Business Processes and Strategy

Overview Intro - Business Processes Concept in Sound CG

Organisations as Systems

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OVERVIEW

- Paul Harmon
- Steve Skidmore

- Concept of bis process change – improve bis processes – more efficient and effective
- Changes driven by new technologies – exploit new technologies emerging

- Harmon process-strategy matrix

- Concept of business process commoditization – business process outsourcing possible

- Process redesign patterns

1. Business process re-engineering
2. Value-added analysis RAGS
3. Gaps and disconnects
4. Simplification
- Identify process redesign options – evaluate feasibility of each option

- Software solutions
- Establishment of info system (IS) requirements
- Pros and cons of generic software solution
- Processes for selecting and implementing most appropriate software package

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INTRO – BUSINESS PROCESSES

- Business process change

- How managers analyse – redesign – improve business processes
- Changes driven by new technologies - exploit new technologies emerging Eg internet ;
Driven by managerial concerns for improved efficiency and productivity
- search for better ways of doing things

- Business process redesign – create processes that link groups of companies together in processes that span
companiES
- single seamless process – seamless, uninterrupted flow of info and pdt btw dozen suppliers, manufacturing
sites and distributors (complex supply chain)
Eg Henry Ford – Ford Motor Company – moving production line

ORGANISATIONS AS SYSTEMS

- traditionally – reductionist approach – reduce/breakdown orgz to components

- focused on own activities without much thought to the overall process – departmentalism

- holistic approach = systems perspective

- everything is connected to everything else
- stress linkages and relationships and information flows
- look at big picture – work together as one process to achieve organizational goals
- Eg Porter’s value chain – concept – single value chain – integrate all activities – no boundaries ;
Porter’s value network

- Business process – should cut across traditional depts to combine activities into a
single seamless process flow (horizontal approach)

- Business process – combination of many inter-related activities – breakdown into tasks

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BUSINESS PROCESS RE-ENGINEERING [BPR] not imp – not examiner fav – mayb examined for criticisms

- Davenport and Hammer

- Insisted companies think in terms of comprehensive processes – improve whole process vs sub process
- Define all major processes – focus on processes offered most return on improvement efforts
- Designed from ground up (from scratch) – take advantage of new IT systems

- Good news – focused on everything involved in a process – significantly improve overall process
- Bad news – forced to tackle very large re-design efforts

- Definition
1. Fundamental rethinking – start from zero, clean sheet ; no assumptions
 BPR assumes nothing
2. Radical redesign – extreme, massive change
3. Dramatic improvements – 1000%
 Social implications, people feel insecure, difficulties

- Process – a series of inter-realted activities – should be integrated – vs specialization created depts. – each
tried to maximize own efficiency at the expense of the whole
- Solution
1. Processes conceptualized as complete, comprehensive entities
2. Use IT - integrate comprehensive processes

- Criticisms
CDEF

1. Established processes often have valuable internal control systems – when process re-engineered –
critical control features such as segregation of duties and mgnt supervision (to cut cost) mayb be
removed from the process
2. Significant disruptive changes – affect staff – people fear, anxiety
3. Emphasizes on efficiency improvements – neglect effectiveness – by reducing number of managers and
employees – reduce innovation and creativity – Hamel and Prahalad call this process as ‘hollowing out’
– taking out a lot of knowledge (brains)
4. Many proposed changes may not be technically and operationally feasible

- Alternatives
 Business process improvement
 Business process re-design

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MODERN DAY TERMINOLOGY IRR

- Paul Harmon
1. Process improvement
 Existing process stable and small
 Incremental improvements to existing processes – not dramatic change – small and
step-by-step change
 Problem-solving approach – look at existing process – identify problems

2. Process re-engineering
 Similar to BPR – not recommended
 Very large process – seeks to re-design process in a comprehensive manner
 Reconceptualising – start from zero

3. Process re-design
 Intermediate scale of operation
 Medium-sized existing processes – require extensive improvement or change
 Not to solve problem – existing process work in fine – just to improve – fine tune – make it
perfect – more efficient and effective

- ICT – info and communications technology plays as an important enabler (‘means’) in all the above three
change efforts

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 J’08 Q2(a)
PROCESS-STRATEGY MATRIX 
D’09 Q3(b)

- Paul Harmon
- Analyses processes
 Complexity
 Strategic importance (value they add)
- identify processes outsourced or retained in house?

- Vertical axis - degree of process complexity and dynamics

 Base – simple processes – programmable, automated – machine-oriented processes – static, routine
 Top – complex processes – may require negotiation, discussion and complex design – complex and
dynamic – process keep change quite often – cannot be programmed – needs human intervention,
judgment, intuition, and XP etc – people oriented – very difficult to automate

- Horizontal axis - degree of strategic importance of the process

 Left – low value processes – non-core process – not a source of competitive advantage –
can be outsourced
 Right – high value processes – crucial for competitive success – add significant value –
core processes – major source of competitive adv – should retain in-house

- Harmon categorizes processes into four quadrants – suggest how processes must be tackled
(solution options)

1. Low strategic importance, Low process complexity and dynamics

 Straightforward processes
 Static
 Commodity processes – common
 Add very little value
 Automated – undertake efficiently within orgz OR outsourcing – no harm
 Software package solutions – std packages
 Eg payroll – very routine – low importance

2. Low strategic importance, High process complexity and dynamics

 Complex processes – hard to automate
 Add very little value
 Not core
 Outsource

3. High strategic importance, Low process complexity and dynamics

 Straightforward
 Static
 Valuable - core competence lie
 Automated – gain efficiency - reduce cost – improve quality
 Eg manufacturing co – production

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4. High strategic importance, High process complexity and dynamics
 Complex processes – very difficult to automate
 Valuable – core
 Invest in technologies (not automate) – to support individual undertaking these processes
 Eg new pdt design (CAD) ; deals with other companies (negotiations, bargains)
 Focus of major re-design initiatives – improve business process – through improvement of people
undertaking these processes (eg training)

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PROCESS RE-DESIGN METHODOLOGY unlikely tested -  phase 2 & 3

- Paul Harmon
- Much in common with project mgnt techniques (Chap 11)

- Organising the project team (Harmon)

 Executive committee/B.O.D
 Strategic lvl mgrs
 Call for process redesign projects

 Business/Process architecture committee (BAC) J’08

 Permanent committee
 Senior mgnt lvl
 Continuously monitor strategic business processes – improve/redesign
 Looks at all processes
 Responsible for orgz’s responses to perceived O & T
 Specific responsibility – effectiveness of overall business processes
 Executive committee set overall goals and strategies – delegate decisions
abt process development to BAC

 Process Manager
 Remove the boundaries across functions
 Process sponsor for the project Chap 11
 Role – overall decision making and championing the project at the highest lvl – does not
undertake detailed redesign work

 Project Facilitator
 Act as project manager
 Consultant – facilitate project redesign
 Remains neutral – not committed to any functions or dept

 Process re-design team

 Process re-design steering team

 Temporary – after project done – desolved
 Guide the project team into right direction – 1 design project at a time – responsible for only
1 process)
 2 main functions
1) Approving the work of redesign team
2) Ensure managers and staff affected by the redesign support changes and will implement
them

- 5 phases
Phase 1 : Planning
Phase 2 : Analysis 
Phase 3 : Redesign 
Phase 4 : Resource development
Phase 5 : Transition
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Phase 1 : Planning

 BAC/ project sponsor/ facilitator/ steering committee produce

Project Initiation Document (PID) Chap 11 – define the scope of work
 Project manager/facilitator produce and obtain agreement for a detailed project plan Chap 11
at the executive committee lvl

Exam : analyse the Swimlane diagram J’09 Q1

Phase 2 : Analysing the existing process

 By drawing out the process

 Analysis does not take place if designing completely new process / reengineering
 Full documentation of existing processes – involves using process diagrams – swimlane diagrams
 ‘IS’ process diagrams – show existing process as it is
 Known problems with the system are noted – remove/eliminate ; strengths – retain

Phase 3 : Redesign / Designing the new process Exam : narrative form – do not redraw a new swimlane diagram

 Get rid of weaknesses/problems

of existing processes
 To create a design for a new or improved process
 Once u/stand what is currently being done (thru IS processes) – generate alternative and evaluate
pros and cons of each options – COULD diagrams – potential solutions, multiple options
 Choose the best alternative – SHOULD process diagram
 Other important aspects
1) Supporting mgnt roles and responsibilities and performance measures need to be designed
2) Streamline reporting responsibilities – resulting in a new organizational structure
3) Run simulations – prepare cost estimates on alternative COULD new designs – require the use of
software tools
4) New design – fully documented
 Final output – approval from senior mgnt

Phase 4 : Resource development

 Making arrangement for all resources – people, IT etc

 Project sponsor – role – coordinate provision of resources needed
 New process more likely to be effective – staff and resources committed to it are managed by a
process mgr rather than by a group of separate functional mgrs – manage whole process without
being constrained by departmental or functional boundaries

Phase 5 : Transition

 Implementation – action part – make the change – extensive change – people affected
 Failed – resistance from senior mgrs and employees resist using new procedures / new software systems
 Success transition depends on successful change management – address social impact of the change

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MEASURING AND MANAGING REDESIGNED PROCESSES

- Good process redesign accompanied by a good measurement and management plan is much more likely to
be implemented and be successful
- In reality, one round of process redesign improves the process, but leaves some problems that need to be
resolved
- Establish process measures – managers continuously check these measures – take actions as and when
deviations occur – process improvement

>>> after implemented the new process – measure – do not take it for granted that it’ll meet the objective – if
only some obj not achieved – simple change – make further change – improvement – X redesign/re-engineer

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