What is business process change?

Organizations undertake process change initiatives for a variety of reasons. What do you think some of these reasons are? Briefly describe one or two of them.

In their article, Davenport and Short define business processes as “a set of logically-related tasks performed to achieve a defined business outcome.” Hammer and Champy define business process as “a collection of activities that takes one or more kinds of input and creates an output that is of value to the customer.”   

According to Hammer and Champy, there are three situations in which a company would engage in business process change;

• The company is in deep trouble, its costs are much higher that the competition’s, it’s product quality is lower, or it’s customer service is poor.  It must change radically or die.
• The company is not yet in trouble, but has the foresight to see trouble coming – new competitors, changing customer requirements or characteristics, an altered regulatory or economic environment, but change is inevitable.
• The company is in peak condition and has no present or approaching difficulties, but uses the opportunity to further its lead and to raise the bar even higher, solidifying its position of leadership.

They colorfully describe these cases as follows: “Companies in the first category are desperate; they have hit the wall and they are lying injured on the ground.  Companies in the second category are cruising along at high speed, but see something rushing toward them in their headlamps.  Could it be a wall?  Companies in the third category are out for a drive on a clear afternoon, with no obstacles in sight.  What a splendid time, they decide, to stop and build a wall for the other guys.” (p 37-38).

So what drives organizations to engage in business process change initiatives?  Harmon posed the following answer:

“In economically bad times, when money is tight, companies seek to make their processes more efficient.  In economically good times, when money is more available, companies seek to expand, to ramp up production and to enter new markets.  They improve processes to offer better products and services in hopes of attracting new customers or taking customers away from competitors.” (p 20).

Pearlson and Saunders distinguish between to two types of business process change, incremental and radical.  “Some examples of situations requiring radical change are when the company is in trouble, when it imminently faces a major change in the operating environment, or when it must change significantly to outpace its competition.” But Hammer rejects the notion of incremental change as not a reengineering or radical redesign of business processes, per se, and therefore not business process change.

“Unless we change these [outmoded] rules, we are merely rearranging the deckchairs on the Titanic. We cannot achieve breakthroughs in performance by cutting fat or automating existing processes. Rather, we must challenge old assumptions and shed the old rules that made the business under perform in the first place.”  Hammer referred to “quantum leaps in performance” in his 1990 Harvard Business Review article.

Pearlson and Saunders also point to the radical aspects of BPC, and highlight some of the key characteristics that they think impel organizations to engage in this radical form of change:

• ·         The need for major change in a short amount of time
• ·         Thinking from a cross-functional process perspective
• ·         Challenging old assumptions
• ·         Networked (cross-functional) organizing
• ·         Empowerment of individuals in the process
• ·         Measurement of success via metrics tied to business goals

Vacecich and Schneider note that “information systems can be used to gain and sustain competitive advantage by supporting and/or streamlining activities along the value chain” and stress the need to “integrate business activities across departmental boundaries.”  They point out that “competitive advantage can be accomplished here by integrating multiple business processes in ways that enable a firm to meet a wide range of unique customer needs. … Information systems allow the company and its suppliers to satisfy the needs of customers efficiently since changes can be identified and managed immediately, creating a competitive advantage for companies that can respond quickly.” (292).

But they also indicate that the essential element underlying business process change is its radical nature.  “BPM [business process management] is similar to quality improvement approaches such as total quality management and continuous process improvement in that they are intended to be cross-functional approaches to improve an organization. BPM differs from these quality improvement approaches, however, in one fundamental way. These quality improvement approaches tend to focus on incremental change and gradual improvement of processes, while the intention behind BPM is radical redesign and drastic improvement of processes.” (297).

So while change is the ultimate driver; change in the market, the overall environment or economy, or change brought about by new competitors, new products and especially new technologies; what prompts companies to engage specifically in business process change initiatives, is a desire to achieve “quantum leaps” in performance by adopting a process perspective and avoiding the incremental improvements attained in the past by focusing on specific functional silos, rather than the end-to-end processes that provide value to the customer.  Recognizing that the new technological possibilities can be a source of dramatic improvement, some companies embrace ERP, CRM or SCM in the hopes of realizing performance improvements, but without first aligning the business activity to the technology, this approach often leads to disappointment. 

WORKS CITED

Thomas H. Davenport & James Short, “The New Industrial Engineering: Information Technology and Business Process Redesign,” Center for Information Systems Research, Massachusetts Institute of Technology, Sloan School of Management (June 1990), 4.  

Michael Hammer, “Reengineering Work: Don’t Automate, Obliterate,” Harvard Business Review (July–August 1990), 4.

Hammer, M. & Champy J. (2003). Reengineering the Corporation: A Manifesto for Business Revolution.  New York, NY: HarperCollins Business Essentials.

Harmon, P. (2007). Business Process Change: A Guide for Business Managers and BPM and Six Sigma Professionals. Burlington, MA 01803: Morgan Kauffman Publishers.

Pearlson, K., & Saunders, C. (2009). Managing and Using Information Systems: A Strategic Approach. Hoboken, New Jersey: John Wiley & Sons, Inc.

Valacich, J. & Schneider, C. (2012). Information Systems Today, Managing in the Digital World. Upper Saddle River, New Jersey: Prentice Hall.