Different types of change in e-business

Viewed at a large scale across an entire industry, change takes two forms. Incremental change involves relatively small adjustments required by changes in the businesss environ­ment (Chapter 4). Organizations scan their environment and make adjustments according to the introduction of new products from competitors, new laws or long-term changes in customer behaviour such as the increasing spending power of teenagers. Organizations also make changes to improve the efficiency of their processes. More significant discontinuous change or transformational change involves a major change in the business environment which changes the basis for competition. The opportunities and threats presented by wide­spread availability of low-cost Internet connectivity is a discontinuous change.

Organizational change mirrors that at industry level. It can occur on a continuous or incremental basis or on a discontinuous basis. The introduction of e-business requires organizations to manage both types of change.

Nadler et al. (1995) developed a useful way of classifying types of organizational change. This uses the concepts of incremental and discontinuous change together with anticipatory or reactive change. Anticipatory change occurs when an organization makes proactive changes in order to improve its efficiency or to create an advantage within the competitive environment. Reactive change is a direct response to a change in the external environment. The four different forms of organizational change identified by Nadler etal. (1995) are:

  • Tuning. This is an incremental form of change when there is no immediate need for change. It can be categorized as ‘doing things better’. New procedures or policies may be used to improve process efficiency, e.g. to reduce time to market or reduce costs of doing business. E-business involves ‘tuning’ as Internet technologies are applied to improve efficiency.
  • Adaptation. Also an incremental form of change, but in this case it is in response to an external threat or opportunity. It can also be categorized as ‘doing things better’. For example, a competitor may introduce a new product or there may be a merger between two rivals. A response is required, but it does not involve a significant change in the basis for competition. Managing e-business-related change also requires adaptation.
  • Re-orientation. A significant change or transformation to the organization is identified as a priority in the short-to-medium term. There is not an immediate need for change, but a significant change is anticipation of change. When IBM was one of the first organizations to introduce the concept of‘e-business’ in the mid-1990s, this was a re-orientation in the way it delivered its service (with an increased focus on consultancy services rather than hardware and software) which helped to spark a wider change in the way businesses worked. Successful adoption of e-business also requires re-orientation for many organizations.
  • Re-creation. In re-creation, the senior management team of an organization decides that a fundamental change to the way it operates is required to compete effectively. In the airline industry, established airlines have had to establish change programmes to respond to the low-cost carriers, for example by emphasizing service quality or introducing rival low-cost services. Both re-orientation and re-creation can be categorized as ‘doing things differ­ently’. E-business has also caused ‘re-creation’ in the airline industry, with the low-cost airlines now gaining more than 90% of bookings online. However, as we saw in Chapter 4, such dramatic change has not been caused in every industry.

1. Business process management

So, some forms of e-business initiative related to internal processes such as the introduction of a human resources management system are simply about improving efficiency – they involve incremental change. The practice of improving the efficiency of business processes with the assistance of information systems is an important activity in many organizations as is shown by Case Study 10.1. It can be seen that the label in vogue at the time of writing is ‘business process management’ (BPM). This encompasses different scales of improving business process that are introduced above.

The BPM concept has been defined by Gartner (2003) as follows:

BPM is a methodology, as well a collection of tools that enables enterprises to specify step-by-step business processes. Proper analysis and design of BPM flows require a strong understanding of the atomic business steps that must be performed to complete a business process. As BPM executes a business process, these atomic steps will often correspond to well-known business activities, such as checking credit ratings, updating customer accounts and checking inventory status. In effect, the BPM process flow is often just a sequence of well-known services, executed in a coordinated fashion.

Classic document workflow, which was BPM’s predecessor, focused on humans performing the services. Fueled by the power of application integration, BPM focuses on human and automated agents doing the work to deliver the services.

2. Discontinuous process change

Although BPM often refers to continuous, incremental change, other forms of information- management-related applications such as e-ticketing for an airline will be associated with discontinuous change – with low-cost airlines such as easyJet and Ryanair now selling over 80% of their tickets online this has had a fairly significant impact on the airline industry. The introduction of e-business applications or enterprise resource planning systems described in Chapter 2 are also often related to transformational change programmes. Three degrees of business-process change are shown in Table 10.2.

In the early-to-mid 1990s organization-wide transformational change was advocated under the label of‘business process re-engineering’ (BPR). It was popularized through the pronouncements of Hammer and Champy (1993) and Davenport (1993). The essence of BPR is the assertion that business processes, organizational structures, team structures and employee responsibilities can be fundamentally altered to improve business performance. Hammer and Champy (1993) defined BPR as:

the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed.

The key terms from this definition that encapsulate the BPR concept are:

  • Fundamental rethinking – re-engineering usually refers to changing of significant business processes such as customer service, sales order processing or manufacturing.
  • Radical redesign – re-engineering is not involved with minor, incremental change or automation of existing ways of working. It involves a complete rethinking about the way business processes operate.
  • Dramatic improvements – the aim of BPR is to achieve improvements measured in tens or hundreds of per cent. With automation of existing processes only single-figure improve­ments may be possible.
  • Critical contemporary measures of performance – this point refers to the importance of measuring how well the processes operate in terms of the four important measures of cost, quality, service and speed.

Willcocks and Smith (1995) characterize the typical changes that arise in an organization with process innovation as:

  • work units changing from functional departments to process teams;
  • jobs changing from simple tasks to multi-dimensional work;
  • people’s roles changing from controlled to empowered;
  • focus of performance changing from activities to results;
  • values changing from protective to productive.

In Re-engineering the Corporation (1993) Hammer and Champy have a chapter giving ex­amples of how IS can act as a catalyst for change (disruptive technologies). These technologies are familiar from applications of e-business such as those described in Chapter 2 and include tracking technology, decision support tools, telecommunications networks, teleconferencing and shared databases. Hammer and Champy label these as ‘disruptive tech­nologies’ which can force companies to reconsider their processes and find new ways of operating. It is arguable though whether technology is commonly disruptive in the sense of achieving major changes such as those in the re-orientation and re-creation categories.

Many re-engineering projects were launched in the 1990s and failed due to their am­bitious scale and the problems of managing large information systems projects. Furthermore, BPR was also often linked to downsizing in many organizations, leading to an outflow of staff and knowledge from businesses. As a result BPR as a concept has fallen out of favour and more caution in achieving change is advocated.

Less radical approaches to organizational transformation are referred to as ‘business process improvement’ (BPI) or by Davenport (1993) as ‘business process innovation’. Taking the example of a major e-business initiative for supply chain management, an organ­ization would have to decide on the scope of change. For instance, do all supply chain activities need to be revised simultaneously or can certain activities such as procurement or outbound logistics be targeted initially? Modern thinking would suggest that the latter approach is preferable.

If a less radical approach is adopted, care should be taken not to fall into the trap of simply using technology to automate existing processes which are sub-optimal – in plain words, using information technology ‘to do bad things faster’. This approach of using tech­nology to support existing procedures and practices is known as ‘business process automation’ (BPA). Although benefits can be achieved through this approach, the improve­ments may not be sufficient to generate a return on investment.

A staged approach to the introduction of BPR has been suggested by Davenport (1993). This can also be applied to e-business change. He suggests the following stages that can be applied to e-business:

  • Identify the process for innovation – these are the major business processes from the organization’s value chain which add most to the value for the customer or achieve the largest efficiency benefits for the company. Examples include customer relationship management, logistics and procurement.
  • Identify the change levers – these can encourage and help achieve change. The main change levers are innovative technology and, as we have seen, the organization’s culture and structure.
  • Develop the process vision – this involves communication of the reasons for changes and what can be achieved in order to help achieve buy-in throughout the organization.
  • Understand the existing processes – current business processes are documented. This allows the performance of existing business processes to be benchmarked and so provides a means for measuring the extent to which a re-engineered process has improved business performance.
  • Design and prototype the new process – the vision is translated into practical new processes which the organization is able to operate. Prototyping the new process operates on two levels. First, simulation and modelling tools can be used to check the logical operation of the process. Second, assuming that the simulation model shows no significant problems, the new process can be given a full operational trial. Needless to say, the implementation must be handled sensitively if it is to be accepted by all parties.

Cope and Waddell (2001) have assessed approaches managers in manufacturing industry in Australia use to introduce e-commerce services. They tested for different stages of transfor­mation from fine-tuning through incremental adjustment, modular transformation and corporate transformation. They found that in this particular industry at the time of the survey, a relatively conservative approach of‘fine-tuning’ was predominant.

Source: Dave Chaffey (2010), E-Business and E-Commerce Management: Strategy, Implementation and Practice, Prentice Hall (4th Edition).

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