Business Process Re-engineering (BPR) is a type of organizational change in which processes are analyzed, and subsequently redesigned and simplified, with the aim of improving efficiency and profitability within a firm. The necessity for the implementation of BPR initiative results partly from an increase in consumer expectation with regard to services and products provided by organizations (Lobontiu & Big, 2006). Information technology (IT) is used in BPR to improve service, speed, and quality of processes. The adoption of IT-BPR projects has been shown to be positively affected by organizational innovation, competitive intensity, and market pressure (Lee et al., 2009). Essentially, BPR entails the construction of new IT systems that will ultimately improve processes of a business in order to improve and maximize efficiency and profits. These new IT systems assist organizations in achieving improvements with regard to quality, costs, and delivery time (Olalla, 2009). However, not every IT-enabled BPR project results in effective improvement, and BPR programs are widely considered to be huge undertakings with a high rate of failure (Elmuti & Kathawala, 2000).
Kohli & Hoadley (2006) examined three case studies of firms in various industry sectors. The three organizations under observation were a financial services firm labeled FinCo, a non-durable manufacturing firm labeled ManuCo, and a hospital labeled HealthCo. The researchers investigated these three firms with regard to how successfully they executed IT-enabled BPR, and how effective their efforts were in achieving sought after outcomes. The measures used to determine success of the BPR were also analyzed by the researchers. The following discussion will examine each of these three organizations with regard to concepts involving planned organizational change, the value of information systems in business, the management of project risk, and the role information systems play in achieving competitive advantage.
FinCo is a quality-differentiated investment organization characterized by having the highest price in the industry. Investment relationships with customers are built and maintained by FinCo through a traditional account structure, and their BPR efforts were aimed at assessing work hours spent on each customer account in order to successfully implement a document imaging system. The goal was to devise ways to reduce cycle time involved in account management. The overall process measure for FinCo was profitability.
Achieving competitive advantage is important for all organizations, and was an especially important motivating factor for FinCo. There are a few crucial strategies that must be employed in order to effectively deal with competitive forces. One highly effective strategy is low-cost leadership, which entails achieving the lowest possible operating costs and the lowest possible prices. FinCo undertook IT-led BPR in order to reduce the costs involved in gaining and servicing accounts while still providing the customer with the highest value with regard to customization and service. FinCo recognized the importance of this particularly due to the fact that they were the most highly priced firm in the financial industry. This low-cost leadership would be attained through the development and implementation of the document imaging system that would ultimately reduce time spent by managers on each customer account, thereby improving efficiency and profitability.
To achieve greater profitability, FinCo must improve customer value and productivity. In order to assess the target for IT enabled BPR, competitive forces were identified and strategies, such as low-cost leadership, were implemented. The focus of this strategy and the exact manner in which it could be implemented could have been determined through a value chain model. This model would have determined the activities of the organization that add value to its services, and these activities are designated as either primary or supportive. The account structure used by FinCo would be considered as a component of supportive activities that makes the delivery of financial services possible. The targeting of this activity by the BPR involved improving technology involved in document imaging in order to make account management more efficient, and thus achieve greater customer value and profitability.
Organizational change through IT system development occurs readily through BPR. FinCo implemented BPR through the analysis, simplification, and redesign of technology associated with account structures. This was done with the goal of improving the speed at which account managers could deal with customer accounts, which also led to improved service and product quality. These changes could fall under the realm of work flow management, in which business procedures are streamlined to improve ease and efficiency in the movement of documents. By identifying the need for a more streamlined procedure for account management, FinCo took the first step toward effective BPR. The next step in effective BPR is the measurement of change due to the IT-led BPR. This is done through comparing changes in customer value, productivity, and profitability with FinCo before and after implementation of the BPR.
The study by Kohli & Hoadley (2006) determined there were little or unknown gains with regard to profitability of the FinCo BPR project, while some gains were observed in productivity. Most of the gains incurred by FinCo due to the implemented BPR were improvements in customer value (Kohli & Hoadley, 2006). This calls into question whether this IT-enabled BPR produced sufficient results in order to justify the high costs involved in its implementation. Profitability would be considered a tangible benefit, while improvements in customer value would be considered intangible benefits. Overall though, the outcomes of the BPR were deemed as positive (Kohli & Hoadley, 2006). However, the completion time of the BPR project was considered to be burdensome, thus presenting evidence of project risk, likely with regard to the size of the project. This could have been effectively dealt with through early identification of this potential risk and subsequent use of appropriate planning and control tools for the documentation and monitoring of the BPR project.
As a market-leading producer of supplies servicing the fast-food industry, ManuCo sought to improve process flexibility in order to meet the ever-increasing and changing demands of customers, while still maintaining market share (Kohli & Hoadley, 2006). The IT-led BPR was implemented initially through investment in electronic design technology that enabled interactive product design between customers and designers. This is an example of the use of a product differentiation strategy in order to deal with competitive forces. The technology invested in by the firm allowed customers and designers to interactively make changes to artwork for products in a time-efficient manner. It also enabled the designers to receive approvals from customers electronically. This technology differentiated ManuCo from competitors in their field that didn't have that technology, and gave them an edge with regard to improved customer value as a direct result of their IT-enabled BPR. The use of this new IT would also strengthen intimacy between ManuCo and its customers, which is another way of effectively counteracting competitive forces. However, it is noted that ManuCo were late in their industry in regards to the implementation of this type of design technology (Kohli & Hoadley, 2006).
Through the use of a value chain model, ManuCo devised which activities need to be focused on in the BPR project and what goals were to be attained. The goal of ManuCo was to better manage lower level measures in the manufacturing process, which would result in the achievement of improved profitability through lower costs. One primary activity that adds value to the products and services offered by ManuCo is the basic production of supplies sold in the fast-food industry and the sales of these products to consumers. A secondary activity that contributes to and makes possible the primary activity would be the design production technology discussed earlier. Focusing IT-led BPR efforts on the secondary activity, the design technology, would result in improved customer-supplier intimacy and would help with product differentiation. However, after assessing capital costs involved in manufacturing in order to maintain the BPR process and still reap gains, ManuCo decided not to invest in the design production technology for fear that costs involved in the investment may not be recouped. Also, customers perceived investment in the technology to be of limited value, and ManuCo therefore determined that the IT decreased profitability.
There are steps taken by organizations that are necessary for effective BPR. The first critical step was taken by ManuCo when they recognized what facets of their organization needed improvement. ManuCo wanted to improve customer value, productivity, and furthermore, profitability. However, profitability was considered to be the most important variable, and was the primary outcome focus for the BPR project. ManuCo believed that the improvement of unit-operating cost was the most integral element to increased profitability, so the firm sought to achieve an overall minimization of operating costs. The second step in effective BPR is measurement of change with regard to the improvement desired. The BPR undertaken by ManuCo resulted in improved customer value and process flexibility, which resulted in the crucial retention of customers. However, the high costs involved in the execution of business with the BPR resulted in no improvement in revenue, and therefore no improvement in profitability. It was stated by Kohli & Hoadley (2006)…