Final Business Process Reengineering

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  • 7/28/2019 Final Business Process Reengineering.



    Sr. No. Topic Page No.

    1 Introduction 2

    2 History 2

    3 Definition of BPR 3

    4 Concept of BPR 4

    5 How does BPR Differ from TQM 6

    6 Relationship Between BPR & IT 7

    7 Impact Of BPR on Organizational Performance 8

    8 How To Implement a BPR Project 8

    9 Steps Involved in BPR 9

    10 Benefits of BPR 10

    11 Application of BPR 11

    12 Advantages of BPR 16

    13 Risks In BPR 18

    14 Myths About BPR 20

    15 Success Stories 21

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    1. Introduction

    Business process reengineering (BPR) began as a private sector technique to

    help organizations fundamentally rethink how they do their work in order to

    dramatically improve customer service, cut operational costs, and become world-class competitors. Leading organizations are becoming bolder in using this

    technology to support innovative business processes, rather than refining current

    ways of doing work.

    Business process reengineering (often referred to by the acronym BPR) is the

    main way in which organizations become more efficient and modernize. Business

    process reengineering transforms an organization in ways that directly affect


    Business process reengineering is one approach for redesigning the way

    work is done to better support the organization's mission and reduce costs. Hence,

    Reengineering starts with a high-level assessment of the organization's mission,

    strategic goals, and customer needs.

    (Aim/Purpose/Objective of BPR): Reengineering identifies, analyzes, and

    redesigns an organization's core business processes with the aim of achieving

    dramatic improvements in critical performance measures, such as cost, quality,

    service, and speed.

    2. History

    BPR was first introduced to the business world by Frederick Taylor when he

    published his article The Principles of Scientific Managementin the 1900s. Following

    on from the earlier ideas of Time and Motion Studies pioneered by Frank & Lillian

    Gilbreth, Scientific Management was the first step to the introduction of BPR which

    turned out to be unsuccessful due to the many issues which were not resolved.

    During Taylors time, not many knowledgable workers were employed in the

    manufacturing workforce, which at the time was the main wealth generator. ScientificManagement involved breaking the manufacturing process down to a thoughtless

    cycle of simple sequences which were to be carried out in the least amount of time

    possible with the minimum amount of effort. This often raised the factory workers

    salaries but also cause the workers to work just as hard in back-breaking manual

    labour. This practice of improving efficiency in manufacturing often raised the

    concern of dehumanization of the workplace

    The Scientific Management method gave birth to Total Quality Management in

    Japan after World War II, which eliminated many of the discrepancies that the
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    previous method of improving the business structure. Total Quality Management's

    main goal is to improve the manufacturing operations.

    Six Sigma and Total Quality Management (TQM) are terms often confused with

    BPR, and are not its replacements. All are change initiatives, with the main

    difference being BPR is focused on radical, "big bang" change, and Six Sigma and

    TQM both focused on continuous, incremental improvement.

    3. Definition Of BPR

    The definition given by Hammer & Champy (1993), who have perhaps done the most

    to popularize the concept within the ranks of western management, is given:

    "Reengineering is 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".

    In this definition you can find four important key words:

    fundamental: "Why do we do what we do?" and "Why do we do it the way we

    do?" Reengineering ignores what is and concentrates on what should be.

    radical: Disregarding all existing structures and procedures and inventing

    completely new ways of accomplishing work

    dramatic: Used for quantum leaps in performance, not used for small jumps

    process: the most important key word, Collection ofactivities taking multiple

    inputs to create an output that is of value to the customer

    Davenport (1993) a famous BPR theorist emphasised the term process innovation,

    in his defination and he described it as encompasses the envisioning of new work

    strategies, the actual process design activity, and the implementation of the change

    in all its complex technological, human, and organizational dimensions.

    At this juncture, it is relevant to emphasize the term business process. Davenport

    and Short (1990) defined business process as a set of logically related tasks

    performed to achieve defined business actions.

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    4. Concept of Business Process Reengineering

    The reengineering concepts involve four dimensions that are stated below:

    a) Innovative Rethinking:

    This is a process that is itself utterly dependent on creativity, inspiration and

    old-fashioned luck. Drucker (1993) argues that this paradox is apparent only not

    real most of what happens in successful innovations is not the happy

    occurrences of a blinding flash of insight but rather, the careful implementation of

    unspectacular but systematic management discipline.

    b) Process Function:

    Taking a systematic perspective, Hammer and Champy (1993) describes

    process functions as a collection of activities that take one or more kinds of input

    and creates an output that is of value to the customer. Typical process of this

    includes ordering of organizational structure, manufacturing, production,

    development, delivery and invoicing.

    c) Radical change:

    In radical change, a key business process is the transformation of

    organizational element; it is essential to an organization survival. Change leads tonew ideas, technology, innovation and improvement. Therefore, it is important

    that organizations recognize the need for change and learns to manage the

    process effectively (Pamela et al,1995).

    d) Organizational Development and Performance:

    It takes a look at the firms level of efficiency and way to improve its current

    activity level in order to meet up to standards and survive the competitivepressure.

    One way to judge the performance of an organization is to compare it with other

    unit within the company. Comparison with outsiders however can highlight the best

    industrial practices and promote their adoption. This technique is commonly term

    bench making (Roberts, 1994).

    Johansson et al define BPR by relating it to some other contemporary initiatives:

    "Business Processing Reengineering (BPR), although a close relative [of JIT& TQM], seeks radical rather than merely continuous improvement. It escalates the

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    efforts of JIT and TQM to make process orientation a strategic tool and a core

    competence of the organization, BPR concentrates on core business processes, and

    used the specific techniques within JIT and TQM 'toolboxes' as enablers, while

    broadcasting the process vision."

    These definitions, from some of the pioneer writers and practitioners, are

    sufficient to pick out the common threads. One key aspect of BPR is that it defines

    completely new and radical ways of how an organisation undertakes its activities.

    Often they will innovative. Because these new ways cut right across an organisation,

    and even outside it, affecting all parts they are seen as revolutionary. BPR is at

    ahigh level within an organisation and driven by external and strategic demands. It

    should be differentiated from process improvements, which is defined

    as incremental changes to existing processes. Successful implementations of BPR

    bring order of magnitude improvements in business benefits.

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    5. How Does BPR Differ from TQM?

    In recent years, increased attention to business processes is largely due to the

    TQM (Total Quality Movement). They conclude that TQM and BPR share a cross-

    functional orientation. Davenport observed that quality specialists tend to focus onincremental change and gradual improvement of processes, while proponents of

    reengineering often seek radical redesign and drastic improvement of processes.

    Davenport (1993) notes that Quality management, often referred to as total

    quality management (TQM) or continuous improvement, refers to programs and

    initiatives that emphasize incremental improvement in work processes and outputs

    over an open-ended period of time. In contrast, Reengineering, also known as

    business process redesign or process innovation, refers to discrete initiatives that

    are intended to achieve radically redesigned and improved work processes in a

    bounded time frame. Contrast between the two is provided by Davenport (1993):

    Process Improvement (TQM) versus Process Innovation (BPR)

    From Davenport (1993)

    Improvement Innovation

    Level of Change Incremental Radical

    Starting Point Existing Process Clean SlateFrequency of Change One-time/Continuous One-time

    Time Required Short Long

    Participation Bottom-Up Top-Down

    Typical Scope Narrow, within functions Broad, cross-functional

    Risk Moderate High

    Primary Enabler Statistical Control Information Technology

    Type of Change Cultural Cultural/Structural

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    6. Relationship between Business Process Reengineering (BPR)

    and Information Technology (IT)

    Hammer (1990) considers Information Technology (IT) as the key factor in BPR

    for organisation that wants to witness a radical change in its operation. He

    prescribes the use of IT to challenge the assumption inherent in the work processes

    that have existed since long before the advent of modern computer and

    communications technology. He argues that at the heart of reengineering is the

    notion of discontinuous thinking or recognizing 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. Aremu and Saka (2006) argued that Information technology (IT)

    is a strategic resource that facilitates major changes in competitive behaviour,

    marketing and customer service. In essence, IT enables a firm to achieve

    competitive advantages.

    Davenport and Short (1990) further posted that Business Process Reengineering

    requires taking a broader view of both Information Technology (IT) and business

    activity and of the relationships

    between them. IT should be viewed as more than an automating or mechanizing

    force; to fundamentally reshape the way business is done.

    Information technology (IT) and Business Process Reengineering (BPR) have

    recursive relationship. IT capabilities should support business processes and

    business should be in terms of thecapabilities IT can provide. Davenport and Short (1990) refer to this broadened,

    recursive view of IT and BPR as the new industrial engineering business process

    represent a new approach to coordination

    across the firm, IT promises and its ultimate impact is to be the most powerful tool for

    reducing cost of coordination (Davenport and Short, 1990).

    Davenport and Short (1990) outline the following capabilities that reflect the roles

    that it can play in Business Process Reengineering (BPR):



    Knowledge management





    Tracking and


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    In the 1990s, Michael Hammer and James Champy introduced their book

    reengineering the Corporation, which gave birth to the term business process

    reengineering. Michael Hammer a former professor of computer science at the

    Massachusetts Institute of Technology (MIT), once said, Serving thecustomeris not

    a mechanical act but one that provides an opportunity for fulfillment and meaning

    Hammer claimed that: Most of the work being done does not add any value for

    customers, and this work should be removed, not accelerated through automation.

    Instead, companies should reconsider their processes in order to maximize customer

    value, while minimizing the consumption of resources required for delivering their

    product or service. A similar idea was advocated by Thomas H. Davenport and J.

    Short in 1990[3]

    7. The impact of BPR on organizational performance

    The two cornerstones of any organization are the people and the processes. If

    individuals are motivated and working hard, yet the business processes are

    cumbersome and non-essential activities remain, organizational performance will be

    poor. Business Process Reengineering is the key to transforming how people work.

    What appear to be minor changes in processes can have dramatic effects on cash

    flow, service delivery and customer satisfaction. Even the act of documenting

    business processes alone will typically improve organizational efficiency by 10%.

    8. How to implement a BPR project

    The best way to map and improve the organization's procedures is to take a top

    down approach, and not undertake a project in isolation. That means:

    1. Starting with mission statements that define the purpose of the organization

    and describe what sets it apart from others in its sector or industry.

    2. Producing vision statements which define where the organization is going, to

    provide a clear picture of the desired future position.

    3. Build these into a clear business strategy thereby deriving the project


    4. Defining behaviours that will enable the organization to achieve its' aims.

    5. Producing key performance measures to track progress.

    6. Relating efficiency improvements to the culture of the organization

    7. Identifying initiatives that will improve performance.

    Once these building blocks are in place, the BPR exercise can begin.
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    9. Steps Involved in Business Process Reengineering

    Davenport and Short (1990) prescribe a five-step approach to Business Process

    Reengineering. These are:

    1) Develop the business vision and process objectives: Business Process

    Reengineering is driving by a business vision which implies specific business

    objectives such as cost reduction, time reduction, output quality improvement,

    quality of work life.

    2) Identify the processes to be redesigned: Most firms use high- impacts

    approach which focuses and most important processes or those that conflict most

    with the business vision. Few number of firms use the exhaustive approach that

    attempts to identify all the processes within an organization and the prioritizethem in order to redesigned urgency.

    3) Understand and measure the existing process: For avoiding the repeating of

    old mistake and for providing a baseline for future improvements.

    4) Identity information technology (IT) levels: Awareness of IT capabilities can

    and should influence process. This is because IT is a sine qua non to the

    business process reengineering.

    5) Design and Build a prototype of New Process: The actual design should notbe viewed as the end of the BPR process. Rather, it should be viewed as a

    prototype, aligns the BPR approach with quick delivery of results and the

    involvement and satisfaction of customers.

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    10. Expected Results / Benefits

    The expected results for a company that implements business process

    reengineering are the following:

    Reallocation of jobs and processes so as to be combined into fewer, to be

    executed in natural order, simultaneously and by the least possible number of


    Reorganization of the company's structure (downsizing) and employee


    Jobs and processes become flexible so as to be executed according to the needs

    of each case, company's and customer's need's

    The above changes will bring reductions of costs in the company, better quality

    (as far as price, promptness of delivery and offerings of related services) in the

    products and services provided to the customers. It can produce huge initial savings

    where a business is struggling and often has the affect of turning around an

    unprofitable operation. Also, it leaves the business with a fully documented model of

    the operation, which is invaluable if embarking on a quality programme.

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    11. Application Of BPR

    A. Where the technique has being applied

    Many public and private sector organizations and SMEs Word-wide hadundergone major reengineering efforts. The technique was applied first to

    multinational cooperations, such as IBM, AT&T, SONY, GENERAL ELECTRIC,

    WALL MART, HEWLLET PACKARD, KRAFT FOODS having as a result major

    downsizing in their organizational structures.

    Later, the banking sector began to reengineer with a great degree of success


    BPR is also being used to change the organizational structure of publicservices. First the government cabinet of Egypt reengineered its processes along

    with many Municipals in Europe. As the technique was becoming well known to

    the business sector smaller enterprises were using the technique for

    organizational upgrade. Today most SMEs are investigating the re-engineering

    technique and a lot of them are applying re-engineering, since the technique is

    applicable and affordable to almost all SMEs. This is proved by the increasing

    demand for BPR consultants in Greece and worldwide. Most of the times re-

    engineering is applied as a "must" when innovative IT tools are introduced to

    SMEs. Tools such as SAP, BAAN and various ERP systems that promote the

    horizontal organizational structure are the vehicles for re-engineering the

    organizational structure in order to adapt to the horizontal operational

    subsystems of the tools. For the first time we can say " that IT does not only

    support management, IT changes the organizational structure". Today 120

    businesses from small to medium size in Greece and thousands in Europe have

    installed such types of IT systems reengineering also their organizational


    Business processes are characterized by three elements:

    The inputs, (data such customer inquiries or materials).

    The processing of the data or materials (which usually go through several

    stages and may necessary stops that turns out to be time and money

    consuming) and,

    The outcome (the delivery of the expected result). The problematic part of

    the process is processing. Business process reengineering mainly

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    intervenes in the processing part, which is reengineered in order to

    become less time and money consuming.

    An example of BPR application:

    A typical problem with processes in vertical organizational structure is that

    customers must speak with various staff members for different inquiries. For

    example, if a bank customer enters into the bank determined to apply for a loan,

    apply for an ATM card and open a savings account, most probably must visit

    three different desks in order to be serviced, as illustrated in figure.

    When BPR is applied to an organization, the implementation of "One

    Stop Shopping" as a major customer service innovation requires the closecoordination with a team of staff assigned to a process powered by IT for

    exchanging information and documents in order to service the customer's

    request. For instance a customer applying for a loan "triggers" a team of staff

    assigned to service a loan application. The customer communicates with only

    one person, called "case manager", for all three inquiries, shown in figure 3

    managers completes an application for a loan in electronic form, which in turn

    is submitted through the network to the next team member, the credit control

    director, who examines the credit status of the customer. If the credit status is

    not satisfactory the rejection of the loan is approved by the credit managerand a rejection form is filled and it is returned to the case manager. The case

    manager explains to the customer the reason that his application was


    On the other hand, if the credit status of the customer is satisfactory,

    the application is submitted electronically to the next team member, who

    calculates interest rates and payment tables. The application is then

    submitted to the credit manager for approval using a digital signature. The

    approval of the application along with the payment table is delivered to the

    customer by the case manager.

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    Most importantly, while the loan application team was processing the

    loan application, the case manager "triggered" the account team to open a

    savings account and the ATM team to supply the customer with an ATM card.The customer leaves the bank having a response for his loan application, a

    new savings account and an ATM card, And all these without having to move

    around the desks for signatures and documents. All the customer's requests

    were satisfied at the same time in parallel motion. The difference between the

    vertical organization (figure 2) and the cross functional organization (figure 3)

    lies in the way businesses are organized internally. The vertical organization

    is organized based on functional units (e.g. the sales, the accounting

    department). In cross-functional organizational units the main organizational

    unit is the process. Since "doing business" is mainly running processes, itwould be very logical to organize companies based on processes. For

    instance, the ordering process crosses different departments. The sales

    department for order taking, the accounting department for credit control and

    invoicing, the logistics department for inventory control and distribution, and

    the production department for producing the order.

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    B. Types of firms / organizations that BPR can be applied

    BRP could by implemented to all firms (manufacturing firms, retailers,

    services, etc.) and public organizations that satisfy the following criteria:

    Minimum Number of employees: 20 (at least 4 in management positions).

    Strong management commitment to new ways of working and innovation.

    Well formed IT infrastructure

    Business Process Reengineering could be applied to companies that

    confront problems such as the following:

    High operational costs

    Low quality offered to customers

    High level of ''bottleneck" processes at pick seasons

    Poor performance of middle level managers

    Inappropriate distribution of resources and jobs in order to achieve


    performance, etc.

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    12. Advantages of BPR

    1. Satisfaction

    A big advantage of reengineering is that the work becomes more satisfying

    because the workers get a greater sense of completion, closure, and

    accomplishment from their jobs. As it is described in chapter 3.2.1 the employee

    performs a whole job, a process or a subprocess, that by definition produces a

    result that somebody cares about. The workers not only try to keep the boss

    happy or to work through the bureaucracy. More important is the fact to satisfy

    the customer needs.

    2. Growth of Knowledge

    Furthermore, the personal development within a process team environment does

    not play such an important role which means climbing up the hierachy is a minor

    goal. In this case it is much more important to get a widespread knowledge of the

    whole process and there are no such things as "mastering" a job; as a worker's

    expertise and experience grow, his or her job grows with it.

    3. Solidarity to the Company

    "Moreover, since workers in a reengineered process spend more time onvalueadding work and less time on work that adds no value, their contributions to

    the company increase, and, consequently, jobs in a reengineered environment

    will on the whole be more highly compensated."

    4. Demanding Jobs

    "There is, however, a challenging side to all this good news about work in a

    reengineered environment. If jobs are more satisfying, they are also more

    challenging and difficult. Much of the old, routined work is eliminated or

    automated. If the old model was simple tasks for simple people, the new one is

    complex jobs for smart people, which raises the bar for entry into the workforce.

    Few simple, routine, unskilled jobs are to be found in a reengineered

    environment." This fact that the jobs are more demanding can be either an

    advantage or a disadvantage. It depends on the view from where you consider it.

    Unskilled employees might get difficulties to get along with the process

    changings. For such persons it will be probably difficult to survive within this new

    environment which mostly leads to a personal failure in their job.

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    5. Authority

    In a traditional oriented company the managment expects from the employees

    that they follow some specific rules. In contrast to that the reengineered

    companies "dont want employees who can follow rules; they want people who

    will make their own rules. As management invests teams with the responsibility ofcompleting an entire process, it must also give them the authority to make the

    decisions needed to get it done.

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    13. Risks of Reengineering

    Not every company will succeed by applying Business Process Reengineering at

    their company like it is described in the previous chapters. "They end their efforts

    precisely where they began, making no significant changes, achieving no majorperformance improvement, and fueling employee cynicsm with yet another

    ineffective business improvement program." [23] [Hammer, Champy, 2001]Between

    50 % and 70 % of the organizations which have undertaken a reengineering effort do

    not achieve the dramatic results they have intended.

    The comparison of chess and roulette describes the situation of such

    companies. "Roulette is a high-risk endeavor, chess is not, although a player may

    lose at chess as frequently as at roulette. Roulette is purely a game of a chance.

    Once the money is put down, players have no control over the outcome; in chess,

    chance plays no part in the outcome. The better player can expect to win; loss

    results from ability and strategy."

    The same theory can be applied for Business Process Reengineering which

    means that the success always depends on the knowledge and the ability, but not in


    1. Resistance to the change

    "There will certainly be some resistance to the change necessary forreengineering,but the key is to expect this resistance and develop ways to

    confront it. Employees will be most concerned about their job status after a

    reengineering; they will often show this by promoting opposition to the plan.

    Employers must confront this and deal with the employees concerns and not

    their arguments."

    2. Drawbacks to Business Process Reengineering

    "People are not inherently opposed to change... but they dont like surprises.

    It is a leader's responsibility to let people know what the issues are."

    "Just understanding how to reengineer does not ensure success. When

    clearly thought out and implemented properly, BPR can be a very good way to

    improve the success of a company. Unfortunately, many companies implement

    BPR as a fad, forgetting completely about the people involved. Companies that

    wish to use Business Process Reengineering must determine the best strategy

    and follow through with the objectives. BPR will not be successful if the company

    flagellates. It will also not be successful if the company uses BPR over and over

    again. The reengineering process must come from the top down the executives

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    must be committed and ready to promote the changes as an example for the rest

    of the company."

    3. Higher Demands to the Workers

    Empowering the workers is an inevitable step in a reengineered process.

    Therefore the companies which hire new workers have to consider additional

    criterias in their hiring. "It is not longer enough merely to look at prospective

    employees' education, training, and skills; their character becomes an issue as

    well. Are they self-starting? Do they have self-discipline? Are they motivated to

    do what it takes to please the customer?"

    This might be more complicated to find the right people for one specific job.The worker has to be a kind of "Allrounder" which can perform several jobs. As it

    was enough to convince a possible employer in a job Organization & Markets

    Business Process Reengineering interview with practical skills, now it is also very

    important to have the more and more demanded soft skills.

    "For multidimensional and changing jobs companies dont need people to fill a

    slot, because the slot will be only roughly defined. Companies need people who

    can figure out what the job takes and do it, who can create the slot that fits them.

    Moreover, the slot will keep changing. In an environment of flexibility and change,it is clearly impossible to hire people who already know everything they're ever

    going to need to know, so continuing education over lifetime of a job becomes the

    norm in a reengineered company."

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    14. What are the Myths about BPR Created by the Popular


    The popular management literature has created more myth than practical

    methodology reengineering. The concept of BPR has been with us since about 1990,

    however it is widely misunderstood and has been equated to downsizing,

    client/server computing, quality, ABC, and several other management nostrums of

    the past several years. Based on interviews and conversations with more than 200

    companies, and 35 reengineering initiatives, Davenport & Stoddard (1994) identify

    seven reengineering myths.

    The Myth of Reengineering Novelty:

    Reengineering, although about familiar concepts, is new in that these

    concepts are combined in a new synthesis. These key components have

    never been together before.

    The Myth of the Clean Slate:

    Regardless of Hammer's (1990) exhortation: "Don't automate,

    obliterate!" clean slate change is rarely found in practice. Or, as Davenport

    and Stoddard (1994) state: A "blank sheet of paper" used in design usuallyrequires a "blank check" for implementation. Hence, a more affordable

    approach for most companies is to use Clean Slate Design which entails a

    detailed vision for a process without concern for the existing environment.

    However, the implementation is done over several phased projects. Also

    supported by preliminary findings of Stoddard & Jarvenpaa 1995: their

    findings ran contrary to Hammer (1990): "although reengineering can deliver

    radical designs, it does not necessarily promise a revolutionary approach to

    change. Moreover, a revolutionary change process might not be feasible

    given the risk and cost of revolutionary tactics."

    The Myth of Information Systems Leadership:

    In contrast to the much touted leadership role, Information Systems

    (IS) is generally viewed as a partner within a cross- functional team that is

    generally headed by a non-IS project leader and a non-IS business sponsor

    who have better control over the processes that are being redesigned.

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    The Myth of Reengineering vs. Quality:

    Unlike Hammer & Champy's (1993) call for all out "radical change,"

    most companies have a portfolio of approaches to organizational change

    including reengineering, continuous improvement, incremental approaches,and restructuring techniques.

    The Myth of Top-Down Design:

    The implementation and execution of the redesigned processes

    depends upon those who do the work. Hence, the participation, and more

    importantly, acceptance and ownership, at the grass roots level is essential

    for successful BPR.

    The Myth of Reengineering vs. Transformation:

    BPR is a process that contributes to organizational transformation

    (OT), however it is not synonymous with transformation. OT is defined as,

    "Profound, fundamental changes in thought and actions, which create an

    irreversible discontinuity in the experience of a system" (Adams 1984). OT is

    generally about the emergence of a new belief system and necessarily

    involves reframing, which is a discontinuous change in the organization's or

    group's shared meaning or culture. It also involves broad changes in other

    organizational dimensions besides the work processes: such asorganizational structure, strategy, and business capabilities.

    The Myth of Reengineering's Permanence:

    Davenport & Stoddard (1994) speculate that reengineering has peaked

    in the US in 1994 and would probably become integrated with much broader

    organizational phenomena: such as another synthesis of ideas that includes

    the precepts of reengineering; its integration into existing change methods; or

    its combination with quality and other process-oriented improvement

    approaches into an integrated process management approach.

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    15. Business process reengineering Success stories

    BPR, if implemented properly, can give huge returns. BPR has helped giants like

    Procter and Gamble Corporation and General Motors Corporation succeed after

    financial drawbacks due to competition. It helped American Airlines somewhat getback on track from the bad debt that is currently haunting their business practice.

    BPR is about the proper method of implementation.

    General Motors Corporation implemented a 3-year plan to consolidate their

    multiple desktop systems into one. It is known internally as Consistent Office

    Environment (Booker, 1994). This reengineering process involved replacing the

    numerous brands of desktop systems, network operating systems and application

    development tools into a more manageable number of vendors and technology

    platforms. According to Donald G. Hedeen, director of desktops and deployment at

    GM and manager of the upgrade program, he says that the process lays the

    foundation for the implementation of a common business communication strategy

    across General Motors.

    Lotus Development Corporation and Hewlett-Packard Development Company,

    formerly Compaq Computer Corporation, received the single largest non-government

    sales ever from General Motors Corporation. GM also planned to use Novell

    NetWare as a security client, Microsoft Office and Hewlett-Packard printers.

    According the Donald G. Hedeen, this saved GM 10% to 25% on support costs, 3%

    to 5% on hardware, 40% to 60% on software licensing fees, and increased efficiencyby overcoming incompatibility issues by using just one platform across the entire


  • 7/28/2019 Final Business Process Reengineering.



    Southwest Airlines offers another successful example of reengineering

    their company and using Information Technology the way it was meant to be

    implemented. In 1992, Southwest Airlines had a revenue of $1.7 billion and an after-

    tax profit of $91 million. American Airlines, the largest U.S. carrier, on the other hand

    had a revenue of $14.4 billion dollars but lost $475 million and has not made a profitsince 1989. Companies like Southwest Airlines know that their formula for success is

    easy to copy by new start-ups like Morris, Reno, and Kiwi Airlines. In order to stay in

    the game of competitive advantage, they have to continuously reengineer their

    strategy. BPR helps them be original.

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    Michael Dell is the founder and CEO ofDELL Incorporated, which has been

    in business since 1983 and has been the worlds fastest growing major PC

    Company. Michael Dells idea of a successful business is to keep the smallest

    inventory possible by having a direct link with the manufacturer. When a customer

    places an order, the custom parts requested by the customer are automatically sentto the manufacturer for shipment. This reduces the cost for inventory tracking and

    massive warehouse maintenance. Dells website is noted for bringing in nearly $10

    million each day in sales. Michael Dell mentions: "If you have a good strategy with

    sound economics, the real challenge is to get people excited about what you're

    doing. A lot of businesses get off track because they don't communicate an

    excitement about being part of a winning team that can achieve big goals. If a

    company can't motivate its people and it doesn't have a clear compass, it will drift."

    (Smith, 1999) Dells stocks have been ranked as the top stock for the decade of the

    1990s, when it had a return of 57,282%. Michael Dell is now concentrating more on

    customer service than selling computers since the PC market price has pretty much

    equalized. Michael Dell notes: "The new frontier in our industry is service, which is a

    much greater differentiator when price has been equalized. In our industry, there's

    been a pretty huge gap between what customers want in service and what they can

    get, so they've come to expect mediocre service. We may be the best in this area,

    but we can still improve quite a bit--in the quality of the product, the availability of

    parts, service and delivery time." Michael Dell understands the concept of BPR and

    really recognizes where and when to reengineer his business. Ford reengineered

    their business and manufacturing process from just manufacturing cars to

    manufacturing quality cars, where the number one goal is quality. This helped Fordsave millions on recalls and warranty repairs. Ford has accomplished this goal by

    incorporating barcodes on all their parts and scanners to scan for any missing parts

    in a completed car coming off of the assembly line. This helped them guarantee a

    safe and quality car. They have also implemented Voice-over-IP (VoIP) to reduce the

    cost of having meetings between the branches.

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    A multi-billion dollar corporation like Procter & Gamble Corporation,

    which carries 300 brands and growing really has a strong grasp in re-engineering.

    Procter & Gamble Corporations chief technology officer, G. Gil Cloyd, explains how

    a company which carry multiple brands has to contend with the classic innovators

    dilemma - most innovations fail, but companies that dont innovate die. His solution,innovating innovation... (Teresko, 2004). Cloyd has helped a company like Procter &

    Gamble grow to $5.1 billion by the fiscal year of 2004. According to Cloyds

    scorecard, he was able to raise the volume by 17%, the organic volume by 10%,

    sales are at $51.4 billion up by 19%, with organic sales up 8%, earnings are at $6.5

    billion up 25% and share earnings up 25%. Procter and Gamble also has a free cash

    flow of $7.3 billion or 113% of earnings, dividends up 13% annually with a total

    shareholder return of 24%. Cloyd states: "The challenge we face is the competitive

    need for a very rapid pace of innovation. In the consumer products world, we

    estimate that the required pace of innovation has double in the last three years.

    Digital technology is very important in helping us to learn faster." (Teresko, 2004) G.

    Gil Cloyd also predicts, in the near future, as much as 90% of P&Gs R&D will be

    done in a virtual world with the remainder being physical validation of results and

    options. (Teresko, 2004).