business-process-re-engineering

Business Process Re-engineering In A Nutshell

Business Process Reengineering became popular in the 1990s after the publishing of a Harvard Business School article titled Reengineering Work: Don’t Automate, Obliterate. Business Process Reengineering (BPR) describes the redesign of core business processes to improve productivity, quality, cost reduction, or cycle times.

Understanding Business Process Reengineering

The HBR article asserted that many businesses use new technology to automate ineffective processes. However, author Michael Hammer notes that a more efficient approach is to simply re-design the process itself.

This can be achieved through the systematic and disciplined nature of BPR. 

Both human and automated workflows can be analyzed to identify process improvements. Some common scenarios where BPR may be useful include:

  • Rising inventory levels.
  • A lack of corporate governance.
  • High employee conflict, stress, or turnover.
  • Cash flow problems.
  • An inability to fulfill customer orders promptly.

The six key steps of BPR

Six key steps encourage a fair, transparent, and efficient BPR process.

Here is a look at each.

  1. Define business processes. Start by mapping the current state of affairs (workflows, activities, roles and reporting, business rules, supporting technology, and so forth).
  2. Analyze business processes. Then, identify any elements that contribute to organizational inefficiency or prevent a goal or objective from being realized. This may encompass gaps, root causes, or strategic disconnects.
  3. Identify and analyze improvement opportunities. How can the elements identified in the previous step be addressed? Often these initiatives will be innovative and forward-facing. That is, they are not associated with current processes.
  4. Design future state processes. In this step, select the improvement opportunity deemed to have the greatest impact on organizational efficiency. Here, the business should ensure that it has sufficient resources. Time, capital, and talent are the most crucial. Complete this step by creating a future state map outlining the selected opportunities.
  5. Develop future state changes. It’s important to realize that a new opportunity is only as robust as the processes that underpin it. Each process needs to be designed from the ground up and communicated to relevant staff. The new functionality must also be rigorously tested before becoming operationalized. 
  6. Implement future state changes. Once implemented, the change must be evaluated for effectiveness through performance monitoring. Is the new opportunity meeting KPIs?

When should Business Process Reengineering be used?

One drawback of BPR is that the larger a business is, the more expensive it will be to implement. 

Indeed, a start-up with only a few months of operating experience will find it much more cost-effective to pivot to a new opportunity.

Nevertheless, the ability to respond to unforeseen circumstances is important in all businesses – regardless of size. BPR is also well suited to any business that wants to break free of the status quo and achieve goals once thought too ambitious.

If a business is still unsure of BPR, it should ask itself the following questions:

  • Who are our customers and what values are we offering them?
  • Are current operations delivering these values?
  • If not, do some operations need to be reconfigured?
  • Do our processes reflect our strategic objectives or long-term mission?
  • How would these operations be implemented if we were a new company?

Business process reengineering examples

While BPR has existed for around three decades now, how are modern, twenty-first-century businesses initiating process design transformations?

Let’s have a look at two examples.

Airbnb

airbnb-business-model
Airbnb is a platform business model making money by charging guests a service fee between 5% and 15% of the reservation, while the commission from hosts is generally 3%. For instance, on a $100 booking per night set by a host, Airbnb might make as much as $15, split between host and guest fees. 

At some point in its recent history, Airbnb wanted to create a sustainable, efficient, product development process.

The only problem was that the company’s designers, engineers, and researchers were only involved in the process at specific times.

For example, designers were forced to wait for engineers to write the code before a model could be visualized.

Engineers themselves also had to wait for researchers to validate product ideas in a process that routinely resulted in incorrect project assumptions.

To foster deeper and more consistent engagement between its various teams, Airbnb used BPR to develop three solutions:

  1. Treat dispersed resources as if they were centralized – a single, digital environment was created where both designers and engineers could collaborate. This eliminated countless rounds of quasi-prototypes and enabled files to reflect real-time updates and data. Even if Airbnb staff could not interact in the same physical space, they needed to have access to the same product information at the same time.
  2. Organize around outcomes instead of tasks – product teams were then organized around outcomes to avoid wasting time on irrelevant features. This encouraged teams to use emotion when talking about outcomes in addition to the logical, detail-oriented perspective of writing code.
  3. Link parallel activities – instead of researchers becoming involved at the end of the process, they now participate across the entire product development process to ensure that the voice of Airbnb’s hosts and guests are heard and incorporated throughout. This allows teams to validate developmental stages and reduce instances of backtracking.

T-Mobile

Mobile telecommunications company T-Mobile outwardly preached that happy customers were its main priority.

But internally, the company based customer success and indeed staff remuneration on two metrics: Average Handling Time (AHT) and First Response Time (FRT).

The problem for T-Mobile was two-fold. For one, its KPIs were not reflective of satisfied customers, while the second problem was more complex.

Thanks to the introduction of self-serve portals, customers no longer contacted the company’s call centers with basic problems such as a change of address request.

Instead, there was a clear shift toward them requiring assistance with far more complex issues that customer support personnel were unable or unwilling to solve.

Here are two ways the company used business process reengineering to improve its customer service standards across the board:

1 – Ensure those who output processes perform those processes 

To start, T-Mobile untethered itself from its archaic AHT and FRT metrics and redesigned its team structure to fundamentally shift the way customer service is delivered.

The company instituted the Team of Experts (TEX) model where cross-functional teams of 47 people each serve a dedicated geographical market. 

Instead of handing off an issue to someone else, the team structure now empowers individuals to stick with the same customer from start to finish and solve their problem.

In rare cases where a hand-off is necessary, the rep stays on the line while the customer speaks with a tech specialist to learn how to address a similar question in the future.

Customer service KPIs are now connected to profit and loss, and reps are invested in each outcome because they handle the entire customer service process.

2 – Build control into the process and place decision points where work is performed

It was also important that T-Mobile shifted decision points and authority under the new TEX model.

Previously, managers were called into the process over superficial details that only just exceeded the role responsibilities of a low-level rep.

This increased customer wait times and rendered these reps powerless in many situations.

Using BPR, the decision point was shifted to afford them more responsibility and, by extension, the capacity to impact customer service outcomes.

Customer wait times were also reduced since trivial details did not need to be clarified with a superior.

The results of T-Mobiles initiatives have been profound since they were introduced. In 2018, the company reported a 31% decrease in calls escalated to superiors and an impressive 71% decrease in transferred calls.

There was also a significant impact on customer churn (down 25%) and Net Promoter Score (up 56%).

Key takeaways:

  • Business Process Reengineering is the redesigning of business operations to facilitate improvements in quality, cost, service, or alignment.
  • Business Process Reengineering is underpinned by six key steps that are fair, transparent, and efficient.
  • Business Process Reengineering can be an expensive undertaking for large companies. To ensure that BPR is money well spent, a business should consider some guiding questions to determine if operations are in alignment with broader strategies.

Read Next: SWOT AnalysisPersonal SWOT AnalysisTOWS MatrixPESTEL AnalysisPorter’s Five ForcesTOWS MatrixSOAR Analysis.

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