Let’s get horizontal! Toward a process view of organizations

objectives  present the process view of organization  describe business processes  discuss business process reengineering

reinventing organizations old view… new view

definition of business process a specific ordering of work activities across time and place, with a beginning, an end, and clearly identified inputs and outputs Davenport, 1993

focus on “what”focus on “how” vertical; chain of commandhorizontal; workflow static; slice-in-timedynamic task-centeredcustomer-oriented individual; specialistteam; generalist parochialholistic So, what’s the difference? FunctionProcess

typical business processes  product development  customer acquisition  manufacturing  order management  human resource management  planning & resource allocation

cross-functional processes: product development MARKETING PRODUCTION R & D product development competitor analysis market research new product prototype needs analysis research market test component design product test product release process design equipment design production start

cross-functional processes: order management SALES FINANCE LOGISTICS order management sales order payment proposal commitment configuration delivery credit checking billing collection

example: sales logistics sales order delivery payment

SAP event process model: sales logistics xor V V Arrival of order w/oreference to quotation Arrival of order w/oreference to quotation Quotation is valid Quotation is valid Arrival of order with reference toquotation Arrival of order with reference toquotation Standardorder processing Standardorder processing xor Order confirmation is sent Order confirmation is sent Material requirements planning Rejection is sent to customer Rejection is sent to customer Delivery processing Delivery processing Materialis issued Materialis issued Billing document proceessing Orderis released Orderis released Sales requirements are determined Sales requirements are determined Create billing document Create billing document

value chain  stream of activities  part of larger “value system”  applies to both products and services profit margin support: primary: infrastructure, hr, r&d, procurement inbound logistics operations outbound logistics marketing & sales service

inter-organizational processes The 2000’s will be about breaking down external walls: integrating and redesigning inter-enterprise processes using the Internet -Michael Hammer

real triviality quiz Who is Michael Hammer?

Michael Hammer “Father of Reengineering” “Don’t automate… business process reengineering...OBLITERATE!”  fundamental redesign of processes  “clean sheet of paper”  leveraging technology  upgrading skill levels (aka fewer jobs)

Hammer’s principles  outcomes over tasks  users of output: do it yourself!  process information at the source  geography doesn’t matter  coordinate activities ‘ empower workers

servicing of loan follow-up processing origination of loan pre- qualification document generation application processing credit analysis & underwriting approval & closing payment processing escrow management customer service collections & foreclosures valuation & risk analysis transfer to secondary mkt loan processing desk-to-desk approach credit reporting

loan processing team approach field rep laptop regional production center loan origination team loan servicing team

BPR success stories  Ford A/P  eliminated invoices  reduced headcount: from 500 to 125  Mutual Benefit Life  revised application processing (from 30 steps, five departments, 19 people, 5 to 25 days to one person + expert system, 4 hours)  eliminated 100 positions

summary  presented the process view of organization  described business processes  discussed business process reengineering