Business Process Reengineering
Monday, November 25, 2013
Stan runs a soft drinks company.
His
revenues, and his profits, have been steadily dropping for the
past year.
He studies his major cost centers, and he worries that he might have to "right size" the assembly line (in other words, lay
off workers) to reduce costs.
Currently, there are six stations that need human monitoring. The
assembly line runs OK, but Stan can purchase new technology to
remove the need for monitoring at three stations. This means that
he can reduce his workforce by nine people (three shifts a day).
So Stan buys the new equipment and, with regret,
lays off nine workers.
Now it's a year later, and Stan's profit margin is in even worse
shape. What happened? The technology that was supposed to lower
his costs hasn't helped profits at all! So he looks for other
cost-saving opportunities and ways to complete the work more
efficiently.
Do you think Stan is likely to solve his problem?
Maybe not. Why? Because he's looking for more efficient ways to do
the SAME things. This addresses only one side of the issue. The
other side involves determining if WHAT he's doing is actually
necessary, or done the right way.
If Stan had investigated different bottle designs, he could have
filled the bottles and had them ready for shipping in half the
time – and he would have delivered a bottle that his customers
actually preferred. If he had thought about how to redesign the
manufacturing process, instead of just how his production line
functioned, he would have discovered better ways to meet his
customers' needs – and he would have saved money.
A Different Kind of Solution
In 1990, Michael Hammer, a former MIT professor, published a
Harvard Business Review article that described this management
approach. It was called business process reengineering (BPR), and
it became very popular.
Hammer defined BPR as "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."
Thomas Davenport, of Ernst & Young,
published a similar paper in the Sloan Management Review the
same year as Hammer. And in 1993, Davenport wrote "Process
Innovation: Reengineering Work Through Information
Technology."
Soon after Hammer's article, management experts (for example,
Peter Drucker and Tom Peters) supported business transformation as
a way to achieve enormous improvements across a variety of
performance measures. Big consulting firms quickly
began to sell this new management strategy to their clients.
By the mid-1990s, corporate managers everywhere were talking about
BPR. Its customer focus was very appealing – many companies'
profits were suffering from increased global competition. And soon,
many people automatically connected BPR to downsizing, because
many businesses were looking for ways to use their resources more
efficiently.
What Makes BPR Unique?
The key difference between business process reengineering and
other business improvement strategies, like Total Quality
Management and Just In Time , is this: BPR = process innovation.
BPR is not about slow and steady improvement – it's about radical,
dramatic changes to the framework and culture of a business.
Rather than improving what's already there, BPR starts from the
beginning and builds an entirely new process.
Here are some key ways that continuous improvement differs from
the innovation of BPR:
Factor
Continuous Improvement Model
Innovation Model
Degree of change
Incremental, small steps
Radical, extreme
Starting point
Existing processes
Clean slate, starting from new
Frequency of change
Continuous (may be one-time)
One-time
Participation
Bottom up
Top down
Typical scope
Narrow, within functions
Broad, cross-functional
As you can see, BPR is radical in every way, and it caused massive
changes within many organizations. Typically, management starts
BPR because of a technological change that can offer significantly
different and more efficient ways of doing things. Information
technology changes aren't always necessary for BPR, however they
tend to come at the same time.
Note:
A business process is a set of
logical, linked activities that (1) can cross many
functional areas, (2) have a clear beginning and end, and
(3) end in the desired result for an internal or external
customer. Business processes can be things like
manufacturing, customer service, order fulfillment, or
developing a new product.
BPR focuses on how key business elements
are connected, and how they work with or against one
another, depending on the structure of relationships. For
the best results, the company's structure, people,
technology, strategy, and other resources have to work
together to meet organizational goals. Learn more about the
relationships between various organizational structures with
models like McKinsey's 7Ss , Leavitt's Diamond , and the Burke-Litwin Change Model .
The Basic BPR Methodology
The steps for complete business process reengineering are too
detailed for this article. Also, BPR's exact method is
significantly influenced by the specific organization and process
that's examined.
However, some key common elements of any BPR plan include the following:
Defining the project (limits and scope).
Determining the vision for the redesign.
Creating a plan or model for the redesign.
Completing a cost-benefit analysis.
Developing a detailed plan for implementation.
Establishing performance measures for evaluation.
BPR Today
Business process reengineering is still discussed today, but not
as often as it once was. This is because the extreme nature of BPR
initiatives can lead to many problems, and BPR has had some
negative results – massive layoffs, difficulty adjusting to
radical changes to corporate culture, and only mediocre success.
Most BPR projects have failed to produce the results expected
because of unrealistic expectations, inadequate resources, loss of
management commitment (because they took too long), and resistance
to change.
Softer, gentler approaches are now more popular. Instead of
dramatic changes to processes, you're more likely to see gradual
innovation through continuous improvement strategies.
Many executives have avoided the BPR approach for fear of causing
disruption and disorder in a company. This is unfortunate, because
BPR provides a great opportunity to take strong and definitive
action to turn a company around. And its fundamental message is
strong: Don't just look for ways to do the same things better,
because you may continue to do the "wrong" thing. Consider
focusing instead on doing different – and better – things as well
Key Points
Business process reengineering, business transformation, business
process innovation – these are all different names for the same
basic strategy: creating radical changes to business processes to
respond to customer needs, reduce costs, and do things more
efficiently. In the 1990s, many organizations tried this approach
to be more profitable in the face of expanding global competition.
Some companies got the method right and committed to the plan, and
they benefited greatly from new and improved business processes.
But some organizations didn't get it right, and they suffered
significantly, because BPR doesn't always consider the unique
nature of people, and the resistance and resentment created by
such massive change.
The strategy still lives. However, its planning and implementation
tend to be more gradual and less radical than the original idea.
Apply This to Your Life
If you think BPR might be right for your organization, here are a few questions to answer:
Is your company willing and able to endure the pain that BPR
can cause?
Is your top management team personally involved and committed
to completing the project? The costs of stopping the process in
the middle are high, so make sure you know what you're starting.
Are you prepared to lose staff who simply cannot handle the
change?
Tags:
Skills, Strategy Tools
His
revenues, and his profits, have been steadily dropping for the
past year.
He studies his major cost centers, and he worries that he might have to "right size" the assembly line (in other words, lay
off workers) to reduce costs.
Currently, there are six stations that need human monitoring. The
assembly line runs OK, but Stan can purchase new technology to
remove the need for monitoring at three stations. This means that
he can reduce his workforce by nine people (three shifts a day).
So Stan buys the new equipment and, with regret,
lays off nine workers.
Now it's a year later, and Stan's profit margin is in even worse
shape. What happened? The technology that was supposed to lower
his costs hasn't helped profits at all! So he looks for other
cost-saving opportunities and ways to complete the work more
efficiently.
Do you think Stan is likely to solve his problem?
Maybe not. Why? Because he's looking for more efficient ways to do
the SAME things. This addresses only one side of the issue. The
other side involves determining if WHAT he's doing is actually
necessary, or done the right way.
If Stan had investigated different bottle designs, he could have
filled the bottles and had them ready for shipping in half the
time – and he would have delivered a bottle that his customers
actually preferred. If he had thought about how to redesign the
manufacturing process, instead of just how his production line
functioned, he would have discovered better ways to meet his
customers' needs – and he would have saved money.
A Different Kind of Solution
In 1990, Michael Hammer, a former MIT professor, published a
Harvard Business Review article that described this management
approach. It was called business process reengineering (BPR), and
it became very popular.
Hammer defined BPR as "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."
Thomas Davenport, of Ernst & Young,
published a similar paper in the Sloan Management Review the
same year as Hammer. And in 1993, Davenport wrote "Process
Innovation: Reengineering Work Through Information
Technology."
Soon after Hammer's article, management experts (for example,
Peter Drucker and Tom Peters) supported business transformation as
a way to achieve enormous improvements across a variety of
performance measures. Big consulting firms quickly
began to sell this new management strategy to their clients.
By the mid-1990s, corporate managers everywhere were talking about
BPR. Its customer focus was very appealing – many companies'
profits were suffering from increased global competition. And soon,
many people automatically connected BPR to downsizing, because
many businesses were looking for ways to use their resources more
efficiently.
What Makes BPR Unique?
The key difference between business process reengineering and
other business improvement strategies, like Total Quality
Management and Just In Time , is this: BPR = process innovation.
BPR is not about slow and steady improvement – it's about radical,
dramatic changes to the framework and culture of a business.
Rather than improving what's already there, BPR starts from the
beginning and builds an entirely new process.
Here are some key ways that continuous improvement differs from
the innovation of BPR:
Factor
Continuous Improvement Model
Innovation Model
Degree of change
Incremental, small steps
Radical, extreme
Starting point
Existing processes
Clean slate, starting from new
Frequency of change
Continuous (may be one-time)
One-time
Participation
Bottom up
Top down
Typical scope
Narrow, within functions
Broad, cross-functional
As you can see, BPR is radical in every way, and it caused massive
changes within many organizations. Typically, management starts
BPR because of a technological change that can offer significantly
different and more efficient ways of doing things. Information
technology changes aren't always necessary for BPR, however they
tend to come at the same time.
Note:
A business process is a set of
logical, linked activities that (1) can cross many
functional areas, (2) have a clear beginning and end, and
(3) end in the desired result for an internal or external
customer. Business processes can be things like
manufacturing, customer service, order fulfillment, or
developing a new product.
BPR focuses on how key business elements
are connected, and how they work with or against one
another, depending on the structure of relationships. For
the best results, the company's structure, people,
technology, strategy, and other resources have to work
together to meet organizational goals. Learn more about the
relationships between various organizational structures with
models like McKinsey's 7Ss , Leavitt's Diamond , and the Burke-Litwin Change Model .
The Basic BPR Methodology
The steps for complete business process reengineering are too
detailed for this article. Also, BPR's exact method is
significantly influenced by the specific organization and process
that's examined.
However, some key common elements of any BPR plan include the following:
Defining the project (limits and scope).
Determining the vision for the redesign.
Creating a plan or model for the redesign.
Completing a cost-benefit analysis.
Developing a detailed plan for implementation.
Establishing performance measures for evaluation.
BPR Today
Business process reengineering is still discussed today, but not
as often as it once was. This is because the extreme nature of BPR
initiatives can lead to many problems, and BPR has had some
negative results – massive layoffs, difficulty adjusting to
radical changes to corporate culture, and only mediocre success.
Most BPR projects have failed to produce the results expected
because of unrealistic expectations, inadequate resources, loss of
management commitment (because they took too long), and resistance
to change.
Softer, gentler approaches are now more popular. Instead of
dramatic changes to processes, you're more likely to see gradual
innovation through continuous improvement strategies.
Many executives have avoided the BPR approach for fear of causing
disruption and disorder in a company. This is unfortunate, because
BPR provides a great opportunity to take strong and definitive
action to turn a company around. And its fundamental message is
strong: Don't just look for ways to do the same things better,
because you may continue to do the "wrong" thing. Consider
focusing instead on doing different – and better – things as well
Key Points
Business process reengineering, business transformation, business
process innovation – these are all different names for the same
basic strategy: creating radical changes to business processes to
respond to customer needs, reduce costs, and do things more
efficiently. In the 1990s, many organizations tried this approach
to be more profitable in the face of expanding global competition.
Some companies got the method right and committed to the plan, and
they benefited greatly from new and improved business processes.
But some organizations didn't get it right, and they suffered
significantly, because BPR doesn't always consider the unique
nature of people, and the resistance and resentment created by
such massive change.
The strategy still lives. However, its planning and implementation
tend to be more gradual and less radical than the original idea.
Apply This to Your Life
If you think BPR might be right for your organization, here are a few questions to answer:
Is your company willing and able to endure the pain that BPR
can cause?
Is your top management team personally involved and committed
to completing the project? The costs of stopping the process in
the middle are high, so make sure you know what you're starting.
Are you prepared to lose staff who simply cannot handle the
change?
