Stage 1: Initiation

The purpose of this first stage is to mobilize, organize, and energize the people who will perform reengineering. This initial stage involves the crucial components of aligning corporate goals and strategies with the reengineering effort. It is within this stage that management commitment is secured, vital business processes are identified, and process owners are chosen.

1. Identify the challenges and problems:

The starting point for a reengineering project is to identify the challenges and problems faced by the company. The challenges that a company faces are coming from either internal or external. One can employ the six-force analysis model (Groove, A, 1996) to identify the external challenges and value-chain analysis (Porter, M, 1999) model for internal ones respectively.

2. Review company’s vision:

BPR’s mission must be aligned with the corporate strategy. Reengineering efforts may differ greatly depending on varying strategic directions--for example, market share expansion, profit increasing, growth of existing market, expansion into new market, or cost reduction. A review of strategic alignment helps to identify critical reengineering efforts that have profound strategic significance.

3. Identify the key or bottleneck process:

It aims to investigate the problematic processes that are critical to and essential for enhancing the company’s competitive position. By doing so, a company needs to list all the key business processes and to measure their performances. The bottleneck processes are the ones with the unsatisfying performance and consequently hinders a company from reaching its goals. Atos Origin categorized processes as followings:

 Value-adding process: the one converts inputs into output to generate greater values; such as research and development, product/service produce and delivery, marketing and selling.

 Enabling process: the one supports one or more processes as enterprise infrastructure; such as financial resources management, logistic management, human resources management

 Governing process: the one monitors or tunes other processes, such as quality and reliability control, internal audit and control.

Brand and van der Kolk (1995) identified four main measurement dimensions in the effects of redesign measurement: time, cost, quality, and flexibility. A company can derive its own specific measurement indexes according to its business requirements. For examples, a manufacturing company defines ‘yield rate’; a service company defines ‘number of customer complaints’

as indexes to measure their operation quality. By analyzing the collected measurement indexes of its business processes and comparing with desired targets, a company can effectively identify the potential bottleneck processes.

4. Select the high-impact process to be re-engineered:

Processes to be reengineered should have high impact on the business. Due to the nature of vast amount of resource required for BPR project, organizations can’t afford to conduct multiple BPR in the same time. Therefore, the management team in an organization needs to identify the business process to be reengineered with the highest business impact and relatively lowest cost. The implementation cost is normally a function of process complexity. Oracle Consulting developed a two-dimension matrix, i.e., business impact and process complexity, to identify the candidates of high-impact processes to be re-engineered. The variables used to evaluate the business impact are revenue, cost, operation cycle time, quality of

product or service etc. Whereas the variables to evaluate the process complexity are number of process steps, number of organization involved, number of integration points, number of decision points, number of process exception. As the Figure 3 demonstrates, the business processes fallen in the quadrant of high business benefits and low process complexity are good candidates of quick win of BPR project.

Figure 3 Business Process Impact and Complexity Matrix

5. Set BPR objectives:

To determine the level of success of the reengineering project, the performance of the new process must be measured and compared to that of the processes replaced.

These improvements are generally expressed in terms of

 Productivity

 Speed

 Quality

 Cost

 Customer service (Alavi & Yoo, 1996)

BPR objectives must be ambitious, radical, and highly optimistic in nature. It is

Benefit

not unrealistic to set performance goals of 50% to 60% improvement in cost and productivity or reductions in staffing by half. It’s also suggested that a stretch goal helps to create the organizational momentum necessary to depart from the status quo (Kettinger et al 1997).

6. Designate process owners:

The process owner is responsible for reengineering a specific process and is expected to run interference with the bureaucracy and work to gain the cooperation of other managers whose functional groups are involved in the process. The candidates for process owner are senior managers responsible for a key portion of a process to be reengineered. Most companies do not have such

“process owner” defined in the organization because in traditional organizations people do not tend to think in process terms and the responsibility for a certain process is fragmented across organizational boundaries (Hammer and Champy, 1993). That’s why the process owner is so important for BPR project. The process owner's job will not end when the reengineering project is completed. In a process-oriented company, process owner will play an important role to run and monitor the process after the new process is in place.

7. Search for BPR benchmark target:

In order to broaden the project team’s perspective and reduce subjectivity, to seek the internal or external benchmarks is widely adopted by companies during the initiation stage. A company can search for benchmark target from the following four categories (Mische and Warren,1996):

 Internal benchmarking: benchmarking against peer organization in the same company.

 Competitive benchmarking: benchmarking against competitors in the same industry.

 Functional benchmarking: benchmarking against external best practice company in the same industry but is not direct competitor.

 Cross industry benchmarking: benchmarking against external best practice company in different industries.

8. Secure commitment from top management:

The CEO, president, and leaders of all the major functional departments must realize that their efforts are required in guiding the direction of the new processes and in selling the project to employees (Guha et al, 1993). In general, top management’s supports are critical to BPR project in the following areas:

 BPR’s objective and scope: The objectives of BPR should be aligned with company’s ultimate goal and serve as one of critical means to solve the challenges that a company faces. Top management is the one setting a company’s goal and knows well the challenges and problems, so it’s in the best position to define BPR’s objective and scope and to monitor the progress of BPR in order to reach the company’s goal.

 Cross-organization resource allocation: A BPR project requires large amount of resources. Due to the fact that most critical processes in a company usually across multiple organizations, to form a dedicated BPR task force consisting of employee from different departments is imperative to BPR success. And forming such a cross-organization team needs the approval and commitment from the top management.

 Budget allocation: In addition to the human resource, most BPR projects need major amount of financial budget to hire external BPR expertise, develop new IT systems, purchase additional computer hardware and software, etc. To allocate such large amount of capital budget needs the approval of the top management.

 Mitigate the resistance to change: BPR will result in changes and changes often cause the fear or resistance from the employees who are involved in the existing process. These changes include new role and responsibility, new knowledge and skills to fulfill requirements of the new process, or sometimes job replacement or reduction. To mitigate the potential resistance or fear due to the introduction of BPR, the consecutive attention and frequent communication from the top management are important.