From Aziz Ahmad
Apr 10 - 16, 2000
Redesigning Business Processes for Attaining Competitive Advantage
through Information Technology.
In broad terms, technology is the application of knowledge. In a
business, technology includes the skills, techniques, procedures, equipment, and systems
used to perform the work. As companies strive to improve, they seek the most appropriate
technology to accomplish their work.
When a business designs or redesigns its production or operations
systems, it makes choices about the methods and equipment, hence the technology that will
be used to produce goods and provide services. Michael Porter, a noted author on
competitive strategy, remarked that technological innovation is perhaps the most important
source of changes in market share among competitors and probably the most frequent cause
for the demise of entrenched dominant firms.
Managers must see that their companies remain current and competitive.
Clearly, operations managers must consider technology in the initial design of an
operations system, and they must continually evaluate technological threats and
opportunities and be open to changing and adopting new ways. Technology can be improved
through major strategic changes in processes and equipment that necessitate
upper-management decisions. Managers have to develop and nurture within the organization
the ability to understand how major technical advances can be applied, and they must keep
the organization open and motivated to change. It is difficult for a company to improve if
its employees are resistant to change.
Companies must improve both their products and their productivity to
remain competitive. Managers must guide these improvements and must ensure the long-term
success of their companies through continued investments in technology and personnel
training. They must nurture an environment or culture that accepts change as a way of life
and that seeks and encourages improvement. For almost any company and product there are
small innovations that can be applied to advantage. Managers must remain alert for
occasional technological breakthroughs that provide major opportunities and challenges.
The Importance of Technology
New Goods and Services
Technology can lead to new products or services that offer the customer
something new and desirable. We often think of companies operating large research and
development laboratories that work to develop new products to gain sales as older products
enter the declining portion of their life cycles. High-tech firms try to commercialize
technology in products by rapidly bringing out new products before the same company or one
of its competitors introduces some other improved version.
A US based, multinational company called Hewlett-Packard, for example,
70% of sales comes from products that have been introduced or revamped within the past 2
years. A decade ago only 30% of sales came from recently developed or redesigned products
[1].
Improved ways to provide goods and services
Banks provide services through automatic teller machines and
manufacturing companies use computer controlled machine tools to make parts. Another
possibility in the biotechnology field is to have kidney stones removed by introducing
special bacteria that devour them.
Improve the Structure and Functioning of the Organization
Technology can be used to change the way the organization communicates,
interacts and coordinates the activities of its members. Employees may connect through
telephone lines to telecommute to a virtual office where they access shared databases and
communicate with fellow employees through E-mail and video-conferencing. A department or
section of a company may "work together" but may literally be scattered all over
the world. Technology may also be used in the logistics of linking a company to its
suppliers and customers.
The Impact of Information Technology on Businesses and Our
Daily Lives
Information technology is very pervasive and is used in many parts of
companies in a wide variety of types of business. Table 1 gives an indication of how
widespread computers are in the workspace in regard to persons who directly use them [2].
Many people benefit from applications of computers without being aware that computers are
they're working for them. A computer can be whatever it is programmed to be.
Workers Using Computers on the Job, by Industry.
Finance, insurance and real estate |
71% |
Public administration |
62% |
Transportation, communication, and other public utilities |
40% |
Services |
39% |
Manufacturing |
36% |
Mining |
28% |
Wholesale and retail trade |
28% |
Construction |
13% |
E-Commerce
In Pakistan today, IT is gaining a valuable position in the field of
business and commerce. Being employed mostly in large businesses, companies and firms are
adopting the transition from primitive business strategies towards a more sophisticated
technological approach. Companies are recognizing the fact that the world wide web is
becoming an ultimate business platform and are trying to utilize its potential. EM,
electronic data interchange, involves the use of standard formats and compatible equipment
so that computers in two or more companies can exchange messages and conduct transaction
processing. When incorporated with the web, an EDI based system can work wonders because
customers and suppliers work very closely, due to the automation of all outgoing and
procurement processes. A computer at a large retailer, for example, can scan inventory
records to determine which items are below their recorder levels. A buyer can indicate
which items are to be purchased. The computer can prepare purchase orders, sort them and
store them electronically in designated "mailboxes" in its memory or in a
database at a timeshare data service. Major banks in Pakistan have adopted ATMs (automatic
teller machines) and will soon incorporate PC/Home banking where technology will minimize
personal interaction at all levels to facilitate the smooth running of businesses.
Business Process Change
In a recent issue of the Sloan Management Review, Thomas H. Davenport
and James E. Short described a new way to combine the techniques of information technology
with those of industrial engineering to transform an organization more profoundly than
simply mechanizing existing work. In another article that appeared about the same time in
the Harvard Business Review, Michael Hammer told managers "it is time to stop paving
the cow paths. Instead of embedding outdated processes in silicon and software we should
obliterate them and start over.
We should 'reengineer' our businesses: use the power of modern
information technology to redesign our business processes radically in order to achieve
dramatic improvements in their performance." Both articles describe the new
techniques businesses are beginning to employ to radically change their business processes
in their search for competitive advantage. Davenport and Short identified five steps in
business process redesign as shown in the table below [3]:
Five Steps in Process Redesign
Develop business vision and process objectives
Identify processes to be redesigned
Understand and measure existing processes
Identify IT levers
Design and build a prototype of the process
Technology In Banking and Financial Services
The importance of technology in banking and financial services cannot
be overstated—the confluence of technology, business and telecommunications has made
them inseparable. Citibank, for example, is a premier global financial services
organization. As the world's economies become increasingly interrelated and integrated,
the ability to deliver services globally will be an important competitive advantage.
Technology has always been a key ingredient of Citibank's success; their innovative use of
technology has allowed them to provide high-quality financial products and services to
customers worldwide. Citibank's business strategy calls for a greater use for
technology-based products and services in order to harness the explosive changes occurring
in the business and technology marketplaces.
Conclusions
Today the emergence of virtual banking and electronic commerce is
increasing the role of technology in the banking and financial services industries at a
dramatic pace. Once a company achieves a competitive advantage through a new way of doing
things or a better way of doing old things, it can sustain it only through relentless
improvement. Competitive advantage can be achieved and sustained over time but the
question addressed time and time again is whether and how much information technology can
help to accomplish this.
References:
[1] Dilworth, James D. Operations Management. McGraw Hill, Second Ed.
1996.
[2] Callon, Jack D. Competitive Advantage through Information
Technology. McGraw Hill, 1996.
[3] Flaatten, Per O. Foundations Of Business Systems. The Dryden Press,
1992.
[4] Garvin, David A. "Competing On The Eight Dimensions of
Quality". Harvard Business Review, November-December 1987, pp.l01-109.
Michael E. Porter, "The Technological Dimensions of Competitive
Strategy", in Research on Technological Innovation, Management and Policy, R. S.
Rosenbloom, ed. (Greenwich, Conn.:JAI Press, 1983), p. 3.
Hamdard Institute of Management Sciences
Hamdard University. City Campus.
