. .



InformationTechnology
Redesigning Business Processes

Column
For the record
Profile
Omer Manya
Science & Technology
Solar heartbeat
Internet cellphones
InformationTechnology
Redesigning business processes
Society
Women executives and their success

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.