Organizational transformation enabled by information technology and the Internet

1
Chapter 5

• Organizational transformation enabled by
  information technology and the Internet

2
Why transform?

• IT, Internet and associated technologies are
  making possible / facilitating / driving at times
  quite profound changes in important business
  processes.
• In order to avail itself of the many advantages
  of EC, an organization may need to transform
  existing business activities / processes, both
  internal and external to the organization.

3
Key points...

• break from previous ways of acting
• developing discovering new opportunities, etc.
• change in behaviour of majority of organisation
• new ways of thinking and doing
• creating new content and/or new context
• content systems, procedures, structures that
  dictate how processes function
• context deeply imbedded business models
  understanding that drive an organisation

4
Different types of transformation

• strategic transformation for competitive
  advantage
• redefine vision, mission, objectives
• create / obtain new competencies, capabilities
• obtain / use resources to take advantage of
  market opportunities

5
Different types of transformation

• dramatic improvements to operations
• costs
• time
• quality of service
• often achieved through re-engineering processes,
  roles and responsibilities, redefining
  performance standards
• cross-functional teams

6
Different types of transformation (cont.)

• corporate self-renewal
• on-going ability to anticipate and cope with
  change

7
Process of transformation

• vision of future
• values that guide actions aimed at achieving
  vision
• what kind of organisation do we want to be?
• what business are we really in?
• mission? goals objectives?
• alignment of missions
• personal
• team, business unit
• organisation

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Process of transformation

• knowledge of core business
• process knowledge
• inventory of core processes
• identifying candidates for change
• domain knowledge
• understanding (changing) business environment
  industry trends
• characterised by relentless focus on rethinking
  and revitalizing aspects of organizational
  performance with a view to significant improvement

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Framework for transformation
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Strategy

• establish customer-oriented vision that will
  engender and support long-term success
• affects and is affected by
• understanding of external business environment
• understanding of internal resources,
  competencies, capabilities, IT infrastructure

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People and culture

• shared values, experiences, and common goals
• learning derived from surviving in external
  environment
• learning from problems of internal integration
• organising, motivating, empowering people to
  succeed
• changes to incentive programmes?
• customer as focal point of cultural change

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Processes

• sequence of activities designed to fulfil needs
  of customer
• internal or external
• way work is done
• how and when action is implemented
• way of implementing strategic vision
• way of harnessing efficiency and effectiveness of
  resource use

13
Technology

• critical role in generation, transfer,
  management, and use of information knowledge
• supports streamlined processes
• provides tools to support entire workforce
• enhances key relationships with customers and
  suppliers
• enables/supports most corporate transformations

14
Structure and systems

• describes individual and collective
  responsibility and accountability
• reporting roles and structures
• communication lines
• enable / prevent necessary communication,
  knowledge transfer and customer contact
• differentiation vs integration

15
Process innovation and re-engineering

• Effective business processes essential to deliver
  benefits of innovation
• Some existing business processes may have been
  designed before the capabilities of modern IT
  were available
• Need for re-engineering
• Support with appropriate IT to support
  achievement of business objectives

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What is a process?

• a set of interrelated work activities
  characterized by specific inputs and value-added
  tasks that produce customer-focused outputs.
  Business processes consist of horizontal work
  flows that cut across several departments or
  functions.

(Sethi King 1998)
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Advantages of process-focus

• focus on customer
• unique to organization
• virtually impossible to copy

The key to long term organizational success is
to identify a set of processes that deliver an
output that is needed by a given customer, and
then to implement those processes in the most
efficient way possible. (Cats-Baril
Thompson 1997)
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Core process maps

• Core process fundamental processes employed to
  deliver value to customer
• Process map illustrates core processes and their
  interconnections
• Probably contains 58 processes
• Identifies process vision for organisation

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Definition of Reengineering

• The fundamental rethinking and radical redesign
  of core business processes to
• achieve dramatic improvements in critical
  performance measures such as quality, cost, and
  cycle time.

Source Adapted from Hammer and Champy,
Reengineering the Corporation, 1993
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Process within an Organization
Information Flow
Physical Flow

• Processes are designed based
• the environmental requirements and constraints
• available technical solutions
• Both conditions has changed dramatically

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Constrained by Technology(1)
Information Flow
Physical flow

• Limit information flow

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Constrained by Technology(2)
Information Flow
Physical Flow

• use paper work as information carrying vehicle
• paper centered processes

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Reducing Coordination Costs
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Division of Functions Dysfunctional Issues

• Piece-meal
• Complexity
• Local optimization

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Conservative Computerization
Why should customers get involved in your
internal division of work, before they qualify as
your customers?

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Feasible Solutions Information Technology
Single widow services
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Basic Thoughts

• What is the objective of the process?
• Why did I do it this way?
• Has the environment conditions changed?
• Requirements
• Constraints
• Technology
• What are the opportunities?
• Example Auto-teller Machines
• What has changed with ATM?

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The Evolution of Major Business Idea

• The 1960s and 1970s
• corporate strategy
• The 1980s
• quality management and the role of IT
• The 1990s
• reengineering

Source Adapted from Thomas Davenport, Business
Process Reengineering Its Past Present, and
Possible Future, Harvard Business School,
9-196-082, 1996
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Processes Are Often Cross Functional Areas
"Manage the white space on the organization
chart!"
Customer/ Markets Needs
Supplier
Value-added Products/ Services to Customers
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Definition of Process

• A process is simply a structured, measured set of
  activities designed to produce a specific output
  for a particular customers or market.
• -- Thomas Davenport

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Characteristics

• A specific sequencing of work activities across
  time and place
• A beginning and an end
• Clearly defined inputs and outputs
• Customer-focus
• How the work is done
• Process ownership
• Measurable and meaningful performance

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Ford Accounts Payable Process
Purchasing
Vendor
Purchase order
Goods
Receiving
Copy of purchase order
Receiving document
Accounts Payable
Invoice

• PO?Receiving D c. ? PO
  Receiving Doc. Invoice

Payment
Source Adapted from Hammer and Champy, 1993
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Ford Procurement Process
Purchasing
Vendor
Purchase order
Goods
Receiving
Purchase order
Goods received
Accounts Payable
Data base
Payment
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Did BPR work?

• proved popular initially
• high rates of failure (60-85)
• but are there clear-cut notions of success?
• creation of uncertainty in organisation
• destruction of staff morale
• loss of valued employees
• stress on remaining staff to learn more skills,
  take on additional responsibilities
• increase expectations of being proactive,
  flexible, innovative

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Rethinking BPR

• from rhetoric to reality
• clean slate BPR rarely practised
• revolution evolutionary, incremental
  implementation
• political, cultural, organisational, resource
  constraints

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Rethinking BPR

• from IT as driver to IT as enabler
• info / IT rarely sufficient to bring about
  process change
• IT alone does not deliver sustainable competitive
  advantage
• move from efficiency gains to new ways of working

Q Is IT responsible for rigidity
inflexibility in organisations? Can IT contribute
to flexibility and innovation?
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Rethinking BPR

• from analytic to holistic process
• acknowledgement of soft elements in business
  processes
• human, social
• cultural
• political
• acknowledgement of resource constraints
• quick fix organisational change process
• strategic transformation of interrelated
  subsystems

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Rethinking BPR

• from internal process to external network
  perspective
• recognition that sources of competitive advantage
  lie partly within an organisation and partly
  outside

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Rethinking BPR

• from re-engineering organisations to
• re-engineering business
• does / can IT fundamentally impact the nature /
  content / context of an industry?

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Rethinking BPR

• from re-engineering projects to
• re-engineering capability
• need to continuously learn and change
• promote mechanisms for constant renewal
• planning viewed as learning
• hence, assumptions underpinning planning should
  be constantly challenged

41
Enterprise resource planning systems (ERP)

• Often now called enterprise systems
• Commercial software packages that enable the
  integration of transaction-oriented data and
  business processes throughout an organisation
  (and ultimately, along the supply chain)

(Markus and Tanis, 2000)
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Enterprise resource planning systems (ERP) (cont.)

• Provide fast, reliable, integrated
  enterprise-wide information architecture for
  business
• Imply substantial changes to portfolio of systems
  (business processes), and changes to hardware,
  software, databases, telecommunications

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Implementing ERP

• Holistic approach to implementation
• Need to re-engineer existing business processes
  to fit processes embedded in software
• Increasing use of web-enablement to support
  global availability of some applications
• Supply chain, customer self-help and
  self-service, e-commerce applications, Internet
  marketing systems, sales force automation
  technologies

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ERP success factors

• Success is not guaranteed
• Many disappointments reported
• Good planning
• Defining business needs
• Understanding what/how ERP systems can do
• Being clear on objectives and goals
• Good project management
• Configuration decisions are auditable
• Good change management (training)
• Ongoing evaluation, review

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Summary

• IT and Internet creating new possibilities
• Need for transformation, change
• Adopt process focus
• Re-engineer core business processes to exploit
  new technologies
• Transformation includes rethinking strategy,
  structures, people as well as technology and
  processes
• ERP systems are central to organisational
  transformation
• Web-enablement increasing supports global
  availability of range of core business
  applications supporting core business processes