The Power of Process Innovation: A Guide to Reengineering Work Through Information Technology by Thomas H. Davenport
Process Innovation: Reengineering Work Through Information Technology
In today's competitive and dynamic business environment, simply formulating a strategy is not enough; organizations must also design and implement the processes that can execute it effectively. This requires a radical change in the way they do business, which can be achieved by process innovation.
Process Innovation: Reengineering Work Through Information Technology Thomas H. Davenport
Process innovation is a revolutionary new approach that fuses information technology and human resource management to improve business performance. It involves redesigning and reengineering the core business processes that deliver value to customers, stakeholders, and employees. In this article, we will explore what process innovation is, how to implement it, and some examples of process innovation in different business areas.
What is Process Innovation?
Definition and Characteristics
Process innovation can be defined as "the implementation of a new or significantly improved production or delivery method" (OECD, 2005). It is also known as business process reengineering (BPR), which is "the fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical, contemporary measures of performance, such as cost, quality, service, and speed" (Hammer and Champy, 1993).
Process innovation has the following characteristics:
It focuses on the core business processes that create value for customers and stakeholders.
It challenges the existing assumptions and rules that govern how work is done.
It involves radical changes in the structure, activities, roles, and relationships of the process.
It leverages information technology as a key enabler of process change.
It requires organizational and human resource changes to support the new process.
Benefits and Challenges
Process innovation can bring significant benefits to organizations, such as:
Improved efficiency and productivity by eliminating waste, duplication, and errors.
Enhanced quality and customer satisfaction by delivering faster, cheaper, and better products and services.
Increased flexibility and innovation by enabling faster adaptation to changing customer needs and market conditions.
Gained competitive advantage by creating distinctive capabilities and value propositions.
However, process innovation also poses significant challenges, such as:
High cost and risk of failure due to the complexity and uncertainty of process change.
Resistance to change from employees, managers, customers, and suppliers due to fear of losing power, control, or jobs.
Lack of alignment between strategy, process, technology, organization, and culture due to poor communication and coordination.
Lack of leadership commitment and support due to competing priorities or short-term focus.
How to Implement Process Innovation?
A Framework for Process Innovation
To implement process innovation successfully, organizations need a systematic approach that guides them through the stages of process change. One such approach is the framework for process innovation proposed by Thomas H. Davenport in his book "Process Innovation: Reengineering Work Through Information Technology" (1993). The framework consists of six steps:
Creating a process vision: This step involves defining the scope, objectives, and principles of the process innovation initiative. It also involves identifying the key stakeholders and their expectations.
Understanding and improving existing processes: This step involves analyzing the current state of the processes to be changed. It also involves identifying the problems, opportunities, and best practices of the existing processes.
Designing and implementing the new process: This step involves designing the future state of the processes to be changed. It also involves developing and testing the new process, technology, organization, and culture.
Measuring the results: This step involves evaluating the performance and outcomes of the new process. It also involves comparing the results with the objectives and expectations of the process vision.
Continuous improvement: This step involves monitoring and adjusting the new process to ensure its sustainability and effectiveness. It also involves identifying and implementing further improvements and innovations.
Learning from experience: This step involves capturing and sharing the lessons learned from the process innovation initiative. It also involves applying the knowledge and skills to other processes and projects.
Organizational and Human Resource Enablers
Process innovation requires not only technological changes, but also organizational and human resource changes to support the new process. Some of the key enablers of process innovation in this regard are:
New organizational structures: Process innovation often requires breaking down the functional silos and creating cross-functional teams that are responsible for the end-to-end delivery of a product or service. These teams can be organized around customer segments, product lines, geographic regions, or business processes.
New human resource programs: Process innovation often requires changing the roles, skills, incentives, and culture of the employees involved in the new process. Some of the human resource programs that can facilitate this change are: training and education, performance appraisal and reward, empowerment and participation, communication and feedback, and change management.
Information Technology as an Enabler
Information technology is a crucial enabler of process innovation, as it can provide the capabilities and tools to support the new process. Some of the information technology enablers of process innovation are:
Data and information systems: These systems can provide accurate, timely, and relevant data and information to support decision making, coordination, and control in the new process. Examples of these systems are: databases, data warehouses, business intelligence, enterprise resource planning, customer relationship management, and supply chain management.
Communication and collaboration systems: These systems can facilitate communication and collaboration among the employees, customers, suppliers, and partners involved in the new process. Examples of these systems are: email, instant messaging, video conferencing, social media, intranet, extranet, and cloud computing.
Automation and integration systems: These systems can automate and integrate the tasks, activities, and workflows in the new process. Examples of these systems are: workflow management, business process management, robotic process automation, artificial intelligence, and internet of things.
Examples of Process Innovation in Different Business Areas
Customer-facing processes are those that directly interact with customers to deliver products or services. Process innovation in this area can improve customer satisfaction, loyalty, retention, and acquisition. Some examples of process innovation in customer-facing processes are:
Amazon.com: Amazon.com is an online retailer that has innovated its order fulfillment process by using advanced information technology. It uses a network of warehouses that are strategically located near customers to reduce delivery time and cost. It also uses artificial intelligence to optimize inventory management, demand forecasting, pricing, and product recommendations. It also uses robotic process automation to speed up picking, packing, and shipping of orders.
Dominos Pizza: Dominos Pizza is a pizza delivery company that has innovated its pizza ordering process by using various communication channels. It allows customers to order pizza through phone calls, text messages, mobile apps, web browsers, smart speakers, smart watches, social media platforms, or even emojis. It also uses internet of things to track the location and status of pizza orders from oven to door.
Management processes are those that support the planning, execution, monitoring, and control of business activities. Process innovation in this area can improve efficiency, effectiveness, quality, and innovation. Some examples of process innovation in management processes are:
Sears Roebuck: Sears Roebuck is a retail company that has innovated its merchandise planning process by using data-driven decision making. It uses a system called Integrated Retail Information System (IRIS) that collects and analyzes data from various sources such as sales transactions, customer feedbacks, market trends, competitor actions, and supplier information. It then uses this data to optimize merchandise assortment, allocation, pricing, Sears Roebuck: Sears Roebuck is a retail company that has innovated its merchandise planning process by using data-driven decision making. It uses a system called Integrated Retail Information System (IRIS) that collects and analyzes data from various sources such as sales transactions, customer feedbacks, market trends, competitor actions, and supplier information. It then uses this data to optimize merchandise assortment, allocation, pricing, and promotion across its stores. It also uses a model called the Employee-Customer-Profit Chain that links employee satisfaction, customer satisfaction, and financial performance.
Manufacturing processes are those that transform raw materials into finished products. Process innovation in this area can improve quality, efficiency, flexibility, and sustainability. Some examples of process innovation in manufacturing processes are:
Toyota: Toyota is an automobile company that has innovated its production process by using the Toyota Production System (TPS). TPS is a set of principles and practices that aim to eliminate waste, improve quality, and reduce cost in manufacturing. Some of the key elements of TPS are: just-in-time production, pull system, kanban system, continuous improvement, standardization, and employee involvement.
Apple: Apple is a technology company that has innovated its product design process by using a user-centric approach. It uses a process called design thinking that involves understanding the needs and desires of users, generating ideas and prototypes, testing and refining solutions, and delivering products that delight users. It also uses a process called concurrent engineering that involves integrating design and engineering teams to speed up product development and reduce errors.
Summary of Key Points
In this article, we have discussed the following key points:
Process innovation is a revolutionary new approach that fuses information technology and human resource management to improve business performance.
Process innovation involves redesigning and reengineering the core business processes that deliver value to customers, stakeholders, and employees.
Process innovation can bring significant benefits to organizations, such as improved efficiency, quality, flexibility, and innovation.
Process innovation also poses significant challenges to organizations, such as high cost, risk, resistance, and alignment.
Process innovation requires a systematic approach that guides organizations through the stages of process change.
Process innovation requires organizational and human resource changes to support the new process.
Process innovation leverages information technology as a key enabler of process change.
Process innovation can be applied to different business areas, such as customer-facing processes, management processes, and manufacturing processes.
Here are some frequently asked questions about process innovation:
What is the difference between process innovation and process improvement?
Process innovation and process improvement are both ways of changing business processes to achieve better results. However, they differ in the degree and nature of change. Process innovation involves radical and fundamental changes in the structure and logic of the process. Process improvement involves incremental and continuous changes in the performance and efficiency of the process.
What are some examples of tools and techniques for process innovation?
Some examples of tools and techniques for process innovation are: process mapping, benchmarking, gap analysis, brainstorming, prototyping, simulation, pilot testing, and change management.
What are some best practices for implementing process innovation?
Some best practices for implementing process innovation are: aligning the process vision with the business strategy, involving stakeholders throughout the process change, communicating the benefits and expectations of the new process, empowering employees to participate in the new process, providing training and support for the new process, measuring and rewarding the results of the new process, and learning from experience and feedback.
What are some common pitfalls to avoid in process innovation?
Some common pitfalls to avoid in process innovation are: neglecting customer needs and preferences, ignoring existing best practices and lessons learned, overlooking potential risks and barriers to change, underestimating the cost and time required for process change, isolating the process change from the rest of the organization, imposing the new process without consultation and participation, and failing to monitor and adjust the new process.
What are some trends and opportunities for process innovation in the future?
Some trends and opportunities for process innovation in the future are: increasing customer expectations and demands, emerging technologies and platforms, globalization and competition, social and environmental responsibility, and knowledge and innovation economy.