Building and changing business

processes

Dr Amit Mitra
Bristol Business School
Agenda
• Functional versus business process
perspective
• Strengths and weaknesses
• Enterprise systems
• When system drives change

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Business processes
• Cross functional set of activities that turn
inputs into outputs, are at the heart of how
businesses operate

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Functional perspective
• In a hierarchical structure, departments
are organised on the basis of their core
competencies
• The structure allows them to focus on
what they do best
• Each major function within the
organisation usually forms a separate

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Hierarchical structure

Executive Offices
CEO
President

Operations Marketing Accounting Finance Administration

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Strengths of the functional perspective
• They allow an organisation to optimise expertise
and their training
• The silos allow the organisation to avoid
redundancy in expertise by hiring one person
who can be assigned to projects across
functions on an as-needed basis instead of
hiring an expert in each function
• Within a functional organisation it is easier to
benchmark with outside organisations, utilise
bodies of knowledge created for each function
and easily understand the role of each silo

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 Weaknesses of silo organisations
• Individual departments often recreate information
maintained by other departments
• Communication gaps between departments are
often wide
• Handoffs between silos are often a source of
problems, such as finger pointing and lost
information, in business processes
• Silos tend to lose sight of the objective of the
overall organisation and operate in a way that
maximises their local goals
• Silo organisations can experience significant sub-
optimisation
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Process perspective
• A process perspective keeps the big
picture in view and allows the manager to
concentrate on the work that must be done
to ensure the optimal creation of value
• It helps a manager to avoid or reduce
duplicate work, facilitate cross-functional
communication, optimise business
processes, and ultimately, best serve the
customers and stakeholders

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Process
• In business, a process is defined as an
interrelated, sequential set of activities and
tasks that turns inputs into outputs, and
includes the following:
– A beginning and an end
– Inputs and outputs
– A set of tasks (sub-processes or activities)
that transform the inputs into outputs
– A set of metrics for measuring effectiveness

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Sample procurement business process

Receive Create and

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Strengths of the process perspective
• Focus on the process by its nature
ensures focus on the business’s goals
because each process has an ‘endpoint’
that is usually a deliverable to a customer,
supplier or other stake holder
• A process perspective recognises that
processes are often cross-functional

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 Cross functional nature of business
processes
Functions

OPE MAR ACC

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Management of flow as well as tasks
• Identifying the customers of processes (who
receives the output of the process?)
• Identifying these customers’ requirements (what
are the criteria for successful implementation of
the process?)
• Clarifying the value that each process adds to
the overall goals of the organisation
• Sharing their perspective with other
organisational members until the organisation
itself becomes more process focused

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Comparison of silo and business
process perspective
Silo perspective Business Process
Perspective
Definition Self-contained functional Interrelated, sequential
units such as marketing, set of activities and tasks
operations, finance, and that turns inputs into
so on outputs
Focus Functional Cross-functional
Goal Accomplishment Optimises on functional Optimises on
goals, which might be a organisational goals, or
suboptimal ‘big picture’
organisational goal
Benefits Highlighting and Avoiding work
developing core duplication and cross-
competencies; functional functional
efficiencies communication gaps;
organisational
effectiveness

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Enterprise systems
• A class of IT applications called enterprise
systems is a set of IS tools that many
organisations use to enable information flow
within and between processes across the
organisation
• They help ensure integration and co-ordination
across functions such as accounting, production,
customer management, and supplier
management
• Some are designed to support a particular
industry like health care, retail, and manufacturing
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Common types of Enterprise Information
Systems
• Enterprise Resource Planning (ERP)
• Supply Chain Management (SCM)
• Customer Relationship Management
(SCM)
• Product Life Cycle management (PLM)

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Process automation using enterprise systems
Enterprise system Sample processes
Customer Relationship Marketing (resource management, brand management, campaign management,
Management (CRM) segmentation management)
Lead management
Loyalty program management
Sales planning and forecasting
Territory and account management
Quotes, contract, order capture management
Sales team performance management
Customer service and support history
Return and repair management
Field service management
Warranty and claim management
Installation and maintenance management
Enterprise Resource Financial management (accounting, financial close, treasury management, invoice to
Planning (ERP) pay process, receivables management)
Human capital management (talent management, Core HR, payroll, workforce
management, succession planning)
Operations management (Procurement, logistics management, product development
and manufacturing life cycle, requisition-invoice payment, parts inventory and logistics
management)
Supplier chain management Supply chain design
Order fulfilment
Warehouse management
Demand planning, forecasting
Sales and operations planning
Service parts planning
Product Lifecycle Innovation management (strategy and planning, idea capture and management,
Management (PLM) program/project management)
Product development and management
Product compliance management
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Characteristics of ERP systems
• Integration: ERP systems are designed to seamlessly
integrate information flows throughout the company. ERP
systems are configured by installing various modules,
such as:
– Manufacturing (materials management, inventory, plant
maintenance, production planning, routing, shipping, purchasing,
etc.)
– Accounting (general ledger, accounts payable, accounts
receivable, cash management, forecasting, cost accounting,
profitability analysis, etc.)
– Human resources (employee data, position management, skills
inventory, time accounting, payroll, travel expenses, etc.)
– Sales (order entry, order management, delivery support, sales
planning, pricing, etc.)

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Characteristics of ERP systems (Contd.)
• Packages: ERP systems are usually commercial
packages purchased from software vendors
• Best practices: ERP systems reflect industry best
practices for generic business processes
– To implement them, businesses often have to change their
processes in some way to accommodate the software
• Assembly requirements: It often requires middleware
(software used to connect processes running in one or
more computers across a network)
• Evolution: ERP systems were designed first for
mainframe systems, then client-server architectures, and
now for web-enabled or cloud-based delivery

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 Benefits of Enterprise systems
• All modules of the information system easily
communicate with each other
• Because of the focus on integration,
enterprise systems are useful tools for an
organisation seeking to centralise operations
and decision making
– A key benefit of centralisation is the effective use
of organisational databases
• Use of ES can reinforce the use of standard
procedures across different locations
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 Disadvantages
• Requires an enormous amount of work
• Most implementations would require
comprehensive redesign of business processes to
achieve optimal performance of the integrated
modules
• All systems make assumptions about how the
business processes work, and at some level,
customisation is not possible
• ES and the organisational changes that they induce
tend to come with a hefty price tag
• There may be significant risks associated with
implementation of ES
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When system drives the change
• When an organisation is just starting out and
processes do not yet exist, it is appropriate to
begin with an ES as a way to structure the
operational business processes
• When an organisation does not rely on its
operational business processes as a source of
competitive advantage, then using an ES to
redesign these may be appropriate
• It is reasonable when the current systems are in
crisis and there is not enough time, resources,
or knowledge in the firm to fix them
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When system drives the change
• When an organisation derives a strategic
advantage through its operational
business processes, it is usually
inadvisable to buy a vendor’s ES
• When the features of available packages
and the needs of the business do not fit
• When there is lack of top management
support, company growth, a desire for
strategic flexibility, or decentralised
decision making that render the ES
inappropriate 23
Summary
• Most business processes have a
significant IS component to them.
• IS can enable or impede business process
change
• To understand the role that IS plays in
business transformation, one must take a
business process, rather than a functional
perspective

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References:
• Pearlson, K.E. and Saunders, C.S. (2013).
Strategic Management of Information
Systems, 5th edition, Wiley
• Beynon-Davies, P. (2013). Business
Information Systems, Palgrave Macmillan
• Stair, R.M. and Reynolds, G.W. (2014).
Principles of Information Systems,
International Edition, Cengage

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