When talking about business process reengineering, it reminds me of an employee training program that we took part in a few years ago. The trainer asked us to imagine that we are on board the Titanic and to rethink the rescue process in a way that we can rescue everyone. Once we shared the solutions, we realised that everyone could survive the tragedy if the decision-makers on board try to put people on floating objects rather than trying to put them on lifeboats. Later we learned that this is actually a study done by Harvard Business Review that highlighted the psychological phenomena called "Functional Fixedness". It's the psychology behind humans looking at things to see only it's intended use. This tragic incident resulted in redesign of cruise liner safety protocols, by ensuring that there were sufficient safety equipment and accessories for all passengers. In turn, the quality of the service improved for passengers. This is similar to what happens in business process reengineering. Let's try to understand it with some GCPs from various industries.
Before diving in, we have to understand what a process is and the difference between business process management (BPM) and business process reengineering (BPR).
Processes are everywhere and it consists of
If you consider a business process, it consists of employees, business activities, workflows, systems and technology, roles and relationships, rules and regulations. When such a process is practised for some time, it becomes a part of the organizational culture. And when the organization expands, all of its processes become more complicated. When a process is complicated,
This results in management having to assign people to make these processes more efficient and effective.
BPM is a methodology. It tries to formalize and improve the existing business processes to be more efficient. There are various approaches like Lean, Kaizen, 6 Sigmas, that managers use in BPM. They even replace the elements of the process like employees for better performance but they don't consider the process as a whole. Since the process is part of the organizational culture, eliminating or replacing the entire process is not normal.
In 1990, MIT professor in computer science, Michael Hammer published an article on Howard Business Review called " Re-engineering Work: Don't Automate, Obliterate”. In it he highlighted that most of the work done does not add any value to customers. Such work should be removed rather than trying to accelerate them through automation. According to Michael Hammer, BPR is a radical approach to reconstruct or replace an entire business process to achieve fundamental business outcomes such as cost reduction, quality improvement and increase in quantity. It considers processes as a whole and even eliminates them when necessary. Rather than an everyday change to elements of a processor, BPR considers replacing it entirely with:
In the same year (1990), American Academic, Thomas H Davenport (Author of famous books in the IT industry like Mission Critical, Thinking for a living, Competing on Analytics, Big Data @ Work, The Attention Economy), published an article called " Information Technology and Business Process Redesign". In it, he talked about a 5 step process that became the model that we practice for BPR in today's context.
These steps are:
Now we have an understanding of what steps to follow and how important the role of IT in process reengineering. Let's look at some success and failure stories to understand the applications of BPR.
Like any telecommunication provider, T-Mobile was trying to offer the best customer care service and realized that it's not how polite you address your customers, it's how fast you solve their problems. So they set an objective to improve their customer care service with 2 KPIs
T-mobile identified the key drawbacks that make their customer care process slower. They had several departments within the customer care unit and a customer had to talk to at least two operators in order to solve a problem. Most layers of the unit don't have the power to make decisions so they had to talk to management before a problem was solved. If a customer had multiple issues they had to go through various divisions of the customer care unit by repeating themselves again and again. Above all, average first response time was considerably higher.
T-Mobile came up with few drastic changes to their process. They introduced automated customer portals so that the general queries will be handled fast and through the portal and only the unique or critical issues have to be addressed by customer care representatives. They then removed divisions from their customer care unit and introduced a new concept called TEX model (Team of Experts). They replaced their customer care unit with 47 trained employees that had enough knowledge to solve any inquiry. They passed decision making power to this team of experts and as a result they were able to achieve high levels of customer satisfaction through quicker response and handling times.
This is the most known case study when it comes to BPR. In 1980, Ford was focusing on cost reduction and during a competitor analysis they figured that they have 500 employees in the accounts payable division and their Japanese competitors handled that entire process with 5 employees. Even though Mazda was comparatively small in size, Ford knew they needed to redesign the payable process. In the payables department, there were 14 steps for a payment to be completed with many documents to be matched. Ford came up with a computer system and an integrated database and they reduced the process into just 3 steps. By doing so, they managed to overachieve their objectives. Their initial objective was to reduce the cost by 20% but they ended up reducing employees headcount in the accounts payable department by 75%.
Levi Strauss & Co had a successful restructure in their organizational culture in the mid 90s. By doing so they became the leader in the apparel industry by expanding their global footprint to 100+ countries. But in 2008 they experienced an utter failure. In 2008, even with the help of Deloitte consulting, they implemented a SAP ERP system. The third party system integrators didn't have the total understanding of the Internal controls and they completed the project with some errors. Those errors dismantled the order taking process of Levi Strauss & Co across the world and they had to shut down the process for a whole week. This process reengineering failure resulted in 98% decline of their net profit compared to the same quarter of 2007. After this process failure, some reported this relationship between the software vendor, customer and the third party implementation service provider as the devil's triangle or the Bermuda triangle of system implementation.
As you can understand, BPR is a risk worth taking to survive the modern day competition and it directly impacts the organization's vision. We should give priority to the role of IT in the reengineering process and have to make sure those IT solutions are scalable and customisable according to the future market demands. Process mining, prototyping and simulations are the key to implement a new process successfully.
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