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BPR

Objective

1. Gain an understanding of what is meant by "business process".


2. Understand and contrast continuous process improvement and business
process reengineering (BPR).

If you have ever waited in line at the grocery store, you can appreciate the
need for process improvement. In this case, the "process" is called the
check-out process, and the purpose of the process is to pay for and bag your
groceries. The process begins with you stepping into line, and ends with you
receiving your receipt and leaving the store. You are the customer (you have
the money and you have come to buy food), and the store is the supplier.

The process steps are the activities that you and the store personnel do to
complete the transaction. In this simple example, we have described a
business process. Imagine other business processes: ordering clothes from
mail order companies, requesting new telephone service from your
telephone company, developing new products, administering the social
security process, building a new home, etc.

Business processes are simply a set of activities that transform a set of inputs
into a set of outputs (goods or services) for another person or process using
people and tools. We all do them, and at one time or another play the role of
customer or supplier.

You may see business processes pictured as a set of triangles as shown


below. The purpose of this model is to define the supplier and process
inputs, your process, and the customer and associated outputs. Also shown is
the feedback loop from customers.
So why business process improvement?

Improving business processes is paramount for businesses to stay


competitive in today's marketplace. Over the last 10 to 15 years companies
have been forced to improve their business processes because we, as
customers, are demanding better and better products and services. And if we
do not receive what we want from one supplier, we have many others to
choose from (hence the competitive issue for businesses). Many companies
began business process improvement with a continuous improvement model.
This model attempts to understand and measure the current process, and
make performance improvements accordingly.

The figure below illustrates the basic steps. You begin by documenting what
you do today, establish some way to measure the process based on what
your customers want, do the process, measure the results, and then identify
improvement opportunities based on the data you collected. You then
implement process improvements, and measure the performance of the new
process. This loop repeats over and over again, and is called continuous
process improvement. You might also hear it called business process
improvement, functional process improvement, etc.

This method for improving business processes is effective to obtain gradual,


incremental improvement. However, over the last 10 years several factors
have accelerated the need to improve business processes. The most obvious
is technology. New technologies (like the Internet) are rapidly bringing new
capabilities to businesses, thereby raising the competitive bar and the need to
improve business processes dramatically.

Another apparent trend is the opening of world markets and increased free
trade. Such changes bring more companies into the marketplace, and
competing becomes harder and harder. In today's marketplace, major
changes are required to just stay even. It has become a matter of survival for
most companies.
As a result, companies have sought out methods for faster business process
improvement. Moreover, companies want breakthrough performance
changes, not just incremental changes, and they want it now. Because the
rate of change has increased for everyone, few businesses can afford a slow
change process. One approach for rapid change and dramatic improvement
that has emerged is Business Process Reengineering (BPR).

Business Process Reengineering (BPR)

BPR relies on a different school of thought than continuous process


improvement. In the extreme, reengineering assumes the current process is
irrelevant - it doesn't work, it's broke, forget it. Start over. Such a clean slate
perspective enables the designers of business processes to disassociate
themselves from today's process, and focus on a new process. In a manner of
speaking, it is like projecting yourself into the future and asking yourself:
what should the process look like? What do my customers want it to look
like? What do other employees want it to look like? How do best-in-class
companies do it? What might we be able to do with new technology?

Such an approach is pictured below. It begins with defining the scope and
objectives of your reengineering project, then going through a learning
process (with your customers, your employees, your competitors and non-
competitors, and with new technology). Given this knowledge base, you can
create a vision for the future and design new business processes. Given the
definition of the "to be" state, you can then create a plan of action based on
the gap between your current processes, technologies and structures, and
where you want to go. It is then a matter of implementing your solution.

In summary, the extreme contrast between continuous process improvement


and business process reengineering lies in where you start (with today's
process, or with a clean slate), and with the magnitude and rate of resulting
changes.

Over time many derivatives of radical, breakthrough improvement and


continuous improvement have emerged that attempt to address the
difficulties of implementing major change in corporations. It is difficult to
find a single approach exactly matched to a particular company's needs, and
the challenge is to know what method to use when, and how to pull it off
successfully such that bottom-line business results are achieved.

Business Process Reengineering:


Analysis and Recommendations
By
Maureen Weicher
William W. Chu
Wan Ching Lin
Van Le
Dominic Yu

Thanks to Dr. Samuel Ryan of Baruch College, City University of New York. This paper was written by a
group of MBA and MS students at Baruch College. Introduction

1. Old Wine in New Bottles?


2. Is BPR a Quick Fix?
3. The Price of Experience
4. The Role of the Leader and Manager
5. Reengineering the Human Resource
6. Human Reengineering Case Study: The Conquering Power of the Small
7. BPR Places the Customer at the Center by Breaking Down Organizational Barriers
8. Is Information Technology an Enabler or a Bottleneck?
9. Alternatives to Reengineering
10. Reengineering Recommendations
11. Bibliography

Introduction

The "jumping off" point for this paper is Reengineering the Corporation by Michael Hammer and James
Champy. The paper goes on to review the literature on BPR. It explores the principles and assumptions
behind reengineering, looks for common factors behind its successes or failures, examines case studies, and
presents alternatives to "classical" reengineering theory. The paper pays particular attention to the role of
information technology in BPR. In conclusion, the paper offers some specific recommendations regarding
reengineering.

Old Wine in New Bottles

The concept of reengineering traces its origins back to management theories developed as early as the
nineteenth century. The purpose of reengineering is to "make all your processes the best-in-class."
Frederick Taylor suggested in the 1880's that managers could discover the best processes for performing
work and reengineer them to optimize productivity. BPR echoes the classical belief that there is one best
way to conduct tasks. In Taylor's time, technology did not allow large companies to design processes in a
cross- functional or cross-departmental manner. Specialization was the state-of-the-art method to improve
efficiency given the technology of the time. [17]
In the early 1900's, Henri Fayol originated the concept of reengineering: "To conduct the undertaking
toward its objectives by seeking to derive optimum advantage from all available resources." [17] Although
the technological resources of our era have changed, the concept still holds. About the same time, another
business engineer, Lyndall Urwick stated "It is not enough to hold people accountable for certain activities,
it is also essential to delegate to them the necessary authority to discharge that responsibility." [17] This
admonition foreshadows the idea of worker empowerment which is central to reengineering.

Although Hammer and Champy declare that classical organization theory is obsolete, classical ideas such
as division of labor have had an enduring power and applicability that reengineering has so far failed to
demonstrate. BPR does not appear to qualify as a scientific theory, because, among other things, it is not
duplicable and it has limited scope. The applicability of classical management theories, such as division of
labor, were widely duplicable and portable. These ideas stimulated increases in productivity, output, and
income that led to the creation of the middle class.

If BPR is not a theory, but a technique, Hammer and Champy are surprisingly vague about the details. This
paper attempts to fill in the blanks. Despite their vagueness, Hammer and Champy are clear about who to
blame when reengineering attempts fail; it is the fault of the individual company.

Cyert and March, among others, point out that conflict is often a driving force in organizational behavior.
BPR claims to stress teamwork, yet paradoxically, it must be "driven" by a leader who is prepared to be
ruthless. One executive with BPR experience warns not to assume "you can simply issue directives from
the center and expect it to happen." [4]

According to Thomas Davenport, "classical reengineering" repeats the same mistakes as the classical
approach to management by separating the design of work from its execution. Typically, a small
reengineering team, often from outside the company, designs work for the many. The team is fueled by
assumptions such as "There is one best way to organize work; I can easily understand how you do your
work today; I can design your work better than you can; There is little about your work now that is worth
saving; You will do your work the way I specify." [5] Davenport suggests that the engineering
model/analogy that BPR is based upon is flawed, both in terms of process design and information
technology. He proposes an "ethnographic" approach to process design and an "ecological" approach to
information systems. Partipative business makeovers are discussed later in this paper.

IS BPR a Quick Fix?

BPR is often used by companies on the brink of disaster to cut costs and return to profitability. The danger
is that during this process the company may slash its capacity for future growth. The example of "Star
Vault, Inc.", a mid-sized entertainment company illustrates this conundrum. [1] After BPR, Star Vault
returned to short-term profitability by sacrificing its internal production capability to create new products.

Senior management soon discovered that the company's library was becoming overexposed and
competition for the most attractive product acquisitions more intense. Star Vault was forced to reevaluate
its strategic direction. It opted to focus on niche markets. "Instead of simply improving the processes, the
company eliminated non-value- added expenses, and evaluated which organizational elements were
relevant to the strategy... As a result, the company now has the opportunity to sustain and increase its
market share." [1]

To reap lasting benefits, companies must be willing to examine how strategy and reengineering
complement each other -- by learning to quantify strategy (in terms of cost, milestones, timetables); by
accepting ownership of the strategy throughout the organization; by assessing the organizations current
capabilities and processes realistically; and by linking strategy to the budgeting process. Otherwise BPR is
only a short term efficiency exercise. [1]
One of the hazards of BPR is that the company becomes so wrapped up in "fighting its own demons" that it
fails to keep up with its competitors in offering new products or services. While American Express tackled
a comprehensive reengineering of the credit card business, MasterCard and Visa introduced a new product
-- the corporate procurement card. American Express lagged a full year behind before offering its
customers the same service. [3] Another writer urges consultants not to present BPR as a quick fix program
since it "may help you save money tomorrow but will leave you in a worse position next month or next
year." [16]

The Price of Experience

Why are so many companies still eager to experiment with reengineering, even when they have
experienced previous failures themselves? Companies such as American Express and Amoco were able to
learn from earlier reengineering failures, and succeed on later attempts. It seems that "experience, more
than the possession of the right approach or methodology, is the key to reengineering triumph." [3] This
acknowledgement may help explain the increasing interest in reengineering, despite the high failure rate.

Wheatley, on the other hand, describes the appeal of reengineering as a sign of "collective desperation."
She notes "when a star is in its death stage, about to collapse on itself, it burns at its brightest, with
tremendous energy and fury. Reengineering is the supernova of our old approaches to organizational
change, the last gasp of efforts that have consistently failed." [2]

The Role of the Leader and the Manager

Many articles point out that BPR must have the full support of top management to succeed. If resistance is
encountered, the leader must be willing to "drive" change, even to the point of ruthlessness. One article
even exhorts the leader to emulate a private detective -- such as Philip Marlowe -- who adheres to the
following "heroic" qualities; Relentless adherence to what is right; Courage -- moral as well as physical;
Recognition that surface appearance is often an illusion; A dogged determination to get at the deeper truth.
[10] Managers in a company undergoing reorganization must work to quell the fears of employees and
resistance to change (despite the fact that they may have their own apprehensions.)

According to one executive with BPR experience, "Once the [reengineering] plan is in place, you've got to
pull out the stops and execute it. You cannot live in limbo between what you used to do and what you're
going to do." Otherwise, the dramatic results are sacrificed, people lose their focus, and "reengineering
slips into process improvement." [4] Employees may be enthusiastic about reengineering during the initial
phases if they view it as a "win- win" situation. Some companies experience resistance in later stages when
employees begin to harbor doubts about the impact of reengineering, and managers are forced to adopt a
more "insistent" policy. [4]

CSC Index points to poverty of ambition as a reason why BPR projects fail. "Companies that just flirt with
[reengineering] suffer the pains without the gains." [6] Reengineering advocates urge management to pull
out all the stops and implement change on a grand scale. Managers in the organizations after reengineering
are compared to coaches. They do not order; they guide. They do not direct the work of others; they
coordinate, facilitate and empower.

Reengineering the Human Resource

Hammer and Champy recognize the importance of the human resource when they state "companies are not
asset portfolios, but people working together to invent, sell and provide service." [9] However, they fail to
demonstrate how to reengineer the human resource in conjunction with reengineering processes. Of the
four cases presented in Reengineering the Corporation, only the case of Capital Holding addresses this area.
Capital Holding performed a "cultural audit" which revealed that the unwritten code of conduct encouraged
information hoarding and barely acknowledged the customer. In order to combat these tendencies, senior
management provided a constant flow of information throughout the company regarding reengineering
expectations and successes, and revised the performance appraisal system to emphasize the new values of
team work and cooperation.

Although Hammer and Champy provide a long list of why reengineering fails, nowhere do they include the
prerequisite that no reengineering effort will succeed without first reeducating and retraining the people
who will ultimately work with the new process. According to Meg Wheatley, "If you're going to move
information and responsibility down to the local level, then the key question is how can you be sure that
people will behave appropriately? You need to make sure that everyone is playing by the same rule book."
[2]

CSC Index identifies principle obstacles to BPR include the fear among employees that their jobs are
endangered and that years of experience will account for nothing. To overcome these apprehensions,
managers must constantly communicate their plans and expectations. [6]

Although companies which are seeking to reengineer may work on revamping the performance appraisal
system to support new values, this can be problematic. When bonuses are linked to profits or even the
performance of a team, this may lead to a situation where the individual is judged on factors beyond his or
her control.

Human Reengineering Case Study: The Conquering Power of the


Small

GTO Inc. is a small company which manufactures automatic gate openers based in Tallahassee, Florida.
When the founder died suddenly, the company was appeared to be in desperate need of reengineering: GTO
was losing money on a monthly basis, it lacked a line of credit and suppliers shipped only on a COD basis.
Employees were required to work twenty-four hour shifts to fill important orders and salesmen were
reduced to writing minuscule orders to supplement their incomes. The new CEO, Chuck Mitchell, adopted
"...a strategy made up of small gestures rather than sweeping moves." [11] These gestures consisted of
creating an atmosphere of trust and optimism among GTO's harried employees by listening to and adopting
their suggestions and improving their health and disability insurance. When things started to turn around,
pay was increased and bonuses distributed from a profit sharing plan. The salesman were put on salary with
incentives. Acts such as fixing the leaky roof, allowing ten minute breaks, and keeping the coffee machine
stocked convinced the employees that Mitchell was "genuine." The following year, GTO witnessed a
cultural and company turnaround. Net profits moved from the red to nearly $500,000. This was
accomplished by a 9% increase in gross sales along with a 33% decrease in total operating and
administrative costs. Employee turnover decreased equally dramatically. As employees began to seek
outside education and were promoted from within, the number of returned goods fell. [11]

GTO's dramatic turnaround was a result of many small steps which could be said to foster precisely the
"culture of incrementalism" that Hammer and Champy warn against. The focus was on human resources
rather than on processes.

Case Study: Escorts AMG’s ERP upgrade

New tools at Escorts AMG

Escorts Limited's, Agri Machinery Group had deployed Avalon's ERP systems and faced challenges like
inability to upgrade, lack of vendor support, and buggy software. It used tools from the Oracle 11i suite and
now performs its critical operations with better productivity levels. by Shipra Arora

Escorts Limited's Agri Machinery Group (EL-AMG) manufactures agricultural machinery, and has four
manufacturing plants in Faridabad. It manufactures three lines of tractors, imports and sells various other
In a nutshell
farm equipment, and consequently accounts for around almost
two-third of Escort's revenues (Rs. 900 crore in FY 2002-2003). The company
The use of an ERP thus plays a significant role in the business Escorts Limited's Agri Machinery Group
operations of this busy manufacturing company. (EL-AMG) manufactures agricultural
machinery, and has four manufacturing
plants and an R&D center in Faridabad.
EL-AMG had already deployed ERP systems from Avalon, but
was plagued with a number of challenges. The company was
unable to draw a future roadmap and upgrade its technology. The need
And to make matters worse, the ERP vendor Avalon had shut The company used an ERP from Avalon
shop in India. This prompted EL-AMG to look for an which did not allow the company to
alternative enterprise applications solution for its business. As a upgrade technology. And the vendor
solution, it deployed a number of modules of the Oracle 11i shut down its office in India, cuttingoff
suite of products and can now make better and more informed support.
decisions, and enjoy a bug-free software performance.
The solution
The company deployed a range of tools
Business challenges
from the Oracle 11i suite like Oracle
Financials, Oracle Discrete
Despite using an ERP, the toughest challenge was the inability Manufacturing, Oracle Purchasing,
to draw a future roadmap by leveraging the latest technologies. Oracle Order Management, Oracle
This was impeding the scope for future growth. The company Workflow and Alerts, and Financial
could not leverage the benefits of the Internet by offering e- Analyzer (OFA).
commerce and other Web initiatives. Since the Avalon ERP
could not be Web-enabled. To make matters worse, Avalon had
The benefits
shut shop in India, shutting down chances of upgrades and
The company was able to perform better
making use of the latest technology developments.
workflow processes, easier generation of
MIS reports, bug-free performance of
"The Avalon ERP system had outlived itself and had become a systems, and timely closing of
dead product," said Vinay Mehta, IT Head, EL-AMG. The accounting cycles.
product had inadequate documentation, which made
maintenance very difficult. It was a headache to incorporate Escorts Agri Machinery Group
frequent changes in the application.

EL-AMG also had to deal with the problems of software bugs,


which could not be resolved due to lack of proper
documentation. The company feels that the bugs appeared due
to over-customization of the product. The central systems
department, which took charge of applications maintenance,
spent most of its time tackling these bugs.

The system was not very user-friendly. The users were not able
to run queries on their own. The responsibility of running the
large amounts of queries and reports was delegated to the
central systems department. This created a huge backlog of
work. Click on image for larger view

EL-AMG also had a certain amount of legacy, which included i2 SCM, demand planner, factory planner,
warehouse management software for the spare parts division, HR and payroll applications, after-sales and
warranty systems, and Auto-Matrix Exchange for collaboration with vendors. The group wanted an end-
user-driven system that would empower the users and allow them to run their own queries, reducing the
burden on the systems department. This made the company decide to implement a new ERP system, which
could take care of the future growth strategies of the company and provide the needed functionalities.
Choosing the ERP system

In early 2001, EL-AMG began to look for a new ERP system to replace the existing one. The company
chose Oracle among other vendors keeping in mind the organization's functional and technical
requirements. Since the ERP project was very significant for company, it was named, 'Pragati'.

A lot of time was spent in planning and deciding upon the right software. And the entire proceedings were
conducted in an elaborate and phased manner to ensure efficiency.

The company laid down three ground rules for vendors willing to participate.

They were:

• The vendor had to conduct a three-month Business Process Re-engineering (BPR) exercise at EI-
AMG.
• The ERP vendor would be the technology implementation partner and handle the sole
responsibility of the project.
• The ERP systems had to integrate seamlessly with the company's legacy software systems.

An important highlight in the selection process was the involvement of end users. A team of around 70
members was created during evaluation. Almost 80 percent of the members belonged to functional areas.
The rest were from the IT department.

"This was a key learning from the earlier ERP implementation, which was largely IT-driven. If the selection
process is not end-user-driven, you'll have a hard time convincing users about the benefits. In our new ERP
implementation, we made sure that it was the choice of the end users, so that they accepted the decision
easily," explained Mehta. The Gartner group was also involved in providing consultancy at each stage.

Each member of the team gave ratings to the vendor. The evaluation was finally done on the following
criteria:

• Functionality
• The ability to integrate third party software
• Type of feedback from existing user base (through visits to other company's ERP sites)
• Presence in India
• Localization of modules
• Cost
• Time taken to implement.

In March 2002, Oracle was chosen for the applications, an Accenture was chosen to conduct the BPR
exercise.

Implementing 'Pragati'

The rollout of Oracle's products began in March 2002. EL-AMG is present in five locations, which
comprised four manufacturing plants and an R&D setup, all within distances of three Km in Faridabad.

The company decided upon the 'big bang' approach to implementation in the five locations. It went live on
Oracle 11i in March 2003. The modules implemented were Oracle Financials, Oracle Discrete
Manufacturing, Oracle Purchasing, Oracle Order Management, Oracle Workflow and Alerts, Financial
Analyzer (OFA), Purchasing and Manufacturing Intelligence, Teleservice, iReceivables, and Oracle
Treasury.

An important set of exercises during implementation was on data cleansing and migration. Earlier, different
finance divisions used various items, parts, and vendor codes. With the unification of the different
divisions, standard codes were created for simplification and more efficiency. The data was taken from
legacy system and the coding scheme was revamped.

Reporting and MIS systems had different formats and had to be revamped. The Bill of Materials (BOM)
systems also had to be re-done during implementation.

The company network

The heart of the network is at the second plant (Plant 2) in Faridabad. Around 40 servers, some of which are
PCs configured as servers, act as a centralized system. The servers range from NT, Windows 98, Windows
2000 to Linux and Solaris.

A set of four HP severs (HP-Ux 11i) run the core Oracle application modules. These are connected to a
SAN box. The other three plants and the R&D locations connect to these servers through 2 Mbps leased
lines. The area offices are able to connect to the servers located in Plant 2 through a VPN provided by HCL
Infinet using a PSTN dial-up.

BPR

"If one goes for an ERP without BPR, there is a chance the company will miss out on a lot of benefits of
BPR," said Mehta. The BPR exercise was closely aligned with the ERP implementation, ensuring that 'best
practices' were incorporated. Accenture was involved in defining the re-engineered processes and
convincing the end users of the future benefits. Oracle's role was to map the processes into their products.

The processes involved in re-engineering included finance, procurement, materials, plant maintenance, and
quality assurance.

How the new tools helped

A significant benefit of the new Oracle-based systems was the resolution of the problems with present in
the earlier Avalon ERP. Due to the bugs, the company could not use its database (Oracle) for generating
any meaningful MIS. So, the MIS for the top management was generated through Excel sheets instead of
being generated directly through the system.

With 11i, the MIS is generated through the system and standard reports are created. Currently, there are
around 250 reports generated for the middle management and operational people.

The company has also deployed Business Intelligence (BI) tools from Oracle for the top management.
While earlier the focus was on the middle management and operational personnel, the present focus is on
the top management so that they can perform informed planning and better decision making activities.

With the help of the new tools, the company was able to shorten the time taken to close the annual accounts.
It was able to close the year end accounts of FY 2002-2003 within two months, an improvement from four
months time taken earlier. By next year, the company hopes to bring the time taken down to one week. It is
also able to close the accounts each month by the first week of the next month.
At any time the company is aware of its inventory status. According to R.K. Jain, Dy. General Manager,
AMG (Information Systems), there has been elimination of a lot of non-value added activities as well,
translating into benefits for the group.

ROI

The company feels that it's a little early to calculate ROI, and the results are already visible in the lowered
inventory value. According to Mehta, the system has already brought down the value of inventory by
around 30 percent. There has been substantial savings in terms of inventory and manpower resources.

The future roadmap

Within the next three months, the company will extend its ERP system to its area offices, which number 25.
It will roll out the ERP to 15 nationwide depots. And will implement product data management systems. It
will also integrate its R&D systems, designing, and product development systems in the plants in the next
few months.

BPR Places the Customer at the Center by Breaking Down


Organizational Barriers

Service organizations can put their professed commitment to customer satisfaction into action by placing
the customer at the center of the reengineering process. Service workers are often unable to satisfy the
customer because they must follow strictly defined rules, and they lack the authority to make exceptions or
the resources to complete a transaction.

Robert Janson points to three basic principle that provide the foundation for service organizations seeking
to reengineer:

Make the customer the starting point for change -- by identifying customer wants and creating the
infrastructure to support these expectations

Design work processes in light of organizational goals

Restructure to support front-line performance. [12]

When IBM started reengineering in 1992, the guiding principle was to become more customer-centered.
Twelve customer relationship processes were identified and used as a basis for the reengineering project.
One example is "solutions delivery": a contract between IBM and the customer for a complete IT system,
including hardware, software, technical support, consulting services and third party products. The
redesigned process moved the responsibility for pricing to the case team, who used "pricing tool" software.
This eliminated a nearly two month delay that formerly occurred when pricing was referred to IBM
headquarters. [13]

Is Information Technology an Enabler or a Bottleneck?

According to a roundtable of executives with extensive BPR experience, although information technology
plays a central role in reengineering, the IT department in many companies is "unable to play." This
ineffectualness may be due to the historic inability of IT to do "anything big quickly", the "breeding out" of
risk-taking, or the lack of advanced technology groups. [4]

Another danger is that, since the IT group is not perceived as being part of the business process, they are
excluded from the reengineering team. Aetna tried to combat this "disengagement" by presenting
workshops on client businesses to the IT group. [4]

Senior management may be skeptical about the effectiveness of IT as a whole due to the "lackluster"
performance of many information systems in the past decades. In fact, it can be argued that the huge
investment in IT has had little impact on productivity. Although 85% of IT spending in the 1980's was in
the service sector, productivity in this sector increased only 1.9%, while productivity in the manufacturing
sector rose 44%. [15] Based on this record, it is not unreasonable to view IT as a disabler, which is never
used to "challenge why things are done in a company, but instead justify the way they are done." Systems
in the service sector have been used to generate more unneeded reports, speed up superfluous work steps,
generate unnecessary information, encourage shoddy thinking and misdirect attention to spurious details.
[15]

One (anonymous) company failed repeatedly to reengineer because it "spent a lot of time building castles in
the air regarding process redesign without paying attention to information technology." [3] On the other
hand, Ontario Hydro found that the greatest improvement came when they gave the IT group "the tools, the
information, and the authority" to implement change, rather than by core process reengineering. The IT
group was able to implement client server applications relatively early -- because individuals took
"ownership, responsibility and accountability without [the company] even asking for it." [4]

Most analysts view reengineering and information technology as irrevocably linked. Walmart, for example,
would not have been able to reengineer the processes used to procure and distribute mass-market retail
goods without IT. Ford was able to decrease its headcount in the procurement department by 75% by using
IT in conjunction with BPR, in another well known example.

Despite studies that indicate over half of all reengineering efforts are initiated "because of a perceived
information technology opportunity...the actual technological solution is far less important than educating
employees to use IT as both a strategic initiative and as a tool in the reengineering process." [4]

Based on the above findings, some insist that when developing a reengineering strategy, the best companies
"ignore information technology." Only after the strategy is complete should innovative IT applications be
benchmarked, since innovative applications often "stem from a combination of breakthrough ideas and
from modifying several best practices." [7]

IT can prove useful during the reengineering analysis and design process. Graphics software and CASE
tools can produce process maps; spreadsheets and costing software allow for activity-based cost analysis;
databases can track customer satisfaction and complaints; "blind" e- mail bulletin boards can be used to
capture employee suggestions. In addition e-mail and groupware can facilitate communication and
coordination across geographical and organizational barriers. [7]

During the implementation stage, it is recommended that companies follow these basic rules:

Recognize that IT is only part of the solution: it allows managers to collect, store, analyze, and
communicate and distribute information better.

Cut and paste the IT tools needed.

Bring in internal or external IT experts: their knowledge, skills, acumen, and experience are invaluable.

After implementation, continually monitor IT performance and keep up with new IT developments. [7]
On the other hand, some companies have found it useful to design a technology strategy before
reengineering. When Star Maker Inc., an entertainment/communications company experienced a downturn,
the CIO of the company convinced senior management to make addressing the role of IT the first item on
the agenda. Star Maker designed a plan to use technology to place the company in the forefront of the
industry, with services such as electronic product catalogues, customer interface standards, sophisticated
electronic data links, customer and market databases, and digital video. The new technology needed to
drive growth was then paid for by the cost savings from BPR. [1]

Davenport proposes an "ecological" model when redesigning information systems. Up to the present, the
dominant model of IT has been "that data streams can be deigned architecturally and engineered...[This]
approach involves detailed modeling of information requirements and flows, and their relation to business
activities and processes." [5] The traditional approach runs into difficulties when confronting environments
that are fluid, dynamic, or characterized by dissent. Davenport argues that the basis of IT redesign must be
the individual who uses the information. Data turns into information when it is placed in a human,
behavioral context.

"Like the more familiar form of ecology, [information ecology] involves establishing a context for analysis,
an understanding of the interrelatedness of a number of different factors, the need for acute observation and
description (instead of modeling and prediction),the valuing of diversity, and the recognition of continual
flux and evolution." [5]

Wheatley also expresses misgivings about the dominant scientific model for IT. She suggests that the
natural sciences may be a more appropriate model. She describes organizations as "living systems" which,
in order to be healthy, need "access to its own intelligence ... where conditions support the use of that
intelligence." She points to the example of the U.S. Army, which is "intent on moving information
everywhere in their organizations without knowing ahead of time who will need what." [2]

The "democratization" of IT from the mainframe to the PC is "breaking down the communications barriers
between corporate functions, suppliers, and even customers." [7] The distruptive power of IT allows
information to be at many places at the same time -- which allows companies to reap the benefits of both
centralization and decentralization - and is at the heart of BPR.

Alternatives to BPR

Reengineering focuses on changing existing business practices. This "impairs the entire reengineering
process, as it stifles innovation in finding new ways to compete." BPR falls short when dealing with new
products or services, since "any strategic objectives achieved are simply the by- product of improved
productivity." [15] Strategic reengineering addresses this shortcoming by focusing on designing the
organization to compete. This is accomplished by undertaking strategic initiatives at the start of the
reengineering process. These initiatives seek to provide understanding of the markets, competitors, and the
position of the organization within the industry. Critical success factors required to compete are identified
and prioritized. Only then are individual business processes addressed. [15]

Participative business makeovers reject the "top- down" approach to reengineering in favor of a middle
ground, where the managers and workers come together to redesign business processes. Davenport
proposes that the BPR team be split into two parts, a design team made up of senior mangers, and an
execution team composed of people who will actually do the work. While Hammer and Champy
specifically warn against spending too much time studying the current process, this method advocates an
"ethnographic" approach where the designer studies and participates in the process to be redesigned. This
provides a deeper understanding of the process and demonstrates the team's commitment to the workers.
The team must be willing to sell a new process as though it were a process, expect and tolerate
modifications to the process, and change the reward system to motivate change. [5]
Critics of BPR argue that it is often used as a euphemism for "denominator reduction." One may view
productivity as a function of revenue or sales divided by the number of people required to generate the
revenue. BPR increases productivity by cutting costs but does nothing to increase the revenues or sales.
BPR is often undertaken by firms "playing catch up" to avoid disaster, but it does nothing to "regenerate
core strategies," which can lead to a real growth in revenues. [9] For example, Britain's manufacturing
output (the numerator) increased about ten percent between 1969 and 1991, while the number of employees
(the denominator) was cut in half. Although productivity skyrocketed, Britain surrendered global market
share. "One almost expected to pick up the Financial Times and find that Britain had finally matched
Japan's manufacturing productivity -- and the last remaining person at work in British manufacturing was
the most productive son of a gun on the planet." [1]

Other critics warn that although BPR may lead to a competitive advantage, it is destined to be short- lived.
When one company lowers its costs of doing business, other companies will immediately follow, and the
competitive advantage is lost. One writer warns that the reason why reengineers are so dangerous is that,
due to the obsession with bench-marking, "all firms in an industry start converging on a point of no
difference and thus of no profit." [14]

During the past decades the U.S., along with the rest of the world, has had to reassess the idea of
competitive advantage. The idea that competitive advantage lies in a nation's natural resources has been
abandoned. BPR, if left unchecked, seems to offer the dismal prospect that competitive advantage lies in
constant cost minimization. Foreward looking thinkers propose that competitive advantage for the new
century lies in a nation's workforce and infrastructure, and the ability to create and deliver new products
and services in the global marketplace.

Reengineering Recommendations

• BPR must be accompanied by strategic planning, which addresses leveraging IT as a competitive


tool.
• Place the customer at the center of the reengineering effort -- concentrate on reengineering
fragmented processes that lead to delays or other negative impacts on customer service.
• BPR must be "owned" throughout the organization, not driven by a group of outside consultants.
• Case teams must be comprised of both managers as well as those will actually do the work.
• The IT group should be an integral part of the reengineering team from the start.
• BPR must be sponsored by top executives, who are not about to leave or retire.
• BPR projects must have a timetable, ideally between three to six months, so that the organization
is not in a state of "limbo".
• BPR must not ignore corporate culture and must emphasize constant communication and
feedback.