BUSINESS PROCESS CHANGE: Concepts, Methods and Technologies By Varun Grover William J. Kettinger Center for Information Management and Technology Research College of Business Administration University of South Carolina IDEA GROUP PUBLISHING Harrisburg, USA • London, UK Senior Editor: Mehdi Khosrowpour Managing Editor: Jan Travers Printed at: Rose Printing Published in the United States of America by Idea Group Publishing Olde Liberty Square 4811 Jonestown Road, Suite 230 Harrisburg, PA 17109 Tel: 717-541-9150 Fax: 717-541-9159 and in the United Kingdom by Idea Group Publishing 3 Henrietta Street Covent Garden London WC2E 8LU Tel: 071-240 0856 Fax: 071-379 0609 Copyright © 1998 by Idea Group Publishing. All rights reserved. No part of this book may be reproduced in any form or by any means, electronic or mechanical, including photocopying, without written permission from the publisher. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional person should be sought. From A Declaration of Principles jointly adopted by a committee of the American Bar Association and a committee of publishers. Printed in the United States of America Library of Congress Cataloging-in-Publication Data Grover, Varun, 1959- Business process change: reengineering concepts, methods, and technologies / Varun Grover, William J. Kettinger. p. 704 cm. Includes bibliographical references and index ISBN 1-878289-29-2 : $84.95 1. Organizational change--Management. 2. Information technology--Manage- ment. 3. Strategic planning. I. Kettinger, William J. II. Title. HD58.8.G77 1995 658.4'063--dc20 95-37 CIP To Anita and Lynda who’ve settled for only incremental change in each of us, and, to Ankit, Arjun, Lindsey and David who have wonderfully begun the process of life-long change. BUSINESS PROCESS CHANGE ...a business process is a set of logically related tasks that use the resources of an organization to achieve a defined business outcome. Business Process Reengineering (BPR), Process Improvement, Busi- ness Transformation, Process Innovation and Business Process Rede- sign are terms frequently used interchangeably to represent the phe- nomenon of “Business Process Change.” Popular competing definitions of Business Process Change propose that it is: “the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance” “the analysis and design of team-based work flows and processes within and between organizations” “a methodological process that uses information technology to radically overhaul business process and thereby attain major business goals” “the reconfiguration of the business using IT as a central lever’ “the overhauling of business processes and organization structures that limit the competitiveness effectiveness and efficiency of the organi- zation” “the design of a company’s core processes to yield breakthrough levels of improvement, laying the basis for continuous improvement” “a strategy driven organizational initiative to (re)design business pro- cesses to achieve competitive breakthroughs in performance; differing in scope from process improvement to radical new process design, contingent upon the degree of socio-technical change required” This phenomenon is typically known to: involve CROSS FUNCTIONAL CORE PROCESSES but many improvement initiatives within narrower functional areas have also proved successful. focus on RADICAL/ONE TIME process changes but continuous improvement through stewardship of processes may be more beneficial in the long term. (iv) This phenomenon is typically known to: takes a CLEAN SLATE approach but most process change methodologies advocate documentation and analysis of existing “as is” processes and many firms are unwilling to commit resources for clean slate “revolutionary” implementation. be STRATEGY LED with initiatives from senior management but some bottom-up process change initiatives, with strong inputs from line workers and middle mangers, have proven successful. strive for BREAKTHROUGH PERFORMANCE GAINS but benchmarking and measurement of these gains can prove elusive and in many cases moderate gains more consistent with organiza- tional culture and orientation define success. be INFORMATION TECHNOLOGY ENABLED but numerous organizational innovations involving people, jobs, skills and structures can also facilitate new process oriented behaviors. be CUSTOMER DRIVEN with value defined as satisfaction but some scholars and practitioners advocate a longer-term and more strategic perspective to overcome the possible myopia of immediate customer demands in order to discover new ways to benefit future as well as present stakeholders. enhance individual capacities through EMPOWERMENT AND TEAMS but many process change projects are defended based on cost objectives achieved through downsizing and outsourcing with few opportuni- ties for retraining, team work or reallocation of decision rights. adapt a number of METHODS touted by armies of consultants but few standardized and structured approaches exist. (v) This phenomenon is typically known to: minimize redundancy, maximize concurrency toward a VIRTUAL SYSTEM but many successful process change efforts have benefited from simple efficiency improvements without fully exploiting or optimizing the best utilization of a virtual enterprise’s resources and knowledge. be run by OUTSIDERS such as consultants but the lack of concern for maintaining new business processes once reengineered has caused process management responsibilities to shift toward internal managers closer to the processes and more vested in the business. Thus, the (r)evolution of reengineering, the requirement to sustain and integrate process change, the need to reconcile alternative process improvement and management ap- proaches, and the recognition of organizational constraints to implementation, all serve to broaden the concept of BUSINESS PROCESS CHANGE, recognizing the need for the radical, the incremental, the continuous and the contin- gent. (vi) FOREWORD This book was conceived during a period of tumultuous change in the global business environment. Corporations were undergoing massive restructuring. Global competition, sluggish economies and the potential offered by emerging technologies were pushing firms to fundamentally rethink their business processes. Prominent consultants seeking to provide solutions to these problems prescribed Business Process Reengineering (BPR) as a means to restructure aging bureaucratized processes in an attempt to achieve the strategic objectives of increased efficiency, reduced costs, improved quality, and greater customer satisfaction. These consultants typically repackaged existing change theories and tech- niques of organizational structure, technology, operations, quality, and human resources in a new and exciting synthesis directed at dramatic improvements in business performance. BPR soon became the rage! Endless magazine articles heralded claims or tremendous payoffs resulting from process change. The popularity of BPR was in part fueled by claims of high pay-offs from early BPR projects. For example, Ford Motor Co. and AT&T reported major increases in productivity and decreases in staff after process reengineering and DEC was able to consolidate 55 accounting groups into five. Kodak reengineered its 1,500-employee black and white film operations by focusing on customer satisfaction and cut costs 15% below budget; cut response time in half; and dramatically reduced defects. Other early reengineering success stories include: Hallmark’s product development process, Bell Atlantic’s system billing process, an similar examples at GE, IBM’s Credit Corp., Capitol Holdings, Taco Bell, Wal-Mart, CIGNA RE, XEROX and Banc One. Ironically, while much has been discussed about BPR, most companies are still searching for theories and methods to better manage business process change. Academics are also now beginning to recognize the need to study this phenomenon, but precious little has been published. Basic questions lack consistent answers: • What does process change entail? • What are key enablers of process change? • Is there a process change methodology? • What techniques and tools have been found to successfully model and redesign business processes? • What is the role of information technology in this change? • What is the role of Information Systems personnel in changing business processes? • What is the role of people empowerment and team-based manage- (vii) ment in process change? • How do we best plan, organize and control process change efforts? • Under what conditions will BPR be most effective? Answers to these questions are not easy, nor direct. Pondering these same questions from our “steamy southern” vantage point in the Summer of 1993, we recognized there was little impartial and scholarly analysis of this compelling management trend. A book idea was born! But where should we look for quality contributions on this topic? Managers from firms that had actually undergone BPR? —These seasoned process “changees” certainly could provide important hands-on insights. But cursory descriptions of their experiences had been covered by the popular press. The time was right for moving beyond