Chapter 5 Information Technology and Changing Business Processes

Transcription

1 Chapter 5 Information Technology and Changing Business Processes Jason C. H. Chen, Ph.D. Professor of MIS School of Business Administration Gonzaga University Spokane, WA USA chen@jepson.gonzaga.edu Introduction How can IT enable business change? How can IT impede business change? What problems are caused by the functional (silo) perspective of a business? The process perspective keeps the big picture in view. How can IT help with this management style? How are TQM and BPR used to transform a business? 2 1

2 Learning Objectives List how IT enables business change Identify ways in which IT can impede business change Understand the problems that are caused by the functional (silo) perspective of a business Identify how the process perspective keeps the big picture in view and how IT can be used to facilitate this perspective Define TQM and BPR and explain how they are used to transform a business Explain an enterprise system and how they are used to implement organizational change 3 SILO PERSPECTIVE VERSES BUSINESS PROCESS PERSPECTIVE 4 2

3 Silo (Functional) Perspective The silo perspective views the business as discrete functions (accounting, sales, production, etc.). Figure 5.1 shows a traditional org chart which is how a functional business is organized. Each functional area determines its core competencies and focuses on what it does best. Advantages: Allows optimization of expertise. Group like functions together for learning. Disadvantages: Significant sub-optimization. Tend to lose sight of overall organizational objectives. 5 Figure 5.1 Hierarchical Structure 6 3

4 Process Perspective Process is defined as an interrelated, sequential set of activities and tasks that turns inputs into outputs, and includes the following: A beginning and an end Inputs and outputs A set of tasks (subprocesses) that transform the inputs into outputs A set of metrics for measuring effectiveness Keeps the big picture in view. Focuses on work being done to create optimal value for the business. 7 Process Perspective Examples of business processes include: customer order fulfillment manufacturing, planning and execution payroll financial reporting procurement (see figure 5.2) 8 4

5 Figure 5.2 Sample business process 9 Process Perspective Advantages: Helps avoid or reduce duplicate work. Facilitate cross-functional communication. Optimize business processes. Figure 5.3 shows the cross-functional view of processes as they cross departments (functions). 10 5

6 Figure 5.3 Cross-functional nature of business processes 11 What model we learned that is related to process perspective? 12 6

7 The Value Chain (Value) N 13 Support Activities Manufacturing Industry Value Chain Product and Service Flow Administrative and Other Indirect Value Added Research and Development Production Engineering and Manufacturing Marketing Sales and Distribution Service Primary Activities Dr. Chen, The Trends of the Information Systems Technology N 14 7

8 Process Perspective (continued) When managers gain the process perspective they begin to lead their organizations to change. Question status quo. Don t accept because we have always done it that way as an answer to why business is done in a particular way. Allows managers to analyze business s processes in light of larger goals. Zara is a good example of a process perspective business (see chapter 2). 15 Definition Silo Perspective Self-contained functional units such as marketing, operations, finance, and so on Business Process Perspective Interrelated, sequential set of activities and tasks that turns inputs into outputs Focus Functional Cross-functional Goal Accomplishment Benefits Optimizes on functional goals, which might be a suboptimal organizational goal. Highlighting and developing core competencies; Functional efficiencies Optimizes on organizational goals, or big picture Avoiding work duplication and crossfunctional communication gaps; organizational effectiveness Figure 5.4 Comparison of Silo Perspective and Business Process Perspective 16 8

9 RE-ENGINEERING CHANGE MANAGEMENT BUSINESS ANALYSTS IT REPRESENTATIVES RE-ENGINEERING VISION IT ARCHITECTURE & TECHNOLOGY INFRASTRUCTURE PLANNING IT MODELS SYNCHRO- NIZED PROCESS RE-DESIGN CURRENT IMPACT ANALYSIS PROCESS SIMULATION APPLICATION PROTOTYPE (by Class of Application) IT PROCESS MANAGEMENT PROCESS IMPLEMENTATION FRONT OFFICE APPLICATION(S) CLIENT/SERVER OPERATIONAL APPLICATION(S) DATA WAREHOUSE/ DECISION SUPPORT APPLICATION(S) STRATEGY DESIGN PROTOTYPE IMPLEMENTATION STAGES PROCESS ACTIVITIES PROCESS 17 Business Systems Planning (BSP) Approach (Top-Down) Business Strategies Business processes Applications Data classes Organizational databases Information architecture 18 9

10 THE TOOLS FOR CHANGE 19 Incremental Change Total Quality Management (TQM) is a tool for change that uses small incremental changes. Personnel often react favorably to TQM. Greater personnel control and ownership. Change is viewed as less of a threat. Six-Sigma is one popular approach to TQM 20 10

11 Six Sigma Six Sigma asserts that Continuous efforts to achieve stable and predictable process results are of vital importance to business success. Manufacturing and business processes have characteristics that can be measured, analyzed, improved and controlled. Achieving sustained quality improvement requires commitment from the entire organization, particularly from top-level management. It seeks to eliminate defects from any process. 21 Sigma levels further information Short-term sigma levels correspond to the following long-term DPMO values (one-sided): One Sigma 690,000 DPMO = 31% efficiency Two Sigma 308,000 DPMO = 69.2% efficiency Three Sigma 66,800 DPMO = 93.32% efficiency Four Sigma 6,210 DPMO = % efficiency Five Sigma 230 DPMO = % efficiency Six Sigma 3.4 DPMO = % efficiency 22 11

12 Six Sigma Six Sigma is a business management strategy, originally developed by Motorola (by Bill Smith), that today enjoys widespread application in many sectors of industry. Six Sigma seeks to identify and remove the causes of defects and errors in manufacturing and business processes. It uses a set of quality management methods, including statistical methods, and creates a special infrastructure of people within the organization who are experts in these methods. Processes that operate with "six sigma quality" over the short term are assumed to produce long-term defect levels below 3.4 defects per million opportunities (DPMO). 23 Radical Change & BPR Business Process Reengineering (BPR) is a more radical change management tool. Attain aggressive improvement goals. Goal is to make a rapid, breakthrough impact on key metrics. Figure 5.5 shows the difference over time of the radical (BPR) and incremental (TQM) approaches to change. Greater resistance by personnel. Use only when major change is needed

13 Figure 5.5 Comparison of radical and incremental improvement 25 The Process for Radical Redesign The different approaches for radical redesign all include: Begin with a vision of which performance metrics best reflect the success of overall business strategy. Make changes to the existing process. Measure the results using the predetermined metrics. Figure 5.6 illustrates a general view of radical design. Figure 5.7 illustrates a method for redesigning a business process. Tool used to understand a business process is a workflow diagram

14 Figure 5.6 Conceptual flow of process design 27 Figure 5.7 Method for redesigning a business process 28 14

15 Risks of Radical Redesign Research shows some of the common reasons why companies fail to reach their goals: Lack of senior management support. Lack of coherent communications. Introducing unnecessary complexity. Underestimating the amount of effort needed. Combining reengineering with downsizing. 29 AGILITY AND CONSTANTLY REDISGNING PROCESSES 30 15

16 Agile Processes Agile processes are processes that iterate through a constant renewal cycle of design, deliver, evaluate, redesign, and so on. Ultimate goal for some are agile processes that reconfigure themselves as they learn. For a process to be agile necessitates a high degree of use of IT. Processes that run entirely on the Internet are candidates for becoming agile processes. 31 Shared Services Horizontal integration - term for looking beyond individual business processes and considering the bigger, cross functional picture of the corporation. Integrated databases, web 2.0 technologies and services, and common infrastructure are the tools IT brings to the implementation of horizontal integration. Many organizations have restructured their common business processes into a shared services model. This model consolidates all individuals from all business units into a single organization, run centrally, and utilized by each business unit

17 Business Process Management (BPM) Systems 33 BPM In the 1990s, a class of systems emerged to help manage workflows in the business. They primarily helped track document-based processes where people executed the steps of the workflow. They go way beyond the document-management capabilities, including features that manage person-toperson process steps, system-to-system steps, and those processes that include a combination. Systems include process modeling, simulation, code generation, process execution, monitoring, and integration capabilities for both company-based and web-based systems. The tools allow an organization to actively manage and improve its processes from beginning to end

18 FIGURE 5.8 Sample BPM Architecture: Appian Enterprise 35 ENTERPRISE SYSTEMS 36 18

19 Enterprise Systems A set of information systems tools used to enable information flow within and between processes. Enterprise systems are comprehensive software packages. ERP (Enterprise Resource Planning) software packages are the most frequently discussed type of enterprise system. Designed to manage the potentially hundreds of systems throughout a large organization. SAP is the most widely used ERP software package. 37 Characteristics of Enterprise Systems Integration seamlessly integrate information flows throughout the company. Packages they are commercial packages purchased from software vendors (like SAP, Oracle, Peoplesoft, etc.). Best practices reflect industry best practices. Some assembly required the systems need to be integrated with the existing hardware, OS s, databases, and telecommunications. Evolving the systems continue to change to fit the needs of the diverse marketplace

20 Benefits and Disadvantages of Enterprise Systems Benefits: All modules easily communicate together. Useful tools for centralizing operations and decision making. Can reinforce the use of standard procedures. Disadvantages: Implementation is an enormous amount of work. Most require some level of redesigning business processes. Hefty price tag (sold as a suite). They are risky. 39 The Adoption Decision Sometimes it is appropriate to let the enterprise system drive business process redesign. When just starting out. When organizational processes not relied upon for strategic advantage. When current systems are in crisis. Sometimes it is inappropriate to let the enterprise system drive business process redesign. When changing an organizations processes that are relied upon for strategic advantage. When the package does not fit the organization. When there is a lack of top management support

21 INTEGRATED SUPPLY CHAINS What is a Supply Chain (network)? A supply chain is a network of organizations that are involved, through upstream and downstream linkages, in the different processes and activities that produce value in the form of products and services delivered to the ultimate consumer. A supply chain has three flows: Information, Goods/materials, and Payment Today s supply chain is a complex web of suppliers, assemblers, logistic firms, sales/marketing channels, and other business partners linked primarily through information networks and contractual relationships

22 What is a Supply Chain (network)? Flows and Competition SCP and SCE in the supply chain P E O P L E F L O W S Material Flows Product/Service Flows 43 Risks of Radical Redesign Research shows some of the common reasons why companies fail to reach their goals: Lack of senior management support. Lack of coherent communications. Introducing unnecessary complexity. Underestimating the amount of effort needed. Combining reengineering with downsizing. FOUR out of FIVE are related to Human Elements Source: Managing and Using Information Systems, Pearlson and Saunders, p

23 The Financial and Business Reporting Supply Chain Integrated Supply Chains Processes linked across companies. Supply chain begins with raw materials and ends with a product/service. Globalization of business and ubiquity of communication networks permits use of suppliers from anywhere. Requires coordination among partners of the integrated supply chain

24 Integrated Supply Chain (continued) Challenges include: Information integration. Synchronized planning. Workflow coordination. Leads to new business models. For example when banks link up to businesses new financial services are offered such as on-line payments. Companies list needs and vendors electronically bid to be the supplier. 47 FOOD FOR THOUGHT: IS ERP A UNIVERSAL SOLUTION?: CROSS-CULTURAL BUSINESS PROCESSES 48 24

25 Cross-Cultural Business Processes Major vendors, SAP and Oracle, show a western bias in reporting best practices. Due to problems encountered, businesses in nonwestern companies/locations are turning to local vendors. If the system is based on a cultural model that conflicts with the local customs and which can not easily be accommodated by the ERP it should NOT be implemented. 49 Summary IS can enable or impede business change. You must look at business process to understand the rule IS plays in business transformation. TQM or BRP are normally used to make changes to business processes. ERP systems can be used to affect organizational transformation. Information systems are useful tools to both enable and manage business transformation

26 End of Chapter