This chapter looks at one way information systems can bring competitive advantage through their effect on business processes. As you read, think about the previous chapter on competitive advantage. How are the two concepts related?
Business Process Re-engineering
As organizations look to manage their processes to gain a competitive advantage, it is also important to understand that existing ways of doing things may not be the most effective or efficient. A process developed in the 1950s is not going to be better just because it is now supported by technology.
In 1990 Michael Hammer published an article in the Harvard Business Review entitled "Reengineering Work: Don't Automate, Obliterate". This article suggested that simply automating a bad process does not make it better. Instead, companies should "blow up" their existing processes and develop new processes that take advantage of the new technologies and concepts. He states in the introduction to the article:
Many of our job designs, work flows, control mechanisms, and organizational structures came of age in a different competitive environment and before the advent of the computer. They are geared towards greater efficiency and control. Yet the watchwords of the new decade are innovation and speed, service, and quality.
It is time to stop paving the cow paths. Instead of embedding outdated processes in silicon and software, we should obliterate them and start over. We should "re-engineer" our businesses: use the power of modern information technology to radically redesign our business processes in order to achieve dramatic improvements in their performance.
Business Process Re-engineering (BPR) is not just taking an existing process and automating it. BPR is fully understanding the goals of a process and then dramatically redesigning it from the ground up to achieve dramatic improvements in productivity and quality. But this is easier said than done. Most people think in terms of how to do small, local improvements to a process. Complete redesign requires thinking on a larger scale. Hammer provides some guidelines for how to go about doing business process re-engineering:
- Organize around outcomes, not tasks. This simply means design the process so that, if possible, one person performs all the steps. Instead of passing the task on to numerous people, one person does the entire process, resulting in greater speed and customer responsiveness.
- Have those who use the outcomes of the process perform the process. With the use of information technology many simple tasks are now automated so the person who needs the outcome should be empowered to perform it. Hammer provides the following example. Instead of having every department in the company use a purchasing department to order supplies, have the supplies ordered directly by those who need the supplies using an information system.
- Merge information processing work into the real work that produces the information. When one part of the company creates information, such as sales information or payment information, it should be processed by that same department. There is no need for one part of the company to process information created in another part of the company.
- Treat geographically dispersed resources as though they were centralized. With the communications technologies available today, it becomes easier than ever to focus on physical location. A multinational organization does not need separate support departments (such as IT, purchasing, etc.) for each location anymore.
- Link parallel activities instead of integrating their results. Departments that work in parallel should be sharing data and communicating with each other during a process instead of waiting until each group is done and then comparing notes. The outdated concept of only linking outcomes results in re-work, increased costs, and delays.
- Put the decision points where the work is performed, and build controls into the process. The people who do the work should have decision making authority and the process itself should have built-in controls using information technology. Today's workforce is more educated and knowledgeable than in the past so providing workers with information technology can result in the employees controlling their processes.
- Capture information at the source. Requiring information to be entered more than once causes delays and errors. With information technology, an organization can capture it once and then make it available whenever needed.
These principles may seem like common sense today, but in 1990 they took the business world by storm. Hammer gives example after example of how organizations improved their business processes by many orders of magnitude without adding any new employees, simply by changing how they did things.
Unfortunately, business process re-engineering got a bad name in many organizations. This was because it was used as an excuse for cost cutting that really had nothing to do with BPR. For example, many companies simply used it as a reason for laying off part of their workforce. However, today many of the principles of BPR have been integrated into businesses and are considered part of good business-process management.