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Business Engineering and Process Redesign in Higher Education: Art or Science?

CAUSE 98 Seattle, Washington December 8, 1998

ABSTRACT

The University of Minnesota is one of many organizations addressing aging legacy systems and non-compliant Year 2K issues through the replacement or enhancement of its existing legacy systems. This presentation explores both policy and operational issues associated with optimizing the return on an organization�s investment in enterprise transactional systems via business engineering and process redesign.

Susan M. Grotevant
Director, Information Management Systems
University of Minnesota
Suite 660, West Bank Office Building
1300 South Second St.
Minneapolis, MN 55455
Phone: (612) 626-0577
Fax: (612) 626-8745
E-mail: [email protected]

Business Engineering and Process Redesign in Higher Education: Art or Science?

Old organizations, like old people can become set in their ways. American higher education institutions in particular inherit a unique mix of centuries old traditions and more modern organizational inventions. As resources and public expectations continue to shift and change, there is a compelling need now more than ever to challenge the unwritten traditions, norms and paradigms and to ask penetrating questions about what the University of the 21^st century ought to be and what they are uniquely positioned to contribute now and in the future.

This paper draws on the enterprise change strategies and experiences of for profit organizations already addressing increased change and competition driven by technological innovation. Can these experiences be applied to higher education institutions? Without question, yes. At the same time that educational institutions are struggling to identify a management paradigm that advances and supports core educational values and outcomes, the increased competition for public resources is inexorably privatizing educational enterprises. As a result, while the effects of increasing change and competition may lag or be less apparent in higher education institutions, it is inconceivable to assume that they will be exempt from the same forces affecting other business enterprises.

What is more likely is that to the extent that Y2K issues have driven an unprecedented investment in new Enterprise Resource Planning systems the need for Enterprise Engineering has in fact accelerated in order to provide an acceptable return on sizeable financial investments and benefits promised by vendors. Rather than ameliorating financial and competitive pressures, system implementations without process and organizational transformations may actually impair future financial stability by "casting in stone" obsolete processes and procedures. Those institutions that successfully tap the powerful synergy resulting from the merger of technology and business strategy to transform their organizations will experience an unparalleled competitive advantage as they enter the new millennium. While the negative consequences for organizations that fail to act or whose efforts are unsuccessful will be far more significant than in the past.

All enterprises, whether public or private, destined to thrive in the coming millennium will, of necessity, be organizations that are constantly learning and changing, that maximize the use of knowledge and information, and deploy it faster and to better advantage than their competitors. Successful organizations will be characterized by their ability to use information better, learn faster, be dynamic rather than static, and foster innovation while managing risks. All of these outcomes will require significant organizational transformations in both public and private organizations.

This paper is about Enterprise Engineering/Business Process Change Strategies for helping organizations to get from here to there and the role of information technology, both in driving and supporting organizational change. If there is a single core message for IT professionals it is that the new business paradigms need the joint creativity of business people and computer people. "�to talk about transforming work processes and organizations without talking about information technology is like talking about politics without television� Electronic technology changes everything. Business people who attempt to discuss business redesign without adverting to sophisticated new technology are limited in what they achieve. Computer professionals who talk about business reinvention usually miss major opportunities."

SEPARATING MYTHS FROM REALITY

Before discussing the art and science of organizational and process transformation, it may be helpful to separate the mythology from the methodology. "Perception is everything�" and like many topics that become a part of our popular lexicon, there is as much myth as reality when it comes to discussing organizational change. A discussion of some of the more prevalent myths follows:

Myth #1: Business Process Engineering is either a relatively new concept or a passing fad. The need to transform organizations is not new and, driven by advances in technology, will only increase. What is new is the expanding discrepancy between the speed of technological innovation and organizational change responses. The tools, concepts and methodologies for transformation, the degree of innovation, the naming conventions and the manner in which they are packaged and presented will continue to vary but the need will not decline.

Myth # 2: Terms such as Business Reengineering, Business Process Redesign, Total Quality Management, Business Transformation, Process Change Management are interchangeable. Although these terms as they have entered the popular lexicon, are often interchangeably used, together they represent a family of change methods that transform work processes and organizations in ways that range from incremental to radical. The more discontinuous the change required, the more likely that changes in organizational structure, strategies, business capabilities, and cultural norms will be necessary to capitalize on the business opportunties resulting from reengineering work processes. James Martin has chosen to group these various methods under a larger umbrella term known as Enterprise Engineering.

"Enterprise Engineering is an integrated set of disciplines
For building or changing an enterprise, its processes, and
systems. It integrates the most powerful change methods
and makes them succeed�Enterprise Engineering provides
management with a tool box of change methods. It aims to
select and integrate the most powerful methods so that
management can plan and succeed with complex change
while continuing to run the business.

Myth#3: IT drives Enterprise Engineering. "Technology permits changes in work, and work must change radically in order to take advantage of technology." It is often very tempting for management to sidestep difficult but necessary decisions by seeking to reengineer an organization through systems implementation (i.e. let the system force the decisions). "Information Technology provides the infrastructure and tools, which fundamentally change organizations, but management provides the strategic business vision that transforms technology into competitive advantage" should be the mantra of every CIO and IT manager. Systems implementations make business and breakthrough process change possible and business managers should partner with IT, not the reverse. But the reality is that when there is not a clear business vision driving decisions within an organization, it is often difficult for IT to decline the leadership role in Enterprise Engineering efforts.

As a result, IT is often blamed for the failure to successfully transform an organization through implementation of systems when in fact, it is the lack of strategic business vision and leadership from the outset that led to the failure to achieve desired outcomes. Thus IT managers and organizations should not accept responsibility for driving an organizational transformation without understanding the accompanying risks and only after failing to recruit the necessary business leadership and vision to lead the effort.

Myth #4: Work processes can be reengineered without significant organizational changes and organizational changes do not require changes in work processes. It is difficult to successfully reengineer existing processes to take advantage of the potential opportunities presented by technology without rethinking the existing hierarchical organizational structures and rigid processes and procedures ill suited to meet the integrated information needs of business users. In looking for examples of dramatic breakthrough improvements achieved by organizations more often than not you will find fundamental changes in work processes have been implemented and the organizational structure was modified to implement those changes. This is in sharp contrast to typical organizational realignments that reshuffle the upper layers of an organization but rarely impact actual work processes or the flow of information. As a result most organizations go through multiple management reorganizations without changing work processes or technology is used to automate outdated processes, which are then forced to operate within inappropriate organizational structures.

Many of the core administrative processes in higher education institutions where new systems are being implemented in response to Y2K problems were designed before the advent of technology or designed to take advantage of centralized mainframe computing capabilities now obsolete. Upon closer examination, more times than not you will find that where technology exists it has been superimposed on existing work processes rather than adapting the work to take advantage of technological opportunities. Ironically, there is the real possibility that significant investments in new ERP systems, which reinforce outdated procedures, will hinder rather than enable needed change.

Myth #5: The Focus of Enterprise Engineering is Information Technology. Too often people view Enterprise Engineering as associated primarily with information, digital technology, networking, and communication rather than recognizing it is primarily about people and their the changing role in organizations. In many knowledge-based organizations today, expenditures associated with people represent the largest expenditure of resources. Pursuing technological potential without exploiting human potential will not yield the outcomes sought from Enterprise Engineering efforts. Failure to consider the human and cultural issues within an enterprise almost always results in a failure to successfully implement organizational change.

The purpose of Enterprise Engineering should be to increase the value of people whether through process or policy redesign, automation, expert systems, training, or access to information. In order to be successful organizations will increasingly need to develop the potential of their employees, increase their knowledge and provide a work environment that facilitates learning and experimentation at every level in the organization. It is important not to lose sight of the fact that the potential of an organization represents the sum of the potential of its people.

This approach runs directly counter to the current trend in both public and private sectors to "downsize" or "right-size" organizations by reducing the number of employees instead of choosing to change the workplace and processes to increase the value of an organization�s employees. Requiring people to "do more with less" is perhaps the least imaginative and effective response to competitive or resource challenges.

ENTERPRISE ENGINEERING CHANGE METHODOLOGIES

Enterprise Engineering at its best represents the fusion of information technology and management� science and art. The term "engineering" implies a body of scientific knowledge that can be taught, and whose results can be measured and quantified. The art of managed change rests not only in the ability to assess organizational readiness and capability to implement change from a cultural, human resource, financial or technological standpoint but also in determining which combination of business engineering approaches will yield the desired results in a given organization. . Information Technology provides the infrastructure and tools, which fundamentally change organizations, but management provides the strategic business vision that transforms technology into competitive advantage. For Enterprise Engineering to succeed two questions must be answered:

1. What is the strategic vision for the enterprise?
2. How to get from here to there?

Despite the popular tendency to lump a wide range of change methodologies under umbrella terms such as Business Reengineering, Business Process Redesign, Total Quality Management, Business Transformation, and Process Change Management, there are very distinct differences in the approaches embodied in these terms. A quick overview would yield two fundamentally different strategies: Process Improvement and Process Innovation. A summary of the differences between these two concepts follows:

Process Improvement versus Process Innovation

A significant determinant of the likelihood of success or failure of any particular approach is the ability to match the method to the desired outcome and the organizational circumstances. It is worth noting that no one methodology or approach is right for every organization and every instance and there are documented successes and failures for every transformational strategy. For the purposes of this paper, various change strategies are presented using a methodological framework proposed by James Martin illustrated below.

Although there are significant differences in the change strategies between categories, the methodologies can be applied one at a time or by coordinating or combining methods in multiple categories. The categories are largely differentiated by the degree of continuous or discontinuous change anticipated as a result of implementation of the change strategy. The organizational forces that form the context in which the change must take place (people, organizational culture and the knowledge infrastructure needed to support the change processes) are linked to each of the change categories. Martin’s objective in representing the relationships between change methodologies in this way is bring home the point that in the absence of a partnership between IT and management many business redesign efforts falter due to cultural and political resistance to change and the failure to successfully leverage IT resources.

Whatever the methodology employed, Enterprise Engineering is about the simplification of work to achieve higher quality, better results for customers, and lower costs. It is about replacing manual processes with automation, eliminating unnecessary bureaucracy, streamlining and minimizing handoffs across departments, providing the right information at the right time to the right people, eliminating unnecessary work, reducing unnecessary controls, empowering every employee, and getting it right the first time.

Continuous Process Improvement (TQM, Kaizen)

The least invasive type of change strategy available to organizations is one of continuous improvement, which operates under the principle that excellence can be achieved by making a large number of small or incremental improvements continuously over time. The goal is to please both internal and external customers by improving the quality of both processes and outcomes. Work teams and individuals are encouraged and empowered to suggest and implement improvements using a structured set of tools and techniques to correctly identify and define both problems and solutions.

This management approach originated in Japan in the 1960’s where it is known as Kaizen, which means continuous improvement of products, services, customer support, relationships, systems etc. that involves everyone within the organization. Although there is no directly equivalent word in English, the culture of Kaizen is most closely approximated in the precepts of Total Quality Management (TQM) which gained widespread visibility in the United States in the last two decades. However, the term "Kaizen "does have one major advantage over TQM in that while there is often very little agreement over what how to define or measure terms like quality, there is very little disagreement with the concept that anything can be improved.

Although this approach is the most incremental of the methodologies to be discussed, successful implementations of this approach often requires significant time and sustained investment by top management to institute the necessary cultural changes in US organizations. The old adage that "…if it isn’t broken, don’t fix it…" represents the antithesis of a Kaizen/TQM organization where anything that can be improved–is improved and every problem is an opportunity. This emphasis on process is very different from the typical shorter-term innovation and results-oriented focus of U.S. organizations. Despite the costs required to implement Kaizen/TQM, there is ample evidence that it can be justified in results oriented operating environments when process improvement is designed to result in measurable productivity increases and cost decreases. Although successful implementations of a TQM/Kaizen culture can be documented over a wide range of organizations in the U.S., it is generally more successful in smaller and newer organizations than in large, complex, vertical organizations.

Implementation of Kaizen/TQM has a significant impact on an organization’s information technology strategies since information systems need to change as quickly as human procedures. In today’s current IT environment, that concept is most perfectly embodied in the opportunities offered through internet/intranet management information systems, to a lesser degree in client server environments and least of all in organizations dependent on legacy systems for management information. A successful quality implementation requires the ability to automate dynamic business rules, policies and procedures and to use management information and reports to reinforce and support change. Organizations that attempt to create a quality management culture without ensuring similar flexibility in their IT environment may end up worse off than if they had taken no action.

The establishment of the annual Malcolm Baldridge National Quality Award, awarded to organizations that excel in quality achievement and quality management, reflects the growth of the quality movement in this country. The framework for continual process improvement required by this award reflect the best practice outcomes envisioned in continuous process improvement (TQM/Kaizen).

• The customer defines quality.
• An organization’s senior management needs to create an organizational environment that clearly values quality and integrate those values into the organization’s operating policies, procedures, processes and rewards.
• Excellence in quality requires well-designed processes and systems.
• Quality requires an organizational culture that both demands and rewards continuous improvement.
• Quality leadership is demonstrated through the development of process-oriented goals and tactical strategies and operating plans consistent with the principles of continuous process improvement.
• Strategies for achieving quality should include reducing the response and processing times, improving design quality and defect and error prevention.
• Management and operational decisions should be based on information.
• Excellence in quality requires the participation of trained employees at every level in the organization.

No matter how well implemented, a quality oriented, continuous improvement strategy also has its limitations. David Kerns points out that while institutional survival may require improvements in quality, quality improvements alone will not ensure success. Martin (1995) echoes this observation in his remarks on the importance of distinguishing "…between TQM quality and inspirational quality. TQM quality is in a sense, minimal quality–the prerequisite to being in business. Inspirational quality is needed for world class leadership…to achieve greatness we need flair, excitement, and originality." Quality is not a substitute for innovation and creativity.

Although a General Accounting Office (GAO) study of 20 Baldridge Award winners that indicated that the implementation of TQM resulted in measurable performance improvements, other studies have indicated more than 60% of the companies implementing quality programs failed to achieve significant, sustained improvements in quality, productivity, competitiveness, or financial returns. Outcomes of subsequent studies suggest that an organization’s the implementation strategy may be a greater determinant of success than the particular change methodology adopted. Usilaner (1993) identified the following differences between organizations that experienced benefits from TQM and those that failed to achieve any lasting benefits.

In the final analysis it is important to remember that TQM is one of a family of change strategies, rather than an end in and of itself. Although proponents of continuous change strategies often advocate for process improvement methodologies as if it were an all or nothing alternative to more radical discontinuous change methodologies, Enterprise Engineering recognizes TQM not only as a stand alone transformation strategy but also as a useful adjunct or follow-up to more discontinuous change efforts. In instances where employees are learning new work processes in a new organizational structure, using new systems and changed incentive and reward systems, continuous improvement strategies need to be implemented in order to obtain and sustain the full benefits of the more radical process discontinuous change strategies discussed below.

Discontinuous Change Strategies

Continuous and discontinuous change strategies are not mutually exclusive nor is one inherently better than another. Determining which solution strategy best fits the problem or in what combination to use both approaches is the art of Enterprise Engineering. The term "Business-Process Redesign" is often used interchangeably to refer to procedure redesign and value stream invention but for the purposes of this discussion, based on Martin’s (1995) model, they are discussed separately.

Procedure Redesign

Many organizations need more than incremental change in existing processes to achieve the necessary outcomes. They don’t need to make existing processes more efficient or effective, they need to identify fundamentally new ways to do business. In many cases, taking advantage of the opportunities provided by powerful technological advances or succeeding in increasingly competitive environments requires discontinuous change. Attempting to leverage technology or become more competitive without fundamental process redesign heightens the risk that significant investments in new technology or enterprise engineering will yield few if, any improvements in productivity and no return on a major financial investment.

Procedure Redesign is the least ‘invasive" of the discontinuous change strategies because while it may involve streamlining of work flow, automation of activities, or improved information dissemination, it does not necessarily require replacing current processes or organizational structures. Procedure redesign is broader in scope than TQM, often spanning multiple, cross-functional departments and/or organizations. Although it does not typically require organizational changes, it may well require installation or modification of major information systems. While broader in scope than TQM, process redesign with its emphasis on improving existing procedures is often narrower in scope than value-stream reinvention, which focuses on replacement of existing processes. Used strategically, procedure redesign can be very effective.

However, when radical changes are required, process redesign will not prove to be a satisfactory substitute or yield sufficient outcomes for the investment of financial and political capital. Martin (1995) observes that " Organizations often bend over backward to avoid the radical redesign of organization structures. They will use automation, motivation, employee empowerment, mission statements, management reorganization, downsizing, and the current year’s buzzwords, before resorting to value-stream reinvention. …In some situations procedure redesign is valuable; in others it is like replacing the deck chairs on the Titanic with automated recliners."

Value-Stream Reinvention

Value Stream Reinvention, like TQM, focuses on pleasing the customer, but rather than achieving this through incremental change, Value Stream Reinvention looks to radical changes in processes to achieve significant breakthrough improvements. This type of approach substitutes a more broadly defined term "value-stream" in lieu of "process" to describe an "…end to end set of activities that delivers particular results to a given customer (internal or external)".. In this process the needs and desires of the customer drive the design of the process rather than customers being required to adjust to the needs of internal processes and procedures.

As the term reinvention implies, this methodology starts with a clean slate and asks what the best way to structure a function or process rather than focusing on how to improve an existing one.

Every organization consists of a series of value streams with most large organizations identifying 10-20 primary value streams, which represent the functions, and processes that define an organization. Typically one or two of these primary value streams will be designated as strategic value streams or areas where management believes they have the opportunity to among the best. Value streams that encompass functions that enable the business to operate are often referred to as support value streams. Even if those value streams have not been explicitly identified named, and managed, they exist since they correspond to how information and work actually flows in an organization. The fact that in most organizations the management structure is based on functional responsibilities rather than managing end-to-end value streams and most value streams cross multiple departments or functional areas just tends to make the value streams slower, more costly and less satisfying to the ultimate customer.

Examples of primary value streams in an educational institution might include:

• Instructional/Educational Programs
• Research
• Outreach/Public Service
• Student Services
• External Sales and Services

Examples of support value streams might include:

• Financial Management
• Human Resources
• Legal
• Facilities Management
• Information Technology
• Internal Sales & Services
• Auxiliary Enterprises
• Procurement

Since "…technology permits changes in work, and work must change radically in order to take advantage of technology…", IT plays a key role in reinvention strategies. It not only drives the need to reinvent processes and organizations but also contributes to the ultimate success of reinvention efforts by its ability to provide fast and cost effective solutions to information and operational needs. New enterprise systems can fail from cultural resistance, inadequately trained staff or resistance to change. Reinvented business processes without supporting information and reporting systems can also fail. Human and technological changes need to be integrated but in traditional organizations built around functional hierarchies, there are few organizational mechanisms to facilitate that outcome.

Since a primary objective in designing a new work process using Value Stream Reinvention is to create a cross-functional process that is fast, simple, leverages technology, with few, if any, handoffs across organizational units, and has direct contact with the ultimate customer, redesigning organizational structures is often necessary to succeed. As a result, Value Stream reinvention is a top down process that requires a high level of investment and determination by the top executive officer or team and the skill to overcome cultural and human resource issues. Just as investment returns are inextricably linked to risk, returns on investments in reengineering are inextricably linked to the degree of change required and breakthrough advances almost always necessitate process innovation accompanied by organizational change.

Value Stream Reinvention is about making 1000% improvements rather than 10% improvements. It is a methodology capable of achieving "outrageous" or "unthinkable" objectives, but converting from a functional structure to a value-stream structure can be both difficult and traumatic. Organizations should not choose this approach unless they are seeking radical improvements and returns since the risk of failure and turmoil can be high. Given those facts which value streams would benefit from redesign and which ones should be designated as high priorities?

Criteria for evaluating value stream redesign potential include:

• Value streams cross multiple functional areas and individuals
• Value streams that have no clear owner or manager
• Value streams where the ratio of elapsed time to work time is high
• Dysfunctional or high cost value streams.
• Value streams with high visibility or customer dissatisfaction
• Value streams with high likelihood of success or impressive paybacks
• Value streams redesign efforts with relatively low political costs
• Value streams where improvement would provide significant competitive advantage (i.e. strategic value streams)
• Value streams where supporting IT systems are scheduled to be replaced or upgraded
• Value streams associated with new business units.

Enterprise Redesign

Most large organizations could benefit from a complete redesign rather than the continual reorganizations, substitution of horizontal organizational structures for vertical organizational structures, "right sizing", and other strategies commonly employed. But the reluctance to pursue more far-reaching solutions is understandable given the inherent difficulties and increased risks associated with enterprise change.

Traditional hierarchical organizations are characterized by their ability to preserve the status quo and reject paradigm shifts and change–even when remaining competitive or survival depends on it. "As organizations grow, their cultures adapt. Mature organizations have deeply entrenched culture like the roots of an old tree. The problem with most mature corporations is that they have the wrong culture for the present era. It was set into place before the age of value streams, empowered teams, kaizen, computer networks, and so on." Ironically, the stronger the existing culture and organization is the more successfully it can resist change thus successful organizations are often more at risk than new or less successful ones in periods of paradigm shifts. Previous successes can also be a risk factor to the extent that it results in increased complacency and a shift in focus from external competitive factors to internal bureaucracy and maintenance of the status quo.

In the past, change occurred slowly enough that each generation of managers did not encounter obsolescence. Now technological advances recycle more quickly than management changes. Increasingly the premium is on organizations and individuals that learn more and faster than their competitors and can rapidly operationalize the outcomes of that learning process. Organizations must now deal with how to prevent both human resource and technological obsolescence.

It is one of the many ironies surrounding enterprise redesign that although technology increases the need for reengineering, it is also can also be the key to making significant changes more palatable. The 20^th century is remarkable for the magnitude of technological change that has been willingly accepted by diverse groups of people without consciously realizing the fundamental cultural changes that will inevitably result. Although the unquestioning acceptance of the benefits of technological change is diminishing, it still can be a useful strategy for introducing change when change agents strategically employ technology to delight the end user or customer. People can still become more excited about new technological opportunities, bells and whistles than they will ever be about the prospect of embracing change.

If the risks associated with enterprise redesign are high, the benefits achieved also need to be high. What should an organization expect as a result of implementing an enterprise redesign strategy?

• An overall reduction in the costs and energy required to run an organization resulting from management of cross functional relationships, minimizing problems from handoffs that cross functional boundaries, and passing information up and down hierarchical silos.
• Increased speed and efficiency and a reduction in errors and resistance to change.
• Faster communication of information and a reduction in the potential for information filtering and distortion.
• Reduction of barriers to fast, fluid, flexible decisions and actions.
• Increased speed of change and responsiveness to customer needs.
• Increased individual accountability and ownership of outcomes.
• Increased use of information driven decision making and a concurrent reduction in political and power based decision models.
• Elimination of rules and controls that unnecessarily increase complexity without providing value added.
• Increased value from the organization’s investment in human resources.

Since the costs and risks are high and the demands intense, organizations considering enterprise design should ensure that a number of preconditions exist before attempting enterprise redesign. First, enterprise redesign places a premium on committed, visionary leadership with a clear vision of the direction of needed change, and the ability and persistence to constantly reiterate the message, inspire others and overcome setbacks over long periods of time i.e. 5-10 years. This requirement is a "show-stopper" and no organization can successfully navigate enterprise redesign in its absence. Second, radical redesign cannot occur without a fundamental rethinking of an organization’s strategic vision. To incur the costs and risks of enterprise redesign to achieve an obsolete strategic vision is the worst of all worlds. In many cases, it is difficult to achieve a paradigm shift in strategy without new leadership from outside the organization recruited from non-traditional sources. Third, reinventing an organization will create unanticipated problems, complexities and resistance that increase geometrically with the scope of the redesign. Sufficient organization talent and strength, committed to the successful implementation of enterprise reinvention must be present at all levels of the organization from the outset. Although many organizations consider enterprise redesign only in response to problems that have evaded simpler solutions, in fact stronger organizations proactively initiating enterprise level redesign have a significantly better chance of success. Finally, IT and HR functions should be reengineered first in order to support need to be in place to support the demands of enterprise redesign. The ability to rapidly respond to new systems and information needs and deliver a high level of care and attention to individuals through retraining and counseling programs as well as new compensation plans, reward systems, and appraisal mechanisms is critical to the success of enterprise reinvention efforts.

Who is likely to be affected the most by the changes envisioned in enterprise redesign? Perhaps surprisingly, the greatest changes and therefore the greatest level of resistance occurs in the roles of managers. Recognition of this fact is critical because, in my experience, the attitude(s) of middle management is one of the greatest predictors of the success or failure of organizational changes. Providing managers with the skill set to successfully navigate the transition from a traditionally structured organization to a redesigned organizational model is critical. How managers can be potentially impacted by Enterprise Redesign is summarized below.

Management Roles in Hierarchical Organizations	Management Roles in Redesigned Enterprises
Managers responsible for direction and supervision of groups of functional specialists.	Managers achieve objectives by building self-directed teams, creating a vision that motivates and energizes team members and creating an environment that enables and facilitates their achievement.
Spans of control relatively small.	Spans of control much larger.
Scope of responsibilities is consistent with hierarchical organization and the ability to affect outcomes is limited as a result of fragmentation of an end-to-end stream of activities between many departments.	Individual accountability and control over outcomes is increased through the creation of cross-functional teams responsible for an end-to-end value stream of activities.
Measurements and rewards often based on cost containment, budgetary compliance.	Measurements and rewards based on outcomes resulting from the ability to please customers
Managers collect, control and "own" information.	Management information is widely available and easily accessed throughout an organization.
Time and energy is invested in protecting organizational boundaries and "turf".	Time and energy is invested in producing better outcomes.

Recognizing the need to start over need not necessarily require "nuking" the existing organization. Where changing an existing culture is perceived as too costly, organizations can redesign themselves by creating new business units or splitting off existing units, merging with other organizations, or incrementally reengineering multiple value streams.

Strategic Visioning

No matter how powerful an organization’s technology is or how effectively you employ Enterprise Engineering strategies, if you are headed in the wrong direction you won’t succeed. So although strategic visioning is discussed separately, it is essential to any level of organizational transformation and functioning. As change accelerates, the need to constantly revisit an organizations strategic assumptions and visions increases

People with the ability to continually see organizations and environments through "new eyes" are probably more often "born" than "made". Providing a niche within an organization for innovators, individuals who look at the world in different ways, who question what is possible and challenge the collective wisdom and understanding within an organization is an essential role in strategic visioning. The degree to which organizations tend to rely on consultants to play this role is probably a testament to the difficulty individuals with this ability often experience within organizations.

Unfortunately organizations often mistake strategic planning for strategic visioning, thus it is important to understand the distinctions between these two functions. Unlike strategic planning, strategic visioning places a premium on insight and intuition. It is about challenging the generally accepted assumptions and models and developing an institutional vision of what ought to be rather than what is. It is about anticipating paradigm shifts and creating new rules where old ones no longer apply. It is about recognizing windows of opportunity to create excellence or new opportunities, products or services.

In contrast, strategic planning activities tend to rely on current operational and organizational models and investigation and deployment of existing resources. And while strategic vision needs to be supported by the provision of knowledge and information, knowledge and information do not necessarily yield strategic thinking and decisions. Once the vision is created it is the role of strategic planning to collect information, explore alternatives, conduct feasibility studies, identify the cost benefits and otherwise operationalize a strategic vision.

Why do Enterprise Engineering Projects Fail?

Obstacles that can result in failure rates for enterprise reengineering projects as high as 70% include 1) lack of sustained management commitment and leadership; 2) unrealistic scope and expectations; and 3) resistance to change. Champy and Hammer (1993) would add not understanding what business engineering entails and the ability to manage change as additional predictors that cause Enterprise Engineering efforts to fail. The failure rate for organizations attempting strategic changes is even higher with some studies reflecting a failure rate of 90 %. In these instances failure rates appear to be highest in instances where strategic changes are initiated in response to external events or pressures rather than as a result of proactive or anticipatory actions by top management. King (1994) offers an additional insight into the primary reason for the failure of organizational transformation efforts by noting the higher failure rates in organizations that view organizational transformation primarily as a tactical rather than strategic effort. Bashein et al. (1994) attributes the success and failure of enterprise reengineering projects in terms of positive and negative preconditions.

What is most notable about these findings is that the majority of predictors have less to do with the science of enterprise engineering or the transformation methodology selected and much more to do with the organizational environment, leadership and motivation for change. This observation should cause organizations seeking breakthrough results from business process reengineering to devote more time to addressing the inevitable internal obstacles than can and will arise than would otherwise be the case.

At each step of the change process (design, implementation and operational rollout) problems related to sponsorship, scope, organizational culture, leadership, skills, human resources, and management can arise. Examples of the types of problems are summarized as follows.

The obstacles identified above are not unique to a specific organization. Some combination of these problems will occur as the result of any enterprise reengineering effort. Therefore it is not only prudent but also possible to avoid or minimize adverse impacts by building on the experiences of other organizations whom have "gone before". Commonly used strategies discussed in Martin (1995) include the following:

• Prototyping. Prototyping not only systems and interfaces but also reinvented or improved work processes as early as possible is critical to avoiding costly missteps. It not identifies designs that don’t work as predicted or omit critical steps or functionality, but it also helps trigger new ideas or take advantage of technological opportunities not previously available or understood.
• Pilot testing. Testing reengineered systems and processes under actual operating conditions and running mission critical systems concurrently before a final cut over can uncover previously unidentified problems and provides an organizational safety net for key business functions.

For either of these strategies to be most effective, requires the adopting the approach that what can go wrong will go wrong, rather than planning and adopting timetables under the assumption that everything will go right. Absent this critical assumption, organizations are likely to schedule both prototyping and pilot testing, but be unwilling or unable to take advantage of the information or opportunities disclosed.

• Planning for Post Implementation Continuous Improvement. Anticipating and funding continuous improvement processes subsequent to the initial rollout enterprise changes is almost always necessary to obtain the full benefits of process and enterprise innovation efforts. Assuming that the initial deployment of changes represents the final outcome is to sacrifice a significant percentage of the potential return on investment.
• Maximizing Speed. Moving as quickly as possible through the "Valleys of Despair or Death"(i.e. the period of time between when the change is announced to when it is implemented). This strategy assumes that the sooner a solution can be deployed, the sooner it can be improved and deliver the anticipated benefits. This approach attempts to distinguish between the advantage of workable solutions now and perfect solutions later. A critical assumption underlying this strategy is that some level of process and system improvement is an ongoing function of the organization, rather than a one-time project.
• Minimizing Unnecessary Handoffs. This strategy extends the concept of cross functional value stream organizational models to the reengineering process by ensuring to the degree possible that the same sponsor and team members that design a process or organizational innovation or improvement are also responsible for its implementation and roll out.
• Anticipating Dysfunctional Behavior. Whether caused by fear, anxiety, resentment, uncertainty, lack of understanding or resistance to cultural change, dysfunctional behavior should be anticipated and addressed with both empathy and firmness. It is especially important to understand when cultural resistance may result in failure and chose other strategies such as starting up new divisions or units to accomplish process improvement or innovation. Once a transformation process is initiated it becomes critical to any future change initiatives to achieve a successful outcome by constantly reiterating the will to persevere with change as long as it takes people to become convinced it will really happen. The goal is to clearly and repeatedly articulate the reasons for change, the potential individual and organizational benefits to be derived and if all possible a sense of excitement, enthusiasm sufficient to offset the potential discomfort of individuals. Where individuals or groups continue to resist, it is important to remember that consensus on difficult issues is not always possible and opposition does not necessarily signal a poor strategic choice.

Achieving a Return on Investments in Enterprise Resource Planning Systems and Enterprise Engineering Efforts: Avoiding the Potholes and Pitfalls

Whether driven by Y2k or other issues, the sales of Enterprise Resource Planning Systems (ERP’s) and related services is estimated to total approximately $11 billion annually with the Gartner Group predicting future sales growth at 20% a year. With costs for these programs running from $300,000 to hundreds of millions and promises of reduced costs and improved productivity; it is no surprise that managers, governing boards, legislatures, taxpayers or stockholders are increasingly looking to Enterprise Engineering efforts to recoup one of the most significant investments faced by business, health and educational institutions. Unfortunately, the sheer cost of enterprise applications tends to heighten the risk that the projected costs will be understated and/or the expected benefits overstated in an effort to "sell" the project. Whether in order to obtain the necessary political support or through a genuine lack of information "overselling" a project’s benefits can increase the risk of an otherwise successful project being judged less than successful when the final costs and outcomes are tallied.

Whatever the initial estimate turns out to be, "sticker shock" is inevitable. One of the first questions to surface will be what should a system cost. While there are general multiplier formulas (i.e. implementation = 2-3 times cost to purchase etc.) and there are a number of methodologies advanced by experts and consultants for arriving at an estimated total cost, I have come to believe that a significant factor that accounts for the variances in system implementation and life cycle costs is the quality and depth of both functional and technological staff and project management expertise within an institution. The costs incurred elsewhere to deploy comparable systems may be quite useful in setting some upper and lower bounds on what the implementation is likely to cost, but the ability for a given institution to replicate those costs will depend on the similarity of environments and human and management resources.

This same "sticker shock" and the efforts to determine how to fund such a project is also likely to force the question of how expenditures for this project and technology and information systems in general should be treated. Are they an investment which provides measurable paybacks as measured by cost reductions or increased quality, a recurring capital cost of doing business, a new and/or increased operating cost, or some combination of the above? Whatever the answer for each organization, it is important for it to be determined at the time of approval or the ability to accurately assess the success or failure of a project or measure its benefits and returns will be lost. This is an especially important issue for higher educational institutions since their recurring operating budgets typically do not recognize the technological costs of doing business and overall capital infrastructure investments tend to be too low and more often than not funded from non-recurring funds.

The higher your costs, the greater the investment that is required and the higher the resulting return expected. All of those facts speak to a critical need to manage and contain costs, especially in enterprise level projects. If you don’t build in monitoring and reporting mechanisms before a project begins or very early in the project life cycle, the probability that you will be able to once the project is in full swing are remote. Even a fractional percentage of resources allocated to cost management and containment can make a critical difference in the final outcomes in large business process/systems engineering projects with significant organizational risks. How much is enough? The answer depends on the size of the project, the capacity to absorb budget shortfalls and reduced returns on investment, external factors such as competition, and the tolerance and acceptance of higher costs and lower ROI by governing boards, top management and users.

Can you know everything you need to know to propose achievable outcomes and a realistic budget from the outset? Perhaps not, but if that is the case it needs to be understood from the outset and/or contingencies need to be included to account for the degree of uncertainty present. Don’t budget under the assumption that everything will go as planned. You are likely to come much closer to the target if you work under the assumption that what can go wrong will. Is that approach being unduly pessimistic—perhaps, but it is also likely to be more realistic and increase the percentage of projected benefits actually achieved.

To the extent that an organization seeks a return on its investment in technology and business process design there are several important issues to keep in mind:

• Just because you can calculate the number of steps that can be saved does not mean you can capture the savings to reallocate for payment of the system or other institutional needs.
• Achieving a return on investment in large technology projects almost always requires discontinuous change in both business processes and organizational structures.
• The easiest process changes and benefits/savings to identify and implement will occur in central business units but greatest savings will be achieved by changes that occur at the lowest levels in an organization.
• In many organizations the greatest return on investments in systems technology will occur by improving the access to operational and management information throughout the organization and ensuring the translation of that information into improved business strategies, better cost controls and more effective uses of existing resources.
• Quantifying/and or achieving enterprise savings in highly decentralized organizations composed of relatively autonomous operating units with widely varying business processes is extraordinarily difficult. In instances where a high cultural value is placed on this type of structure, the most realistic way to capture the savings from enterprise projects is through providing the opportunity for savings equal to or greater than the costs assessed to units and letting the unit head determine how to implement the benefits and pay for the costs.

As discussed earlier, organizations too often define systems implementations and conversions as an IT project rather than defining it as a business project to redesign work to take advantages of the opportunities provided by technology. As a result it is critical that any assessment of organizational readiness give equal or greater priority to ability of the business/functional staff to successfully implement the scope of reengineering/systems effort envisioned. Too often the reality is that business units are stretched even to implement the technological aspects of a reengineering effort and inevitably the business redesign processes are subsequently defined out of scope or moved to the bottom of the priority list.

The obvious solution to this problem is base approval for systems implementations/replacements primarily on the strength and maturity of a business vision and design and the resulting financial, quality and competitive advantages that would accrue to the organization rather than basing systems decisions on the inadequacy of existing systems. It is unfortunate that one of the largest investments in technology in recent memory is being driven by Y2k problems, thus the incredible competitive advantages that should have resulted from an investment of this magnitude may be largely unrealized. However, for institutions that were able to avoid or defer systems replacements in response to Y2k issues, there are unparalleled opportunities to learn from the experience of the large number of organizations forced to respond to millenium deadlines.

It is an unusual circumstance where business process improvement efforts and systems implementations can proceed in an iterative, concurrent process. Thus it is probably safer to assume most of the enterprise engineering design needs to have been completed prior to the selection of software and systems implementation (i.e. what you see is what you will get– if all things go right). All too often, the choice of ERP systems drives the shape of enterprise reengineering efforts and many of the business objectives are deferred or failed to be realized once the project falls behind schedule and over the budget. Too often the business objectives are overwhelmed by the need to get something– anything, up and running within the available time and resources.

Equally important is the need for a clear and consistent understanding of the benefits expected to result from investments or expenditures for information systems. The absence of organizational consensus on these issues at the beginning of a project reduces the likelihood of the project being perceived as successfully achieving the intended outcomes. If, as is often the case, more information about the product or adjustments in scope occur during the life of the project it is critical to communicate those changes and manage both sponsor and user expectations throughout the life of a project if it is to be judged successful. No matter what unexpected adversities occur, it is paramount to maintain "trust" and remember that no one likes surprises, especially bad ones.

Finally, it is important to keep in mind that outcomes, especially those related to enterprise engineering, are likely to happen without sufficient forces within the organization passionately committed to achieving improved business outcomes and accountable for making it happen and constantly driving, urging, pushing, facilitating and supporting that outcome.

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Martin, James, The Great Transition, Using the Seven Disciplines of Enterprise Engineering to Align People, Technology and Strategy, American Management Association,1995, p.

Martin, James, pp. xiv,58

Martin, James, p.12

Davenport, T.H. & Short, J.E. (1990 Summer) "The New Industrial Engineering: Information Technology and Business Process Redesign, "Sloan Management Review", p. 11-27.

Martin, James, p.253

Martin, James, p. 58-83

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Martin, James, p.248

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Martin, James p.472-489

Ibid.

Deutsch, Claudia H., "Software That Can Make A Company Cry", New York Times, November 8, 1998.