BUSINESS PROCESS REENGINEERING

An organizational make-over
Reengineering is new, and it has to be done.
Peter F. Drucker

Problem Statement
The Problem is that
we are governing in the 21st century
with Processes and Organizations
designed in the 19th Century
to work well in the 20th Century!

We need entirely different

PROCESSES & ORGANIZATIONS
for Governance in the 21st Century

BUSINESS PROCESS REENGINEERING

The search for, and implementation of, radical
change in business processes to achieve
breakthrough results
Synonyms: business process redesign,
business transformation, process innovation,
business reinvention, change integration
Starting point: clean sheet of paper

Spectrum of Change
Automation
Rationalization
of procedures
Reengineering

Paradigm shift

Definition of Reengineering
The fundamental rethinking
and radical redesign of

We need to
Reinvent
the
processes

core business processes to

achieve dramatic improvements in critical
performance measures such as quality, cost,
and cycle time.

Implementing a BPR Strategy

BPR attempts a radical redesign or
transformation
Big Bang approach
Quantum Leap

Key Words
Fundamental

Why do we do what we do?

Ignore what is and concentrate on what
should be.

Radical

Business reinvention vs. business

improvement

Key Words
Dramatic

Reengineering should be brought in when a need

exits for heavy blasting.

Companies in deep trouble.

Companies that see trouble coming.
Companies that are in peak condition.

Business Process

a collection of activities that takes one or more

kinds of inputs and creates an output that is of
value to a customer.
5

Reengineering Is ...
Obliterate what you have now and start
from scratch.
Transform every aspect of your
organization.
Extremist's View

The Business Context of Business Networking

Virtual Enterprising

Suppliers/
Partner
N

Company
C

Customer
C

Customer's
Customer

Competitor
N: Needs and Perceived Needs
C: Capabilities

What Business Reengineering Is Not?

Automating: Paving the cow paths. (Automate
poor processes.)
Downsizing: Doing less with less. Cut costs or
reduce payrolls.
BPR involves innovation: Creating new products
and services, as well as positive thinking are
critical to the success of BPR.

Reengineering & Continuous

Improvement--Differences
Differences
Level of change
Starting point
Participation
Typical scope
Risk
Primary enabler
Type of change

Reengineering

Continuous Improvement

Radical
Clean slate
Top-down
Broad, cross-functional
High
Information technology
Cultural and structural

Incremental
Existing process
Bottom-up
Narrow, within functions
Moderate
Statistical control
Cultural

17

Key Steps
Select The Process & Appoint Process Team
Understand The Current Process
Develop & Communicate Vision Of Improved Process
Identify Action Plan
Execute Plan

Ford Accounts Payable Process

Purchasing

Vendor

Purchase order

Receiving

Goods

Copy of
purchase
order

Accounts
Payable

Receiving
document

Invoice

PO = Receiving Doc. = Invoice

Payment

Trigger for Fords AP Reengineering

Mazda only uses 1/5 personnel to do the same AP.
(Ford: 500; Mazda: 5)
When goods arrive at the loading dock at Mazda:
Use bar-code reader is used to read delivery data.
Inventory data are updated.
Production schedules may be rescheduled if necessary.
Send electronic payment to the supplier.

Purchasing

FordPurchase
Procurement ProcessVendor
order
Receiving

Goods

Purchase
order
Goods
received

Data base

Accounts
Payable

Payment

Before

Ford Accounts Payable

More than 500 accounts payable clerks matched purchase order,

receiving documents, and invoices and then issued payment.
It was slow and cumbersome.
Mismatches were common.

After

Reengineer procurement instead of AP process.

The new process cuts head count in AP by 75%.
Invoices are eliminated.
Matching is computerized.
Accuracy is improved.

New Life Insurance Policy Application Process at

Mutual Benefits Life Before Reengineering
Department A
Step 1

Issuance
Application

Department A
Step 2

....

Mutual Benefits Life Before Reengineering*

Issuance
Policy

Department E
Step 19

30 steps, 5 departments, 19 persons

Issuance application processing cycle time: 24 hours minimum; average 22
days
only 17 minutes in actually processing the application

The New Life Insurance Policy Application Process

Handled by Case Managers

Mainframe

Physician

Underwriter

LAN
Server

Case Manager
PC
Workstation

application processing cycle time: 4 hours

minimum; 2-5 days average
Application handling capacity double
Cut 100 field office positions

Capital Holding Co. - Direct Response Group

A direct marketer of insurance-life, health, property, and
casualty-via television, telephone, and direct mail.
In 1988, DRG president Norm Phelps and other senior executives
decided that for our company, the days of mass marketing were
over.

Need to strengthen DRG's relationships with existing customers

and target our marketing to those potential customers whose
profiles matched specific company strategies.
A new vision for DRG: The company needed to be exactly what
most people didn't expect it to be an insurance company that
cares about its customers and wants to give them the best
possible value for their premium dollar.

Capital Holding Co.: Vision

Caring, Listening, Satisfying... one by one
Each of us is devoted to satisfying the financial concerns
of every member of our customer family by:
Deeply caring about and understanding each members
unique financial concerns.
Providing value through products and services that
meet each members financial concerns.
Responding with the clear information, personal
attention and respect to which each member is entitled.
Nurturing an enduring relationship that earns each
members loyalty and recommendation.

New Business Model: A Conceptual Breakthrough

Market Management
Target & Segment
of Aggregate Market
Use Group
Information

I Think I Know.

Use Individual
Information

Prospects
&
Customers
Capture Individual
Information

I Know for Sure.

Personalized
Service

Customer Management

Sell &
Renew

A High-Level Service Process Model Today

Increase my A&H coverage

Give me information about my Life Policy beneficiaries

CSR
Customer

Life
Corres.

A&H
MicroPolicy film
Change

Action
Request

Whats your
policy #s?

Data
Entry

System

Customer
receives
two separate
responses
Input
Requested
Change

Day 2
Day 5

Action
Challis 3 Request

Lettershop

Day 8

A&H change
confirmation letter
mailed to customer
Day 6

Day 1
Life 70

Micro-film
Response

Micro-film
Request

Day 5

System
Update
Day 6

(Batch)

Life Policy
beneficiaries letter
mailed to customer

Customer Management Team (CMT):

A Flavor of How DRG Service Process Will Change

Increase my A&H coverage

Give me information about my
Life Policy beneficiaries

CMT:

System:

Teleservice
Representative

Client-server
architecture

Customer

Day 1

Day 1
Answers

Immediate
Response to
Customer

Day 1-2
Day 3-4

Send written
acknowledgment

Outbound
Paper

Taco Bell
We were going backwards - fast ... If
something was simple, we made it complex. If it
was hard, we figured out a way to make it
impossible. - Taco Bell CEO, John E. Martin
Customer buy for $1 are worth about 25 cents.
75 cents goes into marketing, advertising, and
overhead.
Reengineering from the customers point of view.
Are customer willing to pay for these valueadded activities?

Taco Bell

Corporate Vision: We

want to be number one in

share of stomach.

Slashed kitchen:
Kitchens : Seating capacity

70% : 30% 30% : 70%

Eliminate district managers. Restaurant managers are given profitand-loss responsibility.
Moving cooking of meat and bean outside.
Boost peak serving capacity at average restaurant from $400 an
hour to $1,500 a hour.
$500 millions regional company in 1982 to $3 billion national
company in 1992.

Reengineering Example
Cash Lane
No more than
10 items

Which line is
shorter and
faster?

Reengineered Process
Key Concept:
One queue for multiple
service points
Multiple services
workstation

Land Records in India

Existing System (AS IS)
Legacy of British System
Land Records created mainly for Land Revenue

Based on Presumptive Ownership of land parcels

Managed by multiple departments
Title
Survey
Registration
Local Government

Processes & services, mostly manual

Citizens have to visit several offices & wait for months for title changes

Existing System Land Transactions

Buyer &
Seller

Registration of
deeds

Complete
Documents
Submit
Appln.

Cannot verify
ownership

Verify
documents
and register

Buyer &
Seller

Buyer gets proof

of transaction

Pay fees

Land Title Office

Buyer

Complete
application

Submit
Appln for
Mutation.

Verify and
change
records

Buyer

Buyer gets
ownership
records

Buyer

Buyer gets
boundary
info.

Land Surveyor

Buyer

Complete
appl.

Submit
Appln for
Sub-division

Sub-divide
the parcel
and change
records

International Best Practices in

Land Records Management
a. New Zealand

Land Information Online

b. Canada
Land Title & Survey Authority
c. Singapore
Singapore Land Authority

d. Australia
Land Victoria

Vision of BPR Integrated Land Information

Current Situation
Inter - departmental
co- ordination
issues

Poor state of
existing records &
services

Registration &
Stamps Dept.

Survey
Survey
& Land
Department
Records
Departmet

Local Bodies

Stakeholder

Revenue
Department

Presumptive Ownership
of Property

Need to approach four

different entities for
property services

TRANSFORMATION

Integrated Land Information System (ILIS)

Stakeholders

Citizen

Business

Govt.

Services
Conveyance
Sub-division
Information Search
Ownership
Land use
Graphical
Market Valuation
Value Added
Services

Delivery Channels

Web Based

Ownership
Info

Graphical
record

Land Use
Info

Geodetic
Network

ILIS Office

Integrated Land Information

Repository
Service
Provider

Other Info
Layers