Business
Process Reengineering
Business process reengineering (BPR) involves radically
changing a process in order to increase efficiency. The term was first coined by
Michael Hammer and James Champy in their book Reengineering
the Corporation: A Manifesto for Business Revolution. The radical difference
between business process reengineering and
the traditional view of running a business is the focus on the process of how a
company operates as opposed to focusing on specific functions such as
production, marketing, engineering, finance, and human resources. Companies are
generally organized around functional lines. This functional alignment creates
silos that tend to slow the work flow and create inefficiencies. The BPR
perspective is that companies are divided into core processes, such as strategy
creation, product innovation, sales, manufacturing, and customer service. These
processes tend to cut across numerous functions. BPR specialists contend that
the optimal mode of operation is to run a company based on processes and not on
function. This improves the efficiency and the competitive position of the firm
through higher profits, faster time to market, and ability to respond to
customers.
Managers make changes to the way business is done on a day-to-day
basis. If these efforts occur regularly, why would we consider BPR a strategic
alternative as opposed to ongoing operations? BPR tends to have major
implications on a company's competitive ability as well as on its financial
performance. Since BPR affects both strategy and finance, it is critical to
evaluate BPR by linking these implications together and validating that the
strategic use of BPR results in improvements in intrinsic value. In this book,
our discussion will address large-scale efforts that would likely produce swings
in value.
BPR initiatives usually have
the following characteristics that would portend large strategic implications
and intrinsic value:
-
Top-down-driven initiative
-
Dramatic shifts in day-to-day operations
-
Enterprise use of technology to create
efficiencies.
Since IT and BPR initiatives are interrelated, how can you make
the distinction between the two Strategic Alternatives? The difference lies in
what is driving the benefits of the SA. If the objective is solely to change an
existing business process, then the initiative is a reengineering. Many
technology initiatives do not involve large-scale changes in work processes and
there are reengineering initiatives that do not have major technology
components.
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