Business process reengineering
A management approach that examines aspects of a business and their interaction and attempts to improve the efficiency of the underlying processes.
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Executive Summary
Business Process Re-engineering, also known as, BPR, Business Process Redesign, Business Transformation, Process Change Management, and a not too familiar term, Total Quality Management. Business Process Re-engineering has been used by corporation for many years now. Business Process Re-engineering was first introduced to the business world by Frederick Taylor when he published his article The Principles of Scientific Management back in the 1900’s. It was later replaced by Total Quality Management after the World War II by William Deming and Dr. Joseph Juran after they helped Japan become a super economic power taking over market share from North American businesses with quality goods and services. Later in the earlier part of the 1990’s, Michael Hammer and James Champy introduced their book, Reengineering the Corporation, which gave birth to the term Business Process Reengineering. Like every business idea, Business Process Reengineering also had its glitches.
Business Process Reengineering was used by corporations as an excuse for job cuts which pretty much tarnished the name to fear within the employees. Business Process Reengineering, if implemented properly can give huge returns. The biggest problem that businesses usually face with Business Process Reengineering is the overzealous expectations. Businesses do not realize that Process Reengineering is a business tool with high price tag with a huge but gradual return. Business Process Reengineering has helped giants like Procter and Gamble Corporation and General Motors Corporation get back on their feet after financial drawbacks due to competition.
Business Process Reengineering helped American Airlines somewhat get back on track from the bad dept that is currently haunting their business practice. Business Process Reengineering is all about the proper method of implementation and also be very critical about timing the reengineering process just right.
The biggest question about Business Process Reengineering is how much longer can it help businesses succeed?
Full Text
Business Process Re-engineering goes by quite a few other names as well, some of which are: BPR, Business Process Redesign, Business Transformation, Process Change Management, and a not too frequently used Total Quality Management. BPR has been used by major corporations and businesses alike since the 1950’s. Business Process Reengineering dates as far back as the early 1900’s when an author by the name of Frederick Winslow Taylor, an American Industrial Engineer, who published the article on The Principles of Scientific Management. Scientific Management was the first step to the introduction of Business Process Reengineering which turned out to be unsuccessful due to the many issues which were not resolved. During Taylor’s time, not too many knowledge workers were employed in the manufacturing workforce, which at the time was the main wealth generator. Scientific Management involved breaking the manufacturing process down to a thoughtless cycle of simple sequences which were to be carried out in the least amount of time possible with the minimum about of effort. This often raised the factory workers’ salaries but also cause the workers to work just as hard in back-breaking manual labour. This practice of improving efficiency in manufacturing often raised the concern of “dehumanization of the workplace” (Kock, 2002). This later gave birth to Total Quality Management in Japan after World War II, which eliminated many of the discrepancies that the previous method of improving the business structure. This was introduced to the business world by William Deming, statistician and quality management expert, and Dr. Joseph M. Juran, also known as the father of quality management, and is widely acknowledged as the accelerant for the Japanese economic superpower that it is now. Total Quality Management (TQM) main goal is to improve the manufacturing operations. As the business world matured, so did the method used to improve the service provided to customers, which today “is the main contributor to the gross national product of most developed and developing countries” (Kock, 2002). Total Quality Management was replaced by the currently used process of Business Process Re-engineering. This was introduced first back in the early 1990s by Michael Hammer, an engineer by training, and James Champy. Michael Hammer once said, “Serving the customer is not a mechanical act but one that provides an opportunity for fulfillment and meaning” (Microsoft, 2004).
Business Process Redesign can be defined as “the analysis and design of workflow and processes within and between organizations” (Davenport & Short, 1990). BPR has three key target categories: • Customer Friendly: One of the main goals of introducing BPR is to get a competitive edge and that can only be gained by providing the customers more than what the others in the market are asking for. If a customer is looking for products tailored to their needs, for example: a car customized to the customer’s taste, then that car-maker would most probably gain more customers over the competition due to the customization option. • Effectiveness: How effective is the product or service that the business or manufacturing company providing the customer? If whatever product or service the business might be providing to the customer is successful, then the customers would automatically want to buy that product or service again. For example: Japanese made cars like Honda and Toyota, even though they are more expensive compared to the domestic cars, they are very reliable cars causing the customers to continue going back to those brands for generations. This is something that the domestic brand automakers, like Ford and GM have not yet mastered. • Efficiency: How efficient is the company that is manufacturing the product before introducing it to the market to maximize costs? This is one of the key categories that I believe is more important than any others. If a manufacturing company can master the skill of being efficient then they can automatically be more customer friendly and effective. Efficiency is not just about being efficient at the production floor level but the management level also has to be efficient. An example of only the production floor being efficient and not the management level would be the Japanese manufacturing companies. Now they are going through turmoil to repair their problems.
There are advantages and disadvantages to Business Process Re-engineering of course. Like any new concept, they all have their problems that need to be sorted out. Business Process Re-engineering was believed to move the Information Technology sector of the business to the front lines. This is a big misconception as technology is not the one that is going to help the business improve its efficiency but in fact it is the employees in the company that will help the businesses succeed. Business Process Re-engineering to some meant “any attempt to change how work is done” (Davenport, Prusak &Wilson, 2003) and to some it was a nicer word for downsizing. The latter is not what Business Process Re-engineering is all about. It was never mentioned in Process Re-engineering literature about downsizing since that was never the objective of this concept. The first time that a re-engineering was ever used as a term for downsizing was back in 1995 when Pacific Bell called for 10,000 job cuts, followed by Apple Computer Incorporated using the word re-engineering to explain the job cuts. At the time of the job cuts, Computerworld was conducting a research on both Pacific Bell and Apple Computers and noticed that neither of the two companies were far enough in their re-engineering process to suggest how many jobs will be lost. This was the beginning of the trend for the business consultants and managers to use the term ‘Re-engineering’ to explain job cuts. There is only one question to ask. Where did the re-engineering go wrong? The only logical explanation could be that like any new business idea, there was a shortfall of the number of experienced charlatans who could correctly implement Business Process Re-engineering. Another reason for the shortfall could be the book introduced by Michael Hammer and James Champy where they did not take the human constituent of the business process. In late 1996, Dr. Hammer made a confession on the Wall Street Journal where the article read: Dr. Hammer points out a flaw: He and the other leaders of the $4.7 billion re-engineering industry forgot about people. ‘I wasn’t smart enough about that,’ he says. ‘I was reflecting my engineering background and was insufficient appreciative of the human dimension. I’ve learned that’s critical.’(Davenport, Prusak &Wilson, 2003)
The book also fails to acknowledge the fact about “how difficult, time-consuming and expensive it is to reengineer.”(Davenport, Prusak &Wilson, 2003). The implementation issue is also a major factor for the 30% success rate of re-engineering a business, according to James Champy. Too much effort was spent on the process of a business rather than practice and did not involve people who did the work in the implementation. Too much was expected from the re-engineering process a little too early by the executives and a little too many of the business initiatives was outsourced. The Business Process Re-engineering implementation might be based on best practices by a business; too many of them were rather generic and not specific to a particular company. One example of using a generic idea to a particular company would be the implementation of a $28,000.00 voicemail system at Winguth, Dohahue & Co., which was later scrapped because of the computer generated voice which sounded a little too cold and clients were tired of going through all the menu prompts to reach the desired person. Business Process Re-engineering is also time sensitive. In the case of Metropolitan Life, a multibillion dollar company, even after half a century of operation went bankrupt because the company was a little too late to switch from filing cabinets of customer files and records to a database system. With every new process implementation there is a security issue, like in the case of Equifax.com that had people’s identities stolen. There are a certain aspects of a business than can be re-engineered and put on the mainstream of the internet superhighway. Not all businesses can go through the generic re-engineering process. In the case of eBay.com which was down for 15-hours because the company decided to test a new system, which was a part of the eBay re-engineering process, that they had hoped would help the company be more efficient and also provide quality service to the customers.
Of course there are many examples to the successes of Business Process Re-engineering. General Motors Corporation would be the first example to implement a 3-year plan to consolidate their entire multiple desktop systems into one. It is known internally as “Consistent Office Environment” (Booker, 1994). This re-engineering process would be replacing the numerous brands of desktop systems, network operating systems and application development tools into a more manageable fewer number of vendors and technology platforms. According to Donald G. Hedeen, director of desktops and deployment at GM and manager of the upgrade program, he says that it “lays the foundation for the implementation of a common business communication strategy across General Motors.” (Booker, 1994). Lotus Development Corporation and Hewlett-Packard Development Company, formerly Compaq Computer Corporation received the single largest non-government sales ever from General Motors Corporation. GM also planed to use Novell NetWare as a security client, Microsoft Office and Hewlett-Packard printers. According the Donald G. Hedeen, this will save GM 10% to 25% on support costs, 3% to 5% on hardware, 40% to 60% on software licensing fee, and of course increase efficiency since the incompatibility issue is overcome by using just one platform across the entire company. Southwest Airlines would be a second successful example of re-engineering their company and using Information Technology the way it was meant to be implemented. In 1992, Southwest Airlines had a revenue of $1.7 billion and an after-tax profit of $91 million. American Airlines, the largest U.S. carrier, on the other hand had a revenue of $14.4 billion dollars but lost $475 million and has not made a profit since 1989 (Furey & Diorio, 1994). Companies like Southwest Airlines know that their formula for success is easy to copy by new start-ups like Morris, Reno, and Kiwi Air. In order to stay in the game of competitive advantage, they have to continuously re-engineer their strategy. Business Process Re-engineering is all about being original, being different from the competition and have an edge over others. Its all about competitive advantage and Southwest Airlines realizes that, which is why Southwest Airlines is a lot more successful compared to American Airlines, who has been in business longer much longer than Southwest. Another example would be DELL Incorporated. Michael Dell, Founder and CEO of DELL Incorporated, has been in business since 1983 and have been the world’s fastest growing major PC Company. Michael Dell’s idea of a successful business is to keep the smallest inventory possible by having a direct link with the manufacturer. When a customer places an order, the custom parts requested by the customer is automatically sent to the manufacturer for shipment. This reduces the cost for inventory tracking and massive warehouse maintenance. Dell’s websites are racking in nearly “$10 million each day in sales.”(Smith, 1999). Michael Dell mentions: "If you have a good strategy with sound economics, the real challenge is to get people excited about what you're doing. A lot of businesses get off track because they don't communicate an excitement about being part of a winning team that can achieve big goals. If a company can't motivate its people and it doesn't have a clear compass, it will drift."(Smith, 1999) Dell’s stocks have been ranked as the top stock for the decade of the 1990’s where the stock had a return of 57,282% (Knestout & Ramage, 1999). Michael Dell is now concentrating more on customer service than selling computers since the PC market price has pretty much equalized. Michael Dell notes: "The new frontier in our industry is service, which is a much greater differentiator when price has been equalized. In our industry, there's been a pretty huge gap between what customers want in service and what they can get, so they've come to expect mediocre service. We may be the best in this area, but we can still improve quite a bit--in the quality of the product, the availability of parts, service and delivery time."(Smith, 1999) Michael Dell really understands the concept of Business Process Re-engineering and really recognizes where and when to re-engineer his business. A multi-billion dollar corporation like Proctor & Gamble Corporation, which carries 300 brands and growing really has a strong grasp in re-engineering. Proctor & Gamble Corporation’s chief technology officer, G. Gil Cloyd, explains how a company which carry multiple brands have to contend with the “classic innovator’s dilemma – most innovations fail, but companies that don’t innovate die. His solution, innovating innovation…” (Teresko, 2004). Cloyd has helped a company like Proctor & Gamble grow to $5.1 billion by the fiscal year of 2004. According to Cloyd’s scorecard, he was able to raise the volume by 17%, the organic volume by 10%, sales are at $51.4 billion up by 19%, with organic sales up 8%, earnings are at $6.5 billion up 25% and share earnings up 25%. Proctor 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%. Cloyd states: "The challenge we face is the competitive need for a very rapid pace of innovation. In the consumer products world, we estimate that the required pace of innovation has double in the last three years. Digital technology is very important in helping us to learn faster."(Teresko, 2004)G. Gil Cloyd also predicts, in the near future, “as much as 90% of P&G’s R&D will be done in a virtual world with the remainder being physical validation of results and options.”(Teresko, 2004).
Business Process Re-engineering, even though it has a very successful future has been used for quite a few negative circumstances and thus has soiled the name that suddenly brings shiver down their spine whenever the employees of a company hear that their company is going to be re-engineered. To an employee, re-engineering is only another way for their executives to say that the company is going to go through some job cuts. What the executives often do not realize is that re-engineering does not mean trying to cut back on jobs but rather it just mean how can a company improve its effectiveness in the market place to gain a competitive edge. The main idea for Business Process Re-engineering is to use the resources in hand, which also includes the employees working in the company, and trying to offer more to the customer than the competition. In order to reanalyze Business Process Re-engineering to rid the name of such misconceptions, it is being replaced by Six Sigma. Six Sigma is the new and improved Business Process Re-engineering which has been reworked, reanalyzed and renamed for the employees’ sake. There is an endless future for Business Process Re-engineering, it might be renamed but it will never cease to exist in the business world. As long as there are businesses and competition, there will always be Business Process Re-engineering.
Business Process Re-engineering, if implemented properly can make any business successful. Business Process Re-engineering, like any other process and business idea has its drawbacks but this idea is constantly revised and constantly implemented through the various industries. The only way to improve Business Process Re-engineering is to learn from other companies mistakes and to gain competitive advantage over others. Business Process Re-engineering can save a company from huge financial drawbacks, like in the case of Ford where Ford re-engineered their business and manufacturing process from just manufacturing cars to manufacturing quality cars, where the number one goal is quality. This helped Ford save millions on recalls and warranty repairs. Ford has accomplished this goal by incorporating barcodes in every one of their parts and scanners to scan for any missing parts in a completed car coming off of the assembly line. This helped them guarantee a safe and quality car. They have also implemented Voice-over-IP or VoIP to reduce the cost of having a meeting between the branches. Business Process Re-engineering is a successful business process. It should not be ignored and neither should it be feared. If implemented in the proper way, it can save businesses millions and therefore giving the business a competitive edge without sacrificing quality for price.
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