Business process Management implementation and adoption in SMEs: inhibiting factors for Iranian e-retail industry

Business process Management implementation and adoption in SMEs: inhibiting factors for Iranian e-retail industry Imanipour, Narges, University of Tehran, Entrepreneurship Faculty, Tehran, Iran, nimanip@ut.ac.ir Talebi, Kambiz, University of Tehran, Entrepreneurship Faculty, Tehran, Iran, kambeizt@ut.ac.ir Rezazadeh, Siavash, University of Tehran, Entrepreneurship Faculty, Tehran, Iran, Siavash.Rezazadeh@ent.ut.ac.ir Abstract A business s decision for utilizing a technology is based on reviewing the factors influencing this utilization and its advantages. Technology deployment greatly affects the way business is conducted, the optimality of resource utilization and Increase in the business s competitive advantage. Factors influencing this utilization include various organizational, technological (innovation), environmental and individual characteristics. Characteristics of small and medium enterprises have a double-edged razor role in the effective utilization of business process management. These characteristics can create barriers in this utilization and become a great challenge in this issue. Other characteristics can ease this utilization and accelerate the adapting to the new system. This study, based on a mixed method approach, examines the main inhibiting factors in implementation of business process management. In the qualitative phase, these factors are identified through reviewing related research and interviewing experts of the field. Then, based on these findings, a questionnaire is designed. In the quantitative phase, data gathered from 122 samples from 28 businesses, active in Iranian e-retail sector and finally the identified factors were ranked based on their perceived importance by respondents. Keywords Business process management (BPM), small and medium enterprises (SME), inhibiting factors, e-retail Copyright 2012 University of Tehran 1 Electronic copy available at: http://ssrn.com/abstract=1990363

Introduction As corporations downsize in response to global competitive pressures and workers experience a reduction in employment security, SME s are becoming increasingly important. Furthermore SMEs gain further significance as people look for lifestyle alternatives or maintain a small business after the traditional retirement age (Rashid, 2001). SMEs are often described as being flexible, active and informal. Due to the unique characteristics SMEs possess they are able to deliver to market in a timely manner, which allow them to adapt to market demands. SMEs are able to service customers in a more personal way compared to corporate firms and therefore are accredited with a competitive edge (Van Beveren, 2002). Today companies use information and communication technologies to optimize almost all of internal and external business processes. Affected domains are for example human resource management, finance and accounting, customer relationship management, marketing and distribution, supply chain management as well as product life cycle management (Schäfermeyer and Rosenkranz, 2008). now small and medium sized enterprises (SME) are becoming aware of the potential which may be realized through intercompany coordination of processes and the associated positive effects on their competitiveness (Schubert and Leimstoll, 2007) By integrating business processes within and across firms using one single system, organizations obtain more benefits from smooth information flows (Davenport et al., 2004). Integrated and standardized data and processes reduce costs, improve collaboration and ease decision making for management (Weil, 1998). This is especially true for inter organizational collaboration, when information and communication are the main instruments to coordinate the work (Champy, 2002). To develop and successfully implement an application able to improve a company s business processes, lots of resources, expertise and time are needed (Davenport, 1998). An organization s current performance depends upon its business processes collective ability to achieve its fundamental objectives. However, an organization s longer term performance depends upon its ability to satisfy exogenous change requirements such as product lifecycles, new competitors or other types of environmental change (Shaw et al., 2007). Business Process Management (BPM) is a structured method of understanding, documenting, modeling, analyzing, simulating, executing and continuously changing end-toend business processes and all relevant resources in relation to an organization s ability to add value to the business. It is the current term utilized to encapsulate a process-driven approach to attain enterprise operational efficiency (Smith & Fingar 2003). BPM utilizes current technology to provide organizations with the ability to map and/or remodel their business processes, deploy processes as applications that are integrated with existing software systems, and provide managers with the functionality to monitor, analyze, control and improve the execution of those processes in real time (Chong, 2007). Business process management may result in considerable rewards for the companies adopting them. Typical advantages are: reduced lead times, less hand-off errors, and more flexibility to change the structure of supported business processes (Reijers, 2006). On the other hand, implementation of these types of systems can be a complex and time-consuming effort (Bowers et al., 1995). Different factors influence the ease of and the success or failure of a BPM implementation. BPM encompasses the most important strengths and advantages of quality improvement approaches and tools (BPR, TQM, revisionist BPR, Six Sigma, Process Innovation, Kaizen and Lean Management) in a unified framework(harmon 2003; Smith & Fingar, 2003; Reijers, 2006; Hammer, 2007). The most important view that characterizes BPM is a process view of management (hammer, 2007) that avoids the functional boundaries of an organization s individual departments in support of a more holistic approach (Baker & Maddux 2005; Rosemann & de Bruin 2004). Each step of the production value chain, from supplier to customer, can be monitored and explicitly linked to corporate strategy, operational efficiency and competitive advantage (Harmon 2003). There are different and highly diverse views on BPM coming from different backgrounds (Chang, 2006), Ranging from a management strategy (from management scholars) to a software system (from computer science scholars and practitioners). There is still no common consensus Copyright 2012 University of Tehran 2 Electronic copy available at: http://ssrn.com/abstract=1990363

even about the definition of Business Process Management itself (van der Aalst et al. 2003). The only unanimity is the notion that Any BPM implementation by any definition encompasses some form of information technology usage for process enactment (chang, 2006; van der Aalst, 2003). On the other hand, despite significant investment in the area, most studies report as many as 60-80 per cent of BPM initiatives having been unsuccessful (Abdolvand et al., 2008; Karim et al., 2007; Macintosh & Maclean, 1999). It is therefore not surprising that the SMEs are not convinced that a business process approach could bring significant tangible and measurable benefits (Vergidis et al., 2008) and that the risky nature of BPM has motivated a detailed investigation of its critical success and failure factors (Abdolvand et al., 2008). Gartner studies (Gartner, 2009) have identified BPM as the number one business priority of CIOs globally. Earlier research also shows the importance of process management in Europe and US (de Bruin and Rosemann 2007). Research objectives Small and medium sized enterprises (SMEs) play a critical importance to the development and prosper of many economies. An increasing number of SMEs inclined to implement BPM initiatives. Successful BPM implementation enables SMEs to achieve significant improvements in business performance. a comprehensive inspection of literature indicates that much has been written about BPM implementation in large organizations, and little attention has been paid to the SMEs. In an attempt to help managers and practitioners to implement BPM projects successfully, the present paper tries to identify and analyze the inhibiting factors in the Iranian SMEs context. The objective of this research paper is to identify the main obstacles experienced by Iranian SMEs in the e-retail industry in their efforts to implement and adopt BPM in their businesses. The definition of a small business in Iran is any business employing less than 50 people; and 50 or more but less than 100 people for a medium business (Ahmadpour, 2004). The research question is as follows: What are the major issues and challenges related to Business Process Management implementation and adoption in Small- and Medium-sized Enterprises of the Iranian e-retail industry? The study uses an empirical method called mixed methods. Mixed Methods aims at developing theories for applying relevant knowledge into action, based on the combination of theory developing qualitative methods and quantitative techniques for data collection and analysis. This study, examines the main inhibiting factors in implementation of business process management. In the qualitative phase these factors are identified through, an exploratory analysis of implementation studies for SMEs, and the extent to which BPM methodologies and approaches are being applied in Iranian and in the e-retail industry and interviewing experts of the fields of BPM and SME. Then, in the quantitative phase, based on the findings of qualitative phase, a questionnaire is designed and then data gathered from samples (random selection of 122 samples from 42 unique businesses, active in e-retail industry) are analyzed to rank these identified factors based on their importance. It is hoped that the results reveal some of the major issues pertaining to BPM adoption by the e-retail industry, and by extension, to the SME sector in general. It is expected that by determining the factors that influence implementation and adoption, these factors can be managed in the best interest of customers, employees and organizations. Significance of the study In 2010 a group consisting of 57 Iranian e-retail businesses gathered to found the Iranian e-retail union. In 2011 their number became 63. These businesses are active in different markets ranging from software and e-book to grocery. E-retail companies have a special structure that makes change and adopting information technology a straightforward process with lower effort. Their core business operations are based on information technology hence they are familiar with the concept and as a consequence the results and Copyright 2012 University of Tehran 3

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