PROCESS INNOVATION

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PROCESS INNOVATION

• MN3309 Session 18
• Prof. Mark Nissen

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Agenda

• Reengineering Process Innovation
• Redesigning Reengineering
• Quickly today
• Review next session
• Redesign Example (take 1)
• Case/homework Assignment
• Summary

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Innovation

• innovate verb
• To begin or introduce (something new) for or as
  if for the first time.
• invent verb, transitive
• To produce or contrive (something previously
  unknown) by the use of ingenuity or imagination.
• (The American Heritage Dictionary)
• Innovation effort to create purposeful, focused
  change in enterprises economic or social
  potential (Drucker)

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Discipline of Innovation

• Taxonomy of innovation opportunities
• Purposeful, systematic innovation
• Analyze all sources of new opportunities
• Use both sides of brain
• Simple, focused, single innovation
• Start small
• Aim for industry leadership
• Hard, focused, purposeful work
• Can innovation be disciplined?

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Innovation Opportunities - Internal

• Unexpected occurrences
• Use computer for payroll
• Edsel failure gt Mustang success
• Incongruities
• Container ships railroad/truck techniques
• Process Needs
• Japanese road reflectors
• Newspaper advertising
• Industry/market changes
• Institutional investment
• Internet markets

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Innovation Opportunities - External

• Demographic changes
• Japanese robotics
• Club Med vacations
• Perceptual changes
• Health product markets
• Personal computer
• New knowledge
• Scientific, technical and social categories
• Most common notion of innovation (RD)
• Most difficult to predict, manage and effect in
  timely manner (50 years ave thru history)

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Reengineering Process Innovation

• BPR (Hammer Champy)
• the fundamental rethinking and radical redesign
  of business processes to achieve dramatic
  improvements in critical, contemporary measures
  of performance
• Innovation (Davenport)
• revolutionary, process approach to effect
  quantum, multiplicative improvements in business
  performance
• Compare with Druckers concept?

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Reengineering Overview

• Powerful approach to process innovation
  reinvention
• Focus on enterprise process
• Dramatic performance improvement
• Responsible for much economic growth
• Raises competitive bar
• BPR vs. TQM/TQL?

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Reengineering Overview

• 30B including expenses systems
• IT as central enabler
• 50-75 failure rate
• High risk, high return venture
• You are likely to experience BPR
• 50 cycle-time reduction --gt BPR?

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Reengineering Exemplars

• Commercial
• IBM Credit (2 weeks --gt 4 hours)
• Ford A/P (500 people --gt 125 --gt 5?)
• Federal Mogul (20 weeks --gt 20 days)
• NoGru S/W procurement (10 wk --gt 7 day)
• Government
• IRS (collections 33, staff - 50)
• DoD spectrum assignment (6 mo --gt 3 wk)
• SPEDI, AF ADPE procurement
• Many others

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BPR Organization Roles

• Organization
• Cross-functional teams (IPTs)
• Spans org hierarchy
• Can include customers suppliers
• Roles (not mutually exclusive)
• Enterprise Leader
• BPR Steering Committee
• Process Owner
• Reengineering Czar
• Reengineering Team

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Reengineering CSFs

• Critical Success Factors (CSFs)
• Preconditions for success
• Top management commitment
• Realistic expectations (cost/time/results)
• Right people working full-time
• Empowered, collaborative BPR team
• Shared vision
• Sound management processes
• Org growth expansion context
• Sufficient patience budget

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BPR Life Cycle

• Future vision
• Process ID selection
• Process redesign - KW
• Redesign implementation
• Continuous improvement
• Next process or iteration

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Process Redesign

• Central analytical process in BPR
• Parallels IS analysis design
• Analytical, upstream activities
• Match tech with requirements
• Key to implementation maintenance
• Two major approaches
• Greenfield (aka blank sheet of paper)
• Baseline transformation (as-is --gt to-be)

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Greenfield To Be Scenario
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Aircraft System Design Model
Configuration Measurement
Wing Area
System
Thrust
Plastic
FBW
Performance - Speed - Altitude - Maneuverability
Weight
Environment
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Process Redesign Model
Configuration
Performance
Environment
Transform
Strategy
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Reengineering Success?
See, a perfect fit
Worked great for our other clients
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Second Wave of BPR Baseline Transformation

• Make legacy processes explicit
• Principal steps (from Davenport)
• Model current process flow
• Measure baseline process
• Diagnose process pathologies
• Match appropriate transformations
• Generate redesign alternatives
• Prototype test redesigns
• Presently KW done manually

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Redesigning Reengineering
Select
Implement
Model
Measure
Rqmts/Test
ID select process
Diagnose (taxonomy)
Generate
Match (taxonomy)
Inner loop like medical exam outer loop like
product design?
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Redesigning Reengineering
Select
Implement
Model
Measure
Test
ID select process
Diagnose
Generate
Match
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Configuration Dimensions Graph-Based Measures
Configuration
Performance
- Space (statics) length, breadth,
depth - Structure (AI, system dynamics)
feedback, parallelism, size - Dependency
(AI, coordination)
decomposability, producer-consumer, shared -
Organization (STS) job
specialization, centralization, job scope -
Technology (IS) IT-Support,
-Communication, -Automation
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Taxonomy of Process Pathologies

• 10 classes of common pathologies
• Problematic process structure (linear flows)
• Bureaucratic organization (job specialization)
• Fragmented process flows (process friction)
• IT infrastructure (manual, paper-based)
• Checking approach to quality (many reviews)
• Centralized authority (long decision chains)
• Under-utilized human potential (training v ed)
• Inhibitive leadership (directive supervision)
• Centralized information (central DB arch)
• Deficient core competencies (IT expertise)
• Like medical examination?

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Taxonomy of Redesign Transformations

• 7 classes of common transformations
• Workflow reconfiguration (de-linearization)
• Information technology (shared DB system)
• Organizational design (case manager)
• Human resource (team-based compensation)
• Information availability (informate agents)
• Inter-org alliance (supplier-run inventory)
• Management culture (ESOP)
• Source of innovation opportunities?

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Measurement Example
Step 1 Step 2 Step 3
Step 4 Step 5 H
H H
H A AgentA A AgentB A AgentC
A AgentD A AgentE O Org1 O
Org2 O Org3 O Org4 O
Org5 S none S SysA S SysB
S SysC S SysD C phone C
paper C paper C paper C
paper U nil U nil U
nil U nil U nil
Measurements Size 5, Length 5, Feedback
1, Handoffs 4, IT-support 4, IT-Communication
0, IT-Automation 0
KOPeR (NPS site)
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Diagnostic Example
Password?
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Diagnostic Example
Redesigns?
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Redesign Example
Transformations - Delinearization steps 2 3 -
Empowerment step 5 FB - Case manager steps
1-4, H - Workflow system steps 1-4
Step 1 Step 2 Step 3
Step 4 Step 5 H
H H
H A AgentB A AgentB A AgentB
A AgentB A AgentE O Org1 O Org2
O Org3 O Org4 O
Org5 S none S SysA S SysB
S SysC S SysD C WF C
WF C WF C WF C
paper U nil U nil U
nil U nil U nil
X
X
X
X
X
Measurements Size 4, Length 3, Feedback
0, Handoffs 0, IT-support 4, IT-Communication
4, IT-Automation 0
KOPeR (NPS site)
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Comparative Measurements
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Redesign Example
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BPR Example

• Credit Financing process
• Big ticket electronic equipment
• Key part of order fulfillment
• Customer, sales, credit, delivery VCs
• Independent, bureaucratic credit org
• 6-14 days cycle time for credit package
• No capability for internal tracking
• Losing customers tired of waiting

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Credit Financing Process
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Credit Financing - Level 1
Measurements Size 6, Length 6, Feedback
1, Handoffs 5, IT-support 4, IT-Communication
0, IT-Automation 0
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Acquisition Redesign Example

• Procurement processes (3)
• JA (small, simple)
• RFP (medium, average)
• LCP (large, complex)
• Major military sites (aviation)
• Approximately 220 contracts personnel
• Approximately .75B/yr
• Well-managed organization (TQM etc.)

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JA Process - Level 1
Basic structure - Attributed Digraph
Customer JA doc CS
Approvals File assist
assign
- Level (1) - Type (A) - Agent(CS) -
Cardinality(1) - Org(Procurement) - Inputs(Stub,
rqmts) - Outputs(JA_draft) - Tools(NIL) -
Communication(Paper)
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JA Level-2 Approvals
Task List 11 Legal review 10 KO review 8 RACA
review 6 PACA review 3 NAVAIR review
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JA Process Measurements Diagnostics
indicates theoretical minimum for
measure Redesign alternatives?
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JA Redesign Alternatives
indicates superiority by process experts
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JA Redesign Performance
indicates exceeded performance-doubling
threshold
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JA Process Specification
indicates theoretical minimum for measure
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Innovation Case Assignment

• Redesign the Process
• Represent using A-digraph
• Include org, agent, tools, other info
• Measure process
• Diagnose pathologies
• Identify transformations
• Generate at least two redesigns
• Refer to examples in KOPeR
• Also in MISQ article

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Summary

• Innovation can be disciplined
• BPR is powerful approach
• Raises competitive bar
• High-risk, high-return venture
• You are likely to experience
• Process measurement
• Enables engineering approach to BPR
• Combine with redesign heuristics
• KBS support through KOPeR (VPM)