Title: IT As a Business Process Enabler
1IT As a Business Process Enabler
2Reengineering/RedesignA Clean Sheet of Paper
The fundamental rethinking and radical redesign
of business processes to achieve dramatic
improvements in critical contemporary measures of
performance such as cost, quality, service and
speed.
Reengineering the Corporation, Hammer and Champy,
Harper Business (1993)
3Classic Business Reengineering Principles (BPR)
IT is a critical enabler
- Organize around outcomes, not tasks
- Have output users do the process
- Treat geographically dispersed resources as
though they were local - Link parallel activities instead of trying to
integrate separate outputs - Put decision points where the work is done and
build control into the process - Capture information once, and at the source
4BPR What happened?
- You should have read The Fad that Forgot People
for this week - Hyperlink on schedule on course web
- Well talk a little more about BPR
- The good stuff and the bad stuff
- Good lesson about business fads
5The Fad That Forgot People
Reengineering didnt start out as a code word for
mindless bloodshed. It wasnt supposed to be the
last gasp of Industrial Age management. I know
because I was there from the beginning. I was one
of the creators.
The Fad That Forgot People, Davenport, T.H., Fast
Company, November, 1995.
6BPR What happened?
- Started out as real people with real problems
- Ford Motor Co., Mutual Benefit Life, HP
- Synthesis of 3 concepts
- Information Technology
- Business processes
- Clean sheet of paper approach
- While companies did stuff, academics and
consultants started to make models - Davenport, Hammer Champy wrote bible articles
and books
7The Feeding Frenzy
- Top managersbig-time consultantsIT vendors
- Early successes trumpted and coopted
- Projects labeled BPR to get support and funding
- People always looking for magic solutions
- Consultants packaged BPR services
- Big contracts
- Executives of buying companies needed to justify
spent - Layoffs quickest way to realize savings
- Had IT firms selling hardware, software, AND
reengineering consulting
8Reality Bytes
- Massive layoffs labeled reengineering
- Alienation of good employees
- Treated as interchangeable cogs in corporate
machine - 25 yr old newly minted MBAs making 80K as BPR
experts - Major project failures
- Consultants start repositioning for next wave
- And keep selling BPR to rest of the world for a
while
9The Good Stuff
- Focus on business processes
- IT only useful if it helps people do their work
- A Lesson The bigger the hype, the greater the
chances of failure - Techniques and tools of BPR can still be very
useful - focus on processes, modeling processes
- identification of value/non-value added
activities - clean sheet of paper mindset
10The Next Big Thing
- Remember the lessons of BPR
- Dont drop all your current approaches for the
handsome newcomer - Dont listen to the most charismatic advocates,
listen to the most reasoned advocates - Talk softly
- Carry a big ruler to measure real results
11Suppliers as Part of the Value ChainThe Pampers
Story
- WalMart and Procter Gamble
- Pampers bulky, low per space needed
- Original process
- WalMart maintained inventory at WalMart
distribution center - When stores low, filled from distn center
- When distribution center low, ordered from PG
12Suppliers as Part of the Value ChainThe Pampers
Story
- Inventory management a balancing act
- Costs
- Holding versus stock-out
- WM suggested PG should manage WMs distribution
center Pampers inventory - Daily stock movement from WM to PG
- PG told WM when and how much to order
- WM would approve and order would ship
- Over time, WM told PG to skip recommendation and
just ship
13Suppliers as Part of the Value ChainThe Pampers
Story
- Benefits to WalMart
- Less inventory on hand for PG and fewer
stock-outs - Freed up capital for other investments
- PG reduced inventory management costs
- Process so efficient WM sells Pampers before
theyve paid PG for them
14Suppliers as Part of the Value ChainThe Pampers
Story
- Benefits to PG
- PG becomes preferred supplier
- Improves demand management
- Consistent, predictable shipments to WM
- Simplifies accounts receivable process
15Adjusting the PriceYield Management
- A big deal in airlines, hotel industry
- Sell things at different prices to different
customers - Empty plane seats have 0 value after takeoff
- Segment market last minute vs. advance sale,
business, tourist, etc. - Dont want to
- Sell too many cheap seats to those who would
pay more - Have too few cheap seats and result in empty
seats
min
16Improving Product Availability
- Online banking, mutual fund management
- Electronically linked retail stores
- We have that size at our Ann Arbor store.
- Analysis of consumer buying patterns
- Mass customization
17Mass Customization
- Dell, and many other, computer manufacturers
- Hallmark a failure
- Personal web portals
18Providing Better Service
- Using data for
- Capacity planning - Staffing call centers, check
out lines, clinics - Customer satisfaction, feedback
- OTIS Elevator
- Centralized repair dispatching
- 24/7, trained operators, repair history database
- Wireless communication
- Remote monitoring, communication with trapped
passengers, traffic analysis and reporting
19IT Impact - Automational
Eliminating human labor from a process
Example Automatic Call Distributor (ACD) use in
call centers.
20IT Impact - Informational
Capture process information for purpose of
understanding
Example Point of sale systems, manufacturing
data, package tracking systems, material handling
systems, black box on airplanes
21IT Impact - Sequential
Changing process sequence or enabling parallelism
Example Computer Aided Design (CAD) tools and
shared databases allowed design of new Boeing
aircraft to proceed in parallel with real time
conflict checking between different component
designs.
22IT Impact - Tracking
Closely monitoring process status and objects
Example Control system for pneumatic tube
systems and elevators
23IT Impact - Analytical
Improving analysis of information and decision
making
- 1 million telephone calls received/week
- software to automatically ID caller and predict
reason for call - picks 1 of 50 call routing options
- pulls and passes along 24 data elements
- predicts possible customer purchase (customer did
NOT call to buy something)
Example Capital One credit card company
Fast Company - May 1999
24IT Impact - Geographical
Coordinating processes across distances
Example DiabetesWell (Fast Company 11/99)
- Physician created web based community for
diabetes patients - Subscribers (19.95/mo) get quarterly
assessments, nutrition counseling,
recommendations for medications - All test results stored in database
- If you get the right data, you can manage
diabetes. - Significant decrease in hospitalizations, heart
attacks
25IT Impact - Integrative
Coordination between tasks and processes
Example The patient Case Manager in a hospital
26IT Impact - Intellectual
Capturing and distributing intellectual assets
Example Ernst Youngs online portal,
knowledge management
- Hot topic
- Value of brainpower
- Free agent economy
- Labor shortage
- The knowledge worker
27IT Impact - Disintermediating
Eliminating intermediaries from a process
Example Online booking of airline tickets,
online stock transactions, ATM, online auctions
Self-scan, pay, bag process at Kroger