MBA 731: Business Systems Analysis and DesignMinder Chen, Ph.D.

School of ManagementGeorge Mason University

(O) 703-993-1788 (F) 703-993-1809E-Mail: mchen@gmu.edu

Web Site: http://gunston.doit.gmu.edu/ecommerce/MIS731/O

rgan

izat

ion

Technology

Process

© Minder Chen, 1997-2004

- 2 -© Minder Chen, 1993-2007

Outline

• Business Process Reengineering: Introduction and Examples– Business Reengineering Definition and Principles– Business Reengineering Examples– Business Reengineering Framework

• Managing Business Process Reengineering Life Cycle– Business Reengineering Project Life Cycle– Business Reengineering Teams and Infrastructures

• IT Enables for Business Process Reengineering– IT Enablers – New Thinking for Taking Advantages of IT Enablers

• Business Process Reengineering Tools: Process Modeling with IDEF0– IDEF0 Notation and Diagramming Technique – IDEF0 Model Analysis – IDEF0 Tools: Demonstration of Design/IDEF

• Implementation of Business Process Reengineering– Total Quality Management vs. Business Reengineering– Culture Changes in a Reengineering Workplace– Critical Successful Factors of Implementing Business Reengineering

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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: Don’t 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: G321-0110-00, (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

• Examples of BPR– Ford – Mutual Benefit Life Insurance– Capital Holding Co.– Taco Bell– Others

• BPR Principles and Frameworks– Principles– A BPR Framework– Approaches

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Industrial Revolution’s 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

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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 ...

• Obliterate what you have now and start from scratch.

• Transform every aspect of your organization.

Source: Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.

Extremist's ViewExtremist's View

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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

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.

Dimensions & Type Examples

Order from a supplier

Develop a new product

Approve a bank loan

Manufacture a product

Prepare a proposal

Fill a customer order

Develop a budget

Organization Entity• Inter-organizational

• Inter-functional

• Inter-personal

Objects• Physical

• Informational

Activities• Operational

• Managerial

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Processes Are Often Cross Functional Areas

M arketing& S ales

P urchase P roduc tion D is tribution A ccounting

C E O

Supplier

Customer/MarketsNeeds

Value-addedProducts/Services toCustomers

"Manage the white space on the organization chart!"

"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."

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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

Satisfied68%

Jury still out5%

Dissatisfied27%

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

“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

0 1 2 3 4 5 6 7

Actual Benefits

Expected Benefits

Customer Service

Process Timeliness

Quality

Reduce Cost

Competitiveness

New/Improved Technology

Sales/Revenues

Source: Delotte & Touche, 1993

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Reengineering for Achieving Strategic Goals

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.

Senior executives' choice for achieving strategic goals

88

78

77

67

40

0 50 100

Outsourcing

Downsizing

Restructuring

Automation

Reengineering

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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*

Accounts Payable

Accounts Payable

VendorVendor

GoodsReceivingReceiving

Payment

Invoice

Receiving document

PurchasingPurchasingPurchase order

Copy ofpurchase order

PO = Receiving Doc. = Invoice *Source: Adapted from Hammer and Champy, 1993

? ?

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Trigger for Ford’s 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 Procurement Process

AccountsPayable

AccountsPayable

VendorVendor

GoodsReceivingReceiving

Payment

Goods received

PurchasingPurchasingPurchase order

Purchase order

Data base

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Ford Accounts Payable

BeforeBefore

AfterAfter

• 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.

• 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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• 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

Department AStep 1

Department AStep 2

Department EStep 19

. . . .

Issuance Application

Issuance Policy

New Life Insurance Policy Application Process at Mutual Benefits Life Before Reengineering*

*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

Case Manager

UnderwriterPhysician

Mainframe

LAN Server

PC Workstation

• application processing cycle time: 4 hours minimum; 2-5 days average

• Application handling capacity double

• Cut 100 field office positions

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Approve customer credit application

Event Subprocesses Result

Credit

application

is submitted

Complete

applicationEvaluate

applicationDecide on

application

Inform

customer

Set up

customer

Customer is

notified, recorded, and enabled to place orders

Case for action Vision

·We’re 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 don’t’t capture the right information on the application, so we need to go back to the Customer repeatedly.·We can’t answer Customer queries about in-process applications

·The effort and delay aren't’t 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.

·We will offer instant, secured credit to small Customers.·Applications from large Customers will be handled in two days or less.

·All staff will perform higher-value work, and have more authority-Credit

Reps will focus on large clients, and Credit Admin Clerks will handle small applications completely.

·Independent surveys will show that Customers perceive us as the Customer Service leader in our industry.

·Once the new process is implemented, our market share decline will slow,

and within one year we will again be growing at 12% per year.

Actors Mechanisms Metrics

·Applicant·Sales Representative·Credit Representative·Credit Administration Clerk·Credit Bureau·Word Processing Clerk·Marketing Administration Clerk·Customer Data Maintenance Clerk

·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·10% of applications come from previously denied Applicants, and 10% from former Customers·Small Customer bad debt write-offs are less than 2% of sales, and overall they are approximately 1% of sales

Customer Credit Application Analysis

- 30 -© Minder Chen, 1993-2007

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 oneCaring, 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 member’s unique financial concerns.

• Providing value through products and services that meet each member’s financial concerns.

• Responding with the clear information, personal attention and respect to which each member is entitled.

• Nurturing an enduring relationship that earns each member’s 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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• Assumption: You can only trust your friends. Implications

– Lack of trust may indicate a lack of confidence in the organization and may impede the organization’s ability to implement change

– If ideas aren’t shared, there is likely to be less innovation.

– Withholding “bad news” gives an incomplete picture which can result in poor decisions.

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.

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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, McGraw-Hill Inc., 1994.

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New Business Model: A Conceptual Breakthrough

Target & Segmentof Aggregate Market

Use IndividualInformation

Use GroupInformation

Prospects

Customers

Sell & Renew

Capture IndividualInformation

&

PersonalizedService

“I Think I Know.”

“I Know for Sure.”

Market Management

Customer Management

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A High-Level Service Process Model Today

CSR Life A&H Micro- Data Letter- System Customer Corres. Policy film Entry shop

Change

What’s yourpolicy #’s?

Challis 3

Life 70 Micro-film Request

ActionRequest

Day 1

Micro-filmResponse Day 5

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

ActionRequest

Day 2

InputRequestedChange

Day 5

A&H change confirmation letter mailed to customer

SystemUpdate

Life Policy beneficiaries letter mailed to customer

Day 6

Day 6(Batch)

Day 8Customerreceivestwo separateresponses

- 37 -© Minder Chen, 1993-2007

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

ImmediateResponse to

Customer

Day 1Answers

Day 3-4

Day 1-2

Day 1

Send writtenacknowledgment

• Increase my A&H coverage• Give me information about my

Life Policy beneficiaries

Customer

CMT: Teleservice Representative

System: Client-server architecture

Outbound Paper

- 38 -© Minder Chen, 1993-2007

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 customer’s point of view. “Are customer willing to pay for these ‘value-added’ activities?”

*Source: Adapted from Hammer and Champy, 1993

- 39 -© Minder Chen, 1993-2007

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

Which line is shorter and faster?

Cash LaneNo more than 10 items

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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: Don’t Automate, Obliterate,” Harvard Business Review, July-August, 1990, pp. 104-112.

- 43 -© Minder Chen, 1993-2007

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

- 44 -© Minder Chen, 1993-2007

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

- 45 -© Minder Chen, 1993-2007

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.

- 46 -© Minder Chen, 1993-2007

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

- 47 -© Minder Chen, 1993-2007

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-of-the-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.

- 48 -© Minder Chen, 1993-2007

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 inter-

related 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.

- 50 -© Minder Chen, 1993-2007

Three Life Cycle Models of BPR

Define business goal

Analyze the business process

Redesign the process

Implement the new process

Measure the new process

Develop business vision & process objectives

Identify processes to be redesigned

Understand and measure existing processes

Identify information technology levers

Design & build a prototype of the process

Mobilization(Get serious)

Diagnosis(Get started)

Redesign(Get crazy)

Realization(Get real)

WangWang HammerHammer Davenport and ShortDavenport and Short

- 51 -© Minder Chen, 1993-2007

Methodology Components

Phase

Task

Step

Work Breakdowns

Participant

Role

BPR Team Structures

Concept

Method Tool

Methods and Tools

Deliverable

Apply to

Use

Are Involved in

- 52 -© Minder Chen, 1993-2007

Business Process Reengineering Life Cycle Define corporate visions and business goals

Identify business processes to be reengineered

Analyze and measure an existing process

Identify enabling IT & generate alternative process redesigns

Evaluate and select a process redesign

Implement the reengineered process

Continuous improvement of the process

Visioning

Identifying

Analyzing

Redesigning

Evaluating

Implementing

Improving

Manage change and stakeholder interests

BPR-LC

Enterprise-wide engineering

Process-specific engineering

- 53 -© Minder Chen, 1993-2007

Phase 1: Visioning

• 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.

Define corporate vision and business goalsDefine corporate vision and business goals

- 54 -© Minder Chen, 1993-2007

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.

- 55 -© Minder Chen, 1993-2007

Objectives for Business Reengineering

• Improve customer satisfaction

• Shorten cycle time

• Improve output quality

• Cut down costs

• Increase competitiveness

• Maintain the leadership position

- 56 -© Minder Chen, 1993-2007

Business Vision, Strategy, and Processes

Enterprise-Wide Vision

Business Strategy

Process Visualization

Determine who we are and what we are doing about

Define the right things to do

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.

- 57 -© Minder Chen, 1993-2007

Phase 2: Identifying

• 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

Identify business processes to be reengineeredIdentify business processes to be reengineered

- 58 -© Minder Chen, 1993-2007

TI Semiconductor Business Process Map

Manufacturing Capability Development

StrategyDevelopment

ProductDevelopment

CustomerDesign &Support

OrderFulfillment

Concept

Development

Manufacturing

MarketCustomers

Customer CommunicationCustomer Communication

Source: Adapted from Hammer and Champy, 1993, p. 119.

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A Generic High-Level Process Map

MarketCustomer

Developstrategy

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.

OrganizationLearning

OrganizationLearning

- 60 -© Minder Chen, 1993-2007

Using Value Chain to Identify High-Level Processes

AddedValue

Corporate Infrastructure

InboundLogistic Operation Outbound

LogisticServiceSales

andMarketing

PrimaryActivity

SupportingActivity

Human Resource Management

Procurement

Technology Deployment

High-Level Process Diagram of Firm X Customer

Fund Business Operations

Patent Office Customer Supplier

Provide Technology

Support

Provide Personnel Support

Maintain Financial Records

Supplier

product / market

promotions

production plan

product/market, pricing information, market analysis

market analysis

plans and budgets

patent application

pilot productproduct

improvement requirements

material selection

forecasts (material / parts and timing) equipment needed

for production

product improvements, future

product needs

production design documents, method of

production, BOM, inventory, software product

improvements

supplier credentials

production order, general order

product & production supplies

problems with order

supplier invoice

payment

maintenance plan

maintenance

problem summary and product feature requests

monthly sales forecasts for production / customer order

order

customer payment

sales invoice

invoice details

delivered goods

product installation

customer training

productpricing

customised product

maintenance materials

customer enquiries,

problem notification, complaints

defective parts

maintenance / support

maintenance material requirements

parts for repair/refurbishing

finished products for distribution

Customer

Market Research

marketing forecast

production material requirements

finished product, repaired / refurbished parts

production materials

Customer

customer order details

production statistics

Deliver / Install Product

Receive Accounts

pricing

Market Product

Plan and Monitor Business

Manufacture Product

Procure Materials Pay Accounts

Provide Post Sale Customer Support

Develop Product

Warehouse Materials and

Product

Maintain Production Equipment

Plan Production

Sell Product

This report was produced by IBM Consulting Group

Huawei / IBM Confidential

customer wants / needs, satisfaction surveys

- 62 -© Minder Chen, 1993-2007

High Level Segmentations of Enterprise Processes

- 63 -© Minder Chen, 1993-2007

Logical Functional Process Model

- 64 -© Minder Chen, 1993-2007

- 65 -© Minder Chen, 1993-2007

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

- 66 -© Minder Chen, 1993-2007

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

- 67 -© Minder Chen, 1993-2007

The 9-Grid Model for Selecting Processes to Reengineer

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

Bark up the wrong tree

Fruitless Effort

FruitlessEffort

Implementation Difficulty

Pro

cess

Imp

acts

High Medium Low

Hig

h

Me

diu

mL

ow

Woof!

- 68 -© Minder Chen, 1993-2007

Phase 3: Analyzing

• 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.

Analyze and Measure an Existing ProcessAnalyze and Measure an Existing Process

- 69 -© Minder Chen, 1993-2007

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?

- 70 -© Minder Chen, 1993-2007

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

- 71 -© Minder Chen, 1993-2007

Establish a Common Base of Knowledge

• The process and business strategies

• Customer requirements

• World-class benchmarks

- 72 -© Minder Chen, 1993-2007

EXECUTING WAITING

TIME TIME INVOLVEMENT EFFICIENCY COST

Cycle time Idle PeopleScrap 　　　　　 Cost per

　　 execution

Work time Transit Departments Rework

Time worked Queue Handoffs Defect by type Cost of defects

Setup Job Errors Fixed versus

classifications variable costs

Labor unions Iterations

Locations Customer

contacts

Languages Complaints

Countries/ Compliments

cultures

Whatever else

is relevant

- 73 -© Minder Chen, 1993-2007

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.

- 74 -© Minder Chen, 1993-2007

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

- 75 -© Minder Chen, 1993-2007

Identified Broken Processes*• Terminal Disease

– Symptom: Extensive data exchange , redundancy, rekeying– Disease: Arbitrary fragmentation of a natural process

• Just In Case– Symptom: Excess buffers of assets, e.g., inventory– Disease: System slack to cope with uncertainty

• Over-inspection– Symptom: High ratio of checking and control to value adding– Disease: Incompetence and mistrust because of fragmentation

• Rework– Symptom: Frequent rework and iteration – Disease: Inadequate feedback along process chain

• Special Cases– Symptom: Too many exceptions and special cases– Disease: Graduate accretion onto a simple process

Source: Adapted from Hammer and Champy, 1993.

- 76 -© Minder Chen, 1993-2007

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?

- 77 -© Minder Chen, 1993-2007

Phase 4: Redesigning

Identify enabling IT & generate alternative process redesignsIdentify enabling IT & generate alternative process redesigns

Information Technology

Information Technology

BusinessReengineerin

g

BusinessReengineerin

g

How can IT support business processes?

How can business processes be transformed using IT?

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.

Technology-drivenBusiness-pulled

- 78 -© Minder Chen, 1993-2007

Phase 4: Redesigning

Information Technology

Information Technology

BusinessReengineering

BusinessReengineering

How can IT support business strategies and business processes?

Technology-driven

Business Vision & Strategy

Business Vision & Strategy

Business-pulled

How can business strategies be changed business processes be transformed using IT?

- 79 -© Minder Chen, 1993-2007

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

• Integration: – 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.

• Automation:– 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.

- 80 -© Minder Chen, 1993-2007

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

- 81 -© Minder Chen, 1993-2007

Phase 5: Evaluating

• Develop criteria of evaluating alternatives of redesigned processes

• Evaluate design alternatives

• Select and recommend a reengineered process

Evaluate and select a process redesign Evaluate and select a process redesign

- 82 -© Minder Chen, 1993-2007

Evaluation Criteria

• Costs– Design and implementing the business process– Hire and train employee– Develop supporting IS – Purchase of other equipment and facilities

• Benefits– Customer requirements– Breakthrough goals– Performance criteria– Constraints

• Risk– Technology availability and maturity– Time required for design and implementation – Learning curve– Cost and schedule overrun

- 83 -© Minder Chen, 1993-2007

Phase 6: Implementing

• 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

Implement the reengineered processImplement the reengineered process

- 84 -© Minder Chen, 1993-2007

Phase 7: Improving

• Develop performance measurement and reward systems in the reengineered process

• Monitor process performance constantly

• Improve the process on a continuous basis

Improve the process continuouslyImprove the process continuously

- 85 -© Minder Chen, 1993-2007

Elements of Integrated Process Management

Process Reengineering

Process Monitoring

Process Improvement

Integrated Process Management

- 86 -© Minder Chen, 1993-2007

Target Design Visioning: Price Waterhouse

Business Analysis

Level• Strategic • Tactical • Operational Information• Facts• Problems• Opportunities

Visioning Workshop

• Facilitation• Participation • Consensus

High-Level Goals

• Desired end state• Scope of vision

External View

• Best practices• BPR principles• Technologies • Industry &

functional

Vision

• People & culture• Processes• Systems & IT • Organization & Structure• Performance measures &

targets

Process Design

• Segment processes• Select high-return process

redesign opportunities • Perform detailed redesign of

business processes

Target Environment Design

• People & culture• Processes• Systems & IT • Organization & structure

- 87 -© Minder Chen, 1993-2007

Rapid Re Approach

Preparation

Recognize needDevelop executive

consensusTrain team Plan change

Identification

Model customerDefine & measure

performanceDefine entitiesModel processesMap organization Map resourcesPrioritize

processes

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

Solution: Technical Design

Model data & reexamine process linkages

Instrument and informateConsolidate interfaces &

information Redefine alternativesRelocate & 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 staffPilot new processDefine transition Continuous

improvement

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

- 88 -© Minder Chen, 1993-2007

Enterprise Engineering - A Framework for Change

Continuous Process

Improvement

Business Process

Redesign

Business Re-

engineering

Learning Organization

Strategic

Visioning

Information Infrastructure Development

Organization and Culture

Development

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

- 89 -© Minder Chen, 1993-2007

BPR Team Structures

Methodologist Tools Experts Change Master

BPR Czar BPR Steering Commitee

BPR Team

BPR Experts

Domain Experts IS Experts

Team Leader

Process Owner

BPR Team BPR Team

BPR Leader (Champion)

“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)

- 90 -© Minder Chen, 1993-2007

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

- 91 -© Minder Chen, 1993-2007

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.

- 92 -© Minder Chen, 1993-2007

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

- 93 -© Minder Chen, 1993-2007

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

- 94 -© Minder Chen, 1993-2007

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 customer’s 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.

- 95 -© Minder Chen, 1993-2007

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.

- 96 -© Minder Chen, 1993-2007

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"

- 97 -© Minder Chen, 1993-2007

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?

- 98 -© Minder Chen, 1993-2007

Mission: Examples

• AT&T: Our business is service

• Gerber: Babies are our business

• Du Pont: Better things for better living through chemistry

- 99 -© Minder Chen, 1993-2007

Strategic Visioning Process

Past Present Future

Context

Stories

Insight

VisionsVisions

Foresight

- 100 -© Minder Chen, 1993-2007

Five Bold Steps Vision

Vision

Mission

1. step

2.

3.

4.

5.

1. step

2.

3.

4.

5.

Value

Supporting Trends Challenges

Source: The Grove Consultants International, 1996.