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MBA 731: Business Systems Analysis and Design

Minder Chen, Ph.D. School of Management


George Mason University (O) 703-993-1788 (F) 703-993-1809 E-Mail: mchen@gmu.edu Web Site: http://gunston.doit.gmu.edu/ecommerce/MIS731/

Process

Minder Chen, 1997-2004

Outline
Business Process Reengineering: Introduction and Examples
Business Reengineering Definition and Principles Business Reengineering Examples Business Reengineering Framework Business Reengineering Project Life Cycle Business Reengineering Teams and Infrastructures IT Enablers New Thinking for Taking Advantages of IT Enablers IDEF0 Notation and Diagramming Technique IDEF0 Model Analysis IDEF0 Tools: Demonstration of Design/IDEF Total Quality Management vs. Business Reengineering Culture Changes in a Reengineering Workplace Critical Successful Factors of Implementing Business Reengineering

Managing Business Process Reengineering Life Cycle IT Enables for Business Process Reengineering

Business Process Reengineering Tools: Process Modeling with IDEF0

Implementation of Business Process Reengineering

Minder Chen, 1993-2007

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Books on BPR
Hammer, Michael and Champy, James, Reengineering the Corporation: A Manifesto for Business Revolution, New York: HarperCollins Publishers, Inc., 2001 Davenport, Thomas H., Process Innovation: Reengineering Work through Information Technology, Harvard Business School Press, 1992. Hammer, Michael, Reengineering Work: Dont Automate, Obliterate, Harvard Business Review, July-August, 1990. 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. IBM System Journal, a special issue on Business Transformation through Information Technology, Vol 32, No. 1, 1993. Order Number: G321-011000, (1-800-426-5687) Hall, G., Rosenthal, J., and Wade, J., How to Make Reengineering Really Work, Harvard Business Review, November-December 1993, pp. 119-131. Reprint No. 93604.

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BPR Introduction, Examples, & Principles


Introduction to BPR
Problems BPR Definition Process Definition, Dimensions, and Examples BPR Status Reports Ford Mutual Benefit Life Insurance Capital Holding Co. Taco Bell Others

Examples of BPR

BPR Principles and Frameworks


Principles A BPR Framework Approaches

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Industrial Revolutions Model of Organization and Production

Complex work is broken down into simple and repetitive tasks that are performed in sequence by specialists.
Specialization of labor: Individual jobs become simple Sequential processes: Coordinating people becomes more complex (The role of the hierarchy) Narrow and repetitive jobs: De-skilling the work forces

Managers job is to control the quantity, cost, and quality of the work performed.
Control as a dominant style Financial-oriented scoreboard

Employees are organized by business function.


Hierarchical structure
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Problems
Functional departments become barriers to change. Too much time and money are spent in ineffective coordination and communication. Too little time for doing work that really benefits customers. Overheads are soaring. Business processes are evolved over a period of time and are not designed to handle changing business environments or to take advantages of emerging technologies.

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Process Evolution "We are structured today by historical accident. As we added products, we added functional stovepipes." "Processes in organizations have never been designed in the first place."

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Definition of Reengineering

The fundamental rethinking and radical redesign of core business processes to achieve dramatic improvements in critical performance measures such

as quality, cost, and cycle time.


Source: Adapted from Hammer and Champy, Reengineering the Corporation, 1993 Minder Chen, 1993-2007

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What Business Reengineering Is Not? Automating: Paving the cow paths. (Automate poor processes.) Downsizing: Doing less with less. Cut costs or reduce payrolls. (Creating new products and services, as well as positive thinking are critical to the success of BPR.)

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A Cow Path?

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Reengineering Is ...
Extremist's View

Obliterate what you have now and start from scratch. Transform every aspect of your organization.
Source: Michael Hammer, Reengineering Work: Dont Automate, Obliterate, Harvard Business Review, July-August, 1990, pp. 104-112.

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Gordian Knot
In a Greek legend, nobody could untie a knot tied by King Gordius of Phrygia. Many people tried to untie the knot, but nobody succeeded. ... until Alexander the Great found a smart and direct solution.

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Definition of Process
A process is simply a structured, measured set of activities designed to produce a specific output for a particular customers or market.
-- Thomas Davenport

Characteristics:
A specific sequencing of work activities across time and place A beginning and an end Clearly defined inputs and outputs Customer-focus How the work is done Process ownership Measurable and meaningful performance
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Types of Processes
Dimensions & Type
Organization Entity Inter-organizational Inter-functional Inter-personal Objects Physical Informational

Examples
Order from a supplier
Develop a new product Approve a bank loan

Manufacture a product Prepare a proposal

Activities Operational

Fill a customer order

Managerial
Minder Chen, 1993-2007

Develop a budget
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Adapted from: Davenport, T. H. and Short, J. E., "The New Industrial Engineering: Information Technology and Business Process Redesign," Sloan Management Review, Summer 1990, p. 17.

Processes Are Often Cross Functional Areas


"Manage the white space on the organization chart!"

CEO

Supplier
Marketing & Sales Purchase Production Distribution Accounting

Customer/ Markets Needs

"We cannot improve or measure the performance of a hierarchical structure. But, we can increase output quality and customer satisfaction, as well as reduce the cost and cycle time of a process to improve it."
Minder Chen, 1993-2007

Value-added Products/ Services to Customers

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Process-Orientation
Process-orientation is the key to the BPR success Remove stovepipe functions Focus on cross-functional core process redesign Link activities, functions, and information in new ways to achieve breakthrough improvements in cost, quality, and timeliness. *

* Source: Dichter, Gagnon, and Alexander, Leading Organizational Transformation, The McKinsey, Quarterly, 1993, Number 1.

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BPR Achieves Dramatic Improvement


Ford reduced its account payable department by 75% Bell Atlantic cut the cycle time for installing carrier services for customer from 15 days to 3 days. IBM Credit Company reduce loan application turn around time from 6 days to 4 hours while loan applications increased by 100 times. No personnel was added.

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Satisfaction with the Results of BPR


Dissatisfied 27%

Jury still out 5%

Source: Deloitte & Touche, Leading Trends in Information Services, 1994.

Satisfied 68%

50% to 70% of reengineering efforts fail to achieve the goals set for them.
Source: Thomas A. Stewart, Reengineering: The Hot New Managing Tool, Fortune, August 23, 1993, pp.. 41-48.

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BPR and Other Organizational Initiatives


Alias:
Process Innovation Core Process Redesign (CPR)

Relevant Initiatives in Organizations


TQM Continuous Process Improvement Information Strategy Planning and Information Engineering IT for Competitive Advantages

Related Initiatives in Public Sectors


Reinventing the Government Functional Process Improvement (DOD)
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Benefits of Reengineering
Customer Service Process Timeliness Quality

Reduce Cost
Competitiveness New/Improved Technology Sales/Revenues
0 1 2 3 4 5 6 7 Actual Benefits Expected Benefits

Source: Delotte & Touche, 1993


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Reengineering for Achieving Strategic Goals


Senior executives' choice for achieving strategic goals Outsourcing

40 67 77 78 88 0 50 100
Downsizing Restructuring Automation Reengineering

Source: Gateway Information Services, Inc. New York, Figures are based on responses from 121 executives at US firms in the manufacturing, insurance, and utilities industries. * Joanne Cummings, "Reengineering is high on list but little understood," Network World, July 27, 1992, p. 27. Minder Chen, 1993-2007

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BPR Examples
Ford: Accounts Payable Mutual Benefit Life: New Life Insurance Policy Application Capital Holding Co.: Customer Service Process Taco Bell: Company-wide BPR Others

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Ford Accounts Payable Process*


Purchasing Purchase order Vendor

Receiving Copy of purchase order

Goods

Accounts Payable

Receiving document

Invoice

? PO = Receiving Doc. = Invoice


Minder Chen, 1993-2007

Payment
*Source: Adapted from Hammer and Champy, 1993

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Trigger for Fords AP Reengineering


Mazda only uses 1/5 personnel to do the same AP. (Ford: 500; Mazda: 5) When goods arrive at the loading dock at Mazda:
Use bar-code reader is used to read delivery data. Inventory data are updated. Production schedules may be rescheduled if necessary. Send electronic payment to the supplier.

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Ford
Purchasing

Procurement Process
Purchase order Vendor

Receiving Purchase order Goods received

Goods

Data base

Accounts Payable

Payment
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Ford Accounts Payable


Before
More than 500 accounts payable clerks matched purchase order, receiving documents, and invoices and then issued payment. It was slow and cumbersome. Mismatches were common.

After
Reengineer procurement instead of AP process. The new process cuts head count in AP by 75%. Invoices are eliminated. Matching is computerized. Accuracy is improved.
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Minder Chen, 1993-2007

New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*
Department A Step 1 Department A Step 2

....

Issuance Application
Department E Step 19

Issuance Policy

30 steps, 5 departments, 19 persons Issuance application processing cycle time: 24 hours minimum; average 22 days only 17 minutes in actually processing the application
*Source: Adapted from Rethinking the Corporate Workplace: Case Manager at Mutual Benefit Life, Harvard Business School case 9-492-015, 1991.

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The New Life Insurance Policy Application Process Handled by Case Managers

Mainframe

Underwriter

Physician

Case Manager
PC Workstation

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LAN Server

application processing cycle time: 4 hours minimum; 2-5 days average Application handling capacity double Cut 100 field office positions

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Customer Credit Application Analysis


Approve customer credit application Event
Credit application is submitted Complete application Evaluate application

Subprocesses
Decide on application Inform customer Set up customer

Result
Customer is notified, recorded, and enabled to place orders

Case for action

Vision

Were losing market share to competitors offering fast or instant credit, and our image is declining. Our paper-based workflow involves many starts and stops, and involves several departments and job functions. We dontt capture the right information on the application, so we need to go back to the Customer repeatedly. We cant answer Customer queries about in-process applications The effort and delay aren'tt justified for small Customers who pose minimal risk as a group. Credit Representatives spend most of their time on small accounts, not on large ones where their expertise is needed. Unless we fix the process, our market share will continue to erode and closure of the operation is likely.
Actors Mechanisms

We will offer instant, secured credit to small Customers. Applications from large Customers will be handled in two days or less. Reps All staff will perform higher-value work, and have more authority-Credit will focus on large clients, and Credit Admin Clerks will handle
small applications completely.

Customer Independent surveys will show that Customers perceive us as the Service leader in our industry. and Once the new process is implemented, our market share decline will slow, within one year we will again be growing at 12% per year.

Metrics

Applicant Sales Representative Credit Representative Credit Administration Clerk Credit Bureau Word Processing Clerk Marketing Administration Clerk Customer Data Maintenance Clerk
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Credit Application Credit Report Notification Letter Sales System

1 to 4 work hours and up to 7 elapsed days per application 6 Credit Representatives 150 applications per month, growing 10% per year 75% approved, 25% declined 85% of applications come from small Customers 90% of our sales volume comes from 10% of Customers from 10% of applications come from previously denied Applicants, and 10% former Customers they Small Customer bad debt write-offs are less than 2% of sales, and overall are approximately 1% of sales - 29 -

Capital Holding Co. - Direct Response Group*


A direct marketer of insurance-life, health, property, and casualty-via television, telephone, and direct mail. In 1988, DRG president Norm Phelps and other senior executives decided that for our company, the days of mass marketing were over.

Need to strengthen DRG's relationships with existing customers and target our marketing to those potential customers whose profiles matched specific company strategies.
A new vision for DRG: The company needed to be exactly what most people didn't expect it to be an insurance company that cares about its customers and wants to give them the best possible value for their premium dollar. *Source: Adapted from Capital Holding Corporation-Reengineering the
Direct Response Group, Harvard Business School case 192-001, 1992.

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Capital Holding Co.: Vision Caring, Listening, Satisfying... one by one


Each of us is devoted to satisfying the financial concerns of every member of our customer family by: Deeply caring about and understanding each members unique financial concerns. Providing value through products and services that meet each members financial concerns. Responding with the clear information, personal attention and respect to which each member is entitled. Nurturing an enduring relationship that earns each members loyalty and recommendation.
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Capital Holding Co.: Vision


To carry out our vision we must:
Find and serve people who have a strong sense of affiliation, reaching them through new or existing membership groups. Provide our members with a broad range of insurance and savings products. Communicate personally with each member through direct response, emphasizing telephone and technology to build close relationships.

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DRG Cultural Audit Findings


Cultural Audit: First initiative under reengineering umbrella. It would be impossible to reengineer our systems and processes without an understand of the culture barriers the people issue. Trigger major changes in human resource management redesigning of promotion and reward systems.

Assumption: You can only trust your friends. Implications


Lack of trust may indicate a lack of confidence in the organization and may impede the organizations ability to implement change If ideas arent shared, there is likely to be less innovation. Withholding bad news gives an incomplete picture which can result in poor decisions. - 33 -

Minder Chen, 1993-2007

The Underwritten Rules of the Game The most noble organization initiatives are doomed to failure if they require employees to behave in ways that conflict with water-cooler wisdom on how to get on in the company.

Source: Adapted from Peter Scott-Morgan, The Underwritten Rules of the Game: mater Them, Shatter Them, and Break Through the Barriers to Organizational Change, McGrawHill Inc., 1994.

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New Business Model: A Conceptual Breakthrough Market Management


Target & Segment of Aggregate Market Use Group Information

I Think I Know.
Prospects & Customers

Use Individual Information

Capture Individual Information

I Know for Sure.


Personalized Service

Sell & Renew

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Customer Management

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A High-Level Service Process Model Today


Increase my A&H coverage Give me information about my Life Policy beneficiaries

CSR Customer

Life Corres.

A&H MicroPolicy film Change

Data Entry

Lettershop

System
Day 8

Customer receives two separate responses Input Requested Change Day 5

Whats your policy #s? Action Challis 3 Request Day 1 Life 70

Action Request Day 2

A&H change confirmation letter mailed to customer Day 6

Micro-film Request

System Update Day 6

(Batch)

Micro-film Response Minder Chen, 1993-2007

Day 5

Life Policy beneficiaries letter mailed to customer

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Customer Management Team (CMT): A Flavor of How DRG Service Process Will Change

Increase my A&H coverage Give me information about my Life Policy beneficiaries

CMT:
Teleservice Representative

System:
Client-server architecture Day 1

Customer
Day 1 Answers
Day 1-2
Day 3-4

Immediate Response to Customer

Send written acknowledgment


Minder Chen, 1993-2007

Outbound Paper
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Taco Bell*
We were going backwards - fast ... If something was simple, we made it complex. If it was hard, we figured out a way to make it impossible. - Taco Bell CEO, John E. Martin Customer buy for $1 are worth about 25 cents. 75 cents goes into marketing, advertising, and overhead. Reengineering from the customers point of view. Are customer willing to pay for these value-added activities?

*Source: Adapted from Hammer and Champy, 1993

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Taco Bell
Corporate Vision: We want to be number one in

share of stomach.

Slashed kitchen: Kitchens : Seating capacity


70% : 30%

30% : 70%

Eliminate district managers. Restaurant managers are given profit-and-loss responsibility. Moving cooking of meat and bean outside. Boost peak serving capacity at average restaurant from $400 an hour to $1,500 a hour. $500 millions regional company in 1982 to $3 billion national company in 1992.
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Reengineering Example
Cash Lane No more than 10 items

Which line is shorter and faster?

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Reengineered Process

Key Concept:
One queue for multiple service points Multiple services workstation

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BPR Principles
Organize around outcomes, not tasks. Have those who use the output of the process perform the process. Subsume information-processing work into the real work that produces the information. Treat geographically dispersed resources as though they were centralized. Link parallel activities instead of integrating their results. Put decision points where the work is performed and build controls into the process. Capture information once and at the source.
Source: Michael Hammer, Reengineering Work: Dont Automate, Obliterate, Harvard Business Review, July-August, 1990, pp. 104-112. Minder Chen, 1993-2007

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BPR Principles - Derived


Redesign process steps such that they are perform in a correct order. Combine several process steps into one. Design for parallel subprocesses whenever possible to reduce waiting time between tasks. Integrate subprocesses. Processes may have multiple versions. Remove complex, exceptions, and special cases. Empower human potentials. Give front-line workers the responsibility to make decisions. Provide mechanism in the process to encourage individual, team, and organizational learning
Source: Derived from Michael Hammer and James Champy, Reengineering the Corporation: A Manifesto for Business Revolution, HarperCollins Publishers, Inc., 1993

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Informating, Not Automation

An individual without information cannot take responsibility; an individual who is given information cannot help but take responsibility.
Jan Calzon CEO, Scandinavian Airlines

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BPR Principles - Derived (Continued)


Perform the work where it makes sense. Reduce controls and checks. ==> Build in feedback mechanisms at each steps to minimize the need for the checkpoints and control. Minimize reconciliation. Eliminate multiple external contact points. ==> Use case managers to provide a single point of contact for customers. One-stop customer service or customer service center. Design processes with centralized and decentralized operations. Coordinate inventory, buffers, and other assets by sharing data cross organization boundaries. JIT, continuous replenishment, supplier shelf management. Strive for doing things right the first time. Eliminate rework and iteration.
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A BPR Framework
Organization
Job skills Structures Reward Values

Technology
Enabling technologies IS architectures Methods and tools IS organizations

Process
Core business processes Value-added Customer-focus Innovation

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Approaches to BPR
Focus on core business processes. Use information technology to enable new business processes, not just to automate existing ones. Start with a clean sheet of paper and think out-ofthe-box. Consider all aspects of the process. Adopt a BPR methodology. Use proven methods and tools in analyzing and redesigning the process. Manage the implementation and change process from the beginning.
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Managing BPR Projects


BPR Life Cycle Management BPR Team Structures

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Business Process Reengineering Life Cycle The BPR life cycle approach decomposes business reengineering projects into interrelated phases in which a set of integrated

structured methods and tools is applied to


specific tasks in each BPR phases. Each

phase and its detailed tasks contain clearly


defined goals and deliverables.

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Three Life Cycle Models of BPR


Wang
Define business goal

Hammer
Mobilization (Get serious)

Davenport and Short


Develop business vision & process objectives

Analyze the business process

Diagnosis (Get started)

Identify processes to be redesigned

Understand and measure existing processes Redesign the process Redesign (Get crazy)

Identify information technology levers

Implement the new process

Realization (Get real)

Design & build a prototype of the process

Measure the new process Minder Chen, 1993-2007

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Methodology Components
Work Breakdowns Phase Task Step Deliverable

Are Involved in BPR Team Structures Role Use

Apply to Methods and Tools Concept

Participant
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Method

Tool
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Business Process Reengineering Life Cycle


Define corporate visions and business goals Identify business processes to be reengineered Analyze and measure an existing process

Visioning Identifying

BPR-LC
Enterprise-wide engineering

Analyzing Redesigning
Evaluating

Identify enabling IT & generate alternative process redesigns Evaluate and select a process redesign

Process-specific engineering

Implement the reengineered process Continuous improvement of the process

Implementing

Improving

Manage change and stakeholder interests


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Phase 1: Visioning
Define corporate vision and business goals Apply to enterprise-wide reengineering effort. Develop overview of current and future business strategies, organizational structure, and business processes. Develop organizational commitment to reengineering. Develop and communicate a business case for action. Create a new corporate vision. Set stretched goals. Prioritize objectives. Assess implementation capabilities and barriers.
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Case for Action


Business context: What is happening, what is changing, and what is newly important in the environment in which the company operates. Business problem: The major concern of the company. Marketplace demands: New performance requirements that cannot be met by the company. Diagnostics: Why the company cannot meet the new performance requirements? Why the incremental improvement is not enough? Cost of inaction: Consequences of not reengineering. Source: Hammer and Champy, 1993.
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Objectives for Business Reengineering


Improve customer satisfaction Shorten cycle time Improve output quality Cut down costs Increase competitiveness Maintain the leadership position

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Business Vision, Strategy, and Processes

Enterprise-Wide Vision

Determine who we are and what we are doing about

Business Strategy

Define the right things to do

Process Visualization

Do the right things right

source: John L. Barrett, Process Visualization: Getting the Vision Right Is Key, Information Systems Management, Spring 1994, pp. 14-23. Minder Chen, 1993-2007

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Phase 2: Identifying
Identify business processes to be reengineered

Construct high-level process map Develop a process hierarchy Build enterprise-wide data models (optional) Evaluate the processes Select processes to be reengineered Prioritize and schedule processes to be reengineered
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TI Semiconductor Business Process Map


Customer Communication Market Customers

Concept
Development Manufacturing

Strategy Development

Product Development

Customer Design & Support

Order Fulfillment

Manufacturing Capability Development


Source: Adapted from Hammer and Champy, 1993, p. 119. Minder Chen, 1993-2007

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A Generic High-Level Process Map


Market

Customer

Develop strategy

Organization Learning

Understand customer needs & develop solutions

Attract and retain customer

Deliver products and services

Deliver supporting services


Source: Adapted from Mark Youngblood, eating the Chocolate Elephant: Take Charge of Change Through Total Process Management, Micrografx Inc., 1994, p. 146. Minder Chen, 1993-2007

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Using Value Chain to Identify High-Level Processes


Corporate Infrastructure Human Resource Management
Supporting Activity

Technology Deployment Procurement


Added Value

Primary Activity

Inbound Outbound Logistic Operation Logistic

Sales and Marketing

Service

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High-Level Process Diagram of Firm X


Customer Market Research Patent Office Customer Supplier
product improvement requirements

payment supplier invoice

Fund Business Operations

product / market promotions

customer wants / needs, satisfaction surveys

product/market, pricing information, market analysis

pilot product

supplier credentials material selection

production order, general order

Plan and Monitor Business

patent application plans and budgets

Develop Product

Procure Materials

Pay Accounts

forecasts (material / parts and timing) equipment needed for production

Maintain Financial Records


market analysis

production design documents, method of production, BOM, inventory, software

product improvements production material requirements maintenance plan

Market Product
pricing product pricing

product improvements, future product needs

Plan Production
production plan

marketing forecast

problem summary and product feature requests

monthly sales forecasts for production / customer order production statistics

Provide Personnel Support

Sell Product

customer order details customised product

Manufacture Product
production materials finished product, repaired / refurbished parts maintenance

parts for repair/refurbishing

invoice details sales invoice finished products for distribution

maintenance material requirements

Provide Post Sale Customer Support

Provide Technology Support


order

Receive Accounts

Deliver / Install Product

Warehouse Materials and Product

Maintain Production Equipment

customer enquiries, problem notification, complaints

defective parts

customer payment

delivered goods product installation customer training

maintenance / support problems with order maintenance materials

Customer

product & production supplies

Supplier

Customer

High Level Segmentations of Enterprise Processes

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Logical Functional Process Model

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Methods & Guidelines in Selecting Processes


Identify processes to be redesign:
Systemic & exhaustive approach: Information engineering can be used to identify critical business processes using activity-data matrix.

High-impact & intuitive approach: Use facilitated workshops or extensive interviews involving senior management.

Guidelines:
2~5 business processes at a time Identify owners of business processes. Expand the scope of a process been analyzed

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Criteria for Selecting Processes


Broken Bottleneck Cross-functional or cross-organizational units Core processes that have high impacts Front-line and customer serving - the moment of the truth Value-adding New processes and services Feasible

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The 9-Grid Model for Selecting Processes to Reengineer

Process Impacts

Medium

High

Risky business

Pick low hanging fruits

Pick low hanging fruits

Bark up the wrong tree

Good for a serious pilot project

Pick low hanging fruits

Woof!

Low

Bark up the wrong tree High

Fruitless Effort

Fruitless Effort Low

Medium

Implementation Difficulty
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Phase 3: Analyzing
Analyze and Measure an Existing Process
Conduct preliminary scoping. Develop a high-level AS-IS baseline process model (work flow model). Avoid analysis paralysis by conducting preliminary analysis at fairly high level. Surface purpose and assumptions of the process (Ask WHY?). Perform activity-based costing: costs can be assigned based on actual activities and productivity. Reveal hidden time and nonvalue-added activities. Measure cycle-time and quality. Measure profitability in terms of task, product, and customer type.
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Interview Questions
What makes it go? Is anyone else involved?

Does the name of the step accurately convey


the result? Are all outcomes shown? If there is a handoff,how does it get there?

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PROCESS of Gathering Requirements


P: Plan to interview R: Rehearse interview

O: Open interview
C: Collect data

E: End interview
S: Summarize interview S: Synthesize interview

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Establish a Common Base of Knowledge


The process and business strategies Customer requirements World-class benchmarks

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EXECUTING TIME

WAITING TIME INVOLVEMENT EFFICIENCY COST

Cycle time Work time Time worked

Idle Transit Queue Setup

PeopleScrap Departments Handoffs Job classifications Labor unions Locations Languages Countries/ cultures Whatever else is relevant

Cost per

execution
Rework Defect by type Errors Iterations Customer contacts Complaints Compliments Cost of defects Fixed versus variable costs

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Process Model
Process decomposition Process dependency or work flow ICOM of a process as defined in IDEF
Inputs: information and materials Outputs: Products and services Controls: Policy, specification, and timing Mechanism: Resources including people, tools, and facility.

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Process Data
Basic Overall process data:
Customers and customer requirements Suppliers and suppliers qualifications Breakthrough goals Performance characteristics: Cost, cycle time, reliability, and defect rate. Systems constraints: Budgetary, business, legal, social, environmental, and safety issues and constraints.

Measure critical process metrics


Cycle time Cost Input quality Output quality Frequency and distribution of inputs
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Minder Chen, 1993-2007

Identified Broken Processes*


Terminal Disease
Symptom: Extensive data exchange , redundancy, rekeying Disease: Arbitrary fragmentation of a natural process Symptom: Excess buffers of assets, e.g., inventory Disease: System slack to cope with uncertainty Symptom: High ratio of checking and control to value adding Disease: Incompetence and mistrust because of fragmentation

Just In Case

Over-inspection
Rework

Symptom: Frequent rework and iteration Disease: Inadequate feedback along process chain
Symptom: Too many exceptions and special cases Disease: Graduate accretion onto a simple process
Source: Adapted from Hammer and Champy, 1993.

Special Cases

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Analyzing a Process
Why? What are the underlying assumptions?
How do the assumptions affect process structure? Are the assumptions still valid? Can you make them invalid? How would changing the assumptions affect the work and its value?

Who does the work?


Are you assuming that a specialist must do the work?

When? What is the flow of the work?


Are you assuming that one group must finish (collecting all data) before another group can begin?

Where is the work performed?


Are you assuming that decision must be made at the headquarters?

What resources are required?


Are you assuming that local inventory is required for good service?
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Phase 4: Redesigning
Identify enabling IT & generate alternative process redesigns
How can business processes be transformed using IT?

Business Reengineerin g Technology-driven

Business-pulled

Information Technology

How can IT support business processes?

Minder Chen, 1993-2007

Source: Thomas H. Davenport and James E. Short, The New Industrial Engineering: Information technology and Business Process Redesign, Sloan Management Review, Summer 1990, pp. 11-26.

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Phase 4: Redesigning
Business Vision & Strategy
Business-pulled
How can business strategies be changed business processes be transformed using IT?

How can IT support business strategies and business processes?

Business Reengineering Technology-driven

Information Technology

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Three Steps in Redesigning Processes


Simplification:
Task: Change business rules or procedures of a specific task Workflow: A process chain is simplified by elimination of nonvalue-adding activities Redesign tasks into a logical and effective process. A reengineered process often crosses functional boundaries. It offers opportunity for eradicating interdepartmental redundancies and restructuring the organization. Usually accompanies nontechnical redesign of organization structures and procedures. All reengineering costs and benefits can be projected into a model. Reengineering often pays for itself - sources of funding for technology investments are frequently cost savings generated by organizational change.
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Integration:

Automation:

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Steps in Redesigning

Generate new visions for the process Create ideas for dramatic changes Identify core sub-processes Identify enabling technologies Design alternative new processes Estimate cost/benefit/risk involved in alternative process redesigns

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Phase 5: Evaluating
Evaluate and select a process redesign

Develop criteria of evaluating alternatives of redesigned processes Evaluate design alternatives Select and recommend a reengineered process

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Evaluation Criteria
Costs

Design and implementing the business process Hire and train employee Develop supporting IS Purchase of other equipment and facilities
Customer requirements Breakthrough goals Performance criteria Constraints Technology availability and maturity Time required for design and implementation Learning curve Cost and schedule overrun
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Benefits

Risk

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Phase 6: Implementing
Implement the reengineered process

Plan IT implementation Plan organization implementation Conduct a pilot project Develop a prototype system
Technical Design Social Design

Evaluate results from the pilot project and the prototype Prepare large-scale roll out
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Phase 7: Improving
Improve the process continuously

Develop performance measurement and reward systems in the reengineered process Monitor process performance constantly Improve the process on a continuous basis

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Elements of Integrated Process Management


Integrated Process Management
Process Reengineering

Process Monitoring

Process Improvement

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Target Design Visioning: Price Waterhouse


Vision High-Level Goals Desired end state Scope of vision Business Analysis Level Strategic Tactical Operational Information Facts Problems Opportunities Visioning Workshop Process Design Facilitation Participation Consensus Segment processes Select high-return process redesign opportunities Perform detailed redesign of business processes People & culture Processes Systems & IT Organization & Structure Performance measures & targets

External View Best practices BPR principles Technologies Industry & functional Target Environment Design People & culture Processes Systems & IT Organization & structure

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Rapid Re Approach
Solution: Technical Design Preparation Recognize need Develop executive consensus Train team Plan change Vision Understand process structure Understand process flow Identify value-adding activities Benchmark performance Determine benchmark drivers Estimate opportunities Envision and integrate the internal & external ideal Model data & reexamine process linkages Instrument and informate Consolidate interfaces & information Redefine alternatives Relocate & retime controls Modularize & specify deployment Apply technology Plan implementation Solution: Social Design Empower customer contact personnel Define jobs, teams, skills, Specify management structure, org. boundaries, & transitional org. Specify job changes & career paths Deign change mgmt prog. Design incentives Plan implementation

Transformation Build & test the system Train staff Pilot new process Define transition Continuous improvement

Identification Model customer Define & measure performance Define entities Model processes Map organization Map resources Prioritize processes

Source: Adapted form Manganelli & Klein, The Reengineering Handbook, AMACOM, 1994.

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Enterprise Engineering - A Framework for Change

Organization and Culture Development


Continuous Process Improvement Business Process Redesign
Business Re-engineering Strategic Visioning

Learning Organization

Information Infrastructure Development

Source: Adapted from James Martin & Co., Business Re-engineering Quick Reference Guide, 1993.
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BPR Team Structures


BPR Leader (Champion)

BPR Czar

BPR Steering Commitee

Methodologist

Tools Experts

Change Master

BPR Team

BPR Team

BPR Team

Process Owner

The LEADER appoints the PROCESS OWNER, who convenes a REENGINEERING TEAM, with assistance from the BPR CZAR and under the auspices of the BPR STEERING COMMITTEE. (Hammer and Champy, 1993)
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Team Leader

BPR Experts

Domain Experts

IS Experts

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Stakeholders of the Reengineering Project


End users, operators, managers of the process Gainers and losers of benefits Employees who may be affected Decision makers Controllers of resources Suppliers and customers of the process

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BPR Team
Size: up to 8 members in the core team augmented by subject-matter experts when needed. Commitment: half- to full-time. Skills: team skills, process engineering, quality, information systems, benchmarking, organizational and job design, and change management. Composition: Employees, customers, suppliers, and external consultants.

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Facilitated BPR Meetings


Centered around a workshop: It is an organized, controlled, and structured process Participated by users, managers, and IS personnel (if necessary)
User orientation Management direction IS technical assistance

Facilitated by a BPR facilitator to ensure thorough analysis Employ a BPR analysis and design methodology to ensure usable requirements or specifications Focused on a consensus-based decision making process Use multi-media audio-visual equipment or BPR tools to bridge knowledge gap among participants
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Qualifications of a BPR Facilitator


Is skillful in team building and leading Manages group process and dynamics Has energetic and outgoing personality Summarizes discussion Is a good communicator (listening and speaking) Has project management ability Has mastered facilitation skills Understands BPR methods

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BPR Team Experiences at Charles Schwab


The real battle of reengineering is to learn how to translate the best intentions into the best of plans and, ultimately, into the best of products, processes and systems. Current systems can not provide a single view of any one customers business with the firm. Reengineer to survive, to sustain growth, to maintain leadership position, to transform businesses. BPR should be driven by customer satisfaction. You may need to reengineer the reengineering process.
Source: Jeff Moad, Reengineering: Report from the Trenches, Datamation, March 15, 1994, pp. 36-40.

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Lessons Learned
People tend to focus on the shortcoming of existing systems, rather than entirely new way to deliver services to customers. Task-oriented people in BPR teams may not be able to see and change the big picture. You need data about your customers, their needs, and your competitors before you start. Work hard at building a consensus of purpose and an identity for the BPR team. Members should not see themselves as representatives of various functional units brought together to protect their interests. They should work as a team to benefit the business. Insist on direct and active upper management participation such that the team will have the political cloud to actually reengineer and will know the changes in business strategies.
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Vision
A statement of the future business environment and how the company will operate in that environment. Vision is the result of dreams in action . It is a positive image of the future that is the strongest motivator for change. Characteristics
Common purpose: worth the effort Positive feeling and diffuse fear Clarity and values Capture the imagination Inspires and empowers Should have "reach" and "range"
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Mission
A statement of the basic purpose or reason for the company to exit. Lines of questioning
What business are we in? What is the geographic scope? What markets do we serve? What products and services do we provide? What are the critical successful factors of the organization? How can we achieve our competitive advantage?

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Mission: Examples
AT&T: Our business is service Gerber: Babies are our business Du Pont: Better things for better living through chemistry

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Strategic Visioning Process


Visions

Stories

Context

Insight
Present

Foresight
Future
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Past
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Five Bold Steps Vision Vision


Mission 1. step 2. 3. 4. 5.
Value
Source: The Grove Consultants International, 1996.
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