Information Technology and Business Process Reengineering - Assignment Example

INFORMATION TECHNOLOGY AND BUSINESS PROCESS REENGINEERING Information Technology and Business Process Reengineering Introduction Since the early 1990s, the concept of Business Process Reengineering (BPR) has received much attention from the scholarly community. The classic definition of BPR belongs to Hammer (1990) whom defined it as "the fundamental rethinking and radical redesign of business processes to bring about dramatic improvements in performance" (p.106). Several variations of this basic definition can be found in the literature, but all of them highlight the most essential feature of BPR, namely radical redesign of organisational processes. The overwhelming interest expressed by the researchers and practitioners toward this concept coincided with the increasing confrontation in the market, rapidly changing business environment, high churn rates and constantly strengthening competition (Creelman, 1998: 319). Failure of the traditional approaches to effectively address the new conditions led to emergence of innovative perspectives on organizational performance and change with BPR being perhaps the most popular among them. Another distinct feature of the business environment in the early 1990s was the dramatic rise in amounts spent by businesses on information technology (IT), and the linkage between IT and BPR soon became the most popular object of research. Some studies published throughout the first half of 1990s estimated "over half of all reengineering efforts are initiated because of a perceived information technology opportunity" (Caldwell, 1994: 50), and pronounced IT to be the key enabler of effective BRP (Weicher et al, 1995). Although the linkage between IT and BPR has been confirmed repeatedly, there is no clarity as to the aspects of this linkage. The variety of opinions and views expressed in the literature is astonishing ranging from denial of the enabling role of IT in BPR to claims that IT is, in fact, the only enabler of BPR. The below overview seeks to summarise the existing conceptions about the relationship between IT and BPR in order to understand the merit of Information Technology as an enabler to Business Process Re-engineering Main Body In 1990, Michael Hammer published an article in the Harvard Business Review, in which he claimed that the major challenge for managers is to obliterate non-value adding work, rather than using technology for automating it (Hammer 1990). The article was perhaps the first attempt to draw attention of the scholarly community to the problem of information technology (IT) role in BPR. Hammer implicitly accused the management of contemporary businesses of the wrong application of IT which has been used mostly for automating existing practices than rather than revising the obsolete non-value adding ones. Hammer (1990) claims that the potential of IT makes it the most essential enabler of BPR in modern environment, but in order to fulfil the enabling function it must be used as a tool to challenge the traditional conceptions of the business processes that had emerged in the past before the advent and expansion the computer and communications technology. This will result in recognition and breaking away "from the outdated rules and fundamental assumptions underlying operations... These rules of work design are based on assumptions about technology, people, and organizational goals that no longer hold" (p.105). The elements of redesign models described in the early BRP literature illustrate why modern IT plays an important role in the reengineering concept. Hammer (1990) identifies the following basic principles of reengineering: (a) Organization around process outcomes, not tasks; (b) Those who use the output of the process must perform the process; (c) Subsume information processing work into the real work that produces the information; (d) Treat geographically dispersed resources as though they were centralized; (e) Link parallel activities instead of integrating their results; (f) Put the decision point where the work is performed, and build control into the process; (g) Capture information once and at the source. Each element of this model highlights the relationship between IT and BPR suggesting that IT is not an automating or mechanizing force but rather a tool to fundamentally redesign the business practices. A similar set of views on the role of IT in BPR efforts is also expressed in the publications of Davenport & Short (1990), Davenport (1993; 1995) McDonald (1993), Hammer & Champy (1993), and many other renowned scholars. Consequently, since the early 1990s on, the practitioners and researchers have increasingly considered IT-related factors as a critically important element of effective BPR though opinions on how exactly IT enables and enhances the reengineering process vary significantly. The relationship between BPR and IT is not one-sided with IT being the enabler of reengineering but reciprocal: the capabilities provided by IT support business processes in the organisation while business processes must be in terms of the provided capabilities. Davenport & Short (1990) refer to this broad reciprocal view of BPR and IT as the 'new industrial engineering' (p.11). This reciprocity is particularly essential because modern systems analysis facilitates articulating the 'as-is' business model, and the redesigned business model clearly determines the impact of BPR on existing information infrastructure. If this cycle of reciprocity is in place, IT functions as a highly effective tool of redesigning, upgrading or replacing certain elements/systems in order to improve effectiveness of BPR (La Rock, 2003). Yet there is no agreement among the scholars about the balance within this relationship. Some argue that the process of developing a BPR strategy must not rely upon 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" (Davenport, 1995: 24). Once the strategy has been developed, IT can greatly facilitate the reengineering analysis and design process. Thus, CASE tools and visualization software can be used to create process maps; costing software allows to perform accurate activity-based cost analysis; comprehensive and easily accessible databases facilitate processing and tracking customer complaints; networking and e-mail contribute to much improved coordination and communication across organizational and geographical barriers (Davenport, 1995). McDonald (1993) also argues IT can best enhance a company's position by supporting a business-thrust strategy which must be detailed and clearly formulated by the management. The strategy should exactly define and describe the role of IT in reengineering business processes and infrastructures. The key issue is the process of integration between business strategy and IT strategy while the effectiveness of using IT in BPR depends upon the following elements: identification of information resource needs, deriving the IT infrastructure strategy from the business strategy, examining the IT infrastructure strategy against the BPR strategy, the active involvement of management in the process of IT infrastructure planning and IT managers in business planning, and by the degree of synchronization in formulating the two strategies (La Rock, 2003). If these elements are carefully considered, IT plays the enabling role in the reengineering process. Representative of the second major stance argue that a technology strategy must be designed prior to any reengineering schemes. The Starmaker Inc. a large American communications/entertainment company successfully implemented this approach in the early 1990s. The chief information officer convinced the management to address the role of IT in the first turn, and the company designed a strategy which relied primarily upon technology to regain the leading position in the industry. Electronic product catalogues, sophisticated electronic data links, digital video, customer interface standards, and large databases were the key factors that helped achieve the goal while the subsequent cost savings from BRP fully compensated for the expenditures incurred by the new technology (Berman, 1994). Despite variety of views on the linkage between reengineering and information technology, the benefits of using IT have been described in great detail. Davenport & Short (1990) identify the following features that highlight the enabling role that IT can play in BRP: Transactional, Geographical, Automatical, Analytical, Informational, Sequential, Knowledge Management, Tracking, and Disintermediation. These features rely upon credible body of theoretical knowledge and practical research. Thus, in 1996, Caterpillar Inc. (Peoria, IL) introduced BPR into one business unit, Mossville Engine Center (MEC). This experiment resulted in US $10 and $20 million of direct savings. The analysts of Caterpillar associated the success with adoption and implementation of the Business Process Simplification and Improvement (BPS/I), a systematic methodology underlying the company's BPR strategy. Information technology was an essential element of this methodology improving the process of data transformation, information flow and transaction and facilitating communication through each stage of the BPS/I (Paper and Dickinson, 2001). Improved coordination across the organisation is described as perhaps the most evident and beneficial promise of IT in regard to BPR. Specifically, they claim IT provides the most powerful tools for reducing the expenses for coordination (Davenport & Short, 1990). Thus, Teng et al (1994) lists two concepts which play vital role in BPR - degree of mediation and degree of collaboration - claiming that information technology is instrumental in Reducing the Degree of Mediation and Enhancing the Degree of Collaboration (Teng et al, 1994). The capabilities provided by IT have already led and will continue to lead many organisations to create new structures paying particular attention to the effective coordination and collaboration, which will result in introduction of such types of coordination and collaboration were not feasible any time in the past (Malhotra, 1998). The new opportunities, the their turn, will contribute to enabling more effective and seamless reengineering of business processes in the organisation. Gunasekarana and Nath (1997) highlight the role of information technology in BPR and the type of information infrastructure required to successfully redesign business processes in manufacturing industry. The implementation of BPR strategy using new application of IT improved such important aspects of the process as flexibility, team-orientation, and cross-functional co-ordinated management. The continuing development of IT not only "breaks down the communications barriers between corporate functions, suppliers, and even customers" (Davenport, 1995: 24), but also has vast implications for traditional knowledge management practices. The disruptive potential of IT makes it possible to rapidly share and distribute information and make is accessible from remote places at no time. This new practice of knowledge management allows organisations to take advantage of the opportunities available to both centralized and decentralized businesses and is vitally important for effective BPR (Davenport, 1995). Hammer & Champy (1993) list several 'disruptive technologies' that challenge the traditional conception of the existing business practices, including knowledge management, tracking, information processing and other: 1. Shared databases: make information and data accessible from different places; 2. Expert systems: generalists to perform specialist tasks; 3. Telecommunication networks: benefits of both centralized and decentralized organisation; 4. Decision-support tools: standardization and facilitation of the decision-making process; 5. Wireless data communication and portable computers: reducing the personnel's dependence on office conditions; 6. Interactive technologies: immediate direct contact with potential customers/suppliers; 7. Automatic identification and tracking: free availability of the items needed; 8. High performance computing: rapid planning, analysis, and revisioning. Despite the plethora of literature that adopts a positive stance toward the impact of IT on BPR, some authors express scepticism about the effectiveness of IT as enabler of BRP. Such opinion is based on the fact that the vast investment in IT in many cases had only minor impact on productivity (Kehoe, 1994; Weicher et al, 1995) Therefore, the view on IT as a disabler "never used to challenge why things are done in a company, but instead justify the way they are done" (Kehoe, 1994: 8), rather than enabler of BPR should be taken into consideration too. However, many of the reported failures of IT to play the enabling role in business reengineering probably occurred due to misuse of the technological capabilities. Failures are typically reported for those cases when the company's management perceived the benefits provided by the use of IT through the lens of the obsolete ineffective practices. In the highly illustrative case of IBM Credit implementation of the computerised system as a part of BPR seriously reduced the time required to move information from one department to another. But soon it turned out that the queuing time in each department increased which resulted in zero improvement of the overall process (La Rock, 2003). In this case BPR failed because the management employed IT only to computerise the existing practices while the structure remained unchanged. The performance breakthrough, which occurred in IBM Credit after the management changed the process seriously, only supports this notion: this time the company employed the sophisticated computer system to challenge the practice which required each request to be processed by different experts. Conclusion The essence of BPR is to achieve profound changes in all aspects of business and in the impact of IT on feasibility of these changes is vital. IT acts as an enabler of BPR through the disruptive technologies and highly sophisticated tools which facilitate collection, analysis and sharing of information, effectively structure knowledge base of the organisation, improve the level of automation, etc. Although in many cases dramatic improvements promised by advocates of BPR failed to materialize in many organizations, the current level of research lacks explanatory power to clarify the reasons underlying the failures. However, incorrect use of IT potential might be responsible for some of the failures when Hammer's (1990) eminent message 'don't automate, obliterate' was sometimes replaced by the opposite 'don't obliterate, automate'. Therefore, the actual potential of IT may in some cases be even less important than the level of knowledge about it in those whom plan and implement BPR in the organisation. Perception of IT as both an important tool in BPR and a long-term strategy is the key to successful functioning of IT as the enabler of BPR. References Berman, S. (1994). 'Strategic Direction: Don't Reengineer Without It; Scanning the Horizon for Turbulence'. Planning Review, 11, pp.18-24 Caldwell, B. (1994). 'Missteps, Miscues - Business Reengineering Failures', InformationWeek, June 20 Creelmann, J. (1998). Building and implementing a balanced scorecard, London Davenport, T.H. (1993) Process Innovation: Reengineering Work through Information Technology, Harvard Business School Press, Boston Davenport, T.H. (1995). 'Will Participative Makeovers of Business Processes Succeed Where Reengineering Failed' Planning Review, 1, pp.24-29 Davenport, T.H. & Short, J.E. (1990). 'The New Industrial Engineering: Information Technology and Business Process Redesign', Sloan Management Review, 5-7, pp. 11-27 Gunasekarana, A., & Nath, B. (1997). 'The role of information technology in business process reengineering', International Journal of Production Economics Vol. 50(2-3), pp.91-104 Hammer, M. (1990). 'Reengineering Work: Don't automate, obliterate', Harvard Business Review, 7-8, pp 104-112 Hammer, M., and Champy, J. (1993). Reengineering the Corporation: A Manifesto for Business Revolution, Harper Business Kehoe, L. (1994). 'Down in the Dirt to Clean Up IBM/ Louise Kehoe Offers a Contrasting View of Business Process Re-engineering', Financial Times, December 5, p.8 La Rock, N. (2003). Examining the Relationship between Business Process Reengineering and Information Technology, A Graduate Research Report Submitted for INSS 690 in Partial Fulfillment of the Requirements for the Degree of Master of Science: Management Information Systems. Retrieved March 7, 2007 from http://faculty.ed.umuc.edu/meinkej/inss690/larock.pdf. Malhotra, Y. (1998). 'Business Process Redesign: An Overview', IEEE Engineering Management Review, Vol. 26(3) [available online at http://www.kmbook.com/bpr.htm] McDonald, H. (1993). 'Business strategy development, alignment, and redesign'. In: Scott-Morton, M. (Ed.), The Corporation of the 1990s: Information Technology and Organizational Transformation. New York, NY: Oxford University Press. Paper, D, and Dickinson, S. (2001). A Comprehensive Process Improvement Methodology: Experiences at Caterpillar's Mossville Engine Center (MEC). Utah State University; Caterpillar, Inc. [available online at http://www.csa.com/htbin/igp.cgit=988293405&s=6e613fe25bbaa4d0bea2cd5a9c9c4343&pdf=IT5566.pdf] Teng, J.T.C.; Grover, V.; and Fiedler, K. (1994). 'Business process reengineering: charting a strategic path for the information age', California Management Review, 36, 3, pp.9-31. Weicher, M.; W. Chu; W.C. Lin; V. Le; and D. Yu. (1995). Business Process Reengineering Analysis and Recommendations. Baruch College. Retrieved March 6, 2007 from http://www.netlib.com/bpr1.htm Read More