Business Process Reengineering

Business Process Reengineering-I[/b]

By Pratik Nayak

History and Backdrop[/b]

Previously companies were built around Adam Smith’s Principle of breaking down of Industrial work into fragments. Then came the idea of bringing the work to the worker – “Moving conveyer belt” which went a great way in facilitating mass production. Innovation in the way the goods were shipped also helped in the boom – Railways (1820’s). There was also an emergence of bureaucracy- Programming people to act in certain ways & rules making the system predictable, workable and safe.

Some of the other important milestones were as follows:

• Division of Management to overlook different divisions.

• Elaborate planning for understanding what capital is required for what return.

• Demand was much higher than supply- so the belief was “ If you can make it, you can sell it”

• The Options with the consumer were limited.

• The concept of treating consumers as a mass was valid.

Storm at the bay..[/b]

All these developments did come with a price. As number of tasks grew, the overall process of producing a product/service and delivering it also became more complex. Growing number of people in the middle of the corporate hierarchy was one of the prices companies paid for the benefits of fragmentation. (Reporting Relationships) .The distance between the senior management and the end users. Progressive dilution of decision taking power started happening at the bottom of the corporate pyramid.

• There was no one in charge of a process

• People involved in a process looked inward to their department and upward to their bossed but no one looked outward to the customer.

• The fragmented organizations displayed appalling economies of scale.

The basic underlying issue[/b]

• Many activities that employees performed had nothing to do with customer needs- that is creating a product of high quality, supplying it at a fair price and excellent service.

• Many tasks were done simply to satisfy the internal demands of the company’s own organization.

Changing Game..[/b]

With the progress of the industrial era a lot of changes happened in the three C’s –

1. Customer

2. Competition

3. Change

C for Customer[/b]

Customer takes charge – Previously satisfied with whatever was produced.

- Now armed with greater choices they want products suited to their individual needs.

• One major reason why the Japanese were able to sabotage the US automobile market was their ability to do mass production along with providing the customer with quality, price, selection & service. The idea of ‘the customer’ was obsolete. Now it was all about ‘this customer’

• Backward Integration – Consumers were able to do for themselves what suppliers used to do for them.

e.g- When depositors realized that they could themselves purchase the same high grade, short term govt. securities, the bank deposits went for a toss.

C for Competition[/b]

• Niche competitors changed the face of competition.

• Similar goods sell in different markets on entirely disparate competitive bases- On the basis of price somewhere, on quality & service somewhere else.

• Start-up Trauma- New ways not constrained by convention. E.g Walmart vs Sears

• Technology changed the nature of competition in ways companies never expected.

e.g Otis serviced 93000 elevators around the clock in N. America

Change is the only constant..[/b]

With the fast pace of change:

-Product life cycles went from years to months.

-Time available to develop new products and introduce them became less.

-The complexity of product packages changed.

e.g Insurance companies offered a smorgasbord of products.

A company in Pension business developing a service to take advantage of a loophole in the tax system.

Reengineering- The path to change[/b]

• BPR- 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.

• Fundamental, Radical, Dramatic, Processes

Fundamental- Why do we do what we do? And why do we do it the way we do?

Forces people to look at the tacit rules and assumptions that underlie the way they conduct their business. Often, these rules turn out to be obsolete, erroneous or inappropriate

Radical- Disregarding all existing structures and procedures and inventing completely new ways of accomplishing work.

It’s about Business reinvention not business improvement.

Dramatic

Reengineering isn’t about making marginal or incremental improvements but achieving quantum leaps in performance.

If a company falls 10 percent short of where it should be ( sales, service or quality), it doesn’t need reengineering.

BPR is only undertaken when some heavy-blasting is required

Processes

Focus should be on processes not tasks, jobs, people, structures.

Three types of companies who undergo BPR:

No way out

One step ahead

Trend setters

[/list]

What Reengineering isn’t?[/b]

• It is not Automation

• It is not downsizing or restructuring, it’s not about doing less with less but doing more with less.

• It is not delayering or flattening the organization although its one of the outcomes sometimes.

A look at Reengineering at work..[/b]

• IBM Credit

IBM’S Credit Granting Process

Step 1- Field salesperson receives a request for financing.

-The salesperson reaches one of fourteen people sitting around a conference room table in connecticut.

-The person taking the call logs the request for the deal on a piece of paper.

Step 2- some one carted that piece of paper upstairs to the credit dept. where a specialist entered all the details into a system to check the customer’s credit worthiness, wrote the results on a piece of paper and sent it to the next link.

Step 3- The business practices dept. made modifications to suit the requirements of the customer.

Step 4- Then the document would go the pricer where the appropriate interest rate was determined.

Step 5- The administrator turned all the info. On a piece of paper and sent it to the on field salesperson

-The entire process took 6 days.

· The customer had no clue where the document was.

No one in the system had any clue of the document

Initial Solution proposed: One control desk which would keep info. About the proceedings

Ended up increasing the processing time ( For the remaining part of this article visithttp://www.managementparadise.com/article.php?article_id=4582)

[/list]

 

[Dhruv Bindhani]

This article, "Business Process Reengineering-I" by Pratik Nayak, offers a highly insightful and critical examination of the historical context, drivers, and fundamental principles of Business Process Reengineering (BPR). It effectively traces the evolution of industrial organization, diagnoses the inherent flaws of traditional fragmented structures, and then passionately advocates for BPR as a radical solution to modern business challenges. The piece serves as an excellent foundational text for understanding why and how BPR emerged as a transformative management philosophy.

Historical Context and Traditional Flaws​

Nayak skillfully sets the stage by reviewing the historical progression of industrial work, beginning with Adam Smith's principle of task fragmentation and extending through the advent of the "Moving conveyer belt" and the rise of bureaucracy. This historical perspective is crucial for understanding the roots of organizational structures that, while initially enabling mass production, eventually became liabilities. The article then incisively details the "Storm at the bay," highlighting the critical downsides of this fragmentation: increased complexity, a growing middle management layer leading to diluted decision-making power at lower levels, and a pervasive inward focus that neglected the customer. The powerful observation that "There was no one in charge of a process" and that "People involved in a process looked inward to their department and upward to their bossed but no one looked outward to the customer" precisely captures the essence of the problem BPR seeks to solve.

The "Three Cs" Driving Change​

The article masterfully transitions to the "Changing Game," identifying the "three C’s – Customer, Competition, and Change" as the primary forces necessitating a radical shift.

• Customer: Nayak compellingly argues that the customer is now "in charge," demanding personalized products and quality, price, selection, and service. The example of Japanese automakers' success against the US market highlights this shift from "the customer" as a mass to "this customer" as an individual. The concept of "Backward Integration" by consumers further underscores their newfound power.
• Competition: The analysis of competition is equally sharp, pointing to the rise of "Niche competitors" and the "Start-up Trauma" faced by incumbents (e.g., Walmart vs. Sears). The role of technology in fundamentally altering competitive landscapes, exemplified by Otis, effectively demonstrates how unforeseen innovations can disrupt established monopolies.
• Change: The discussion on the accelerating pace of change—shrinking product life cycles, reduced development times, and increasing product complexity—underscores the urgency for organizational agility.

This tripartite framework is exceptionally well-articulated, providing a clear and compelling rationale for the need for BPR.

Defining Reengineering: The Path to Dramatic Improvement​

The heart of the article lies in its definition of "Reengineering- The path to change." Nayak meticulously breaks down the core tenets of BPR:

• Fundamental: Challenging underlying assumptions about why and how work is done.
• Radical: Discarding existing structures for completely new ways of working, emphasizing "Business reinvention not business improvement."
• Dramatic: Aiming for "quantum leaps in performance" rather than incremental gains, indicating that BPR is reserved for situations requiring "heavy-blasting."
• Processes: Crucially, the focus on processes rather than individual tasks, jobs, or structures, is clearly articulated.

This precise deconstruction of BPR's definition is excellent, providing a solid theoretical grounding. The identification of "No way out," "One step ahead," and "Trend setters" as the types of companies undertaking BPR further contextualizes its application. The section "What Reengineering isn’t?" also provides important clarifications, distinguishing BPR from automation, downsizing, or delayering.

Reengineering in Action: The IBM Credit Example​

The partial case study of IBM Credit provides a powerful, albeit incomplete, illustration of the problems BPR addresses. The step-by-step breakdown of their initial, fragmented credit granting process, which took "6 days" with no visibility, vividly demonstrates the inefficiencies born from departmental silos. The initial, failed "solution" of a control desk further highlights the pitfalls of mere incremental fixes when a radical overhaul is needed. The abrupt ending, directing the reader to an external link, leaves the reader wanting the full resolution, yet the setup itself is highly effective in showcasing the problems BPR is designed to solve.

In conclusion, Pratik Nayak's "Business Process Reengineering-I" is an exceptionally well-crafted and insightful piece. It effectively combines historical context, a compelling analysis of market forces, and a precise definition of BPR with a practical example. It serves as an invaluable resource for anyone seeking to understand the foundational imperative and radical nature of Business Process Reengineering in today's dynamic business environment.