W5 - Business Process Reengineering BPR

Reference:

Crowe, T.J., Fong, P.M. and Zayas-Castro, J.L. (2002),

“Quantative risk level estimation of business process reengineering efforts”, Business Process Management Journal, Vol. 8 No. 5,

pp. 490-511.

Neda Abdolvand, Amir Albadvi and Zahra Ferdowsi (2008), “Assessing readiness for business process reengineering”,

        Business Process Management Journal, Vol. 14 No. 4, 2008, pp. 497-511

Varun Gover, Manoj K. Malhotra (1996)

“Business process reengineering: A tutorial on the concept, evolution, method, technology and application”

        Journal of Operations Management 15 (1997) 193-213

Valimaki, J. and Tissari, T. (1997) “Risk management focus in business reengineering initiatives”,

Proceeding of the IPMA Symposium on Project Management: Managing Risks in Projects,

        E & FN Spon, London, pp. 232-42

Grant, D.(2002), “A wider view of business process reengineering”,

Communications of the ACM, Vol. 45 No.2, pp. 84-92

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The critical factors that cause high failure rate of BPR

Background

The seemingly high failure rate of BPR has always been one of the major obstacles in convincing organization to commit to BPR effort (Crowe, 2002). According to a 1995 study bu the Standish Group International (USA) consisting of 8380 BPR projects at 365 companies, projects failure rate is 84 percent and most of them at least experienced some major problems (Valimaki and Tissari, 1997). As a top-manager of an organization with decreasing profit rate, implementing BPR is a difficult and unconvinced decision when facing such a high-failure-rate figure.

Scope

Hence, it is worthy to have an in-depth analysis for critical factors that caused failure of BPR so that managers could be more vigilant when making BPR-related decisions. Many scholars conceived different perspectives and LEE’s conclusion was widely accepted and quoted. He finalized 4 components that measure the level of employee resistance (Lee, 1995):

1.      Middle management fear of losing authority;

2.      Employees’ fear of losing job;

3.      Skepticism about project results; and

4.      Feeling uncomfortable with new working environment.

Middle management fear of losing authority

        Human resources are the primary decision makers and essential ingredients of all human activity system (Grant, 2002). Without the commitment of top and middle management, any organizational strategies would not be successfully implemented. Radical change for business processes is an inevitable step and minimizing the number of processes is always the scene. As a result, conflict of interest between managers exists since that reducing processes leads to demotion or even termination of some managers. This resistance is especially familiar in family-based enterprise. Managers are always the family members and stabilizing the organizational structure is the scene they desire to see.

Employees’ fear of losing job

        To obtaining quantum leap improvements demands from BPR efforts, it demands radical changes in employees’ behavior at work. It is instinctive reaction to resist changes instituted by BPR efforts because of the human nature to develop inertia. The level of resistance is especially high among employees who are directly affected by the changes. Uncertain future initiated by BPR changes would also leads the increase of anxiety level of employees.

Skepticism about project results

        No one could guarantee the success of BPR. Imagine that you are the general manager of an organization; serious hand-off problem and low knowledge-creating capacity jeopardize the future of the company. You propose a huge reform project to the board of directors. The most probable response would be: could you guarantee the changes are profitable? If not, just put it aside and this would not be the first priority in our agenda.

Feeling uncomfortable with new working environment

        Employees are unfamiliar with the radical changes made by BPR efforts. New education and training programs, new empowerment structure and reward systems lead employees feel hard and stressful to follow. Poor performance and low morale among the employees are expected.

Week 4: Sustainable Strategic Alignment Model(COMPLUSORY)

With the proliferation of Information Technology, IT is no longer an afterthought in forming business strategy. It has evolved from traditional orientation of administrative support towards the actual cause and driver of macro business strategy. The Strategic Alignment Model (SAM) tries to answer the question of how to strategically align the business goals and the IT, which is a headache of every corporate.  

The 4 fundamental domains of strategic choice,  

Business strategy,
IT strategy,
Business Infrastructure and
IT Infrastructure, 

form 4 cross-domain and multivariate relationships, they are:

Strategic Execution,
Technology Transformation,
Competitive Potential and
Service Level.

This article I will concentrate on a question: Which alignment perspective is the best?
The answer in my opinion should be: There does not exist a universal superior perspective at all.

Stance

Henderson and Venkatraman, scholars first discussed the SAM, defined IT strategy within SAM as involving choices that position the firm in the global information technology market (Henderson and Venkatraman, 1991, p.74). In an era with rapid economic change, both IT strategy or business strategy are constructed in accordance with the market trend, the IT development and macro-economy. Hence so-called ‘superior’ or ‘universal’ business strategy and alignment perspective does not exist for sure.

Instead, choosing the most appropriate strategic alignment perspective in respect to the recent situation and constraints is told to the best solution. Companies or industries which are suited to the relative alignment perspective are discussed with reasons in the followings.

Strategy Execution

            This alignment perspective perhaps is the most common and widely understood perspective corresponding to the classical strategy management (Henderson and Venkatraman, 1993). As organizations assessed IT performance by cost-centered financial parameters, the common strategy is to integrate internal IS strategies, infrastructure and processes with internal organizational requirement as a response to business strategies, which is a old-fashion business philosophy. This alignment perspective is still used by industry with stable structure and less competitive market environment.

For example, the characteristics of high barriers to entry (sophisticated and expensive machinery are always needed) and unique competitive criteria (possessing latest chemical formula) lead pharmaceutical industry treat IT as tools to improve efficiency of routine work only.

Technology Transformation

            Companies adapted this alignment perspective perceive IT strategy as a tool to enhance competitive advantage in the industry. As a result, top managers would always think in this way: with the given business strategies, how the recent IT strategy of our company achieves those strategies?  A precise IT strategy could reduce TRANSACTION COSTS of the company and customers, and eventually increase the competitiveness.

            For example, UPS has used the same strategy, providing ‘best service with lowest rates’, for 90 years. One of the most visible aspects of technology is the customer’s ability to track his/her package via the UPS Web site. To maintain the best service with lowest rates, UPS invest heavily in advanced information technology to maintain leadership in small-package delivery services.  In short conclusion, added value provided by the advanced information technology system of UPS integrates closely with the basic business processes. Thanks to the synergy effects, UPS could provide instant information to customers with relative low prices.

Service level

            Companies with IT-driven business model are suited to apply this alignment perspective as IT strategy is of fundamental importance for these companies to give directions for business strategy.

            For example, Facebook’s theory is that people have real connections in the world.To achieve, Zuckerberg and his team force provide new functions for users so as to broaden the user base. The launch of ‘News Feed’ in 2006 and the launch of ‘Time Line’ in 2011 are the examples. In the foreseeable future Facebook would focus on realizing its utility components and make something new for internet to provide efficient communication for mankind.

Competitive potential

“IT needs to become part of the business rather than passively aligned with business… defining business opportunities and not simply the builders of other managers’ solution…”   (Sauer and Yetton, 1997). Companies that emphasize on the relationship between IT strategies and business opportunities are suited to this alignment perspective.

Conclusion

Choosing the most appropriate strategic alignment perspective in respect to the recent situation, business model and constraints is told to the best solution. With different internal factors (organizational culture, resources allocated to IT development and emphasis on IT) and external factors (industry structure, market demand and trend, macro economy) could affect the adpotion of differnet strategic alignments.

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Reference

Henderson J.C and Venkatraman, N. (1991),

“Understanding strategic alignment”,

Business Quarterly, Vol. 55 No. 33, pp.72-9.

Henderson J.C and Venkatraman, N. (1993),

“Strategic alignment: Leveraging information technology for transforming organization”,

Sauer, Cand Yetton, P. (1997), Steps to the Future.

            Fresh Thinking on the Management of IT-based Organizational 
           Transformation.

            Josset-bass Publishers, San Francisco, CA.