Q.1 How does business process redesign the complete
overhauling of business process of an organization? Discuss with examples
The term business process redesign refers to a complete overhaul of a company's key business process
with the objective of achieving a quantum jump in performance measures such as return on investment (ROI), cost reduction, and quality of service. Business processes that can be redesigned encompass the complete range of critical processes, from manufacturing and production to sales and customer service. Businesses may call in consultants to direct or assist with the redesign.- Business
process redesign is a complete overhaul of a company's key business
processes.
- A
BPR improves efficiency by cutting slack and excess, reducing costs, and
sharpening management.
- Success
is often measured using profitability metrics.
- BPRs
may be costly and time-consuming, and may also lead to layoffs and the
disruption of workflow.
Understanding Business Process Redesign (BPR)
The term business process redesign is also referred to
as business process reengineering or business process transformation.
Redesigning became popular in the 1990s as a way for business leaders to focus
on adapting to changing technology and other forces in their industries. This
requires a review of the company's current workflow and process structure and
overhauling it to make it more efficient. Because they require a certain degree
of expertise, some companies may require external parties to review, design,
and implement any changes.
Many companies undergo business process redesigns
because of changes in the industry that require
new infrastructure to remain competitive. In some cases, companies
may be required to make radical changes by completely scrapping their processes
and adopting new ones. For example, if a more efficient way of manufacturing a
product or accessing a resource is developed, a business may be compelled to
abandon its processes and adopt new ones in order to remain abreast of its
peers.
Industry forces may require companies to undergo
business process redesigns in order to remain competitive—some may be more
radical than others.
A regulatory mandate might require new safety measures
to be included in a manufacturing process—a step that forces the company to
rearrange its workflow. For instance, lead was banned from being used in
the production of household paints,1 as well as in the manufacture of toys
and other items.2 Companies that used lead in their products had to rework
their processes to cease using it and to find ways to replace it as an
ingredient. Some companies may need to consider eliminating parts of their
business that hurt their profit. A process redesign could be launched to
reduce costs. This may involve consolidation, staff reductions,
tighter budgeting, selling unprofitable operations, and closing
offices and other facilities. Executive positions and layers of management may
be eliminated to narrow the channels of authority.
Special Considerations
It's important for companies to review their
operations, mission statements, and other key components before undergoing
any changes in their business processes. For instance, they may consider:
- Identifying
their key customers
- Determining
how the business delivers value
- Asking
themselves if they need a redesign or just redefine themselves as a whole
- Comparing
their mission to their long-term goals
If a redesign makes sense, it's essential for a
business to consider going through a series of steps including:
- Setting
up clear goals and intentions
- Identifying
core business processes
- Determining
any gaps or areas that require improvement
- Designing
and developing changes
- Implementing
and monitoring changes
Limitations of Business Process Redesign (BPR)
After assessing and mapping the processes that
currently drive the business, the redesign often aims to eliminate unproductive
departments or layers and any redundancies of the operation. The focus of the
redesign can be to maximize aspects of the business that can generate the
greatest revenue and returns for the organization. That may
mean the changes follow a narrow path, only repositioning the neediest parts of
the company.
In some cases, the redesign may take a more expansive
approach, reaching into every department and division. Extensive redesigns may
be more time-consuming and cause more disruption.
The redesign can disrupt operations for a period of
time and alter who employees report to, realign
and consolidate divisions, or eliminate certain aspects of the
business. Two major criticisms of business process redesign are as follows:
- It
may entail a large number of job redundancies or layoffs.
- It
assumes that faulty business processes are the main reason for the
company's poor performance when other factors may also be responsible for
under-performance.
Q.2 Make comparison of Business Process Re-engineering
and Total Quality Management with examples.
Business Process Reengineering (BPR)
Business process can be defined as a set of logically
related tasks performed to achieve a defined business outcome. It is a
structured, measured set of activities designed to produce a specified output
for a particular customer or market. Improving business processes is
important for businesses to stay ahead of competition in today’s
marketplace. Over the last 10 to 15 years, companies have been forced to
improve their business processes because customers are demanding better
products and services. Many companies begin business process improvement with
a continuous improvement model. The Business Process
Reengineering (BPR) methodology comprises of developing business processes
are simplified rather than being made more complex. Job descriptions expand
and become multi-dimensional – people perform a broader range of tasks. People
within the organization become empowered as opposed to being controlled. The
emphasis moves away from the individual and towards the team’s achievements.
The organizational structure is transformed from a hierarchy to a
flatter arrangement. Professionals become the key focus points for the
organization, not the managers. The organization becomes aligned with the
end-to-end process rather than departments. The basis for measurement of
performance moves away from activity towards results. The role and purpose
of the manager changes from of a supervisor to coach. People no longer worry
about pleasing the boss – they focus instead on pleasing the customer. The
organization’s value system transforms from being protective to being
productive. In this context it can be mentioned that, some of the biggest
obstacles faced by reengineering are lack of sustained management commitment
and leadership, unrealistic scope and expectations, and resistance to
change.
Total Quality Management (TQM)
Total Quality Management (TQM) is not just an
academic concept; it is a way of controlling your business. TQM is concerned
with increased customer satisfaction, along with improved business
processes. It uses the goal of customer satisfaction to generate the
organization’s strategies. During the harsh economic climate of the 1980s, many
western organizations began to look seriously at improving activities in their
service and product delivery. Different initiatives were put in place within
the operations of an organization to try to improve these activities but,
disappointingly, the benefits of such measures, when used in isolation, were
limited and difficult to evaluate in strategic terms. Some organizations
continue to use this method of activity improvement, but often the results end
up being partial or short term. In fact, some of these efforts may create a
localized impression of providing solutions, when what they are really
achieving is shifting the problem elsewhere.
A TQM system may actually make use of any or all of
these initiatives as its component parts. However, it differs most importantly
from any one of them in its scale. In TQM, all the improvement activities are
tied together, so that the ‘knock-on’ effects produced are recognized and used
to initiate further improvements. It is a continuous improvement process.
This is the key difference between TQM systems and other quality improvement
systems. TQM integrates all activities within an organization, guarantees that
the activities of one area support changes made in another, and ensures that
the results can be evaluated at strategic level. Under TQM, quality is applied
in all business functions, not just manufacturing.
To achieve total quality assurance, an organization
needs to undertake integrated quality improvement that improves all
departments, not just a willing few.
The Difference between Business Process Reengineering
(BPR) and Total Quality Management (TQM)
Business Process Reengineering (BPR) and Total Quality
Management (TQM) share a cross-functional relationship. Quality specialists
tend to focus on incremental change and gradual improvement of processes, while
proponents of reengineering often seek radical redesign and drastic improvement
of processes. Quality management often referred to as TQM or continuous
improvement, means programs and initiatives, which emphasize incremental
improvement in work processes, and outputs over an open-ended period of time.
In contrast, reengineering, also known as business process redesign or process
innovation, refers to prudent initiatives intended to achieve radically
redesigned and improved work processes in a specific time frame. In contrast to
continuous improvement, BPR relies on a different school of thought.
The extreme difference between Business Process
Reengineering (BPR) and Total Quality Management (TQM) lies in where you start
from, and also the magnitude and rate of resulting changes. In course of time,
many derivatives of radical, breakthrough improvement and continuous
improvement have emerged to address the difficulties of implementing major
changes in corporations.
Leadership is really important for effective BPR
deployment, and successful leaders use leadership styles to suit the particular
situation and perform their tasks, giving due importance to both people and
work. Business process is essentially value engineering applied to the system
to bring forth, and sustain the product with an emphasis on information flow.
By mapping the functions of the business process, low value functions can be
identified and eliminated, thus reducing cost. Alternatively, a new and less
costly process, which implements the function of the current process, can be
developed to replace the present one.
Business process reengineering examples: Cereal
products
The process of transforming food into cereal products
begins on the farm with the harvest. This is followed by primary processing,
packing and transportation to the processing plants (depending on the grain).
This large company analyzed its process and discovered
a serious logistical problem. It lost almost 20% of the grains harvested during
transportation from farms to the factories, located near the biggest
consumption centers, due to the precariousness of the roads. After a study,
this Business Process Reengineering case came to the conclusion that it would
be more profitable to move the factories nearer to the farms. Afterwards, they
transport final products to large centers with much fewer losses.
Q.3 What are the various steps involved in the
management process toward the re-engineering of business improvement? Discuss
with examples.
On the surface, BPR sounds a lot like business process
improvement (BPI). However, there are fundamental differences that distinguish
the two. BPI might be about tweaking a few rules here and there. But
reengineering is an unconstrained approach to look beyond the defined
boundaries and bring in seismic changes.
While BPI is an incremental setup that focuses on
tinkering with the existing processes to improve them, BPR looks at the broader
picture. BPI doesn’t go against the grain. It identifies the process
bottlenecks and recommends changes in specific functionalities. The process
framework principally remains the same when BPI is in play. BPR, on the other
hand, rejects the existing rules and often takes an unconventional route to
redo processes from a high-level management perspective.
BPI is like upgrading the exhaust system on your
project car. Business Process Reengineering, BPR is about rethinking
the entire way the exhaust is handled.
Five steps of business process reengineering (BPR)
To keep business process reengineering fair,
transparent, and efficient, stakeholders need to get a better understanding of
the key steps involved in it. Although the process can differ from one
organization to another, these steps listed below succinctly summarize the
process:
Below are the 5 Business Process Re-engineering Steps:
1. Map the current state of your business processes
Gather data from all resources–both software tools and
stakeholders. Understand how the process is performing currently.
2. Analyze them and find any process gaps or
disconnects
Identify all the errors and delays that hold up a free
flow of the process. Make sure if all details are available in the respective
steps for the stakeholders to make quick decisions.
3. Look for improvement opportunities and validate
them
Check if all the steps are absolutely necessary. If a
step is there to solely inform the person, remove the step, and add an
automated email trigger.
4. Design a cutting-edge future-state process map
Create a new process that solves all the problems you
have identified. Don’t be afraid to design a totally new process that is sure
to work well. Designate KPIs for every step of the process.
5. Implement future state changes and be mindful of
dependencies
Inform every stakeholder of the new process. Only
proceed after everyone is on board and educated about how the new process works.
Constantly monitor the KPIs.
A real-life example of BPR
Many companies like Ford Motors, GTE, and Bell
Atlantic tried out BPR during the 1990s to reshuffle their operations. The
reengineering process they adopted made a substantial difference to them,
dramatically cutting down their expenses and making them more effective against
increasing competition.
The story
An American telecom company that had several
departments to address customer support regarding technical snags, billing, new
connection requests, service termination, etc. Every time a customer had an
issue, they were required to call the respective department to get their
complaints resolved. The company was doling out millions of dollars to ensure
customer satisfaction, but smaller companies with minimal resources were
threatening their business.
The telecom giant reviewed the situation and concluded
that it needed drastic measures to simplify things–a one-stop solution for all
customer queries. It decided to merge the various departments into one, let go
of employees to minimize multiple handoffs and form a nerve center of customer
support to handle all issues.
A few months later, they set up a customer care center
in Atlanta and started training their repair clerks as ‘frontend technical experts’
to do the new, comprehensive job. The company equipped the team with new
software that allowed the support team to instantly access the customer
database and handle almost all kinds of requests.
Now, if a customer called for billing query, they could
also have that erratic dial tone fixed or have a new service request confirmed
without having to call another number. While they were still on the phone, they
could also make use of the push-button phone menu to connect directly with
another department to make a query or input feedback about the call quality.
The redefined customer-contact process enabled the
company to achieve new goals.
- Reorganized
the teams and saved cost and cycle time
- Accelerated
the information flow, minimized errors, and prevented reworks
- Improved
the quality of service calls and enhanced customer satisfaction
- Defined
clear ownership of processes within the now-restructured team
- Allowed
the team to evaluate their performance based on instant feedback
Business Process Reengineering Examples
The past decade has been very big on change. With new
technology being developed at such a breakneck pace, a lot of companies started
carrying out business process reengineering initiatives. There are a lot of
both successful and catastrophic business process reengineering examples in
history, one of the most famous being that of Ford.
Q.4 How does the business organization deal customer
friendly for getting competitive edge in the market in your view? Discuss with
examples.
Having a competitive advantage can create greater
value for a company and its shareholders because of certain strengths it has
when compared to its competition. A consistent competitive advantage can help
companies continue to be the market leaders in their industries. In any business,
a competitive advantage can lead to better profit margins and market control.
In this article, we discuss what competitive advantage is, how it works and
various competitive advantage strategies.
What is competitive advantage?
A competitive advantage enables a company to perform
better than its competitors. It refers to factors allowing a company to produce
services or goods better or for less expense than the competition, which may
generate more sales or higher profit margins. To be successful, a company's
competitive advantage must generate value for its stakeholders and be difficult
for others to reproduce.
Companies could have a variety of competitive
advantages, including:
- Cost
structure
- Product
quality
- Branding
- Customer
service
- Intellectual
property
- Distribution
network
There are six types of competitive advantage you can
make use of:
- Differential: This
advantage means you offer products with a more unique benefit than the
competition, such as better quality or quicker service.
- Cost-leading: This
advantage involves the production of goods or services equal to
competitors but offered at lower prices.
- Market-focused: This
advantage targets pre-defined markets instead of one large market to reach
a specific demographic.
- Brand: This
advantage encourages brand loyalty by offering a unique or superior brand
with image, positioning and strategies, or by continuously updating
features.
- Network: This
advantage refers to subscription services using member benefits or bonus
incentives.
- Resource: This
advantage refers to a company's edge because of limited access to
resources or materials for production.
What is the purpose of competitive advantage?
The purpose of having a competitive advantage is to
distinguish a company from its competitors by offering something different and
of superior value to its customers. Competitive advantage also means the
business can outperform its competition in the market and make a higher profit.
Why is competitive advantage important?
Having a competitive advantage over your competition
is essential to business success because:
- It
can contribute to higher profit margins.
- It
may help attract more customers more frequently.
- It
helps maintain brand loyalty.
- It
can add predictability and constancy to your company's revenue streams.
- It
may help attract more brand alliances, talent and potential investors.
How does competitive advantage work?
In business, there are three factors that can
determine how a company shapes its competitive advantage:
Analyze the market
To develop a good competitive advantage, it's helpful
to know the target market and how it might affect the general growth of your
business. Companies may link their primary reason for achieving competitive
advantage to lower-priced goods or services, quality products or a unique
selling point that reaches many clients. Competitive advantage captures the
interests of a company's target market, leading to new sales.
To gain more insight into your target market, you can
try a few different methods, like:
- Conducting
customer surveys
- Gathering
data about competing companies' products and selling points
- Getting
feedback on marketing and sales strategies
- Identifying
selling trends for certain products during different seasons
Implement strategies
A business can develop and implement strategies they
think could help position their products ahead of the competition. For example,
a hair and makeup business might focus on rebranding their products to make
them stand out from the competition. Another way competitive advantage works is
by identifying the target audience and implementing the strategy that would be
most appropriate.
Monitor performance
A business can monitor the strategy it uses to adjust
areas that aren't as effective and focus more resources on ones that are
successful, which can further its competitive advantage. For example, a beauty
and hair products company whose competitive advantage is its social media
platforms can monitor the number of new customers referred to it through its
social media accounts. Monitoring this information helps the company create
more avenues for new clients to sign up for their products, like bonuses or
referral programs.
Competitive advantage strategies
There are three key strategies for developing
competitive advantage:
Cost leadership
In the cost leadership competitive advantage strategy,
the goal is to become the lowest-cost or most efficient producer. The
traditional way to produce low-cost products or services is to be large-scale
supplier. If your company can produce products at a lower cost than your
competition, you can then establish a selling price your rivals can't
duplicate. To be the lowest-cost producer, you can try:
- Boosting
productivity levels
- Leveraging
bargaining power to negotiate for lower prices for production
- Using
technology more effectively in production
- Decreasing
waste
- Training
employees better
- Decreasing
downtime for machines
Differentiation
In the differentiation strategy, the goal is to offer
your customers a variation of a product or service that is of higher quality or
to innovate products or services that you can then set a premium price for.
Because differentiation occurs by adjusting characteristics such as features,
style, design and performance, the ability to differentiate products can vary depending
on what it is. For example, items that are difficult to differentiate may
include:
- Lumber
- Meat
- Paper
- Sports
equipment
- Office
supplies
- Transportation
Items that are easier to differentiate may include:
- Vehicles
- Appliances
- Furniture
- Technology
- Video
games
Focus
In the focus competitive advantage strategy, a company
targets a specific segment or segments of the market. A company using this
strategy identifies customer groups who have unique needs and wants and
provides products or services specifically for them. This type of strategy is
essentially niche marketing, and the goal is to fill that niche need not
otherwise being met by competitors.
The focus competitive advantage strategy has two main
variants:
- Differentiation-focus: Offering
products or services in a narrow market segment.
- Cost-focus: Being
the lowest-cost producer in a narrow market segment.
Q. 5 What are various strategies to be formulated in the
business organization to concentrate on output rather than inputs? Discuss with
examples. (20)
Every business should have a strategic plan—but the
number of businesses that try to operate without a defined plan (or at least a
clearly communicated one) might surprise you. Research from On Strategy shows
that 86% of executive teams spend less than one hour per month discussing
strategy, and 95% of a typical workforce doesn’t understand its organization’s
strategy. Because so many businesses lack in these regards, you can get ahead
of the game by using strategic planning. In this article, we will explain what
the strategic planning process looks like and the steps involved.
Strategic planning process
Strategic planning process (click on image to modify
online)
What is the
strategic planning process?
In the simplest terms, the strategic planning process
is the method that organizations use to develop plans to achieve overall,
long-term goals. This process differs from the project planning process, which
is used to scope and assign tasks for individual projects, or strategy mapping,
which helps you determine your mission, vision, and goals. The strategic
planning process is broad—it helps you create a roadmap for which strategic
objectives you should put effort into achieving and which initiatives would be
less helpful to the business.
Strategic planning process steps
Before you begin the strategic planning process, it is
important to review some steps to set you and your organization up for success.
Determine your strategic position
This preparation phase sets the foundation for all
work going forward. You need to know where you are to determine where you need
to go and how you will get there. Involve the right stakeholders from the
start, considering both internal and external sources. Identify key strategic
issues by talking with executives at your company, pulling in customer
insights, and collecting industry and market data. This will give you a clear
picture of your position in the market and customer insight. It can also be
helpful to review—or create if you don’t have them already—your company’s
mission and vision statements to give yourself and your team a clear image of
what success looks like for your business. In addition, review your company’s
core values to remind yourself about how your company plans to achieve these
objectives.
To get started, use industry and
market data, including customer insights and current/future demands, to
identify the issues that need to be addressed. Document your organization's
internal strengths and weaknesses, along with external opportunities (ways your
organization can grow in order to fill needs that the market does not currently
fill) and threats (your competition).
As
a framework for your initial analysis, use a SWOT diagram. With input from
executives, customers, and external market data, you can quickly categorize
your findings as Strengths, Weaknesses, Opportunities, and Threats (SWOT) to
clarify your current position.
Input-output analysis (I-O) is a form of macroeconomic
analysis based on the interdependencies between different
economic sectors or industries. This method is commonly used for
estimating the impacts of positive or negative economic shocks and analyzing
the ripple effects throughout an economy. I-O economic analysis was originally
developed by Wassily Leontief (1906–1999), who later won
the Nobel Memorial Prize in Economic Sciences for his work in this
area.
- Input-output
analysis is a macroeconomic analysis based on the interdependencies
between different economic sectors or industries.
- Input-output
analysis is used to estimate the impacts of positive or negative economic
shocks and analyzes the ripple effects throughout the economy.
- The
use of input-output analysis is not common in the Western world or
neoclassical economics but often used in Marxist economics when central
planning of an economy is required.
- Input-output
tables are the foundation of input-output analysis, depicting rows and
columns of data that quantify the supply chain for all of the sectors of
an economy.
- Three
types of impacts are modeled in input-output analysis. They are direct
impact, indirect impact, and induced impact.
- These
impacts on the economy are determined when certain input levels are
changed.
Understanding Input-Output Analysis
The foundation of I-O analysis involves input-output
tables. Such tables include a series of rows and columns of data that quantify
the supply chain for all sectors of an economy. Industries are listed
in the headers of each row and each column. The data in each column corresponds
to the level of inputs used in that industry's production function.
For example, the column for auto manufacturing shows
the resources required for building automobiles (e.g., the amount of steel,
aluminum, plastic, electronics, and so on). I-O models typically include
separate tables showing the amount of labor required per dollar unit of
investment or production.
While input-output analysis is not commonly utilized
by neoclassical economics or by policy advisers in the West, it has
been employed in Marxist economic analysis of coordinated economies
that rely on a central planner.
Three Types of Economic Impact
I-O models estimate three types of impact: direct,
indirect, and induced. These terms are another way of referring to
initial, secondary, and tertiary impacts that ripple throughout the
economy when a change is made to a given input level. By using I-O
models, economists can estimate the change in output across
industries due to a change in inputs in one or more specific industries.
- The
direct impact of an economic shock is an initial change in
expenditures. For example, building a bridge would require spending on
cement, steel, construction equipment, labor, and other inputs.
- The
indirect, or secondary, impact would be due to the suppliers of the inputs
hiring workers to meet demand.
- The
induced, or tertiary, impact would result from the workers of suppliers
purchasing more goods and services for personal consumption. This
analysis can also be run in reverse, seeing what effects on inputs were
likely the cause of observed changes in outputs.
Example of Input-Output Analysis
Here's an example of how I-O analysis works. A local
government wants to build a new bridge and needs to justify the cost of the
investment. To do so, it hires an economist to conduct an I-O study.
The economist talks to engineers and construction
companies to estimate how much the bridge will cost, the supplies needed, and
how many workers will be hired by the construction company.
The economist converts this information into dollar figures
and runs numbers through an I-O model, which produces the three levels of
impacts. The direct impact is simply the original numbers put into the
model, for example, the value of the raw inputs (cement, steel,
etc.).
The indirect impact is the jobs created by the
supplying companies, so cement and steel companies. These companies need to
hire workers to complete the project. They either have the funds to do so or
have to borrow the money to do so, which would have another impact on banks.
The induced impact is the amount of money that the new
workers spend on goods and services for themselves and their families. This
includes basics such as food and clothing, but now that they have
more disposable income, it also relates to goods and services for enjoyment.
The I-O analysis studies the ripple effects on various
sectors of the economy caused by the local government wanting to build a new
bridge. The bridge may require certain costs from the government, utilizing
taxes, but the I-O analysis will show the benefits the project generates by
hiring companies that hire workers that spend in the economy, helping it to
grow.