(Note: This is a reply to Mr. G.'s thread in USeP-IC Web Forum - Assignment 5: In the spectrum of organizational change, which is the most radical type of change: automation, rationalization of procedures, business reengineering, or paradigm shifts?)
It has been a cliché to say “nothing is permanent in this world except change.” Dramatically, this proven proverb led many people to accept change than to oppose it. In this world where technology is at its height and still in progress, change has become widespread and fast. To cope with this, people especially those in the corporate world who, are mostly affected, need to have strategic plans to address such unforeseen changes in the organization.
Carter McNamara in his Organizational Change and Development article wrote that “significant organizational change occurs, for example, when an organization changes its overall strategy for success, adds or removes a major section or practice, and/or wants to change the very nature by which it operates.” This, according to him, also occurs when an organization evolves through various life cycles, just like people must successfully evolve through life cycles. Like what I have stated previously, change can not be avoided nor stopped. But one can effectively succeed in overcoming the effects these changes might bring to a business by modifying some strategies to accomplish its goals. An organization also needs change to develop, for an organization can not retain its competency for a long time without keeping pace with the modern technology. What I meant here is that, it is not technology alone bringing these changes but I suppose it is one major factor why most organizations undergo changes in development. Just like human, a person can not gain more knowledge and experience if he has not gotten into another cycle of his life where he grows and matures.
In an organization, there are major risks and uncertainties in systems development that need to be addressed by the management. Determining when new systems and business processes can have the greatest impact is involved in these challenges. This may be the reasons why organizational change and development is becoming a common scenario to talk about involving management, organizations, business, and leadership. If I am going to say it in simple words, building new systems produce organizational change. And since building new systems is incorporated in the organization, managers should really take a considerable concern not only on the hardware and software aspects but also in people ware, particularly the organizational structure of information flow. In other words, the company agent faced with these changes should have at least a broad understanding of the framework of the change attempt. In this way, the basic systems and the organizational structures including their principles, roles, terms, will be understood by the leadership and management of the organization.
With the fast-changing environment, business conditions bring consequences in management both in inner and outer factors. That is why in most cases, most of the managerial activities revolve around decision – making. Knowledge plays a major role in organizational development.
-----
Organizational changes are also usually described, including management and employee training requirements, recruiting efforts, changes in business processes and changes in authority, structure or management practices.
Information technology can promote various degrees of organizational change, ranging from incremental to far-reaching. There are actually four types of organizational change enabled by information technology: automation, rationalization, reengineering, and paradigm shifts.
This figure shows the four degrees of organizational change. Automation is the easiest and the most common form of change. Being the most common form of IT-enabled change, the using of computer to speed up the performance of existing tasks is an example of automation. This involves assisting employees perform their tasks more efficiently and effectively.
Although automation speeds up performance of tasks, it does not guarantee a very high effectivity in business success. It is just the same as repeating the old manual way of disorders but in a faster way. However, this type of change, although common, is slow – moving, thus producing slow returns. Organizations using automation produce the same products and services as before but changes the way the organization functions. Example of automation in business are calculating paychecks and payroll registers, and giving bank tellers instant access to customers deposit records.
Rationalization of procedures causes the organization to examine its standard operating procedures, eliminate those no longer needed, and make the organization more efficient. It is the streamlining of existing operating procedures, eliminating obvious bottlenecks so that automation makes operating procedures more efficient. Rationalization follows quickly from automation.
Both types of change cause some disruption, but it's usually manageable and relatively accepted by the people.
A more powerful type of organizational change is business process reengineering, in which business processes are analyzed, simplified and redesigned. Using information technology, organizations can rethink and streamline their business processes to improve speed, service and quality. Business reengineering reorganizes work flows, combining steps to cut waste and eliminating repetitive, paper intensive tasks. It is usually much more ambitious than rationalization of procedures, requiring a new vision of how the process is to be organized. Business process reengineering in simpler words is Radical redesign of processes to improve cost, quality, and service, to maximize the benefits of technology.
Business process reengineering can cause radical disruption. The mere mention of the term nowadays strikes fear in the hearts of workers and managers at all levels. Why? Because many companies use it as a guise for downsizing the organization and laying off workers. Business process reengineering causes planners to completely rethink the flow of work, how the work will be accomplished, and how costs can be reduced by eliminating unnecessary work and workers. Business process reengineering is said to be expensive, strikes fear, very risky, and is extremely difficult to carry out and manage. In business process reengineering, the organization can develop the business vision and process objective. It can identify the processes to be redesigned (core and highest payback) and understand and measure the performance of existing processes. It can also identify the opportunities for applying information technology and build a prototype of the new process.
To have a better perspective of the relation of BPR and information technology, let me reprint this excerpt from an article by Yogesh Malhotra (1998): Hammer (1990) considers information technology (IT) as the key enabler of BPR which he considers as "radical change." He prescribes the use of IT to challenge the assumptions inherent in the work processes that have existed since long before the advent of modern computer and communications technology. He argues that at the heart of reengineering is the notion of "discontinuous thinking -- or recognizing and breaking away from the outdated rules and fundamental assumptions underlying operations... These rules of work design are based on assumptions about technology, people, and organizational goals that no longer hold." He suggests the following "principles of reengineering": (a) Organize around outcomes, not tasks; (b) Have those who use the output of the process perform the process; (c) Subsume information processing work into the real work that produces the information; (d) Treat geographically dispersed resources as though they were centralized; (e) Link parallel activities instead of integrating their results; (f) Put the decision point where the work is performed, and build control into the process; and (g) Capture information once and at the source.
Davenport & Short (1990) argue that BPR requires taking a broader view of both IT and business activity, and of the relationships between them. IT should be viewed as more than an automating or mechanizing force: to fundamentally reshape the way business is done.
Business activities should be viewed as more than a collection of individual or even functional tasks: in a process view for maximizing effectiveness. IT and BPR have recursive relationship. IT capabilities should support business processes, and business processes should be in terms of the capabilities IT can provide. Davenport & Short (1990) refer to this broadened, recursive view of IT and BPR as the new industrial engineering.
Business processes represent a new approach to coordination across the firm; IT's promise -- and its ultimate impact -- is to be the most powerful tool for reducing the costs of coordination (Davenport & Short 1990). Davenport & Short (1990) outline the following capabilities that reflect the roles that IT can play in BPR: Transactional, Geographical, Automatical, Analytical, Informational, Sequential, Knowledge Management, Tracking, and Disintermediation.
Teng et al. (1994) argue that the way related functions participate in a process - - i.e., the functional coupling of a process -- can be differentiated along two dimensions: degree of mediation and degree of collaboration. They define the Degree of Mediation of the process as the extent of sequential flow of input and output among participating functions. They define the Degree of Collaboration of the process is the extent of information exchange and mutual adjustment among functions when participating in the same process. In their framework, information technology is instrumental in Reducing the Degree of Mediation and Enhancing the Degree of Collaboration. Also, innovative uses of IT would inevitably lead many firms to develop new, coordination-intensive structures, enabling them to coordinate their activities in ways that were not possible before. Such coordination-intensive structures may raise the organization's capabilities and responsiveness, leading to potential strategic advantages.
Now we will take a look at paradigm shifts. It is about changing the very nature of the business and the structure of the organization itself, whole new products or services that didn't even exist before. In other words, paradigm shifts deals with major disruption and extreme change. Paradigm is a complete mental model of how a complex system works or functions. In other words, a paradigm shift involves rethinking the nature of the business and the organization. It is a complete reconception of how the systems should function.
For an example, higher education is undergoing a major paradigm shift in the online delivery of education. Classes are now offered through the Internet so that students don't even go to classrooms. Many tried-and-true teaching methodologies are being radically altered to accommodate this shift in how education is offered. Paradigm shift is a radical reconceptualization of the nature of the business and the nature of the organization. Deciding which business process to get right is half the challenge to the management. It is said that seventy percent of time programmatic reengineering efforts fail. But still organizations change. The reason is because the rewards are high. Paradigm shift involves great risks, but great returns too.
The Internet is causing all kinds of industries and businesses to alter their products, their services, and their processes in radical ways. Entire organizations are being created to handle the paradigm shifts involved in e-commerce. Look at the automobile industry as an example of this type of change: Traditional dealerships are being disrupted by auto malls and online buying opportunities. How can a local dealer compete on price with these two environmental challenges? What is the dealers' role in the revolutionary changes taking place all around them?
If business process reengineering and paradigm shifting are so disruptive and so dangerous, why even try to do them? Because companies realize they have to take on the challenges in order to stay competitive. They have had to cut costs and streamline their operations because of global economic pressures, in addition to meeting the demands of their shareholders. And done well, the rewards can be tremendous.
==========================
Now that we have discussed various aspects related to the four types of organizational change, maybe we can now think of which of the four is the most radical. I was quite confused by this question because there are actually two characteristics of ‘radical’ which came to my mind: one is radical being fundamental or basic; and the other being far-reaching or deviating by extremes. Nevertheless, I will try to explain my side on both.
We have learned that organizational change carries risks and rewards. And such is illustrated in the above figure about the risks and return of the four type of change. If we talk of a radical type of organizational change, that is, the basic one. I can say that it is automation having the lowest form of risks and returns. It is noted that automation is the most common type of organizational change. Because they are slow – moving in terms of returns or rewards, it poses low – level risks. Not much as those in the highest two (business reengineering and paradigm shift).
However this does not relatively gives us an impact on the organizational change matter. So I will take ‘radical’ being the progressive, advance, and revolutionary one. Based on what I have read, from articles and white papers and sources from the internet, reengineering and paradigm shifts constitute the faster and more comprehensive change among the four. These two carries high rewards but offers substantial chances of failures.
If we are going to look at the chart, the paradigm shift makes the farthest reach. It gains the highest level of rewards to the organization yet it also expands the greatest related risks. Be it noted that in business process reengineering alone, the business workflow has changed. The steps involved in the major processes has been reorganized and redesigned to improve organizational effectiveness and efficiency.
Take a look at this journal excerpt. Consider the following scenario - before re-engineering
Customer: "Customer 165 here. I would like to order 36 units of Product X."
Order Clerk: "Certainly, Sir. ... Oh, I see we are out of Product X at the moment. I'll check with the Warehouse. I will call you back within the hour to let you know when we can expect more of Product X into stock."
Customer: "No don't bother, I need to know now. Please cancel the order."
Now consider the same scenario - after re-engineering:
Customer: "Customer 165 here. I would like to order 36 units of Product X."
Order Clerk: "Certainly, Sir. ... Oh, I see we are out of Product X at the moment. One moment while I check with our suppliers. ... Yes, we can deliver 36 units of Product X to you on Wednesday."
"By the way, do you know about Product Y. It allows you to use Product X in half the time. I can send you 36 units of Y as well for only 20% more than your original order. If you agree, we can deliver both to you on Wednesday."
Customer: "OK. Thanks for that suggestion, and Wednesday is fine. I look forward to receiving 36 units each of Products X and Y on that day."
Order Clerk: "We find that customers using Product X also enjoy Product Z. Have you used this? It has the characteristics of ... ... and costs only ... ... Can I include 36 units of Product Z as well in our Wednesday delivery?"
Customer: "Yes. Thanks again. I confirm that my order is now for 36 units each of Products X, Y and Z - all to be delivered on Wednesday."
What has happened in this second scenario? X was out of stock, so the Product Supply process automatically displayed all suppliers of Product X. The Purchasing function has been re-engineered so that the Order Clerk can link directly into each supplier's inventory system to check the availability and cost of X for each alternative source of supply. For the selected supplier, the Clerk placed a purchase order for immediate shipment and so could confirm the Wednesday delivery date with the customer.
Next, the Product Development process displayed related products that met the same needs addressed by Product X. This suggested that Product Y may be of interest. An order for Y, based on the current order for X, was automatically prepared and priced - and Y was in stock. This extension to the order only needed the customer's approval for its inclusion in the delivery.
Finally, the Market Needs Analysis process knew that customers in the same market as Customer 165, who also used Products X and Y, had other needs that were addressed by Product Z. A further extension to include Z in the order was automatically prepared and priced. Z was also in stock and was able to be included in the delivery, if agreed.
Instead of waiting for stock availability from the Warehouse in the first scenario based on separate, non-integrated processes for each function, the re-engineered scenario let the Clerk place a purchase order directly with a selected supplier so that the customer's order could be satisfied. And the Product Development and Market Needs Analysis processes then suggested cross-selling opportunities based first on related products, and then on related needs in the customer's market.
Of course, this example does not illustrate a new approach to re-engineering. It is used every day in the travel industry. Any travel agent, after a flight is confirmed, will cross-sell accommodation, car rental and perhaps tours of the destination: as the confirmed travel booking indicates possible related needs. However data dependency ensures that re-engineering opportunities from inter-dependent processes are not overlooked. Let us look further at the benefits of data dependency analysis.
***
But paradigm shift is something more than what the business reengineering gets. When business process reengineering causes planners to completely rethink the flow of work, how the work will be accomplished, and how costs can be reduced by eliminating unnecessary work and workers, paradigm shifts talks about changing the very nature of the business and the structure of the organization itself. Not only new products, services, work flows, processes but the very nature and business of the organization. Such is what they call as complete reconceptualization of the business of the organization. Just imagine how extreme the change will be and how great the corresponding risks will yield as consequences.
But lays a great question of why are companies still trying to do business reengineering and paradigm shifts even they are so dangerous. It is because organizations must realize they have to take these challenges to be competitive and to meet the demands of their clients. These changes do not actually promise pure risks and great success. It is up for the management on how to take these challenges and make responsive actions that will alleviate if not prevent risks and absorb the benefits.
I would like to give credits to the following sources in reference to the above statements:
Finkelstein, C., 1993, 'Business Re-engineering: Three Steps to Success', Information Engineering Services Pty Ltd.
http://www.ies.aust.com/papers/brepaper.htm
Malhotra, Yogesh. "Business Process Redesign: An Overview," IEEE Engineering Management Review, vol. 26, no. 3, Fall 1998. (URL: http://www.kmbook.com/bpr.htm)
Sujan Sarkar - CIS Instructor, Chapter 14 - Redesigning the Organization with Information Systems, Santa Rosa Junior College
http://www.santarosa.edu/~ssarkar/cs66fl06/ch14notes.htm
Panagiotis Kanellis, Redesigning the Organization with Information Systems
[url=alexandra.di.uoa.gr/courses/mis/docs/lecture6.ppt]alexandra.di.uoa.gr/courses/mis/docs/lecture6.ppt[/url]
Redesigning the Organization with Information Systems
http://www.pmimontgomerycountymd.org/download/May%202005%20Presentation.pdf
Ziga Turk, Assoc.Prof., University of Ljubljana, Faculty of Civil and Geodetic Engineering
http://www.zturk.com/edu/zagreb/podiplomski/slides/02-1-short-IT-strategies.pdf
Zaliwski, A., Organization, Structure and Information Technology, Dept. of Computer Science, Cracow Academy of Economic, Poland
http://ressources.ciheam.org/om/pdf/c44/00800095.pdf
Microsoft Encarta Dictionaries
Carter McNamara in his Organizational Change and Development article wrote that “significant organizational change occurs, for example, when an organization changes its overall strategy for success, adds or removes a major section or practice, and/or wants to change the very nature by which it operates.” This, according to him, also occurs when an organization evolves through various life cycles, just like people must successfully evolve through life cycles. Like what I have stated previously, change can not be avoided nor stopped. But one can effectively succeed in overcoming the effects these changes might bring to a business by modifying some strategies to accomplish its goals. An organization also needs change to develop, for an organization can not retain its competency for a long time without keeping pace with the modern technology. What I meant here is that, it is not technology alone bringing these changes but I suppose it is one major factor why most organizations undergo changes in development. Just like human, a person can not gain more knowledge and experience if he has not gotten into another cycle of his life where he grows and matures.
In an organization, there are major risks and uncertainties in systems development that need to be addressed by the management. Determining when new systems and business processes can have the greatest impact is involved in these challenges. This may be the reasons why organizational change and development is becoming a common scenario to talk about involving management, organizations, business, and leadership. If I am going to say it in simple words, building new systems produce organizational change. And since building new systems is incorporated in the organization, managers should really take a considerable concern not only on the hardware and software aspects but also in people ware, particularly the organizational structure of information flow. In other words, the company agent faced with these changes should have at least a broad understanding of the framework of the change attempt. In this way, the basic systems and the organizational structures including their principles, roles, terms, will be understood by the leadership and management of the organization.
With the fast-changing environment, business conditions bring consequences in management both in inner and outer factors. That is why in most cases, most of the managerial activities revolve around decision – making. Knowledge plays a major role in organizational development.
-----
Organizational changes are also usually described, including management and employee training requirements, recruiting efforts, changes in business processes and changes in authority, structure or management practices.
Information technology can promote various degrees of organizational change, ranging from incremental to far-reaching. There are actually four types of organizational change enabled by information technology: automation, rationalization, reengineering, and paradigm shifts.
This figure shows the four degrees of organizational change. Automation is the easiest and the most common form of change. Being the most common form of IT-enabled change, the using of computer to speed up the performance of existing tasks is an example of automation. This involves assisting employees perform their tasks more efficiently and effectively.
Although automation speeds up performance of tasks, it does not guarantee a very high effectivity in business success. It is just the same as repeating the old manual way of disorders but in a faster way. However, this type of change, although common, is slow – moving, thus producing slow returns. Organizations using automation produce the same products and services as before but changes the way the organization functions. Example of automation in business are calculating paychecks and payroll registers, and giving bank tellers instant access to customers deposit records.
Rationalization of procedures causes the organization to examine its standard operating procedures, eliminate those no longer needed, and make the organization more efficient. It is the streamlining of existing operating procedures, eliminating obvious bottlenecks so that automation makes operating procedures more efficient. Rationalization follows quickly from automation.
Both types of change cause some disruption, but it's usually manageable and relatively accepted by the people.
A more powerful type of organizational change is business process reengineering, in which business processes are analyzed, simplified and redesigned. Using information technology, organizations can rethink and streamline their business processes to improve speed, service and quality. Business reengineering reorganizes work flows, combining steps to cut waste and eliminating repetitive, paper intensive tasks. It is usually much more ambitious than rationalization of procedures, requiring a new vision of how the process is to be organized. Business process reengineering in simpler words is Radical redesign of processes to improve cost, quality, and service, to maximize the benefits of technology.
Business process reengineering can cause radical disruption. The mere mention of the term nowadays strikes fear in the hearts of workers and managers at all levels. Why? Because many companies use it as a guise for downsizing the organization and laying off workers. Business process reengineering causes planners to completely rethink the flow of work, how the work will be accomplished, and how costs can be reduced by eliminating unnecessary work and workers. Business process reengineering is said to be expensive, strikes fear, very risky, and is extremely difficult to carry out and manage. In business process reengineering, the organization can develop the business vision and process objective. It can identify the processes to be redesigned (core and highest payback) and understand and measure the performance of existing processes. It can also identify the opportunities for applying information technology and build a prototype of the new process.
To have a better perspective of the relation of BPR and information technology, let me reprint this excerpt from an article by Yogesh Malhotra (1998): Hammer (1990) considers information technology (IT) as the key enabler of BPR which he considers as "radical change." He prescribes the use of IT to challenge the assumptions inherent in the work processes that have existed since long before the advent of modern computer and communications technology. He argues that at the heart of reengineering is the notion of "discontinuous thinking -- or recognizing and breaking away from the outdated rules and fundamental assumptions underlying operations... These rules of work design are based on assumptions about technology, people, and organizational goals that no longer hold." He suggests the following "principles of reengineering": (a) Organize around outcomes, not tasks; (b) Have those who use the output of the process perform the process; (c) Subsume information processing work into the real work that produces the information; (d) Treat geographically dispersed resources as though they were centralized; (e) Link parallel activities instead of integrating their results; (f) Put the decision point where the work is performed, and build control into the process; and (g) Capture information once and at the source.
Davenport & Short (1990) argue that BPR requires taking a broader view of both IT and business activity, and of the relationships between them. IT should be viewed as more than an automating or mechanizing force: to fundamentally reshape the way business is done.
Business activities should be viewed as more than a collection of individual or even functional tasks: in a process view for maximizing effectiveness. IT and BPR have recursive relationship. IT capabilities should support business processes, and business processes should be in terms of the capabilities IT can provide. Davenport & Short (1990) refer to this broadened, recursive view of IT and BPR as the new industrial engineering.
Business processes represent a new approach to coordination across the firm; IT's promise -- and its ultimate impact -- is to be the most powerful tool for reducing the costs of coordination (Davenport & Short 1990). Davenport & Short (1990) outline the following capabilities that reflect the roles that IT can play in BPR: Transactional, Geographical, Automatical, Analytical, Informational, Sequential, Knowledge Management, Tracking, and Disintermediation.
Teng et al. (1994) argue that the way related functions participate in a process - - i.e., the functional coupling of a process -- can be differentiated along two dimensions: degree of mediation and degree of collaboration. They define the Degree of Mediation of the process as the extent of sequential flow of input and output among participating functions. They define the Degree of Collaboration of the process is the extent of information exchange and mutual adjustment among functions when participating in the same process. In their framework, information technology is instrumental in Reducing the Degree of Mediation and Enhancing the Degree of Collaboration. Also, innovative uses of IT would inevitably lead many firms to develop new, coordination-intensive structures, enabling them to coordinate their activities in ways that were not possible before. Such coordination-intensive structures may raise the organization's capabilities and responsiveness, leading to potential strategic advantages.
Now we will take a look at paradigm shifts. It is about changing the very nature of the business and the structure of the organization itself, whole new products or services that didn't even exist before. In other words, paradigm shifts deals with major disruption and extreme change. Paradigm is a complete mental model of how a complex system works or functions. In other words, a paradigm shift involves rethinking the nature of the business and the organization. It is a complete reconception of how the systems should function.
For an example, higher education is undergoing a major paradigm shift in the online delivery of education. Classes are now offered through the Internet so that students don't even go to classrooms. Many tried-and-true teaching methodologies are being radically altered to accommodate this shift in how education is offered. Paradigm shift is a radical reconceptualization of the nature of the business and the nature of the organization. Deciding which business process to get right is half the challenge to the management. It is said that seventy percent of time programmatic reengineering efforts fail. But still organizations change. The reason is because the rewards are high. Paradigm shift involves great risks, but great returns too.
The Internet is causing all kinds of industries and businesses to alter their products, their services, and their processes in radical ways. Entire organizations are being created to handle the paradigm shifts involved in e-commerce. Look at the automobile industry as an example of this type of change: Traditional dealerships are being disrupted by auto malls and online buying opportunities. How can a local dealer compete on price with these two environmental challenges? What is the dealers' role in the revolutionary changes taking place all around them?
If business process reengineering and paradigm shifting are so disruptive and so dangerous, why even try to do them? Because companies realize they have to take on the challenges in order to stay competitive. They have had to cut costs and streamline their operations because of global economic pressures, in addition to meeting the demands of their shareholders. And done well, the rewards can be tremendous.
==========================
Now that we have discussed various aspects related to the four types of organizational change, maybe we can now think of which of the four is the most radical. I was quite confused by this question because there are actually two characteristics of ‘radical’ which came to my mind: one is radical being fundamental or basic; and the other being far-reaching or deviating by extremes. Nevertheless, I will try to explain my side on both.
We have learned that organizational change carries risks and rewards. And such is illustrated in the above figure about the risks and return of the four type of change. If we talk of a radical type of organizational change, that is, the basic one. I can say that it is automation having the lowest form of risks and returns. It is noted that automation is the most common type of organizational change. Because they are slow – moving in terms of returns or rewards, it poses low – level risks. Not much as those in the highest two (business reengineering and paradigm shift).
However this does not relatively gives us an impact on the organizational change matter. So I will take ‘radical’ being the progressive, advance, and revolutionary one. Based on what I have read, from articles and white papers and sources from the internet, reengineering and paradigm shifts constitute the faster and more comprehensive change among the four. These two carries high rewards but offers substantial chances of failures.
If we are going to look at the chart, the paradigm shift makes the farthest reach. It gains the highest level of rewards to the organization yet it also expands the greatest related risks. Be it noted that in business process reengineering alone, the business workflow has changed. The steps involved in the major processes has been reorganized and redesigned to improve organizational effectiveness and efficiency.
Take a look at this journal excerpt. Consider the following scenario - before re-engineering
Customer: "Customer 165 here. I would like to order 36 units of Product X."
Order Clerk: "Certainly, Sir. ... Oh, I see we are out of Product X at the moment. I'll check with the Warehouse. I will call you back within the hour to let you know when we can expect more of Product X into stock."
Customer: "No don't bother, I need to know now. Please cancel the order."
Now consider the same scenario - after re-engineering:
Customer: "Customer 165 here. I would like to order 36 units of Product X."
Order Clerk: "Certainly, Sir. ... Oh, I see we are out of Product X at the moment. One moment while I check with our suppliers. ... Yes, we can deliver 36 units of Product X to you on Wednesday."
"By the way, do you know about Product Y. It allows you to use Product X in half the time. I can send you 36 units of Y as well for only 20% more than your original order. If you agree, we can deliver both to you on Wednesday."
Customer: "OK. Thanks for that suggestion, and Wednesday is fine. I look forward to receiving 36 units each of Products X and Y on that day."
Order Clerk: "We find that customers using Product X also enjoy Product Z. Have you used this? It has the characteristics of ... ... and costs only ... ... Can I include 36 units of Product Z as well in our Wednesday delivery?"
Customer: "Yes. Thanks again. I confirm that my order is now for 36 units each of Products X, Y and Z - all to be delivered on Wednesday."
What has happened in this second scenario? X was out of stock, so the Product Supply process automatically displayed all suppliers of Product X. The Purchasing function has been re-engineered so that the Order Clerk can link directly into each supplier's inventory system to check the availability and cost of X for each alternative source of supply. For the selected supplier, the Clerk placed a purchase order for immediate shipment and so could confirm the Wednesday delivery date with the customer.
Next, the Product Development process displayed related products that met the same needs addressed by Product X. This suggested that Product Y may be of interest. An order for Y, based on the current order for X, was automatically prepared and priced - and Y was in stock. This extension to the order only needed the customer's approval for its inclusion in the delivery.
Finally, the Market Needs Analysis process knew that customers in the same market as Customer 165, who also used Products X and Y, had other needs that were addressed by Product Z. A further extension to include Z in the order was automatically prepared and priced. Z was also in stock and was able to be included in the delivery, if agreed.
Instead of waiting for stock availability from the Warehouse in the first scenario based on separate, non-integrated processes for each function, the re-engineered scenario let the Clerk place a purchase order directly with a selected supplier so that the customer's order could be satisfied. And the Product Development and Market Needs Analysis processes then suggested cross-selling opportunities based first on related products, and then on related needs in the customer's market.
Of course, this example does not illustrate a new approach to re-engineering. It is used every day in the travel industry. Any travel agent, after a flight is confirmed, will cross-sell accommodation, car rental and perhaps tours of the destination: as the confirmed travel booking indicates possible related needs. However data dependency ensures that re-engineering opportunities from inter-dependent processes are not overlooked. Let us look further at the benefits of data dependency analysis.
***
But paradigm shift is something more than what the business reengineering gets. When business process reengineering causes planners to completely rethink the flow of work, how the work will be accomplished, and how costs can be reduced by eliminating unnecessary work and workers, paradigm shifts talks about changing the very nature of the business and the structure of the organization itself. Not only new products, services, work flows, processes but the very nature and business of the organization. Such is what they call as complete reconceptualization of the business of the organization. Just imagine how extreme the change will be and how great the corresponding risks will yield as consequences.
But lays a great question of why are companies still trying to do business reengineering and paradigm shifts even they are so dangerous. It is because organizations must realize they have to take these challenges to be competitive and to meet the demands of their clients. These changes do not actually promise pure risks and great success. It is up for the management on how to take these challenges and make responsive actions that will alleviate if not prevent risks and absorb the benefits.
I would like to give credits to the following sources in reference to the above statements: Finkelstein, C., 1993, 'Business Re-engineering: Three Steps to Success', Information Engineering Services Pty Ltd.
http://www.ies.aust.com/papers/brepaper.htm
Malhotra, Yogesh. "Business Process Redesign: An Overview," IEEE Engineering Management Review, vol. 26, no. 3, Fall 1998. (URL: http://www.kmbook.com/bpr.htm)
Sujan Sarkar - CIS Instructor, Chapter 14 - Redesigning the Organization with Information Systems, Santa Rosa Junior College
http://www.santarosa.edu/~ssarkar/cs66fl06/ch14notes.htm
Panagiotis Kanellis, Redesigning the Organization with Information Systems
[url=alexandra.di.uoa.gr/courses/mis/docs/lecture6.ppt]alexandra.di.uoa.gr/courses/mis/docs/lecture6.ppt[/url]
Redesigning the Organization with Information Systems
http://www.pmimontgomerycountymd.org/download/May%202005%20Presentation.pdf
Ziga Turk, Assoc.Prof., University of Ljubljana, Faculty of Civil and Geodetic Engineering
http://www.zturk.com/edu/zagreb/podiplomski/slides/02-1-short-IT-strategies.pdf
Zaliwski, A., Organization, Structure and Information Technology, Dept. of Computer Science, Cracow Academy of Economic, Poland
http://ressources.ciheam.org/om/pdf/c44/00800095.pdf
Microsoft Encarta Dictionaries
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Since the introduction of Reengineering the Corporation by Michael Hammer and James Champy back in the early 90s, business process reengineering principles and processes has faced enormous challenges. The primary challenge is the willingness of managers and workers to embrace and adopt reengineering solutions for the fear of losing their jobs, positions or influence in the workplace. Now, another reengineering trend is emerging called Income Reengineering. Income Reengineering principles and processes are the counterbalance to business processes reengineering in that Income reengineering seeks to link worker prosperity to reengineering applications.
http://thereengineeringprocess.blogspot.com/
This is a great post and wonderful explanation of the 4 levels of change enabled by IT.
Great to see more women in IT :)
I, of course, a newcomer to this blog, but the author does not agree
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