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Business Process Reengineering
Business Process Reengineering
It was in the year 1990 that Michael Hammer, former professor at MIT published the article “Reengineering work: Don’t automate, Obliterate” in HBR, which caught the attention of the world. The crux of his article was an advice to the companies to eliminate the existing processes which do not add any value to the customer instead of automating it and also to re-focus their priorities to make use of the resources in a better way, thus improving efficiencies.
Companies across the industries have ever been in the pursuit of achieving higher levels of efficiencies, enhancing their outputs and gaining higher revenues. Successful companies have been in the forefront of adopting the latest technology available which aimed at streamlining their operations and enhancing their profits. With the opening up of global markets in the 80s and 90s, big corporations were chasing those markets competitively in an attempt to establish their foot prints in the newer vistas. And the idea of reengineering was a boon; it opened up newer ideas to cut the flab, stay fit and remain competitive.
The aim of this essay is to understand in detail about Business Process Reengineering (BPR), and explain how it improves different business measures of performance including quality, speed, cost, and services. The essay will also focus on the importance of adopting the BPR concepts when it comes to ERP implementation. The essay will start with an overview of the idea of BPR; explain the evolution and concepts. The third section is an analysis of why an organization should look at BPR and when is the right time to go after it. Following this a brief snapshot of the modern-day BPR methodologies. Post this, the essay analyzes the importance of BPR in the ERP implementation and how they are complementing each other. The next section is on the change management process and the importance of organizations to adapt to the new environment. The last section of the essay is the analysis and conclusion which explains and summarizes the importance of BPR and how it is proving beneficial to the companies to stay ahead of the competition.
Business Process Reengineering- An Overview
Business Process Reengineering also referred to as business transformation, business process redesign or business process change management began as a private sector technique to help organizations rethink on the definition of their work processes in order to dramatically improve customer service, cut operational costs and become world-class competitors .
The scope of Business Process Reengineering is very wide and cuts across industries. And within an organization, BPR finds scope in a multitude of functions or processes and can be inter departmental as well as intra departmental. The concept of BPR application across the various processes in an organization stems from the belief that any strategic or operational shortcomings are more pronounced at the activity level, which will help to identify the source of inefficiency and provide pointed solutions. BPR application to an existing process in an organization may require a thorough thought process on the organization’s mission, strategic goals, customer’s requirements etc. Information Technology is a great enabler in effecting BPR in an organization. In fact, many of the ERP systems available today are perfected to such an extent that the workflow dictated by them has become the industry standard and has become easier for the companies to adjust their operations in order to achieve higher efficiency levels. But the journey to this current comfort level has not happened overnight, we will have to analyze and understand the evolution of Business Process Reengineering and its various concepts. It should be specially mentioned that, by implementing BPR, organizations should see the bigger picture, i.e. their customers. The objective of BPR should not just be on achieving the company’s objectives, but also on satisfying the requirements of the customer. In short, BPR starts and ends with customers.
In the following section, the essay will focus on the evolution of Business Process Reengineering, the various concepts of BPR and the importance of change management in the organization where the BPR is adopted.
Business Process Reengineering- Evolution and Concepts
As mentioned above, the concept of BPR is relatively new, coined by Michael Hammer in 1990. But it can be argued that Hammer’s idea is the end result of the evolution of the focus on quality and increased quest for the global companies to improve their business processes. Some of the possible factors that may have led to the birth of the concept of BPR include -
Globalization and opening up of markets during late 80s and early 90s resulting in increased global competition
Realization that the existing processes were not work-friendly and inefficient
Realization that IT adoption is not the one stop solution to enhance operational efficiency
Post the introduction of BPR idea by Hammer, there has been many interpretations and implementations of the concept, many of which were wrong earning a bad name for BPR. However, further articles on this topic published by Hammer, Davenport, Short, Champy etc. cleared the air and gave the world the right idea of the meaning of BPR, the ways to effectively adopt BPR and the benefits that can be accrued as a result of the adoption. Hammer and Champy in their book, suggested the following seven principles-
“Organize around outcomes, not tasks”
“Identify all the processes in an organization and prioritize them in order of redesign urgency”
“Integrate information processing work into the real work that produces the information”
“Treat geographically dispersed resources as though they were centralized”
“Link parallel activities in the workflow instead of just integrating their results”
“Put the decision point where the work is performed, and build control into the process”
“Capture information once and at the source”
Let us now focus on the various concepts of BPR- key words and dimensions.
The concept of BPR essentially has four major key words-
Fundamental - A thorough re-look at the existing processes and question each and every stage on its essentiality in improving value. Identify the processes that are obsolete and inefficient and initiate ways to eliminate them.
Radical - Going back to the roots. There is no process improvement involved here; it is about the clean slate and total re-design of the process. BPR is a radical activity and needs to be implemented with utmost caution as it involves the monetary risk of abandoning the existing process altogether and adopting a new one.
Dramatic - Targets a big jump in performance and aims at a high magnitude improvement
Process - An activity that creates the business functions with the intention of providing value to the customer.
The concept of BPR involves three basic stages- designing the new process, implementation of the new process and continuous improvement of the new process. The three basic dimensions of BPR are Physical Technical Layer, Infrastructure Layer and Value Layer. The various layers, their components and their easiness of change are mentioned in the table below -
BPR- Why and When
It is important for an organization to decide upon whether to go after BPR at the first place. There are many critical factors to be considered before taking the plunge. Some of the critical factors to be considered include-
Customer Satisfaction- The most important focus area of BPR is customer satisfaction. As mentioned earlier, BPR starts and ends with the customer. A prime case will be an automobile company implementing BPR in its supply chain process to ensure timely and adequate availability of spare parts thereby ensuring enhanced customer satisfaction.
Competition- Innovation is the key in today’s competitive world, irrespective of the industry. Competition triggers innovation which in turn drives improved processes, new products, geographies and increased sales. A thorough reengineering may be required to accommodate innovative ideas and thereby staying ahead of the competition.
Expanding the Business- Expansion of business to newer verticals and geographies may necessitate a process overhaul as the process designed for the existing system may not fit in a larger frame. Adopting BPR to devise the most efficient process in the changed circumstances will help in a smooth expansion, easy transition and faster time to market thereby ensuring customer satisfaction.
Long Term Growth Vision- Similar to the ‘Expanding the Business’ point, the vision of long term growth will necessitate a process overhaul to accommodate the business expansion, newer business models and growth strategies.
Pioneer of Change- Successfully implementing BPR methodologies will ensure a sea change of the perception about the company among its customers. An effective BPR methodology will ensure in catapulting a laggard to a leader, from just another player to the chief innovator etc.
Now let us look into best time to go after the implementation of BPR. BPR can be implemented at any point of time in a company’s life, but it will depend on the strategy of the company and also on what the company wants to achieve by redesigning its processes. An industry leader may implement BPR, which will help them to consolidate its position as the leader by widening the gap with their competitors. BPR may also be adopted as a prevention measure in situations where the company anticipates a future problem and wants to avoid things getting out of control. Finally, companies staring at bankruptcy may also adopt reengineering to re-define their whole processes and revolutionize their mode of operation, thereby ensuring an extension of their lives.
Present-day BPR Methodologies
Some of the more popular BPR methodologies in practice today are - Process Reengineering Life Cycle (PRLC) methodology, Integrated BPR methodology, Object-Oriented Business Engineering Methodology (OO-BEM), Accenture BPR methodology and McKinsey BPR Methodology.
BPR and ERP Implementation
It is a close knit relation between Business Process Reengineering and ERP implementation. The level of reengineering required in an organization as a part of the ERP implementation depends on the industry, the size of the company and the gap between the existing process and the ERP roadmap. Also, yet another most important question that arises is on which one first, is it BPR and then ERP or vice versa? Or implementing both together?
It has been a widely accepted fact that more customizations to the ERP means more cost additions. It is best recommended from a cost point of view as well as from the implementation effectiveness point of view that Business Process Reengineering should be done prior to the ERP implementation . ERP systems are designed and programmed to achieve the optimum efficiency levels for any industry. These high end platforms are built with a thorough understanding and adoption of the good processes and elimination of bad processes. There are many advantages of implementing a reputed ERP platform, some of them include optimize the operating costs, make accurate demand predictions, streamline the supply chain, eliminate the inefficient processes and speed up the production cycle and enhance customer service.
The implementation plan of BPR and ERP should be clubbed together as a part of the larger agenda of operations optimization. Both should not be viewed in isolation, at least in the strategy devising phase. Once the requirement of process redesign and optimization has been finalized, the next important step is to evaluate the ERP options that will suit the company best by comparing the product with the strategy blueprint. The next stage is to do the gap analysis and identify the areas where the process followed is outdated and is no match to the pre-defined ERP system workflow. Once the inefficient processes have been identified, the following stage is to reengineer the process. Once the whole process has been rewritten to suit the workflow of the ERP, the final stage is to go after the implementation of the ERP. This way, it is made sure that the ERP synchronizes with the new processes and will face only minimal challenges and requires almost zero customization. Here it should be particularly noted that the success of the ERP implementation has minimal dependence on the technology and the maximum dependence is on the process adopted, established and followed. This methodology fits most of the companies, particularly of those whose existing processes are severely outdated and makes absolutely no sense to continue with them.
The second option is the inverse of the methodology adopted above. First implement the ERP and then perform the reengineering of the business processes to match the workflow of the ERP. This methodology is also adopted and is quite popular, but the key to success here is on finding the ERP that closely matches the existing process of the company. Else, the company will bleed financially by performing never ending customizations. Once the ERP has been identified and implemented, the next step is to find out the old processes and eliminate them so that the business processes and the ERP workflow will match. This methodology makes sense only for those companies who have a fairly good, automated and efficient existing process as such a scenario will be more compatible to the current breed of leading ERPs available in the market.
Change Management Readiness
The rollout of Business Process Reengineering is a radical process and not an incremental one. When a company decides to start with the BPR as a predecessor to the ERP implementation, it should be able to anticipate and ready to brace the changes that will happen all of a sudden. One of the most prominent stumbling block in the effective rollout of BPR and ERP as the successor is the resistance to change, particularly from the workforce. Many of the implementations fail not because of the new design flaw or technical glitches of the ERP. They fail because the workforce was either resistant to change to the new process or they were not trained properly to work in the new atmosphere and process. The investment to be made in a BPR and ERP implementation is huge and the companies will never want to experiment with the implementation. It should be a one shot approach and the only option is to succeed, even though some level of customizations are unavoidable and are acceptable. Post implementation modifications, trouble shooting and bug fixes may continue, but it is ideal to keep these to a minimum, else it will drain the company financially. So, what is the effective way to address this problem? Is downsizing the only option?
One of the methodologies that can be adopted is ‘Participative BPR’ where employees of the organization, where it is intended to initiate the BPR process, also become a part of the decision making process. Involving employees of the various departments in an organization in this way will also have the advantage of identifying the inefficient processes in practice, as the employees will have the ground level knowledge of how the operations are happening in reality. In this way, it is made sure that the BPR is designed not just by a few domain experts and also helps to identify and iron out the lesser productive processes and designs.
Analysis and Conclusion
The Greek Philosopher, Heraclitus said centuries ago that “The only thing that is constant is change”. Change is the part and parcel of everyone’s life and the same applies for organizations as well. In fact the change is quicker, radical and clearly visible when it comes to the global organizations. Global Corporations who have survived for decades are the ones who have had the foresightedness to anticipate the changes and adapted well to those changes.
In the fiercely competitive global markets, companies can survive only if they constantly adapt to the changes, modify or rewrite their processes, iron out the inefficiencies and constantly innovate. Technology in the form of ERP or any other software platform is a great enabler to the success of change, but the most important factor is the process management. Global leaders constantly innovate and invent newer paths of efficiencies and current processes get quickly outdated. No organization is immune to this scenario and they are left with no option, but to reengineer in order to stay fit.
The concept of Business Process Reengineering has worked wonders for the global corporations like Ford, Boeing, Wal-Mart, British Airways, Pepsi Corporation etc. It requires special mention that BPR should be considered as a part of the larger strategy of the company that includes ERP implementation as well and not as something which has to act in silo. ERP packages achieve more significance when they have the Business Process Management (BPM) module integrated into them. The newer breeds of BPM products from companies like IBM are significantly advanced and they help in reducing the time for the BPR rollout and ensure synchronization with the ERP system.
Now that the process and technology parts are addressed, the third leg which is equally, if not more important is the ‘people’ dimension. The best designed BPR workflow or the most technologically advanced ERP becomes pointless if the people factor is not properly taken care of. The success of BPR and ERP implementation depends to a great extent on the ‘people’ angle. First of it is addressing the issue of change management, which may be taken care of by adopting the ‘Participative BPR’ concept as explained in the previous section. It is also equally important that the management should paint the overall strategy in a larger canvas and should not feel lost at any point mid-way. They should be able to anticipate the roadblocks, guide the whole process right from the start to the very end and ensure the whole project is running successfully post implementation. And what are the measures of success? Higher productivity, reduction in the turn-around time, improved supply chain process, higher revenue flow and increased profits and the most important one which should be the very aim of the BPR exercise- “Customer Satisfaction”.
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