1

PROCESS VIEW
Process Owner

OPIM 404 SUPPLIER

Inputs
PROCESS
Outputs
CUSTOMER

Business Process
Analysis & Design Requirements and Requirements and
Feedback Feedback

View an organization as a collection of interrelated processes

§ Strategic planning
Process View and § Order entry
§ Supplying the product
Business Process Reengineering § Receiving payment from
the customer
§ Customer satisfaction
Tevhide Altekin § Human resources mgmt.
President President 2
Comparison
OUTLINE Vice
President
Vice
President
Vice
President
Vice
President Vice
President
Vice
President
Vice
President
Vice
President

n Process View
n Business Process Reengineering (BPR)
− How did it start?
Traditional (Functional) Process
− BPR defined
Organization View
− Design Principles
− BPR – What BPR is NOT… Focus Boss Customer
− BPR Success Stories and Failures Work Flow Vertical Horizontal
Primary Chain of Command Customer - Supplier
Relationships
Orientation Hierarchical Process
Decision Management All Employees
Maker
Style Authoriterian Participative
 2a 3
Porter’s Generic Value Chain (1985) Some History Overview
Today functional organization is not effective. Why?
§ Lack of communication between departments
§ Handoffs à Time & information lost btw departments
§ Optimal departmental solutions leading to a poor overall
organizational solution
§ Value creation takes place in horizontal processes
− Thus, work flows horizontally
− Processes cut across functional areas and departments
§ Physical labour replaced by information & knowledge work
§ Employees better educated & informed à Meaningful work
§ Service sector has become dominant
− Direct supervision is not always possible

Result: Process view of organizations is used

2b 4
Rummler’s Value Chain (1984) Some History Overview (Cont’d)
Instead of managing departments, managing
processes is required to
§ Control time & resources better.
§ Focus on customer: As every process has a customer.
§ Define boundaries & customers & suppliers of processes:
Better communication & well-understood requirements.
§ Manage a process that runs through several departments:
Risk of suboptimization is reduced.
§ By appointing process owners fragmentation of
responsibility seen in traditional organizations is avoided.
- First used by another management systems theorist, Geary Rummler, in 1984. § Value creation takes place in horizontal processes.
- A value chain or business process, that cuts across five departmental or
functional boundaries, represented by the underlying organizational chart. The
boxes shown within the process arrow are subprocesses.
- The subprocesses are initiated by an input from a customer, and the process
ultimately produces an output that is consumed by a customer.
 5 7
BUSINESS PROCESS REENGINEERING BPR Defined by Michael Hammer
(BPR) § BPR is “the fundamental rethinking and radical redesign of
business [or organizational] processes to achieve dramatic
§ Radically redesign processes and redirect resources improvements in critical, contemporary measures of
§ To achieve dramatic improvements in service and performance, such as cost, quality, service and speed.”
customer satisfaction § Fundamental: Focus core competencies/value adding process
§ Often results in − Ignore what is & concentrate on what should be.
− Reduced (process) cost, § Radical: Business reinvention not business improvement
− Reduced (flow) time, or
§ Dramatic: Use “when a need exits for heavy blasting.”
− Improved quality. − Companies in deep trouble.
§ Relies upon − Companies that see trouble coming.
− Questioning, − Companies that are in peak condition.

− Challenging, Dramatic improvement (quantum leap)

− Evaluating, and is in contrast to incremental improvement
− Redesigning every element of a process. (change) or continuous improvement of
an existing process
§ Aims dramatic change.
6 7a
How Did BPR Start? When Should a Process Be Reengineered?
§ A number of converging occurrences
− Economic pressures à Late 1980s and early 1990s, § Useful questions to ask (Cross et al. (1994))
reduce costs, squeezed profits, cost cutting/downsizing – Are customers demanding more for less?
− Consultant programs: IT as enabler, cross-functionality – Are your competitors providing more for less?
− Productivity paradox: Large investments in IT leading to
– Can you hand-carry a job through the process much faster
minimal productivity growth ($900 billion in past 10 years than the normal cycle time (e.g. five times faster)?
investment versus 0.7% productivity growth) – Have your incremental improvement efforts been stalled?
− Process focus: Quality (TQM), service & time based comp.
– Have technology investments been a disappointment?
– Are you planning to introduce radically new
− Continuous improvement entered agendas
products/services or to serve new markets?
− Legitimacy à 2 articles & books that became popular
– Are you in danger of becoming unprofitable?
− Bandwagon effect à Early
– Have cost-cutting programs failed to turn the ship around?
aggressive success stories.
– Are operations being merged or consolidated?
Consulting firms & vendors
– Are the core business processes fragmented?
repackaging their solutions.
Ä How to compete effectively? à BPR came right place
at the right time
 8

Classical Reengineering Fundamental:

Focus on core competencies/value adding processes
§ Terms interchangeably used: Business process After BPR − Ignore what is & concentrate on what should be
reengineering, process improvement, business transformation,
process innovation, business process redesign
§ Many definitions…
§ “The fundamental analysis and radical redesign of
business processes to achieve dramatic improvements in
critical measures of performance”
§ Four elements forming nucleus of reengineering
− Consists of radical change
− Has process view:
• Unit of analysis is business
• Not individual departments or functional areas
− Tries to achieve major goals or dramatic performance Radical redesign
improvements IT as enabler
Dramatic
− IT is a critical enabler for this change
improvement

9a
Dramatic Results Examples
Company
Name Benefits after applying BPR
Saved : 10% to 25% on support costs,
General
3% to 5% on hardware,
Motors
40% to 60% on software licensing fees
Southwest It had a revenue of $1.7 billion…… after-tax profit of $91M
Airlines
American It had revenue of $14.4 billion dollars…(don’t apply BPR)…..
Airlines Lost $475M and has not made a profit since 1989.
Dell’s website is noted for bringing in nearly “$10 million
each day in sales”.
DELL Inc.
Dell’s stocks have been ranked as the top stock for the
decade of the 1990s, when it had a return of 57.282%.

Ford Saved millions on recalls and warranty repairs

 9b 9c
Dramatic Results Examples (Continued) Garanti Bank’s Transformation Project
Company
Name Benefits after applying BPR
Grow to $5.1 billion by the fiscal year of 2004.
Raise the volume by 17%, the organic volume by 10%,
sales are at $51.4 billion up by 19%, with organic sales
Procter and up 8%, earnings are at $6.5 billion up 25% and share
Gamble earnings up 25%.
Procter and Gamble also has a free cash flow of $7.3
billion or 113% of earnings, dividends up 13% annually
with a total shareholder return of 24%
Eliminate a nearly two month delay that formerly
IBM
occurred when pricing.
Wal-Mart Reduces restocking time from six weeks to thirty-six
hours.
Taco Bell Sales soars from $500 million to $3 billion.

9b 9d

Dramatic Results Examples (Continued) New Dramatic Results Examples

Company § Yet, they do not always call it BPR.
Name Benefits after applying BPR − Digital Transformation,
Grow to $5.1 billion by the fiscal year of 2004. − Change Management, and
Raise the volume by 17%, the organic volume by 10%, − Process Reinvention are sometimes more popular terms to call
sales are at $51.4 billion up by 19%, with organic sales
what we are learning as BPR.
Procter and up 8%, earnings are at $6.5 billion up 25% and share
Gamble earnings up 25%.
§ Underlying rules of BPR apply to 2020 examples:
Procter and Gamble also has a free cash flow of $7.3
− A core business process is broken, dysfunctional, or
billion or 113% of earnings, dividends up 13% annually
with a total shareholder return of 24% underperforming.
Eliminate a nearly two month delay that formerly
− Leadership seeks dramatic process change (reengineering) as
IBM a solution.
occurred when pricing.
Wal-Mart Reduces restocking time from six weeks to thirty-six § Examples from
hours.
− Airbnb: Used design principles 1, 6 and 7.
Taco Bell Sales soars from $500 million to $3 billion.
− T-Mobile: Used design principles 2 and 5.
 9e 11
Ten Conceptual Design Principles
New Dramatic Results Examples (Cont’d)
§ Airbnb product development process: 1. Organize work around outcomes not tasks
− Focus on horizontal integration of activities
− Goal: Deliver a great product on time − Eliminates unnecessary handoff and control steps
− 3 main functions [designers, engineers, and researchers] − Process complexity is reduced while activity complexity grows
− Worked in silos, • This integration approach often referred to as case management
− Only jumping into the process at defined times. 2. Let those who use the process perform the process
System 1 System 2 System 3 − Work should be carried out where it makes most sense to do it
Designers Engineers Researchers − Risk of coordination inefficiencies due to excessive delegation
decreases
Wait on engineers to write Wait on researchers Find at the very end that
code before a mock-up could to validate product project assumptions
3. Merge information processing and data gathering
be visualized on screen. ideas were off-base. Back … activities
− The people collecting the data should also process it into information
§ It was a process failure (rounds & rounds of quasi prototypes)
− Reduces the risk of errors and incorrect information
− “This was a strong signal to me [of] a failure of process and the
4. Capture information once – at the source
need for more deep and consistent engagement between …
− Reduces costly reentry and frequency of erroneous data
teams.” Judd Antin, Head of Research, Airbnb − Speeds up the process,
§ Process needed to be reengineered. Not optimized or − Increases the quality of information and
automated, but fundamentally redesigned. − Reduces costs
10
Design Principles
General people-oriented and conceptual process design principles

1. Organize work around 6. Treat geographically dispersed

outcomes, not tasks resources as though they were centralized

2. Let those who use the process 7. Link

7. Link parallel
parallel activities
activities instead
instead of
of just
output perform the process just integrating
integrating their their
outputoutput

3. Merge information processing 8. Design the process for the dominant

and data gathering activities flow not the exceptions

4. Capture the information once – 9. Look for ways to mistake-proof

at the source the process

5. Put the decision point where the 10. Examine process interactions
work is performed and build to avoid sub-optimization
control into the process

Themes: Horizontal & vertical integration of work Coordination of activities,

Hand-off elimination, Simplification of flows,
Improved quality and task coordination Elimination of waste and rework
 11
Ten Conceptual Design Principles
1. Organize work around outcomes not tasks
− Focus on horizontal integration of activities
− Eliminates unnecessary handoff and control steps
OPIM 404 − Process complexity is reduced while activity complexity grows
• This integration approach often referred to as case management
Business Process 2. Let those who use the process perform the process
−
Analysis & Design −
Work should be carried out where it makes most sense to do it
Risk of coordination inefficiencies due to excessive delegation
decreases
3. Merge information processing and data gathering
activities
− The people collecting the data should also process it into information
Process View and − Reduces the risk of errors and incorrect information
Business Process Reengineering (Cont’d) 4. Capture information once – at the source
− Reduces costly reentry and frequency of erroneous data
− Speeds up the process,
− Increases the quality of information and
Tevhide Altekin − Reduces costs
12
Ten Conceptual Design Principles (Cont’d)
OUTLINE
5. Put the decision point where the work is performed
n Process View and build control into the process
n Business Process Reengineering (BPR) – Case management compresses processes horizontally and
employee empowerment compresses them vertically
− How did it start?
– Workers are taking over previous management
− BPR defined responsibilities
− Design Principles 6. Treat geographically dispersed resources as though
− BPR – What BPR is NOT… they were centralized
− BPR Success Stories and Failures – IT breaks spatial compromises through virtual co-location
– Geographically disbursed resources should not constrain
the design team to only consider decentralized approaches
7. Link/coordinate parallel activities instead of just
integrating their results
– If parallel activities are operated independently ⇒
operational errors are not detected until the outcomes are
integrated
– Reduces the amount of rework
 13 14
Ten Conceptual Design Principles (Cont’d) Seven Workflow Oriented Design Principles
8. Design the process for the dominant flow not for • Stems from the field of industrial engineering
the exceptions – Successfully used for designing manufacturing
– Reduces the risk of fragmentation and overly systems for decades
complex processes with inherent coordination Traditional, technically oriented workflow design principles
problems
9. Look for ways to mistake-proof (or fail-safe) the Focus: Efficient process flows, managing resource
process capacity, throughput rate and flow times
– Design so that certain critical errors cannot occur ü Establish product orientation in the process
– Mistake-proofing = Poke Yoke ü Eliminate buffers
ü Establish one at a time processing
ü Balance the flow to the bottleneck
ü Minimize sequential processing and hand-offs
ü Schedule work based on its critical characteristics
ü Minimize multiple paths due to specialized
operations for exception handling

13 15a
Ten Conceptual Design Principles (Cont’d)
Tools and Techniques of BPR
8. Design the process for the dominant flow not for
n Flowcharting n Input / Process / Output
the exceptions
n Waste Analysis Diagrams
– Reduces the risk of fragmentation and overly
complex processes with inherent coordination n Ownership Analysis n Control Systems Design
problems n Benchmarking n Measures of Performance
9. Look for ways to mistake-proof (or fail-safe) the n Resource Domination Design
process Analysis n Culture Development
– Design so that certain critical errors cannot occur n Supplier Development
n Product Life Cycle
– Mistake-proofing = Poke Yoke
Analysis n Postponement and Mass
10. Examining interactions to avoid sub-optimization
n Force Field Analysis Customization
– By neglecting interactions, isolated improvements
to sub-processes will lead to sub-optimal solutions n Pareto Analysis n Impact / Ease Analysis
– Known in systems theory as “disjointed n Segmentation n Risk Analysis
incrementalism” n Simulation
Reading assignment: Reengineering Work: Don't Automate, Obliterate by M.
Hammer, Harvard Business Review, July-August 1990, 104-112.
 15b 16
Recall: Generic Solutions with
BPR Success Stories and Failures
respect to Process Classifications
Success Stories
§ Ford cuts payable headcount by 75%
Fundamental
Radical § Mutual Benefit Life improves underwriting efficiency by 40%
Dramatic
§ Xerox redesigns its order fulfillment process and improves
service levels by 75-97% and cycle times by 70% with
inventory savings of $500 million
§ Detroit Edison reduces payment cycles for work orders by
80%

Failures
§ An estimated 50-70% of all reengineering projects have
failed
§ Those that succeed take a long time to implement and
realize

15c 16a

BPR – What BPR is NOT… How to Succeed with BPR?

§ Hammer and Champy
– “The role of senior management is crucial.”
§ Empirical research indicates…
– Organizations which display understanding, commitment
and strong executive leadership are more likely to
succeed with process reengineering projects.
§ Common themes in successful reengineering
§ TQM versus BPR efforts
− Both focus on processes 1. Firms use BPR to grow business rather than retrench
− TQM: Bottom-up participation (usually within function), 2. Firms emphasize serving customers & compete
continuously evaluate current practices leading to incremental aggressively with quantity & quality of products &
changes in work design, can be followed by BPR initiatives services.
− BPR: Initiated top-down, focus on broad cross-functional 3. Firms emphasize getting more customers, more work and
processes, questions the logic of existing designs, one shot more revenues instead of downsizing
attempt at achieving dramatic improvements, IT enabler
 16b 18

What Makes BPR Easier?

BPR Mistakes (Cont’d)
§ Representing business processes n Trying to reengineer from the bottom up
− Cross-functional à Transcend functional boundaries
− Goal à Attain a high degree of parallel coupling of inputs and outputs along n Assigning a leader who does not understand BPR
with a high degree of parallel collaborative information exchange
n Skimping on the resources
§ Technical enabler à IT
− Improve communication & collaboration between involved functions n Not making BPR a top corporate priority
− Reduce physical coupling (physical hand-off of documents) & enhance
information coupling E.g. Direct access to shared database like in Ford Motor n Trying to do too much at once & dissipating resources.
− Workflow systems, CAD/CAM systems, ERP systems, intranet/internet n Concentrating only on design & not implementation.
§ Social enablers à Organizational structure
− Cross-functional teams
n Trying to keep everyone happy.
− Create Case managers & Process generalists à Has access to latest status n Pulling back if people resist.
information on a given transaction & single contact point for customers
• Case manager à Coordinate work performed by many functional n Dragging out the effort & taking too long.
specialists
• Process generalist à Perform their work & eliminate need for the
specialists altogether. Source: Hammer & Champy, Reengineering the Corporation, Chapter 14.
17

BPR Mistakes
According to Hammer & Champy, 70% percent of the
organizations attempting BPR did not achieve the results
they expected. Why? Because they make one or more of the
17 common mistakes:
n Trying to fix a process instead of changing it
n Not focusing on business processes
n Focusing only on the process redesign
n Neglecting people’s values & beliefs
n Settling for minor results
n Quitting too early
n Constraining the scope of the problem & effort
n Letting corporate culture & mgmt attitudes get in the way