STRINF 1108

Journal of Strategic Information Systems 8 (1999) 125142 www.elsevier.com/locate/jsis

Drivers and tracers of business process changes

, A.P.J. Vepsa la inen J. Kallio*, T. Saarinen, S. Salo, M. Tinnila
Helsinki School of Economics, Runeberginkatu 14-16, FIN-00100 Helsinki, Finland Received 27 November 1996; revised paper accepted for publication by Professor R.D. Galliers 15 May 1999

Abstract Many companies have reported impressive results from their business process reengineering efforts. Based on the analysis of 32 Business Process Reengineering (BPR) projects it became obvious that there is huge diversity among the initiatives. Most of the projects studied were focused on streamlining current business processes, while only in few cases was the business radically redesigned. Internal inefciency most often resulted in traditional BPR projects, while changing customer and supplier needs led to diversied business processes. However, external and uncontrollable drivers, such as restructuring of industries, can be traced by changes in business and operations strategies. Based on the results, a framework showing efcient ways of implementing different types of BPR projects was constructed. The framework may help managers to analyze the consistency of the alternative strategies for BPR. 1999 Elsevier Science B.V. All rights reserved.
Keywords: Business processes; Redesign; Reengineering; Organizational development; Change management

1. Introduction Many successful business process reengineering (BPR) cases have been presented both in management and scientic journals (Hammer, 1990; Caron et al., 1994; Jarvenpaa and Tuomi, 1995). It has been repeatedly claimed that BPR has, on the one hand, resulted in dramatic improvements in performance, but on the other hand, there have also been many complete failures (Hammer, 1990; Bradley, 1994). However, systematic studies on the drivers of reengineering initiatives and reasons for success and failure have been scarce. Therefore we decided to conduct a survey of BPR experiences in Finland. There are many opportunities making process changes common and of great importance for Finnish companies. Relatively small size of companies, advanced IT infrastructure and high level of education should facilitate BPR. At the same time high labor costs, recession and consequently required cost savings as well as hard competition among countries in the
* Corresponding author. 0963-8687/99/$ - see front matter 1999 Elsevier Science B.V. All rights reserved. PII: S0963-868 7(99)00018-9

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European Union force companies to actively utilize possibilities offered by process reengineering. Expectations of nding signicant reengineering cases were high, but did we really discover them in the studied companies? Senior executives responsible for the companies information systems were approached to investigate BPR experiences as well as to get contact information on persons having been responsible for the implemented reengineering initiatives. Many of the companies have adopted BPR and have started to systemize their process redesign efforts. Information was collected from as many as 32 BPR projects, which were analyzed carefully. According to our ndings, projects have been successful more often than previously claimed. The major problems met in implementation are connected to change and project management, but were seldom vital to the success of the projects. One of the reasons for frequent successes may be that, opposed to our expectations, many of the studied cases were rather modest as BPR projects. The focus of the projects has obviously been mainly operational, and has created performance improvements on current working processes. However, the expected radical changes of the whole business or business networks were not discovered. We consider this strange when at the same time in Finland there have been many radical restructuring efforts and mergers in the forest sector as well as in the banking, insurance, retail and whole sales industries. In fact, because of the deep recession the whole society has been going through a transformation of previous structures. There are several possible explanations for our results. First, the large and radical changes occur due to external reasons or forces, and require industry-wide arrangements, that have not been realized in the form of single company projects. Instead the focus has been at the lower levels of BPR, when redesigning separate processes. Second, our investigation focused on systematic BPR efforts. Signicant changes are unlikely to emerge from such development efforts. Third, the companies in our sample were not in severe nancial crises that would have forced them to take all-or-nothing, high-risk projects. BPR has been used in many companies to strengthen the chosen strategy or to gain new insights of BPR as a possible management tool in the future. This paper is organized as follows. In Section 2, we will briey review some key frameworks for describing and understanding BPR and its different forms, as well as facets important for successful implementation of the efforts. In Section 3 we describe the research methodology and present our ndings from the empirical survey. In Section 4 we discuss the ndings and their implications. Based on these we developed a new framework for explaining the ndings and giving some advice for different types of BPR projects. The framework aids in identifying the drivers and tracers of business changes and understanding what kind of BPR efforts they are likely to result. It is also possible to understand effective ways of implementing different types of BPR efforts and to be able to manage the trade-offs between them. Finally in Section 5 we suggest some conclusions and directions for future research on business process reengineering.

2. Business process reengineering According to the CSC Index (1994) more than 70% of large American and European

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companies had adopted business process reengineering as a means to improve their operations. Similarly as many as 88% of large corporations in the USA were already using business processes reengineering or were about to start BPR projects. Reengineering has been utilized more often in manufacturing industries than in service industries, except in insurance and banking sectors. Frequent use of BPR is, at least partly, a result of several success stories that have shown even 70% savings in time and costs (Belmonte and Murray, 1993; Hammer, 1990). High potential benets have tempted companies to adopt reengineering, despite the high risk of failures. Some researchers have estimated the failure rate to be as high as 70% (Bradley, 1994). In the face of increasing costs, competivity demands, internal operational problems, and declining prots even the risk has seemed to be acceptable (CSC Index, 1994). 2.1. Business processes Davenport and Short (1990) have dened business process as a set of logically related tasks performed to achieve a dened business outcome. Reengineering has usually concentrated on competitive, customer facing operations. Most common examples of this type are order-delivery, marketing and sales processes. So far, there exist several classications of business processes (Davenport and Short, 1990; Earl, 1994; Edwards and Peppard, 1994; Rockart, 1988), which share, however, many similar characteristics. Earls (1994) classication summarizes the basic ideas classifying processes by their value chain target and process structuredness as follows: Core processes are central to basic business operations and directly related to serving the external customers. They are usually the primary activities of the value chain. Support processes frequently have internal customers and consist of the supporting activities of core processes. Usually they are the administrative, secondary activities of the value chain. Business network processes extend beyond the boundaries of the organization including also suppliers, customers and allies. Management processes are those by which the company plans, organizes and controls resources. Companies can nd potentially attractive projects for reengineering among all types of processes. However, usually greater benets but also higher risks are involved in reengineering core processes crucial to daily business operations or network processes where also other parties are involved. 2.2. Key aspects of BPR Several denitions of reengineering have been proposed in the literature. The most widely referred are probably Hammers (1990) and Davenports (1993) original works that started the whole BPR movement in the early 1990s. Despite the number of denitions in the literature they seem to have a shared understanding of the key elements of BPR , 1995). The following key characteristics are typical to (a review can be found in Tinnila BPR projects:

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Radical change: Reengineering literature advocates radical change as opposed to small incremental steps (see, e.g. Hammer, 1990; Venkatraman, 1991) BPR projects attempt to question and usually abandon, or even obliterate, old ways of operating and replace them with less hierarchical organizational structures and team-based work arrangements. This often leads to many simultaneous changes, not only in organizational structures, but also in individual tasks, required skills and responsibilities (Hall et al., 1993). Dramatic performance improvements: Organizations seeking to reengineer their operations should be bold enough not to be satised with modest improvement targets (Hammer, 1990). Instead of aiming at a small improvement in one performance measure they should set their sights on dramatic improvements in cycle times, production costs, quality of products or services and operational efciency simultaneously. High potential business benets: In addition to quantitatively measurable and explicit performance improvements, BPR often leads to additional benets creating opportunities for future success. These may include improved customer satisfaction, increased exibility and better information and control of both internal work processes and customer behavior (Morrow and Hazell, 1992; Ahire and Waller, 1994; Bradley, 1994). Process-based organizations: Reengineering literature also argues that organizations employing functional specialization and structures have too narrow perspectives and are not exible enough to succeed in the current turbulent business environment. Solutions to these problems is to arrange work cross-functionally along the natural ow of work resulting in organizations based on core business processes, shared information and objectives (Loewenthal, 1994). Customer orientation: The objectives of reengineering should be based on the needs of the customer, which can be internal or external to the company. Every step of the business process should be designed to concretely add value to the customer (Hammer, 1990). Information technology as an enabler: Information technology is considered be the most important enabler for reengineering. This role is based on its capability to make alternative operational solutions economically feasible (Davenport and Short, 1990; Hammer, 1990). Even though recently also other enablers of change have surfaced, the role of IT has been essential in most reported BPR cases (Davenport, 1993). Rapid pace of change: Probably the radical and dramatic nature of reengineering has also called for rapid changes. For example, Hammer and Champy (1993) claim that the changes should be implemented within a year. Stoddard and Jarvenpaa (1995) have, however, questioned whether this rapid pace of implementation can be achieved in practice. High risks: The high failure rate of reengineering projects indicates that considerable risks are also involved. For example, Grover et al. (1995) have identied several classes of reengineering related risks that need to be managed in order to succeed in BPR projects. It is often difcult to separate BPR initiatives from other types of business process change and development projects. The use of the term BPR does not change a continuous improvement project to a reengineering project. Contrarily, radical changes in rms can

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and are made without using any BPR concepts. The above list of typical characteristics of BPR projects can help to recognize the true nature of each development effort. 2.3. Scope and depth of BPR The scope of BPR projects can be measured by the number of involved organizational units (Hall et al., 1993). The focus of BPR in most studies has been on internal processes that seldom cross the function or company boundaries (Short and Venkatraman, 1992; Gilberto, 1993; Loewenthal, 1994). When organizational barriers are crossed this usually occurs between organizational sub-units or functions rather than company boundaries. Besides the scope, the amount of change is also measured in depth, i.e. how many areas the change affects simultaneously. One of the best classications of factors contributing to depth of reengineering-related change is presented by Hall et al. (1993). It covers roles and responsibilities, required skills and knowledge, organizational structures, shared values, measures and incentives and information systems. Additionally, signicant changes in management style or required resources may be good indicators of a deep and dramatic change in the processes as well. The scope and depth of intended change, or the level of transformation, is closely related to the target process and anticipated level of benets. Venkatraman (1994) has proposed a classication of different levels of BPR. Evolutionary levels of transformation, that include localized exploitation and internal integration, leverage change enablers either intra-functionally or intra-organizationally, but do not question or signicantly change the old course of action. Revolutionary levels of transformation, that include business process redesign, business network redesign and business scope redenition, incorporate also questioning and changing the current operations. Rationalization of intra- or interorganizational processes is limited to challenging and restructuring the existing operations without questioning the scope of corporate activities. In the deepest level of revolutionary transformation, the corporation re-examines its core capabilities and operations. By restructuring its activities the company eliminates the unnecessary and outsources the inefcient operations. According to Venkatraman (1994) the greater potential benets can be achieved only on the higher levels of transformation. 2.4. Implementation of BPR projects Reengineering literature emphasizes the design of new operations while the implementation is usually given much less attention. General advice for managing BPR projects can be found, for example, in Davenport and Short (1990), who decompose BPR efforts into ve major phases: develop business vision and business objectives, identify processes to be redesigned, understand and measure existing processes, identify IT levers and design and implement a prototype of a process. This approach is heavily design-oriented and gives little advice on how to implement the designed and prototyped process in the organization. There are also other similar decompositions but, very few of them have, so far, tackled the implementation issues. Many consultant companies have, however, their own set of tools, covering also implementation of BPR initiatives based on their experiences on carrying out other signicant development projects. The lack of widespread debate in implementation issues is surprising since many

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Table 1 Frequency of reengineering in Finland, Europe and USA (gures in percentage) Companys position in the use of BPR Have reengineering initiative(s) Are planning to start reengineering Have neither initiatives nor plans to start one Total
a

Finland a

Finland b

Europe b

USA c

41 14 45 100

68 22 10 100

75 15 10 100

69 16 15 100

Whole sample. Large companies (turnover more than US$ 500 million). c Source: CSC Index (1994) Report.
b

problems in reengineering projects seem to surface during this phase. Grover et al. (1995) have studied the risks of BPR and ended up with a classication of the most common risks met in practice. They are related to management support, technological competence, process delineation, project planning, change management and project management.

3. Empirical survey 3.1. Methodology In order to systematically study experiences in BPR as a management tool, we carried out a survey in Finland complemented by case studies and interviews among the managers responsible for BPR projects. Since the frequency of reengineering initiatives was unknown, we decided to approach companies by sending a three-page questionnaire to senior executives responsible for information systems at the corporate level. The questionnaire covered frequency of BPR and type of processes companies had identied or reengineered. In addition, we sought contact information on managers responsible for reengineering projects for our second, project-level survey. The questionnaire was mailed to 289 large and medium-sized companies that ranged in turnover between US$ 25 million and US$ 13 billion. After a reminder letter we received 49 valid responses, giving a response rate of 17%. An additional telephone survey was conducted of randomly selected 100 non-responding companies. These telephone calls did not uncover any signicant biases in previous responses. Yet the interviews extended the total of responses to 93 or 32%, which was considered acceptable for data analysis at the executive level. Of these 93 companies 38 had experiences of reengineering and thus became the target group for the project-level survey. A seven-page questionnaire was developed focusing on the drivers, scope, implementation and success of changes made to target processes. Based on contemporary BPR literature and the key aspects of reengineering we formed a prole of change effort that was also inquired. Initially we received only 11 valid responses. Since the project-level

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questionnaire was too complex to be used in telephone interviews, we decided to interview project managers in person to get more accurate answers. Additional cases were collected by students and researchers from companies that were known to have implemented BPR projects. After the mail survey and interviews we had gathered data concerning 25 BPR projects. At this point we wrote a preliminary report that was sent to all companies in our initial target group. At the same time we inquired further BPR experiences. This effort gave us additional seven projects resulting in a total of 32 projects that form the database used in this article. 3.2. Experiences of reengineering We asked the senior executives if their companies were involved in BPR, and if so, what type of processes they had identied and redesigned. The rst column of Table 1 presents the results of our whole sample. It indicates that Finnish companies have not adopted reengineering as frequently as their foreign counterparts. Approximately half of the companies in our sample have started or are planning to start a BPR project, as opposed to 59% in the UK (Grint and Willcocks, 1995) or even higher gures reported in third and fourth columns. One reason may be the relatively small size of companies in our sample, since even the largest ones are mediocre or small in international comparison. The size of company could, in fact, be one of the explaining factors, because the companies using BPR were signicantly larger as measured in turnover and personnel than companies that had not yet experiences in reengineering. Consequently we decided to examine only those companies that have annual revenue of at least US$ 500 million to match the criteria of CSC Index Report (1994). We found out that measured this way the frequency of reengineering in Finland is in fact quite similar to other countries. It is also worth noting that the gures may be somewhat over-estimated due to the way of counting the percentages from the respondents, instead of from the whole sample. When comparing companies by industry, we found out that the distribution of practitioners and non-practitioners was quite similar to the results of Grover et al. (1995). The exceptions were banking, nance and insurance industries, that were somewhat more active and manufacturing, particularly forest industry, that was, on the contrary, less active than in the USA. When we inquired reasons for not participating in our study, most of the reasons (44%) were related to lack of experience of BPR or inconvenient timing (22%). The questionnaires were, however, extremely well targeted since only 3% of respondents informed that reengineering is not their responsibility or is practiced at another organizational level. Even when the contact person was wrong, the respondents provided us new contact information on the more well versed person. 3.3. Experiences from BPR projects 3.3.1. Reasons for reengineering We asked, using an open question, the respondents to name the reasons for starting the project. In most cases they identied more than one reason. The answers were classied into the seven classes shown in Table 2.

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Table 2 Reasons for starting the BPR projects Reason for reengineering Changes in business or competitive environment Active pursuit of strategic benets Problem recognized in business process Opportunities offered by new technologies Financial condition of company Other reason(s) Trying out reengineering Number of answers 25 19 15 13 8 4 3 Percentage 78 59 47 41 25 12 9

Reengineering has originally been presented as a unique concept with great expectations that might also explain its popularity (Hammer and Champy, 1993). Our ndings do not support this view since less than 10% of the respondents answered, that trying out the BPR concepts and methods was one of the reasons for starting the project (as proposed by Grint and Willcocks, 1995). More cautious estimates see reengineering as an answer to turbulent business environment that enforces companies to take an initiative. This might well be true, since most of the companies reported changes in business or competitive environment (Grint, 1993; Talwar, 1993) as the main reason for a starting reengineering project. There is, however, a proactive undertone because companies seemed to pursue strategic benets rather than react to problems in business processes. The technology enabled nature of reengineering also gained some support as 41% of companies considered opportunities offered by new technologies as one of the motives for the project. The companies in our sample appeared to be in healthy condition since the nancial reasons initiated only one quarter of projects. It can be concluded, that changes in business environment and strategic reasons seem to be more important than generally maintained.

3.3.2. Key aspects of BPR The nature of projects was examined using the eight characteristics that are typical to BPR efforts as described in Section 2.1. Radical change: Radical change of business processes and obliteration of functions is supposed to be a key issue in reengineering. According to our data almost all projects were ranked as ambitious undertakings by the respondents, with an average of 4.4 in a ve-point scale, and consequently signicant changes in operations were reported. The projects were also considered radical in a sense that change usually occurred simultaneously in several areas, such as roles, responsibilities and skills. However, realized changes were often radical only in the context of individual projects and at a company level, most of the projects did not result in major changes in operations as a whole. This supports the ndings of Grint and Willcocks (1995) that radical BPR approaches are less frequent than usually maintained. Also the rhetoric around radical change and obliteration has received a lot of criticism (see, e.g. Taylor and Grint, 1995). Dramatic performance improvements: The temptation of reengineering is probably in

J. Kallio et al. / Journal of Strategic Information Systems 8 (1999) 125142 Table 3 Performance improvements of the studied projects (gures in percentage) Performance measure Reduction in costs Reduction in throughput time Improvement in quality Improvement in efciency Min 10 10 10 10 Mean 18 37 26 27 Max 50 100 100 50

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the claim, that according to proponents of reengineering signicant improvements in operations cannot be achieved by incremental means. The levels of incremental and dramatic are quite ambiguous, yet 10% improvement has been considered modest, while companies are encouraged to be bold enough to seek 70% improvements (Hammer, 1990). If these levels can be regarded as a yardstick between incremental and dramatic, the projects in our study seem to have reached reengineering level as illustrated in Table 3. The mean values are, however, quite misleading since most of the projects were quite moderate resulting in 1020% performance improvements and can therefore hardly be interpreted as dramatic achievements. In contrast, the few radical reengineering cases inate the averages of all operative measures. On the average the companies seemed to be satised with the achievements of the projects and estimated that the improvements in operations were quite considerable, with an average value of 4.0 on a ve-point scale. Most of the projects were seen also signicant with a mean value of 4.7 on a ve-point scale. In the context chosen and from the viewpoint of single processes, these reengineering projects were important. However, seen from a wider perspective, the more or less dramatic performance improvements of these projects probably will not translate, without few exceptions, to explicit and signicant monetary impacts at company level. High potential business benets: Besides the usual operative targets, companies had also set other qualitative objectives such as reducing complexity, increasing control, changing work methods, and updating information technology infrastructure. In some cases these objectives were considered even more important than the time, cost, quality, and efciency targets. Generally, company specic objectives were also quite well reached, with a mean of 4.0 on a ve-point scale. Process-based organizations: Projects were focused on business processes and from the respondents perspective, signicant organizational changes were achieved within the redesigned processes. Similarly, scope of most processes was cross-functional ranging at least one organizational barrier. However, the achieved organizational changes were mainly at the surface level, while deeper structural changes in the scope and depth of processes were less frequently discovered. This also further supports our arguments about the modest extent of reengineering projects in our sample. Customer orientation: More than 60% of the respondents answered that they have explicitly included the customer into their denition of the processes. Likewise, quite according to basic tenets of BPR, the customer was recognized as the recipient of the

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Fig. 1. Type of studied processes (Earl, 1994).

output of processes. However, in most cases customers were not actively participating in the reengineering task or planning, nor did they change their own operations as a result of reengineering projects. Customer needs were rather considered implicitly in operative efciency than expressed explicitly in distinct requirements. Information technology as an enabler: Information technology has generally played a major role in BPR and not surprisingly also in the studied cases. Adoption of new information systems and their impact on processes were both seen as important factors. Further, in 47% of cases opportunities offered by new technologies were ranked as being of major importance. The level of utilized technology varied case by case, yet in most instances it was not a question of leveraging state-of-the-art technology, but rather applying capabilities of already established information technologies. However, competitive advantage from IT most often arises from incremental, as opposed to radical, change (Senn, 1992). Rapid pace of change: Rapid pace of change with short project lead times has been one of the original principles of BPR. One year has often been mentioned as a time limit (Hammer and Champy, 1993). Most of the projects in this study took, however, considerably longer time to complete. The completion time was close to two years (23 months). In contrast, projects were well within their set time schedules. Our result supports the propositions of Stoddard and Jarvenpaa (1995), that in BPR it is more important that the objectives and pursued changes are radical than the short implementation time. We observed three clusters among projects. Those lasting less than one year, the second at one to two years, and those scheduled for more than two years. Based on the analysis, it seems that the project companies consider as BPR projects, are very different in their nature and many of them are actually rather modest when compared to BPR denitions in the literature. They have many characteristics typical for BPR projects, but seldom include all of them at the same time. 3.4. Reengineered business processes The type of processes was analyzed by asking the respondents to name the category according to Earls (1994) four alternatives, i.e. core process, support process, business network process and management process, the best corresponds with the redesigned process. Fig. 1 illustrates the results.

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More than half of the processes were primary processes, but also many secondary processes were included as opposed to our expectations. Many companies were taking their rst steps in BPR and starting with projects of limited business risk, i.e. support processes in which the customers are internal. Only 18% of the processes were business network processes representing higher levels of reengineering (Venkatraman, 1991,1994). 3.5. Scope and depth of the studied projects The scope of the redesigned processes was evaluated based on responses to a question about the functions included in the redesign of process. Only two processes were dened as intra-functional involving single organizational unit. Thus they can clearly be characterized as local exploitation of IT capabilities in Venkatramans (1994) terms. Ten of the processes were inter-functional, but they do not cross organizational boundaries. They are either internal integration projects or regular business process redesign projects. As many as 17 of the projects were crossing organizational boundaries and could therefore be classied as business network redesign or business scope redenition projects according to Venkatramans classication. However, when we examined the projects in more detail using the data gathered in interviews, we found out that even though the processes were crossing the organizational boundaries, the focus was still in improving internal efciency. For example, customers who were involved in the process were not invited to participate in the design effort, and their processes were not affected by the new way of operating. Customer requirements were acknowledged, but the companies were trying to reorganize only internally to fulll them. For example, a producer in food industry was developing a new method for getting better information on consumer requirements thus helping them improve their own production planning and scheduling. They decided to make longer-term contracts with their direct customers, i.e. the retailers. That arrangement made forecasting of the nal consumption partly unnecessary to them, because the risk of varying demand levels was now taken by the retailers. When designing the arrangement neither the direct customers nor the consumers were included in the analysis. The alternative would have been to, for example, create a better market forecasting system or develop better information gathering facilities in the point of sales systems of the retailers helping both the producer and retailer to optimize their stock levels and production rates. Another producer in food industry was redesigning its supplier relations. The process clearly was crossing the organizational boundaries, but the producer wanted to force its suppliers to adopt its corporate-wide operation principles and were doing that without participation from any of the suppliers. Even though the project could be categorized as a network redesign project, it was limited to internal reorganization without any real co-operation among suppliers and producer. The sample, however, included also some real business network redesign efforts. A good example is a project in which two companies combined their information systems services using shared resources and clientserver technology. In this case the customers beneted remarkably when they were able to do business with both companies using the same systems. This was possible, because the companies were not producers of directly competing products, even though operating in the same industry. The depth of the studied BPR initiatives was analyzed based on classication of Hall et

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Table 4 Number of anticipated and realized risks and problems in the studied projects Category Management support Technological competence Process delineation Strategic planning Tactical planning Change management Human resources Project management Time frame Anticipated risks Realized risks 2 5 3 2 2 14 1 1 3 Problems

4 1 7 9 6 3 5

4 4 5 11 15 3 7 7

al. (1993) that was complemented with additional categories on the objects of change presented in Section 2.3. On the average, all the studied projects involved rather substantial changes. The biggest changes were found in measures and incentives, that is often seen as a necessary prerequisite for successfully accomplishing a BPR project. Information systems were changed considerably, as were also the roles, responsibilities, skills and values of the workers. Additionally, signicant changes were detected in management style and the organizations working methods in most of the projects. Using the additional information from the interviews, we discovered that even though the managers reported changes in all areas, they were not often as substantial as expected. For example, the companies reported that they had to make big changes in their information systems, but in fact, they were more or less creating IT infrastructure by developing their communication networks and shared databases. The new solutions were important for the future projects, but did not yet change the way of working among the employees. 3.6. Implementation and risks of BPR projects We asked the respondents also about anticipated risks, implementation problems and realized risks. The questions were posed on open format, and categorized according to classication of Grover et al. (1995). As shown in Table 4, most of the expected risks were related to traditional project and change management. Time schedules, required resources and budgets were commonly regarded as sources of uncertainty. Risks of change management included resistance to change, lack of motivation and improper communication. Somewhat surprisingly the personnels know-how was not seen as a particularly important area of concern. These ndings are supported by Galliers (1997) who maintains that social and organizational issues should be given more attention in processes change projects. It was also surprising to observe the low frequency of management support among the risks and problems mentioned in the answers. Perhaps managers have learned to pay adequate attention to these projects, or BPR is new, interesting and properly advocated by consultants and literature and therefore deserves special attention from top management. Based on these results, it seems that most of the risk factors are related to the projects, rather than to business processes or business in general. In addition to Grover et al.s (1995) list of risk factors, technical problems were often

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found to be a source of uncertainty. There were, in fact, some projects facing serious problems with the functionality of leading edge technology that was not always working as expected. Likewise risks of the concurrent use of old and new modes of operation were recognized in advance but were still causing problems in the late phases of the BPR projects. Some companies had predicted problems with changes in their business environment and required strategic choices. In Grover et al.s (1995) classication strategic planning is included, but risks caused by the external environment are missing. These additional factors expand the scope of Grover et al.s framework, and make it even more usable for practical purposes than in the original form.

4. Discussion The two main ndings of our study were that BPR projects among the companies we studied have been more successful than previously claimed (Hammer, 1990; Bradley, 1994) and that our sample did not uncover many really radical BPR projects. The rst nding is, at least partly, explained by the second nding. Because the studied projects focused in many cases on narrowly dened process changes they were relatively easy to manage as BPR efforts. The second nding is more difcult to explain. There may be several reasons for not catching the most radical change efforts into our cases. The rst possibility would be that there were no such initiatives among the studied companies. However, we know that there were many ongoing signicant reorganizations and industry wide arrangements in Finland at the time of study. For example, large forest industry companies as well as banks and insurance companies were realizing exceptional mergers and reorganizations of their operations. In addition, the large wholesale companies were reorganizing their logistics, penetrating the markets of the former Soviet Union and preparing for the hard competition after Finland joining the EU in 1995. The second explanation for the absence of large scale change efforts could be that because they occur due to external reasons uncontrollable to any single company, they also require co-operation among companies and are not implemented as intra-organizational projects. This may be the case, but it is also possible that the executives contacted were not personally involved in rearrangements on that scale, to the responsibility of the CEOs. One possible reason for our results is that the studied projects were carried out as systematic development projects. On the contrary the signicant changes are based on one time analysis and decision of the principles of change. These are often implemented as continuous development programs including many concurrent BPR projects, as was the case also in our sample. Finally, most companies in the sample were nancially in relatively good shape and not forced to initiate any all-or-nothing, high risk endeavors. The results can be understood by Fig. 2, presenting possible drivers of BPR and corresponding tracers. The drivers of BPR can be classied as follows: 1. Internal inefciency within a companys current operations observed for example as high cost or low quality. 2. Changed customer/supplier requirements for current products or services observed as low satisfaction or high pace of loosing customers or suppliers.

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Fig. 2. Different types of drivers of BPR and examples of corresponding tracers.

3. External changes uncontrollable and unpredictable to the industry in the forms of, for example, tighter economic conditions, new legislation or advanced technology. Similar drivers are also recognized in the public sector by Hutton (1995). The possible tracers may be classied as follows: 1. Traditional Business process reengineering (BPR), when a single company redesigns its operations by automating or obliterating tasks within its core processes. 2. Business process restructuring (BPS), when a company differentiates its process portfolio for providing variants of same basic products/services. 3. Business reengineering (BR), as proposed by Edwards and Peppard (1994), when companies in the same industry adopt new business and operations strategies in order to produce new products/services through different channels to chosen customer/supplier segments. BPR efforts are usually implemented as separate projects, often controlled by a single company even though usually customers or suppliers are included in the analysis. A good and well-known example of a successful BPR project is Fords procurement process (Hammer, 1990). Operational efciency was improved signicantly, but the project did neither change Fords basic products or services nor the whole industry. Therefore it belongs, from Fords perspective, clearly to our rst category of change methods, the traditional BPR. From the standpoint of Fords suppliers the change was a BPS project requiring them to create a different process for doing business with Ford than with other customers. In our study we found many traditional BPR initiatives, however, not quite as ambitious as Fords case. One example is an importer and dealer of cars, that changed its order fulllment process utilizing new information systems and team-based organization. It was able to cut order delivery time by half and cost by one-third, yet the change effort did not have any clear effect to its market position. An example of BPS effort

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Fig. 3. Efcient drivers and methods.

in our data is a metal company, which has created three differentiated order fulllment processes to serve customers that are asking for standard, customized and oneoff products. Customer satisfaction in all three segments has improved signicantly and costs have decreased at the same time by one-third. As already reported we did not observe any genuine business reengineering (BR) initiative in our data. These would be related to industry reorganizations, as mergers in forest, banking and whole sales in Finland. An internationally well known example might be found from airline industry where IT-enabled reservation systems have dramatically reshaped the structure of the whole industry (Hopper, 1990) and simultaneously also the travel agency industry. It has been widely recognized that efcient implementation of different types of BPR effort is problematic. The same methods are unlikely to be equally successful in all cases. Fig. 3 proposes a mapping of the drivers of change and methods for implementing them. Further, Fig. 3 illustrates the choices that may cause extra cost or unnecessary risk when selecting the change strategies. Traditional BPR is used mainly by companies that are in serious trouble with low business performance. However, it may work well for all situations where there have been observed signicant inefciency in some internal operations, vital to the success of the whole company or not. In this case the reasons requiring redesign are within the company and therefore under control. If a company decides to establish a BR effort to tackle the inefciency problems together with other companies in the industry it leads to extra costs (upper right corner in Fig. 3). This is due to external partners having usually differences in their requirements making the design effort more complicated with minimal benet to the company itself. Furthermore, the locus of the problem may be only inside the companys own processes and not even relevant to other companies.

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When the BPS is started in order to be able to respond to new needs of customers or suppliers in getting the current product or service or processes, the implementation has to occur in close co-operation with them to be able to create simultaneously differentiated processes for each customer/supplier segment. If partners are excluded, there is a considerable threat that the anticipated changes are not fully realized. For example, in automotive industry, the use of EDI has often resulted in automating the processes, e.g. orders earlier delivered by phone or facsimile are converted to electronic form, but the principles of cooperation between customer and supplier remain unchanged (Tuunainen, 1995). When uncontrollable fundamental changes, for example, in competitive situation, legislation or technology are driving the companies to rethink and redesign their business and operations strategies it often has to be done in industry-wide co-operation (lower left corner in Fig. 3). If one company tries to take the lead, it is taking high risk. Under major changes in the logic of business in the industry, single-company projects may offer very high prots, but it is also extremely difcult to predict the subsequent moves of the other players. An example is Apple with its own strong R&D programs and propriety systems. It has been creating innovative products, but due to the rapid development of technology competitors have been able to imitate Apples concepts, jointly forcing new standards and offering broader supply of software and other complementary products, such as network solutions, and nally overruling Apples original advantage.

5. Conclusions We carried out an empirical analysis of 32 Finnish BPR projects and based on these experiences we discovered that the projects were rather successful while not always producing the high performance improvements alluded to in the BPR literature. However, the success of the projects can, at least partly, be explained by the rather modest scope and objectives of the projects as BPR initiatives. When analyzing the drivers behind the projects more carefully, we found out that most of the BPR projects were initiated to solve problems of internal inefciency. Some projects were started to meet change in customer/supplier requirements and resulted in differentiated business processes for various segments. Only in a few projects the motive was change in external circumstances affecting the whole industry. This was unexpected, since at the time of the study there existed signicant restructuring resulting in, for example, mergers in banking and forest sectors. We concluded that these large reorganizations were planned at the top management level and could be traced only as long-term development programs instead of single projects. Well-dened projects are probably initiated when streamlining current business processes, e.g. typical to the systematic BPR efforts within one company. However, broader arrangements need co-operation among companies in the same industry and the need emerges often rather unexpectedly. Industry restructuring is quite ambiguous from a single company perspective and thus hard to analyze as systematic development projects. The BPR projects should always be studied in the proper context. For example, reengineering project may lead to extremely important structural change, even though it does not improve business, perhaps even contrary. This may occur in declining markets,

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when only those who succeed in their BPR efforts survive. Therefore we should look at relative performance rather than just the nancial gures usually shown in the literature.

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