Chapter 15 Summary

1
Chapter 15 Summary

• Business
• and
• Information Systems
• Planning

2
Questions that the Topic of Planning Raises

• How important is planning?
• What is its purpose (Objective)?
• Who needs to do what?
• What is the impact on the organization?
• How can the process be kept dynamic?
• What is the relationship with information
• systems?
• Is there a right planning methodology?
• Are there consistent planning success factors?

3
Strategy Versus Planning

• Strategy is thinking through a companys
• basis for competitive advantage.

Planning is a means of establishing a strategy
but it also focuses on making the strategy work.
4
Strategic Planning Model
Mission Vision
Environment (External)
Business Plan
Tactical Plan
Strategic Plan
Opportunities Threats
Detailed Projects Resources Headcount, Capital
and Expense Budgets
Business Unit Functional Programs Major Project
s
Goals Objectives Strategic Positioning
Enterprise (Internal)
Strengths Weaknesses
Culture (Explicit/Implicit)
Figure 15-3
5
Planning Methodologies

• There are many planning methodologies.
• Methodologies are seldom the reason for planning
  success or failure.
• Planning methodologies are like systems with
  input, processing and output all being key
  elements.
• Key to planning is communicating the intended
  direction through practice.

6
Traditional Approach in IS Planning
Vision
Strategy
Tactics
Traditional I/S Role
Figure 15-2
7
Business - IS Planning
Technology Environment
Opportunities
Corporate Strategy
Business Strategy
Dictates
I/S Strategy
1) Strategic Capability 2) Technology Driven
Business Change
Determines
Benefits
Information Technology
Figure 15-7
8
Why IS Planning Fails

• Management Authority and Responsibility
• 1. A lack of support of the planning process.
• 2. A failure to support the final plan through
  actual implementation.
• 3. The unexpected happens that was not
  anticipated by the plan. The key here is systems
  flexibility.
• 4. Too much time is spent on turf battles or
  other political issues and not enough on the
  desired results.
• 5. Impatience by senior management for results.

9
Why IS Planning Fails

• IS and General Business-related Issues
• 1. Its outcome is stated in terms of technology
  and not business results.
• 2. A lack of user understanding of how IS relates
  to the business objective or a failure to accept
  or support the proposed approach.
• 3. Tends to place blame on todays environment
  rather than project a new and better way of doing
  things.
• 4. A lack of risk taking leads to an incremental
  approach that fails to motivate people.

10
Final Thoughts on Planning

• Planning is a tool. There is an organizational
• learning curve regarding methodologies.
• A good plan with no execution borders on a waste
  
• of the entire effort.
• A relatively weak plan with a few strong thoughts
  
• followed by tenacious implementation can provide
• major business benefits.

11
Possible Exam Questions

• Identify and explain three reasons why a company
  would have problems developing and implementing a
  strategic plan.
• What factors are most important to successfully
  align information systems with the strategic plan
  of the company?

12
Chapter 16

• Was -- Total Quality Management and The Role of
  Information Systems

New -- Business Innovation Based on Process
Reengineering
13
A WIN - WIN PROPOSITION
Figure 16-5
14
A Definition of Quality
Quality is conformance to customer wants,
needs and expectations, at a price he or she
will pay.
15
Total Quality Management
Of the three letters in TQM, the T is most
important. Total says that you maintain a
balanced focus on major business factors and
business results while guarding against becoming
process myopic.
16
TQM ALONE IS NOT ENOUGH
Competitive Advantage
Business Process Reengineering
Competitor
Competitive Advantage
TQM Alone
You
Time
Today
17
BPR Reputation

• BPR is much discussed, often belittled and even
  criticized as
• the latest business fad or buzz words.

Those that believe in its merits suggest that its
critics either dont understand what it is or
grossly underestimate the challenge to apply the
approach successfully.
There is no doubt that a BPR project represents a
major challenge because of its broad scope and
recommended clean slate approach. A typical
high-risk, high-return effort.
18
BPR is a Huge Challenge!

• For a company to achieve and sustain a
  competitive
• advantage it must continually address
• Business Strategies
• Core Business Processes
• Organizational Structure
• Company Culture
• Internal Infrastructure and Support Technology

After validating existing business strategies or
formulating new strategies, a vehicle to address
the other factors can be business process
reengineering (BPR).
19
BPR Focus

• Core Business Processes
• Organizational Structure
• Company Culture
• Internal Infrastructure and Support Technology
• The results can be input to strategies and
  company
• policies and practices.

20
BPR Project Team

• The best of five or six experienced people.
• Really know the business.
• Broad business function representation.
• Excellent interpersonal skills.
• Full time for a month or two.
• Empowered with responsibility and authority.
• Clean slate approach.
• May decide to include a consultant.

21
BPR in Summary

• An approach that incorporates
• Business leadership.
• Rethinking how work is done within the
  organization.
• Core business process analysis.
• Project management.
• Change management.

22
BPR in Summary

• Done well, BPR can make a major contribution to
  the on-going success of a business.
• Done poorly, it can prove costly and very
  disappointing.

23
Four Logical Phases
. . . minimizing the time to realize sustainable
benefits
24
Business Management

• Customer Service
• Flexibility
• Lead time
• Innovation
• Quality
• Cost

Vision
Values Beliefs
Strategies
COMPANY LEVEL
Tactics
Implementation
INDIVIDUALLEVEL
Performance Measures
Methodologies Techniques
25
Over Time Companies Have Taken a Simple
Manufacturing Process and . . .
Make
Assemble
Pack Ship
ORDER
CUSTOMER
26
. . . Complicating It
ORDER
Purchasing
Manufacturing
Distribution
CUSTOMER
Planning
Design
Finance
Sales
Functional Measures
Departmental Barriers
Systems Constraints
27
Complex Manufacturing
Results In

• Large Production Batches
• Long Lead Times
• High Inventory Levels
• Many Suppliers
• Inflexibility
• Complex Scheduling Paperwork
• Wrong Products in Stock

28
Complex Distribution
Manufac -turing
Local Warehouse
Regional Warehouse
Local Warehouse
Customer Warehouse
Supplier

• Long Lead times
• High Stock Levels
• Poor Service
• Many Parties Involved
• Poor Quality

Leads to
High Logistics Costs
29
Complex Business Processes

• More Complexity
• More Overhead Costs
• Longer Cycle Times
• More Levels of Management

Leads to
Higher Overhead Costs
30
Resulting in a Tendency to Automate the
Complexity
ERP
CRM
MRP
Suppliers
Manufacturing
Distribution
31
Core Business Processes
Customer Order Processing

New Product Introduction
Manufacturing
Supplier Development
Supply Chain Logistics
. . . 5 or 6 Core Processes Represent 80 of the
Costs
32
A Better Approach?
Current Processes
Sales
Design
Planning
Purch -asing
Manuf- acturing
Finance
Distr- ibution
Value added (VA)
Ideal Process
Non Value Added (NVA)

• Eliminate all non-value add activities
• The goal is a process consisting of only
  value-add activities

33
Which of These Processes Add Value to the
Customer?

Purchasing
Vendors
Planning
Expediting

Receiving

Customer
Inspection
Management
Engineering
Materials Handling

Distribution
Data Collection
Accounting
Automated Warehouse
Stores
Information Systems

Manufacturing
Robots
Direct Operator

Conveyors
Work-in- Process
Supervision
34
IS as an Integral Part of the Solution
Sales
Design
Planning
Purch -asing
Manuf- acturing
Finance
Distr- ibution
Automates much of the Waste (NVA)
IT Solution
Business Process Reengineering
Eliminates Waste
IT Enhanced
Enhances Value Add
The ultimate objective
Ideal Process
35
A BPR Case Study

• Microsoft Europe

36
WORLD CLASS MILESTONES
World Class Business Processes for Europe
1995
World Class Logistics in Europe
1993
World Class Manufacturing in Ireland
1991
37
A New Manufacturing Approach

• FROM ONE LARGE FACTORY
• Two-stage manufacturing
• Duplicate disk
• Assemble product
• Functionally organized
• Complex planning and tracking process
• Many short-term vendors (Job-by-job tendering)

• TO FOUR FOCUSED FACTORIES
• Cellular manufacturing
• Kitted materials
• Round Tables
• Self-directed, multi-skilled flexible teams
• Kanban, visible controls
• A few, long-term, quality-assured contract
  vendors

38
Manufacturing Results

• Lead time 12 weeks
  to 1 day
• Raw Material WIP 4 weeks to 1 day
• Finished Goods Inventory 12 weeks to NONE
• Quality (defect rate) 1 in 100 to 1
  in million

Result Rapid low cost, high
quality,
response to market demand Consequence
Traditional logistics began to
look inappropriate . . .
39
LOGISTICS
A class (rate-based) products (60 value) - 100
items
Ireland Manufacturing
Distributors Warehouse
Ireland FGS
B C class products (40 value) - 2300 items

• Ireland ships to customers every day.
• Rate-based products made every day and shipped
  directly off the manufacturing line every day.
• 60 of products are not warehoused.
• Non Rate-based products are made periodically as
  required for replenishment and are shipped from
  the warehouse.
• Lead-time from the warehouse is just transit
  time.
• Worst case is three days to Central Europe
• The daily rate of deliveries is reviewed weekly.
• Safety stock holding is calculated as five days
  plus the difference between the set rate and
  actual sales rates.

40
Results of Better Logistics
Microsoft Europe

• 1100 customers 96
• 6 warehouses
  1 warehouse
• 10,000 square meters
  1,000 sq. meters
• Inventory turns from 4 x 32 x
  

Result Short lines of communication
with fewer, larger
customers Consequence Traditional
Pan-European business
processes began to look
inappropriate.
41
Results of BPR
Microsoft Europe

• Reduced complexity and volume of transactions
  allowed closure of Regional Business Systems
• Six AS/400 installations around Europe were
  closed.
• The AS/400 installation in Dublin was enlarged.
• Connections to sales and marketing subsidiaries
  maintained by MS Network.
• Reduction of Regional Establishments
• Forecasting/accounting/inventory
  mgmt/purchasing/distribution/ sales order
  processing/credit control/returns/financials was
  centralized in Ireland.

Result Rapid supply through
a short supply chain
using fewer, simpler transactions. Consequ
ence Competitive advantage and high
customer
satisfaction.
42
Critical Success Factors

• Find out what the customer really wants and/or
  needs.
• Do things in the right sequence Manufacturing -
  Logistics - Business Processes
• Get commitment from senior management at an early
  stage. Functional manager views may need to be
  overridden.
• Have a clear vision of where you want to get to
  and communicate it internally and externally.
• Meticulously plan all transitional steps. It is
  during this period that customer service is
  likely to deteriorate.
• When designing pan-European processes, evaluate
  all local differences and then provide a
  consensus solution where possible.
• Do not underestimate the time required to
  mobilize and implement large scale change
  programs.

43
Improvement Projects
Problem Definition and Linkages Ensure that
improvement projects are focused on critical
business issues and key success factors. Project
Management and Execution Provide a framework
for organizing, implementing and following up on
improvement projects. Improvement Process
Effectiveness Provide a way for the entire
organization to learn from improvement projects
and standardize results learned from them.
44
Leadership and Participation

• Leadership define managements role in
  sponsoring change and focusing on achieving
  business success.
• Managing change
• Empowerment
• Employee development

Participation address methods used to motivate
and involve all employees to contribute to
business success.
45
Hammer Reengineering Principles

• Organize around outcome and not tasks.
• Have those that use the output of the process
  perform the process.
• Integrate information processing work into the
  real work that produces the information.
• Treat geographically dispersed resources as
  though they are centralized.
• Link parallel activities.
• Put decision making where the work is performed
  and build control into the process.

46
BSP Phases
47
BSP Motivation

• Improve value to customer.
• Pursue new business opportunities.
• Strengthen alignment of core processes to
  business strategies.
• Optimize cross-functional performance.
• Broaden scope of activities and individual jobs
  to improve operational responsiveness or
  flexibility.
• Reduce operating costs.

48
Vendor Software/Support

• Project management budgeting and project
  scheduling.
• Problem solving and diagnosis, diagramming and
  cognitive mapping.
• Customer requirements analysis.
• Process capture and modeling, flowcharting,
  activity diagramming and interaction modeling.
• Process measurement activity based costing,
  statistical process control and time and motion
  studies.
• Process prototyping and simulation.
• IS systems analysis and design and software
  reengineering.

49
Vendor Software/Support

• Business planning such as critical success
  factors or core process analysis.
• Organizational analysis and design employee and
  team attitude opinion assessment, job design and
  team building techniques.
• Change management search conferences, assumption
  surfacing, persuasion techniques
• Techniques for project management, problem
  solving and diagnosis are essential for
  management and basic problem analysis.

50
Reasons BPR Projects Fail

• 1) The lack of sustained management commitment
  and leadership.
• 2) Unrealistic scope and expectations.
• 3) Employee resistance to change.

51
Need to Remember

• It is Not Processes, But People that
• Primarily Drive Business Success

52
Total Quality Management

• Total Quality Management (TQM) advocates
  incremental
• changes.
• This change typically includes stabilizing work
  methods,
• strengthening employee involvement and teamwork,
• heightened customer service, benchmarking
  processes and a
• commitment to continuous improvement.

53
Total Quality Management
How do you say to a long time, loyal, hard
working employee that quality isnt good enough?
54
Total Quality Management
1. We are good, but we must continue to
improve.
2. Individually and/or departmentally we may
be very good but we must be as good in the
total efforts of the entire organization.
55
What Youd Get From 99.9 Suppliers

• At Least 20,000 Wrong Drug Prescriptions Each
  Year.

• More than 15,000 Newborn Babies Dropped by
  Doctors
• or Nurses Each Year.

• Unsafe Drinking Water at Least One Hour Each
  Month.

• No Telephone Service or Television Transmission
  for Nearly
• Ten Minutes Each Week.

• Two Short or Long Landings at OHare Airport
  Each Day.

• Nearly 500 Incorrect Surgical Procedures Each
  Week.

• 2,000 Lost Articles of Mail Per Hour.

56
What Youd Get From Six Sigma Suppliers

• One Wrong Prescription in 25 Years.

• Three Newborn Babies Dropped by Doctors or
  Nurses in
• 100 Years.

• Unsafe Drinking Water One Second Every Sixteen
  Years.

• No Telephone Service or Television
  Transmission for Nearly
• Six Seconds in 100 Years.

• One Short or Long Landing in Ten Years in all
  the Airports
• in the U.S.

• One Incorrect Surgical Procedure in Twenty
  Years.

• Thirty-five Lost Articles of Mail Per Year.

57
A Case Analysis
Leadership Through Quality at Xerox or Finding a
Way to Save the Company that Had Once Owned an
Industry and Was the Darling of the Stock Market
58
Xerox 914
Introduced in 1959, the 914 copier was a money
machine nonpareil. It was also arguably the
finest product ever produced by any company since
it combined four technologies chemical, optical,
mechanical and electronics. By the time it was
retired in 1973, it was the biggest-selling
industrial product of all time, and Xerox was in
the dictionary as a synonym for
photocopy. Success spoiled Xerox. To sustain its
rapid growth, it needed to move beyond copiers,
but what could ever measure up to the 70 gross
profit margins of the 914?
59
Xerox History
Quality Circles Began Fuji Xerox Won Deming Award
Leadership Through Quality Initiated
Won Baldridge Award
Benchmarking Started
914 Copier Introduced
Competition Increases
Continuous Improvement

1959 1972 1979 1980 1983
1989 1990s
Figure 16.1
Source Xerox Corp.
60
Off the Benchmark
Indirect/Direct Ratio 2X Production
Suppliers 9X Assembly Line Rejections
10X Product Lead Time 2X Defects Per 100
Machines 7X
61
Quality Through LeadershipProgram at Xerox

• The strategy was for a cultural change that
• enabled and empowered people with quality
• tools and processes to
• 1. Meet customer requirements.
• 2. Achieve business priorities.
• 3. Continuously improve.

62
The Plan for Leadership Through Quality

• 1983--the year of start-up activities
• 1984--the year of awareness and understanding
• 1985--the year of transition and transformation
• 1986--the year when results would achieved
• 1987--the year of approaching maturity

63
Xerox Policy Statement

• Xerox is a quality company.
• Quality is the basic business principle for
• Xerox.
• Quality means providing our external and
• internal customers with innovative products
• and services that fully satisfy their
  requirements.
• Quality is the job of every Xerox employee.

64
Xeroxs Outcome

• Initially
• Failed to focus adequately on core work processes
  and statistics.
• Plan was not integrated with business processes.
• Not tuned to the company culture and the need to
  change it.
• Did not pick the right quality czar at the start.
• Did not push the operating units hard enough.

65
Xeroxs Outcome

• Finally
• Found the right cure to the ills of the company.
• Quality was the right solution at the right time.
• Had a committed senior management
• IS was used effectively to complement changes.
• Employee compensation was tied to quality.
• The pursuit of the Baldridge Award was an
  energizing effort within the company.

66
Important Supporting Elements
Recognition and Reward
Tools and Processes
Transition Team
Xerox is a Total Quality Company
Senior Management Behavior
Communi- cation
Training
Source Xerox Corp.
Figure 16-3
67
Information Systems Support

• Xerox had over 375 major information systems
  supporting the total business.
• Over 175 of these systems related specifically to
  the management, evaluation and planning of
  quality.
• The validity, accuracy and timeliness of
  information systems are assured by the use of a
  Data Systems Quality Assurance process during the
  design, construction and major upgrade of each
  information system.

68
What Xerox Did Right

• 1. It made an appropriate diagnosis of how to
  cure the ills of the company.
• 2. Quality was the right process for the right
  solution at the right time.
• 3. The necessary commitment was made by senior
  management.
• 4. A constituency was built starting at the top
  in a very calculated and deliberate way.

69

• 5. Information systems use was effectively
  aligned with its business objectives and
  processes to achieve them.
• 6. Executive compensation was tied to quality.
• 7. Innovations and successes of the TQM program
  were well publicized.
• 8. The pursuit of the Baldridge Award was an
  energizing effort within the company.
• 9. It achieved measured results.

70
Product and Operations Quality Results
Production Line Defective Parts
Defects Per 100 Machines
Production Suppliers
Reduced
Reduced
Reduced
10X
10X
15X
Source Xerox Corp., Reprinted with permission
Figure 16-2
71
Xerox Perspective

• 1. It took Xerox nine years to really buy into
  quality as a corporate way of life.
• 2. It took five years to complete the TQM
  training for all of its employees.
• 3. The salary of every employee is tied to
  quality improvements and profits.
• 4. It was concluded that all of this was worth
  doing.

72
BPR Conclusions

• A BPR project must start with senior management
  support and sponsorship on an on-going basis.
• 2. Even with the necessary senior management
  involvement, a project will still be very
  challenging given the dramatic improvements and
  possible changes that it can entail.
• 3. A talented and experienced project team and a
  professional approach with discipline and
  interpersonal skills will significantly raise the
  odds of realizing BPR success.

73
BPR Conclusions

• 4. BPR, as a high risk project, represents
  possible high return as proven by the companies
  that have successfully done so.
• 5. Information technology is often the enabler of
  successful BPR and the catalyst for business
  success.

74
Ways to Improve Processes

• Traditional systems analysis incremental
  improvement.
• Business Process Reengineering ambitious and
  dramatic change through a clean slate approach.
• Total Quality Management incremental change
  with a major emphasis on quality.

75
Some Valid BPR Questions

• What frequently triggers consideration of a
  business process reengineering effort by an
  organization? Is it likely that a company would
  decide to implement such an effort for the wrong
  reasons?
• Are there fairly consistent objectives that a
  company would want to pursue that would justify
  turning to BPR as a logical approach?
• What factors will dictate a high probability of
  success or a likelihood of failure?

76
Some Valid BPR Questions

• Does the estimation that between fifty and
  seventy percent of BPR projects fail suggest that
  there is a fundamental flaw in the approach?
• How significant a role would or should
  information systems play in the design of new
  business processes?
• Does Total Quality Management compete with
  Business Process Reengineering or do the two
  complement each other?