Organisational transformation enabled by information

Report
Organizational
transformation enabled by
information technology and
the Internet
CK Farn
April 2006 (Rev)
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.
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
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
Different types of transformation
dramatic improvements to operations
costs
time
quality of service
}
efficiency
often achieved through re-engineering
processes, roles and responsibilities,
redefining performance standards
cross-functional teams
Different types of transformation
(cont.)
corporate self-renewal
on-going ability to anticipate and cope
with change
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
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
Framework for transformation
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
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
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
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
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
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
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)
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)
Core process maps
Core process: fundamental processes
employed to deliver value to customer
Process map: illustrates core processes and
their interconnections
Probably contains 5–8 processes
Identifies process vision for organisation
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
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
Constrained by Technology(1)
Information Flow
Physical flow
Limit information flow
Constrained by Technology(2)
Information Flow
Physical Flow
use paper work as information carrying vehicle
paper centered processes
Reducing Coordination Costs
Division of Functions:
Dysfunctional Issues
Piece-meal
Complexity
Local optimization
Conservative
“Computerization”
Why should customers
get involved in your
internal division of
work, before they
qualify as your
customers?
Feasible Solutions:
Information Technology
Single widow services
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?
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
Processes Are Often Cross
Functional Areas
"Manage the white space on the organization chart!"
Customer/
Markets
Needs
CEO
Supplier
Marketing
& Sales
Purchase
Production
Distribution
Accounting
Value-added
Products/
Services to
Customers
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
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
Ford Accounts Payable Process*
Purchasing
Vendor
Purchase order
Receiving
Goods
Copy of
purchase
order
Accounts
Payable
Receiving
document
Invoice
PO?Receiving D c. ?
PO = Receiving Doc. = Invoice
Payment
*Source: Adapted from Hammer and
Champy, 1993
Ford
Purchasing
Procurement Process
Vendor
Purchase order
Receiving
Goods
Purchase
order
Goods
received
Data base
Accounts
Payable
Payment
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
Rethinking BPR
from rhetoric to reality
‘clean slate’ BPR rarely practised
revolution
evolutionary,
incremental implementation
political, cultural, organisational,
resource constraints
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?
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
Rethinking BPR
from internal process to external network
perspective
recognition that sources of competitive
advantage lie partly within an organisation
and partly outside
Our Organisation
Their Suppliers
Our Suppliers
Our Customers
Rethinking BPR
from re-engineering organisations to
re-engineering business
does / can IT fundamentally impact the nature /
content / context of an industry?
Traditional cut-flower industry chain
Grower
Jobber
Wholesaler
Florist
Customer
Internet-based cut-flower industry chain
Grower
Logistics
Intermediary
Customer
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
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)
Enterprise resource planning
systems (ERP) (cont.)
Provide fast, reliable, integrated enterprisewide information architecture for business
Imply substantial changes to portfolio of
systems (+business processes), and changes
to hardware, software, databases,
telecommunications
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 selfservice, e-commerce applications, Internet
marketing systems, sales force automation
technologies
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
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

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