Business Process Redesign

Like Cameron International, described in the chapter-opening case, many busi­nesses today are trying to use information technology to improve their business processes. Some of these systems entail incremental process change, but others require more far-reaching redesign of business processes. To deal with these changes, organizations are turning to business process management. Business process management (BPM) provides a variety of tools and methodolo­gies to analyze existing processes, design new processes, and optimize those processes. BPM is never concluded because process improvement requires con­tinual change. Companies practicing business process management go through the following steps:

1. Identify processes for change: One of the most important strategic decisions that a firm can make is not deciding how to use computers to improve business processes but understanding what business processes need improvement. When systems are used to strengthen the wrong busi­ness model or business processes, the business can become more efficient at doing what it should not do. As a result, the firm becomes vulnerable to competitors who may have discovered the right business model. Consider­able time and cost may also be spent improving business processes that have little impact on overall firm performance and revenue. Managers need to determine what business processes are the most important and how improv­ing these processes will help business performance.
2. Analyze existing processes: Existing business processes should be modeled and documented, noting inputs, outputs, resources, and the sequence of ac­tivities. The process design team identifies redundant steps, paper-intensive tasks, bottlenecks, and other inefficiencies.
3. Design the new process: Once the existing process is mapped and mea­sured in terms of time and cost, the process design team will try to improve the process by designing a new one. A new streamlined “to-be” process will be documented and modeled for comparison with the old process.
4. Implement the new process: Once the new process has been thoroughly modeled and analyzed, it must be translated into a new set of procedures and work rules. New information systems or enhancements to existing systems may have to be implemented to support the redesigned process.

The new process and supporting systems are rolled out into the business organization. As the business starts using this process, problems are uncovered and addressed. Employees working with the process may recom­mend improvements.

5. Continuous measurement: Once a process has been implemented and optimized, it needs to be continually measured. Why? Processes may deterio­rate over time as employees fall back on old methods, or they may lose their effectiveness if the business experiences other changes.

Figure 13.2 illustrates the “as-is” process for purchasing a book from a physi­cal bookstore. Consider what happens when a customer visits a physical book­store and searches its shelves for a book. If he or she finds the book, that person takes it to the checkout counter and pays for it via credit card, cash, or check. If the customer is unable to locate the book, he or she must ask a bookstore clerk to search the shelves or check the bookstore’s inventory records to see if it is in stock. If the clerk finds the book, the customer purchases it and leaves. If the book is not available locally, the clerk inquires about ordering it for the customer from the bookstore’s warehouse or from the book’s distributor or pub­lisher. Once the ordered book arrives at the bookstore, a bookstore employee telephones the customer with this information. The customer would have to go to the bookstore again to pick up the book and pay for it. If the bookstore is un­able to order the book for the customer, the customer would have to try another bookstore. You can see that this process has many steps and might require the customer to make multiple trips to the bookstore.

Figure 13.3 illustrates how the book-purchasing process can be redesigned by taking advantage of the Internet. The customer accesses an online book­store over the Internet from his or her computer. He or she searches the book­store’s online catalog for the book he or she wants. If the book is available, the customer orders the book online, supplying credit card and shipping address in­formation, and the book is delivered to the customer’s home. If the online book­store does not carry the book, the customer selects another online bookstore and searches for the book again. This process has far fewer steps than those for purchasing the book in a physical bookstore, requires much less effort on the part of the customer, and requires less sales staff for customer service. The new process is therefore much more efficient and time-saving.

The new process design needs to be justified by showing how much it re­duces time and cost or enhances customer service and value. Management first measures the time and cost of the existing process as a baseline. In our example, the time required for purchasing a book from a physical bookstore might range from 15 minutes (if the customer immediately finds what he or she wants) to 30 minutes if the book is in stock but has to be located by sales staff. If the book has to be ordered from another source, the process might take one or two weeks and another trip to the bookstore for the customer. If the customer lives far away from the bookstore, the time to travel to the bookstore would have to be factored in. The bookstore will have to pay the costs for maintaining a physi­cal store and keeping the book in stock, for sales staff on site, and for shipment costs if the book has to be obtained from another location.

The new process for purchasing a book online might only take several min­utes, although the customer might have to wait several days or a week to have the book delivered and will have to pay a shipping charge. But the customer saves time and money by not having to travel to the bookstore or make addi­tional visits to pick up the book. Booksellers’ costs are lower because they do not have to pay for a physical store location or for local inventory.

Although many business process improvements are incremental and ongo­ing, there are occasions when more radical change must take place. Our ex­ample of a physical bookstore redesigning the book-purchasing process so that it can be carried out online is an example of this type of radical, far-reaching change. When properly implemented, business process redesign produces dra­matic gains in productivity and efficiency and may even change the way the business is run. In some instances, it drives a “paradigm shift” that transforms the nature of the business itself.

This actually happened in book retailing when Amazon challenged tradi­tional physical bookstores with its online retail model and Kindle e-book reader. By radically rethinking the way a book can be published, purchased, and sold, Amazon and other online bookstores have achieved remarkable efficiencies, cost reductions, and a whole new way of doing business.

BPM poses challenges. Executives report that the largest single barrier to successful business process change is organizational culture. Employees do not like unfamiliar routines and often try to resist change. This is especially true of projects where organizational changes are very ambitious and far-reaching. Managing change is neither simple nor intuitive, and companies committed to extensive process improvement need a good change management strategy (see Chapter 14).

Tools for Business Process Management

Many software firms provide tools for various aspects of BPM, including IBM, Oracle, and TIBCO. These tools help businesses identify and document pro­cesses requiring improvement, create models of improved processes, capture and enforce business rules for performing processes, and integrate existing systems to support new or redesigned processes. BPM software tools also pro­vide analytics for verifying that process performance has been improved and for measuring the impact of process changes on key business performance indicators.

For example, American National Insurance Company, which offers life insur­ance, medical insurance, property casualty insurance, and investment services, used Pegasystems BPM software to streamline customer service processes across four business groups. The software built rules to guide customer service repre­sentatives through a single view of a customer’s information that was maintained in multiple systems. By eliminating the need to juggle multiple applications si­multaneously to handle customer and agent requests, the improved process in­creased customer service representative workload capacity by 192 percent.

Source: Laudon Kenneth C., Laudon Jane Price (2020), Management Information Systems: Managing the Digital Firm, Pearson; 16^th edition.