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The Cranfield School of Management Working Papers Series has been running since 1987, with
approximately 430 papers so far from the nine academic groups of the School: Economics;
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0 All Rights Reserved. Cranfield School of Management, Edwards & Peppard, 1997
lSBN1859050972
C Edwards, J Peppard
Crunfield School of Management
Cranjeld Bedford MK43 OAL
Tel.:+44 1234 75 1122
Fax: +44 1234 75 1806
Email: j.peppard@Cranfield.ac.uk
If
of
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2911II96
The majority of writers use either one term or the other or, more
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for redesign;hence BT can lead to the re-engineeringof some or all processesfor that
businessunit.
The selectionof those processesto redesignraisesinterestingdiscussionquestionsbut
management often explain the choice in terms of their existing organisational
understandingand the strongly desiredimprovementsexpressedby their customers. In
some situationsthe very selectionof the processto redesignprovided the beginningsof
failure; some organisationschooseto redesignaround existing organisationalactivities
and whilst this may display apparently significant cost reduction, it may make little
contribution to profits. For example, consider Fords much publicised reductions in
accountspayable staff numbers due to redesigningthe accountspayableprocess; did
the 75% headcount reduction in this functional area contribute very significantly to
Fords world-wide profit? We would argue that the actual redesignwas successtil and
exhibited all the halhnarksof BPR but delivered little tangible monetary benefits in the
context of the whole Ford organisation.
shapes
defines
//
encapsulated
in
delivers
\
z-?te
verb HOW; an example of this may be to educate visitors which results from an
demandsmuch more of a creative approach and permits out of the box thinking in
relation to the possible ways the process could be operationalised. The existing
activities are ignored and possibleways of meetingthe expectationdeveloped,through
the use of brainstorming,benchmarkingor other creativetechniques.Existing activities
can then be comparedto those resulting Ii-om the brainstormingto reveal the extent of
the transformation.
which can be left for a while and which do not merit redesign attention. Such focus
not only provides an invaluabledirection for redesigningparticular activities but also
for the ongoing managementof the emergentprocesses. Some processespresumably
are critically important and deserve ongoing senior managementattention, whereas
others can be more sensibly delegated, and maybe some are more appropriately
outsourcedfor others to perform.13
required to addressthis need. Transformation processes are those that create the
capability to operate effectively in the firms chosen industry in the future.
Such
13
For example,quality was a competitive imperativein the auto industriesin the 70s and
80s when UK domestic production was sometimesinferior to imports but in the 90s
this is much less so. Customers expect quality and to be told it is the major selling
point of a car is usually insufficient on its own to stimulate sales. Hence the quality
process is no longer a competitive process but still requires active managementand
hencefor most car manufacturersit would today be seenas a qual@ing process.
The remaining class of processes,we term underpinning processesas these are not
14
are
necessay to exist in the
chosen industry and are
to be organised
on a communal basis
Those processeathat
are neceseay to exi5t
:n the crcsen industry
and are to be uniquely organised
The Strategic
Diamond
should be borne in mind that the actual classificationof a process is often achieved
after much senior managerdebate and much referenceto the written and unofficial
businessstrategy. In fact, such a discussionamongst senior mangers is often very
productive in clarifying the businessstrategy itself
Ruitioning Processes
Does this process relate to
creating a capability
1111)
that wilb~~;;;~i;e;
future YE5
Transformation
Process
NO
+
15 the process one which
is intended to provide
us with advantage?
: NO
III*
YES
Competitive
Process
+
1s the process one which
is necessary to operate in our industry
and is of sufficient importance
to organise on a process basis
lye*
Do we really need to
operate this process?
zYE5
Question
1!1*
the
process
NO
: YE5
+
Underpinning
Process
Qualifying
Process
Figure 4 Positioningprocesses.
As simple as it sounds, organisationshave strategieswith no obvious process to turn
them into actions. For example,a large law firm had a clear strategy focused on being
competitive by better matching a clients needs to the servicesit offered than any of
its competitors. The actual legal servicesoffered were not intended to be any better
than the competitors; the matching process was to be a competitive process and the
provision of various legal serviceswere, for them qualitying process. Considerable
investment was made telling potential clients of the benefits of the organisations
capability in matching their needsto service offerings but the nearest senior managers
16
could come to identifying a process to ensure this actually happenedwas that of the
receptionist. This organisationsstrategywas deliveredby the receptionist and security
staff during the receptionistslunch period!
always entrusted to the level of seniority that one might expect. Could this be a
contributory factor to explain why some businessstrategies remain as desires and
visions and seldombecomereality?
Processcategory
Competitive
Defining characteristics
Processesfocusedon delivering value to the customerin excessof that
deliveredby competitors,and thus have an emphasison customer
requirements.Antecedentsin Michael Porters competitivestrategyand
positioning the firm in responseto industry conditions. Kenichi Ohmae
writes aboutthe importanceof ..serving customersreal needs.
Transformation
Qualibing
Underpinning
Migration of processes
A processis of a particular classat a particular point in time: but processescan change
their classificationthrough time. In our researchwe have identified five observable
movements.
17
19
the qualifying process,with superior design, i.e., the competitive process,then it has
potential to createa very significantcompetitive advantage.
A further benefit of classifyingprocessis as a meansto focus a re-engineeringeffort.
Initial thoughts are often to focus upon competitive processes to gain current
competitiveness and then to turn to the transformation processes to form the
foundation for the M.n-e. However, beware, as it would be somewhat fruitless to
ignore current areasof stakeholderdissatisfaction. For example,what is the point in a
car manufacturerhaving superb design studios that visualisecars which are attractive
to customers,if the inbound logistics process is effectively delaying the building of
these vehicles. This logistics process may be a qualifying process but it cannot be
allowed to be performed unsatisfactory. In summary, the triangle provides the
classification but individual organisational circumstancesdetermine the particular
priorities for redesign and as these circumstanceschange through time, so will an
organisationsredesignpriorities.
The triangle also provides guidelines for the ongoing managementof processesin
addition to focusing redesign effort.
Even when organisationshave identified and positioned their processesthey are often
unsure of which particular processesto re-engineerfirst. We have found it useful to
20
Competitive
Redesign to
Proceases
I
/
Maintain
superior
performsance
Transformation
Qualifying
Ucderpinning
Processes
Restrict spending
to reallign with
Procease
Restrict spending
urgently
Processes
Low
Worse then
competitors
Performance
3imuar to
competitor5
vi+a-vi5
Better
then
competitor5
High
competitors
21
IT Operation was responsiblefor the operational elementof the banks computers and
communicationsystems. It is large by virtually any standards,employing at the time
1,300 staff and having an annualrun rate budget of E240 million. Through the years a
very complex technicalinfrastructurehad grown consistingof equipmentTom virtually
every major vendor. A sister unit of the one in question was responsible for
applicationsdevelopmentand was structured according to the businessit served. For
example,it had analystsand developmentstaff dedicatedto the mortgage businessand
others focusing upon the retail banking business.The relationship with this sister unit
was complex as all contact with the businesswas supposedto be through this sister
unit but of course the businesscustomerssoon recognisedthat some of their requests
were performed quicker by going directly to the operationsgroup.
IT Operations,the subject of the case,operated like any other businessunit having its
own controlling board, a vision statement,a strategy and customers.The vision of the
operations unit was to provide quality services at competitive prices adding value in
first choice partnerships, based on trust and opennessthrough first
class people
passionately committed to the success of clients [the italics are theirs]. It competed
to a limited extent for part of its businessin that some of its customershad sufficient
autonomy to use any supplier they wished, however this was a very limited group of
customers,most were tied to using the operations service. In reality the unit had a
significantcompetitor in the outsourcing companieswho were constantly attempting to
securea large contract by targeting individual parts of the businessand demonstrating
their competence. Given the world-wide trend in outsourcing, the business was
concernedthat they might be consideredas a potential candidate,whether for full or
partial outsourcing. This IT Operations unit was a distinct businessunit within the
group and the businesstransformationinitiative focusesexclusivelyon this unit.
Deciding an approach to the problem
An overview workshop was conductedby one of the authors, which introduced to the
Board the subjectmatter of this article. It was also explainedto them the principles to
be employed,the benefitsthat could be expectedand in particular the commitmentthat
22
Identify stakeholders
Identify and verify stakeholdersexpectations
Form the processesto meet the expectations
Allocate Board membersto be processowners
Categoriseprocessesusing the triangle
For eachprocessidentify highest level activities and allocateowners
Determinethe degreeof effort required to createor improve eachactivity
Determinethe improvementprogrammesthat are to be pursued
Allocate improvementprogrammesto particular Board members
23
Descriptions
Priority
(High,Mediumor LOW)
High availability. reliability,
and integrity of operational
service
Stakeholdergroup
High
The sister developmentunit and clients with purchasingautonomy
7
(combinedas very similar)
Managersof the front line businessunits
f3*
Consumers/users
of the IT servicein the front line businessunits
3
6
Operationsstaff
6
Operationsline management
5
OperationsBoard
1
Suppliers
5
Group Main Board
* Two of theseexpectationwere categorisedas of superhigh importance.
Medium
9
Low
3
1
0
2
3
3
2
2
0
0
0
0
1
1
0
the desireto contain or reduce costs was a common theme. These common items were
consolidated. Every expectation on the resulting list was then examined and the
question was asked have we yet developed a process to deliver this expectation?: if
yesthe expectationwas consolidatedinto that process and a measure(s)was added
to the existing process successmeasures:if no a new processwas originated and a
measure(s)devised. This brief description does not reflect in any way the amount of
effort and debatethat was provoked by this task. Even after a list was produced later
stagesprovoked a fine tuning of this list of processes.The resultant list comprised
twelve processes(seetable 3).
Process
ManageFinances
ManageServiceDelivery
ManageRelationships
ManageProgrammesand
Projects
DevelopOrganisation
ManageCoxnmunications
DevelopServices
ManageWorldlow
ManageSuppliers
ManageProfessionalBusiness
ManageRisk and Reputation
Provision Suuplv
Competitive
Transformation
Qualifying
*
Underpinning
*
*
*
*
*
*
*
*
*
*
Manage Finances
Manage all IT operationsfinances professionallyto the required standardof the Group. Provide the
required level of financial information to support market comparisons,negotiations with Group
Board supplier negotiationsand to satisfy clients as to IT operationscompetence.
Manage Service
25
26
and managing the relationship with customers (see Table 3). They recognisedthat
they needed to improve performance in these processes in order to counteract
competitive threats. The transformational processes of organisation and service
development would create the basis of future competitiveness, creating new
competencies.
Focusing the initiative
27
Having identified and classifiedits processesthe Board had to decide where to begin.
The competitive processeswere obvious choices, but for further analysis, the 12
processeswere mapped onto the process-performancematrix. While this would give
further clarity to the initiative, it would also require that some benchmarking be
undertaken. Slowly one began to see a consensusemerging amongstthe Board as to
what processesto focus upon in the near and medium term future and who was to be
responsible for action. Relationshipsbetween the various departments within the
business unit became clearer and clarity between organisational boundaries was
highlighted. As a result of this exercise,two processeswere selectedas candidatesfor
redesign,and consultantswere hired in order to help in the redesignof these particular
processes.
Benefits of the initiative
The generalbenefits of applying the ProcessTriangle have been discussedearlier and
so this particular sectionrestricts itself to the particular benefits to this organisation.It
is alwaysdifficult to measurethe benefits of a singleproject such as this, as many other
initiatives are ongoing in the organisationas a whole which could impact this project.
However as a short term measurethe Board believed that the analysishad revealed a
new perspectivewhich would aid them in focusing many ongoing initiatives; it would
delay some initiatives to devote extra resources on others. The project certainly
provided a framework in which to constrainthe consultantshired to redesignparticular
the two particular processes.As ever the discussionswhich were necessaryto use the
classificationtool were acknowledgedto be insightful. One major sidebenefit was that
it helped to bind together what was a fairly new (to each other) top team.
The redesignand implementationof these new processblueprints is not the subject of
this article, but the bank clearly recognisedthe importance of managingthe migration
from the old process design to the new. During 1995, the IT Operationsunit took in
excessof their target of &40m out of the annual run budget and have the sametarget
for 1996 which, although it looks stretching, is seenas being achievable. There was a
28
similar story with servicequality which also improved strongly and similar targets are
being set for 1996.
Closing remarks
An organisation should understand its processes, their classification and clearly
develop and agree guidelines for the managementof each process. The Process
Triangle is a meansto classify the processesof an organisationto provide sufficient
understandingto selectparticular processesfor detailedredesignand additionally it can
provide guidelines for the ongoing managementof processes. It builds upon the
experiencesof others and has been deployed in a variety of organisational forms.
Interestingly it has been employed with a variety of IT units requiring to undergo
transformation and the processesdevelopedhave been essentiallysimilar, however the
classification of these processeshas varied considerably. Benchmarking, usually a
difficult task to apply in functionally basedorganisations,is much easierto apply when
processesare well understood. The Triangle becomes invaluable in process based
benchmarkingas it begins to explain why a particular organisation is striving to be
superior or content to be averagein relation to a particular process.
29
References
See for instance CSC Index survey which reported that 69% of US companiesand 75% of
Europeancompanieshave at least one re-engineeringinitiative active. CSC Index, The State of
Re-engineering, 1994.
A figure of 70% is often quotedand attributedto Hammer and Champy. However,Hammer has
assertedthat this figure was descriptivereflecting his experience. M. Hammer and J. Champy,
Re-engineering the Corporation: A Mantfesto For Business Revolution, Nicholas Brealey
Publishing, London. M. Hammer, Hammer defends re-engineering, The Economist, 5th
November, 1994, p. 96; M. Hammer and S. Stanton, No need for excuses, Financial Times,
October5, p. 14.
SeeJ. Peppard,Broadeningvisions of businessprocessre-engineering,OMEGA, International
Journal of Management Science, Vol. 24, No. 3, 1996.
See for example, M. Hammer, Reengineeringwork: dont automate - obliterate, Harvard
Business Review, July-August,pp. 104-I 12 and M.S. Scott Morton, editor, The Corporation of
the 1990s: Information Technology and Organisational Transformation, Oxford University
Press,New York, 1991.
In fact BPR was initially labelled businessprocessredesign. See T. Davenport and J. Short,
The new industrial engineering:information technologyand businessprocessredesign, Sloan
Management Review, Summer, 1990,pp. 1 l-27.
Keith Grint has arguedthat BPR might be better configuredas a Utopia and that it embodiesthe
samekind of possibilitiesand problemsthat Utopiasthroughouthistory have manifested. SeeK.
Grint, Utopian Re-engineexingin
, G. Burke and J. Pappard,Examining Business Process Reengineering: Current Perspectives and Research Directions, Kogan Page,London, 1995,pp. 82106.
G. Hall, J. Rosenthaland J. Wade, How to make re-engineeringreally work, Harvard Business
Review, November-December,
1993, pp. 119-131.
Seefor example,A. Ascari, M. Rock and S. Dutta, Reengineeringand organisationalchange:
lessonsfrom a comparativeanalysisof companyexperiences,European Management Journal,
Vol. 13, No. 1, pp. l-30, 1995; and C. Edwardsand J. Peppard,Forging a link betweenbusiness
strategyand businessre-engineering,European Management Journal, Vol. 12, No. 4, pp. 407416.
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Class
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Tntptrratinn
WORKING
PAPERS
WORKING
PAPERS
List No 11,1997
SWP II97 Hclcn Peck
Towards A Framework of Relationship
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SWP 2197Hclctt Peek
Towards A Fratnework of Relationship
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A Critical Issue in BusinessProcessReEngineering: Focusing the Initiative