BT_FSM3_ITcdc

Business Transformation

/

Business Process Reengineering

June 6th 11th, 2015

FORE School of Management

Prof Raman Sethi & Vineeta Kumar

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Information Technology

The collection of computing systems used by an

organization Major Capabilities of Information System

Perform high-speed, high-volume, numerical computation.

Provide fast, accurate, and inexpensive communication within and between organizations.

Automate both semiautomatic business processes and manual tasks.

Store huge amounts of information in an easy-to-access, yet Store huge amounts of information in an easy-to-access, yet small space.

Allow quick and inexpensive access to vast amount of information, worldwide.

Facilitate the interpretation of vast amounts of data

Enable communication and collaboration anywhere, any time.

Increase the effectiveness and efficiency of people working in groups in one place or in several locations, anywhere.

Facilitate work in hazardous environment .

Changes in Work Rules Brought by IT

Old Rule Intervening Technology New Rule

Information appears in only one place at one time

Shared databases, client/server architecture, electronic mail

Information appears simultaneously wherever needed

Only an expert can perform complex work.

Expert systems, neural computing

Novices can perform complex work.

Managers make all Decision support systems, Decision making is Managers make all decisions.

Decision support systems, enterprise support systems, expert systems

Decision making is part of everyones job

Field personnel need offices to receive, send, store, and process information.

Wireless communication and portable computers, information highways, electronic mail

Field personnel can manage information from any location.

You have to locate items manually.

Tracking technology, groupware, workflow software, client/server

Items are located automatically

Plans get revised periodically.

High-performance computing systems

Plans get revised instantaneously whenever needed.

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Changes in Work Rules Brought by IT

Old Rule Intervening Technology New Rule

Customized products and services are

CAD-CAM, CASE tools, online systems for JIT decision

Customized products can be made fast and inexpensively

People must come to one place to work together.

Groupware and group support systems, telecommunication, electronic mail, client/server

People can work together from different locations.

A long period of time is spanned between the inception of an idea and its implementation (time to market)

CAD-CAM, electronic data interchange, groupware, imaging (document) processing

Time-to-market can be reduced by 90 percent

and services are expensive and take a long time to develop.

systems for JIT decision making, expert systems

made fast and inexpensively (mass customization).

Work should be moved to countries where labor is inexpensive (off-shore production).

Robots, imaging technologies, object-oriented programming, expert systems

Work can be also done in countries with high wages and salaries.

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IT in Integration

Functional Area Information TechnologiesMarketing Multimedia, Internet, database

Distribution Online Inventory and shipment controls, Internet, Database, Barcodig, satellite positioning

Accounting Computerized Data collection, shared Accounting Computerized Data collection, shared Database, Spread Sheets

Design & Engineering CAD

Purchasing Internet, Database, ERP

Production CAM, Database, Scheduling, barcoding, ERP, EDI

Maintenance Expert Systems, Scheduling

Digital Economy

An economy based on digital technologies,

including communication networks (the

Internet, intranets, and extranets), computers,

software, and other related technologies; software, and other related technologies;

also sometimes called the Internet economy,

the new economy,

or the Web economy .

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The New Economy VS. The Old Economy

Example Old New

Buying and selling text book Visit the bookstore Visit web site for publishers and

retailers

Registering for classes Walk around campus to Departments,

Registrars office, etc.

Access campus web site

Photography Buy film, use camera, take picture, take Use digital cameraPhotography Buy film, use camera, take picture, take

it for processing

Use digital camera

Paying for Gasoline Fill up your car, go inside, pay cash or

credit card

Use speed pass token wave over

the sensor and go

Paying the Transportation Pay cash, metal tokens Metro cards electronic cards

Paying for goods Visit store, take the item, pay , go Use self service kiosks

Supplying commercial photos Use newspapers, paper, catalog or on

line

Use hub-like supply chain with

digitized picture

Conflict of New & Old

Old Economy

Bricks & Mortar

Product Driven

Tangible Assets

Infrastructure

Capital

Physical Resources

New Economy

Clicks & Mortar

Service Driven

Intangibles

Human Potential

Knowledge Capital

Goodwill & LoyaltyPhysical Resources

Standard Metrics

ROA

ROI

Rigid Structure

Diversification

Focus on Product Portfolio

Goodwill & Loyalty

New Metrics

Shareholder Value

Employee Productivity

Flexibility

Integration

Focus on Speed & Size

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Role of IT

an initiator, a facilitator, or an

enabler

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Role of IT - Initiator

Agent of change

New requirements

e.g. Imaging technology, Internet

An important technology first creates a

problem then solves the problem Hammer &

Champy

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Role of IT - Facilitator

Make work/workload easier

e.g. Flow of Information

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Role of IT - Enabler

this role of IT has received the most attention

Offers the ability/necessary assistance to accomplishsomething

When IT is to accomplish process innovation, IT serves as an enabler. as an enabler.

IT is designed to accelerate specific process steps and was viewed "as an enabler for working smarter and more productively

IT acts as "an enabler which provides rapid processing and analytical capabilities, parallel access and information capture. For example, networking enables both collection and dissemination of data.

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Role of IT E-Commerce

Personalized service

Lower transaction & material costs

e.g. E-tickets

Save cost of print/mail Save cost of print/mail

Reduce need for telephone reservation staff

Reduced commission payable to travel agency

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Role of IT - Coordination

Shared Databases

Information dissemination

Facilitate distribution

Networking Networking

Assists collection/dissemination

Rapid implementation of decisions

Telecommunication

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Benefits of IT

Cost reduction

Time elimination

Error minimization

Enabling Paralelism Enabling Paralelism

Facilitating Integration

Enhancing decision Making

Minimizing Points of contact

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Role of IT Examples

Dominant motivations for E-Commerce are improving customer service and cost cutting to be followed by building customer loyalty, boosting revenue and offering a new sales channel.

75 extranet projects in Boeing (expected to save millions) for such use as receiving $100 million in spare part orders from airlines through one Web site; sending documents to government.

50 percent of order time reduced in Adaptec Inc., from 16 weeks to 55 days; purchase orders processing fell from six days to minutes; suppliers do not need to manually re-enter faxed-orders; saved $1 million in costs and $9 million from work-in-process.million in costs and $9 million from work-in-process.

General Electric bought over $1 billion in goods and services via its Trading Process Network; estimated to save $500 million over the next three years.

Dell used the Internet for messages to suppliers and reduced inventory on hand to eight days (versus Compaq's 26 days).

Internet-based audio-video conferencing, integrating voice, data, and video over the network: Ford shares documents in real time; estimated to have shortened average car design time from 36 months to 24 months; L.L. Bean uses the network for customer service calls as well as customer Web browsing at the same time using the same line.

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Role of IT

IT Changed Business Processes

Internet / Data Networks

EDI EDI

CAD/CAM

Expert Systems

Barcoding

Database

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Power Sector Overview

The "democratization" of IT from the mainframe to the PC is "breaking down the communications barriers between corporate functions, suppliers, and even customers."

Hammer and Champy call this the "disruptive" power of IT.

This ability for information to be at many places at the same time -- which allows companies to reap the benefits of both centralization and decentralization -- is at the heart of BPR.

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Power Sector OverviewThe Role of Information Technology in implementation of BPR Nandgopal Ramachandran

Information technology as the technology of sensing, coding, transmitting,

translating and transforming information

Information technology and BPR have a recursive relationship

IT capabilities should support business processes, and business processes

should be in terms of the capabilities IT can provide.

IT plays an important role by either enabling or constraining successful IT plays an important role by either enabling or constraining successful

BPR.

IT can also become an inhibitor of Reengineering if the organization's IT

Infrastructure is inadequate or inflexible.

The role of IT is to make a new process design possible.

If nothing changes about the way work is done and the role of IT is simply

to automate an existing process, then economic benefits are likely to be

minimal.19


The role of IT in Reengineering is not to automate the business process.

The application of IT to reengineering requires inductive thinking, which is

the ability to first recognize a powerful solution and then seek the problems

that it might solve.

A fundamental error that most companies commit when they look at A fundamental error that most companies commit when they look at

technology is to see how a new technology will help in solving problems in

their existing process.

The companies have to think how a technology can help them to do things

that they are not doing in the current process.

IT is focused increasingly on creating connections between employees,

across functions, with customers and between data and decision-makers.

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The major advantage of IT in reengineering lies in its disruptive power. IT has

the power to break the rules and make people think inductively and give the

company a competitive advantage.

The company that used the disruptive power of IT to break all rules and gain

competitive advantage was Amazon.com. Amazon.com broke the existing

rules and sold books without a physical presence for its customers through rules and sold books without a physical presence for its customers through

Internet. Amazon.com in doing so has completely changed the book store

business and broke all the rules.

The key to the effective use of IT lies not in moving the information faster

but in doing right things with it.

IT has to be used to make proactive decisions to improve business

performance rather than report on it after the fact.

Supermarkets like Wall-Mart have used IT to drive their business. 21

The Role of Information Technology in implementation of

BPR Nandgopal Ramachandran

Capability of IT Organizational Impact of the Capability

Transactional IT can transform unstructured business process into

standardized transactions

Geographical IT can transfer information with rapidity and ease across

large distances, making business process independent of

locations

Automation IT can reduce human labour in certain process

ISP

Automation IT can reduce human labour in certain process

Informational IT can bring vast volumes of detailed information into a

business process

Analytical IT can bring complex analytical methods to bear on a

process.

Sequential IT enables changes in the sequence of tasks in a process,

often allowing multiple tasks to be worked on

simultaneously



Capability of IT Organizational Impact of the Capability

Knowledge management IT allows the capture and dissemination of knowledge

and expertise to improve the process

Tracking IT allows detailed tracking of status, inputs and outputs

Reduction of IT can be used to connect two parties within a process

ISP

Reduction of

intermediaries

IT can be used to connect two parties within a process

that would otherwise communicate through

intermediaries

IT provides project management skills and experience, which is a key ingredient in

successfully implementing reengineering.

The IT group of the company has experience in large-scale project management as

they are exposed to the structured demand of large scale projects.

Reengineering in a company is and should be undertaken as a project.



Reengineering Area Role of IT

Analysis phase Partnership with the Process owner, and team who are

responsible for implementing reengineering

Design phase Partnership with the Process owner, leader, and team

who are responsible for implementing reengineering

Implementation phase Partnership with the process owner, steering

ISP

Implementation phase Partnership with the process owner, steering

committee, leader, and team who are responsible for

implementing reengineering

Overall accountability

and leadership

Support; project management expertise, design

principles, key ingredient in the reengineered process

Reengineering plan and

implementation

Partnership with the leader, and team who are




Reengineering Area Role of IT

Project management

expertise

Leadership; IT group should provide their project

management expertise m the implementation of

reengineering

Technology expertise Leadership; The technological capabilities should be

evaluated before implementing reengineering

ISP

Identifying the process

to be reengineered

Partnership with the leader, and team who are


Business vision Support; While defining new goals and vision- the

capability of IT has to be taken into account

In a study, 80 % of the CEOs said that the performance of IT in the reengineering

efforts of their company was poor. 48 % confirmed that the operational teams had

conflicts with the IT group. 46 % confirmed that IT and operational group had a

strained relationship.


Criticality of IT in Business Process

The criticality of IT in business process should be analyzed before embarking on the

reengineering project:

otherwise there will be a tendency to use IT for automating the business process,

which is not reengineering.

IT is the enabler, which will streamline business processes, reduce cycle times and

validate the performance improvements. validate the performance improvements.

IT will help standardize and simplify business processes across the various

dimensions of a business thereby bringing in efficiency gains in terms of time and

money.

More importantly, IT through the use of a databases can help in the vital area of

knowledge management by converting data from a common format manipulate it

and present it as information that is useful in decision making.

It can also consolidate and enrich data to create information that is not available

from a single source and can therefore act as a vital source of competitive

intelligence 26


The future role of IT have been identified into three main categories.

1. Participate as a member of the reengineering team but do not take control of

the project.

2. Define technology solutions to enable new business processes and take time

to educate operational managers about new technology.

3. Implement technology needed to support the new business processes.

IT managers and staff have to become business analysts, knowledgeable

of business needs and able to combine a business orientation with

technical expertise.

The advent of Internet and e-commerce, businesses are getting closer to

the customers.

In future Internet will change the way business is carried out.

E-commerce will affect reengineering more than present day IT.

E-commerce initiatives will be business led activities with an implicit

acceptance of process change 27


Conclusion

The role of IT in reengineering is not to automate the business process.

IT is not only an enabler for reengineering

IT has also become an essential and integral part of all reengineering efforts.

IT can become an inhibitor of reengineering if the organization's IT Infrastructure

capabilities are inadequate or inflexible.

IT capabilities of the organization should not directly influence the IT solutions

that are needed for the company.

In the design phase In the design phase

IT can be used to simulate a model of the design and there by validate the

new design.

The disruptive power helps organizations to break all the rules and think

inductively about the business that they are in to gain competitive

advantage.

In the implementation of reengineering

IT provides the skills and tools that are needed to effectively reengineer.

IT provides project management skills

IT supports redesigned business process and facilitates cross-functional

workflow.28

Power Sector OverviewThe Enabling Role of Information Technology - Kevin Lam

Information technology (IT) plays a crucial role in business reengineering

Essentially as an enabler.

Most people misuse the technology.

They look at the technology through the lens of their existing tasks

Information technology breaks conventional rules/assumptions of Information technology breaks conventional rules/assumptions of

processes - rules designed when the processes were created.

IT should not be involved in the redesign process

A specific IT solution should not be a constraint in the redesign stage in

reengineering.

Past investments in IT should not be allowed to constrain the redesign.

Reengineering is about reinventing processes. IT is just a tool. 29

Power Sector OverviewIs Information Technology an enabler or a bottleneck

Maureen Weicher, et al

Information technology plays a central role in reengineering - BUT

"the IS organization in many companies is unable to play."

This ineffectualness may be due to the historic inability of IS to do "anything big

quickly"

Since the IT group is not perceived as being part of the business process, they are

excluded from the reengineering team

"lacklustre" performance of many information systems in the past decades "lacklustre" performance of many information systems in the past decades

Never used to "challenge why things are done in a company, but instead justify the

way they are done."

Systems in the service sector have been used to generate more unneeded reports,

speed up superfluous work steps,

generate unnecessary information,

encourage shoddy thinking and misdirect attention to spurious details.

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Despite studies that indicate over half of all reengineering efforts are initiated

"because of a perceived information technology opportunity...the actual

technological solution is far less important than educating employees to use IT

as both a strategic initiative and as a tool in the reengineering process."

Based on the above findings, some insist that when developing a reengineering

strategy, the best companies "ignore information technology."

Only after the strategy is complete should innovative IT applications be

benchmarked, since innovative applications often "stem from a combination

of breakthrough ideas and from modifying several best practices."

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IT can prove useful in the reengineering analysis and design

process.

Graphics software and CASE tools can produce process maps;

spreadsheets and costing software allow for activity-based cost

analysis; databases can track customer satisfaction and

complaints; complaints;

"blind" e- mail bulletin boards can be used to capture

employee suggestions.

In addition e-mail and groupware can facilitate communication

and coordination across geographical and organizational

barriers.

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Power Sector OverviewIT's Role in Business Process Reengineering Initiatives - William Ulrich

Radically altering business processes within highly automated work environments

typically requires modification to the information systems that support those

processes.

Information technology (IT) organizations have had significant difficulty meeting the BPR

challenge due to the inherent complexities involved in "retooling" complex legacy

environments.

In order to more effectively respond to BPR retooling demands, IT must play a more In order to more effectively respond to BPR retooling demands, IT must play a more

active role throughout a BPR project. IT must:

Increase their level of participation in all areas of a BPR initiative;

Provide key information regarding automated processes to business analysts;

Build a transition strategy that meets short and long-term retooling requirements;

Enforce the integrity of redesigned business processes in the target system;

Reuse business rules and related components that remain constant in a target

application.

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BPR - The Enabling Role of Information Technology

The IT tools for BPR

Simulation and visual simulation tools - to support the

modeling activities of BPR

Flow diagrams - made by specialized BPR tools that are

usually integrated with other toolsusually integrated with other tools

Work analysis - accomplished with tools that conduct

forecasting, risk analysis, and optimization

Workflow software - places system controls in the hands

of end-user departments

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Major Reengineering Activities

Redesign of processes

From mass production to mass customization

mass production

produces a large quantity of an identical, standard product

mass customization

produces large volumes, yet customizes the products to the produces large volumes, yet customizes the products to the

specifications of individual customers

increases with the spread of electronic commerce, which

transforms the supply chain from a traditional push model

to a pull model

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Major Reengineering Activities (continued )

Cycle time reduction

IT makes a major contribution in shortening cycle times by

allowing companies to combine or eliminate steps, and to allowing companies to combine or eliminate steps, and to

expedite various activities in the business process

Cycle time reduction can result in gain a substantial market

share

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Restructuring Entire Organizations

Customerdemographics

Checking Installment

Customer

Account manager supported by ...

Checking accounts

Installment loans

Savings accounts

Mortgage loans

Trusts Etc

Expert system

Statemen

t

Backed up by ...

Checking expect

Loanexpect

EtcConsolidated statement

Reengineered bank with integrated system

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Restructuring Entire Organizations (continued )

Networked organization

resemble computer networks and are

supported by computerized systemssupported by computerized systems

away from the hierarchical organization toward

the networked organization due to the

evolution from an industrial-based economy to

an information-based economy

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Restructuring Entire Organizations (continued )

Empowerment - the vesting of decision-making or approval authority in employees

in instances where such authority traditionally was a managerial prerogative

Empowerments relationship to information technology

the provision of right information, at the right time allows

employees to make decisions

enhances the creativity and productivity of employees, as well as enhances the creativity and productivity of employees, as well as

the quality of their work

training can be enhanced by IT

enables non-managers to make decisions

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Hierarchical vs. Networked Organization

Formal

Highly structured

Manage

Hierarchical Organization

Informal

Loosely structured

Delegate/lead

Networked Organization

Control

Direct

Employees a cost

Informationmanagement-owned

Hierarchical organizations

Risk avoidance

Individual contributions

Ownership/participation

Empower

Employees an asset

Informationshared ownership

Flatter/ manageable organizations

Risk management

Team contributions 40

Power Sector OverviewThe Role of Information Technology - HBS

Early applications of information technology focused on automating tasks

with the objective of speeding up and improving the accuracy of work

performed given the traditional structure.

Yet organisations that wish to engage in BPR must view IT as an enabler for

business process change, not as an automation tool.

The fundamental error that most companies commit when they look at

technology is to view it through the lens of their existing processes

They ask How can we use these new technological capabilities to enhance

or streamline or improve what we are already doing?

Instead, they should be asking How can we use technology to allow us to

do things we are not already doing?

Reengineering, unlike automation, is about innovation. 41

Power Sector OverviewThe Role of Information Technology - HBS

Reengineering is about exploiting the latest capabilities of technology to achieve entirely new goals.

One of the hardest parts of reengineering lies in recognising the new, unfamiliar capabilities of technology instead of its familiar ones.

Information technology is usually a necessary but insufficient factor to achieving business process reengineering.

On one hand, IT has been described as both a strategic catalyst and an enabler of BPR.

On the other hand, managers have also described the absence of needed IT capabilities as a major inhibitor to BPR.

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Power Sector Overview

The "democratization" of IT from the mainframe to the PC is "breaking down the communications barriers between corporate functions, suppliers, and even customers."

Hammer and Champy call this the "disruptive" power of IT.

This ability for information to be at many places at the same time --which allows companies to reap the benefits of both centralization and decentralization -- is at the heart of BPR.

43

BT_FSM3_ITcdc

Documents

decision support systems

online systems

process information

work rules

complex work

information highways

enterprise support systems

group support systems