Pros & Cons • Pros: • faster and cheaper than Clean Slate • easiest to implement • Cons: • involves the most change in organizational practices • requires more training • Most commonly used approach

15. Failed Examples • Hallmark • Tried to shorten its product development cycle from two years, but only managed to cut it down to one year • Still relies on “Okay Committee” • Taco Bell • Tried to help lower prices and increase sales capacity • Ended up relying on two outside firms • Project failed

16. Reasons for Failure • 1994 CSC Index Report: • 50% of companies said that the most difficult part of reengineering is dealing with fear and anxiety from employees • 73% said they were using it to eliminate about 21% of the jobs • Out of 99 reengineering initiatives, 67% produced mediocre, marginal, or failed results

17. Reasons for Failure • BPR has failure rates of 50% to 70% • Reasons: • employees are resistant to change • not enough attention paid to employee concerns • inadequate and inappropriate staffing • not enough tools for the developer and the users • strategies do not match goals • lack of oversight • leaders fail to stay committed to the project

18. Reasons for Failure • Reengineering has failed to focus on people • It treated employees liked “interchangeable parts to be reengineered” • BPR is often used to cut costs and return to profitability, often at the expense of a company’s capacity for future growth • BPR increases productivity by cutting costs but does nothing to increase revenues or sales

19. Reasons for Failure • Pamela Goodwin, former senior VP of Direct Response Group • “Reengineering regressed into the old industrial engineering and that regressed into the big scare. People think they’re going to be reduced to rubble by reengineering. Organizations forget to remind them that they have skills they can apply to a changed work environment and they can learn new ones.”

20. Success Examples • Nestlé • Bought a large mySap.com system in 2000 • Each employee has a customized start page relating to the employee’s specific job function • Sunoco Products Co. • Implemented e-procurement software • Reduced spending on operating resources by 5% to 10%

21. Reasons for Success • No reengineering effort will succeed without reeducating and retraining the people who will work with the new process • Managers need to constantly communicate their plans and expectations • Most analysts view reengineering and IT as irrevocably linked

22. Recommendations for Success • Use strategic planning which addresses leveraging IT as a competitive tool • Put the customer at the center of the reengineering process • BPR must be “owned” by the company, not driven by a few individuals • Teams need to consist of both managers and the people who actually do the work

23. Recommendations for Success • IT group needs to have an integral role in the team • BPR needs to be led by top executives • Projects need to have a clear timetable so the organization is not left hanging during the change • BPR can’t ignore corporate culture and must emphasize communication and feedback

24. Lessons • Most important lesson of BPR was never reengineering but business processes • Information technology is only useful if it helps people do their work better and differently • companies need to work with their employees to infuse technology • The bigger the hype, the greater the chance of failure • companies should underpromise and overdeliver

25. Resources • BPR Online Learning Center: Reengineering (BPR) Introduction and Concepts. Retrieved February 12, 2005 from http://www.prosci.com/intro.htm • Davenport, Thomas H. (1995). The Fad That Forgot People. Retrieved February 12, 2005 from http://pf.fastcompany.com/magazine/01/reengin.html • Olson, David L. (2004). Managerial Issues of Enterprise Resource Planning Systems. New York: McGraw-Hill/Irwin. • Weicher, Maureen, William Chu, Wan Ching Lin, Van Le, and Dominic Yu. (1995). Business Process Reengineering Analysis and Recommendations. Retrieved February 12, 2005 from http:///www.netlib.com/bpr1.shtml