1. Strategic Renewal- Revolution
•Discontinuous nature of renewal is the reference point.
•Any significant change with significant strategic impact
will be resisted by organizations .
•Firms and Employees have a strong preference to
stability.
•Over time processes and cognitive maps get
formalized and rigid structures emerge.
2. Strategic Renewal- Revolution
•Relative Stability is required for efficient functioning but
very often creates a structure which is unwilling or
unable to change when even it is required immediately.
•To make the necessary changes , series of small
incremental changes will not produce the required
directional change and the magnitude of change.
•A sudden pressure and a radical move is necessary to
meet the challenges coming mostly from outside.
•A coordinated attack on processes , cognitive maps
and culture of the organization must be directed across
the organization.
4. Strategic Renewal- Revolution
Environmental Reasons Rigidity Factors
for Revolution
-Technology -Cultural
-Regulatory -Political
-New Entrant -Investment lock in
- Buyers/Suppliers Power -Competence lock in
-Political -Systems lock in
-Recession - Stake Holder lock in
5. Business Process Reengineering
BPR is one of the most commonly used management techniques to
implement revolutionary change process.
The idea of re-engineering was first propounded in an article in Harvard
Business Review in 1990 by Michael Hammer , then a professor of
computer science at MIT. The method was popularly referred to as
business process re-engineering (BPR), and was based on an
examination of the way information technology was affecting business
processes.
“The literature on re-engineering employs the term processes.
Sometimes it is a synonym for activities. Sometimes it refers to activities
or sets of activities that cut across organisational units. In any case,
however, the essential notion is the same—both strategic and
operational issues are best understood at the activity level.”
Michael Porter
6. Business Process Reengineering
Conventional Design Vs. BPR Design
-Specialization of labour -Cross functional perspective
-Economies of scale -Organized around Outcomes
-Tasks defined narrowly
-Users of the process outputs
-Departmental allocation
perform the process
-Management by departmental
-Info/Report processing by
hierarchy
producers of data
-Roots in industrial revolution
era -Geo Teams integrated around
-Lack integration process
-Poor utilization of IT -Linked parallel activities
-Siloed vision -Info captured at data source
-No overall goal -Decision tree at the process
-Departmental objectives point
-Accountability issue -Monitor and measure cycle
-Underutilize skilled labour times
7. Business Process Reengineering
Business Process Reengineering involves the radical redesign of core business
processes to achieve dramatic improvements in productivity, cycle times and quality.
In Business Process Reengineering, companies start with a blank sheet of paper and
rethink existing processes to deliver more value to the customer. They typically adopt
a new value system that places increased emphasis on customer needs. Companies
reduce organizational layers and eliminate unproductive activities in two key areas.
First, they redesign functional organizations into cross-functional teams. Second,
they use technology to improve data dissemination and decision making.(Bain 2011)
8. Business Process Reengineering
Future
•BPR as a management idea progressed into BPM (Business Process Management)
with heavy usage of Information technology . New tools designed to add the
analytical dimension which BPR lacked in the early phases. Modelling , Simulation ,
Data Analysis are core elements of BPM
•BPR still used by Management Consulting firms like Bain ,Mckinsey and Boston
Consulting , supported by analytical tools.
Common Uses
Reduce costs and cycle time. Business Process Reengineering reduces costs and
cycle times by eliminating unproductive activities and the employees who perform
them. Reorganization by teams decreases the need for management layers,
accelerates information flows, and eliminates the errors and rework caused by
multiple handoffs;
Improve quality. Business Process Reengineering improves quality by reducing the
fragmentation of work and establishing clear ownership of processes. Workers gain
responsibility for their output and can measure their performance based on prompt
feedback.
9. BPR Case Study
- IBM credit finances IBM the computers, software and services sold , Processing a finance application used
to take between six days and two weeks from the credit department to the pricing department to an
administrator who wrote out a formal quote letter. When IBM Credit realized actually the process took only
about 90-minutes and the rest of the normal processing time was spent with the application sitting on a pile
on a specialist’s desk waiting to be looked at, they decided to reengineer the entire process
-The four specialists who previously processed the application were replaced by a generalist -- called the deal
structurer -- who processed the application from start to end using templates on a new computer system
which provided all the data and tools each specialist commonly used. For unusual cases, the deal structurer
can still call on the specialists to provide additional expertise. The specialist and the deal structurer then team
up to develop a customized package as required. This happens only rarely.
The results of the reengineering program were:
Turnaround time was reduced from a typical 7-days to
4-hours. Without any increase in staff numbers, IBM Credit has been able to achieve a hundred fol
improvement in productivity it can now handle 100 times the number of credit applications handles
before reengineering was undertaken
10. The Case for Radical Change:
Creative Destruction or Crisis
Physical Laws that `under pressure things become fluid ` applies to
organizations , processes and culture .
Tension is built up over the period company remains misaligned with the
market dynamics, creates a sense of impending crisis
People offer less resistance and become open for radical sometimes
difficult changes . Increased cooperation encourages managers to
prolong the crisis sense to implement all the changes they require.
After the pressure is lifted , organization and processes will be molded
into a new form to tackle challenges facing the company
Creative destruction through technology innovation or superior business
processes require strong leadership to break from the past and get the
firm reborn in every opportunity to be ahead of the competition.
11. The Case for Radical Change:
Nokia
Finnish conglomerate turned itself into the world’s leading mobile phone
company in the 1990s. So Nokia has already been through one
(successful) change program, morphing itself into a focused mobile
phone producer.
•Global market leader in mobile phones - but not smart phones
•Still profitable, but revenues under pressure
•September 2010: New CEO Stephen Elop
•February 2011 - Elop issued the famous “burning platform” memo bluntly
explaining the serious strategic challenges facing Nokia
•Elop outlined results of his strategic review on Feb 11 2011 - making it clear
that Nokia had to undergo a substantial programme of change
•Elop announced a strategic partnership with Microsoft in March 2011 to jointly
develop smart phones using the Windows mobile platform - ditching Nokia’s
previous investment in its homegrown Symbian platform and Meego
12. The Case for Radical Change
• Elop has swept away many elements of Nokia’s previous organisational structure -
a significant process of delayering
• Elop has refocused the business on market development
• Decision-making has been delegated to local/national teams rather than relying on
decisions by an highly centralised senior management team (Finland HQ)
• Stakeholders are clearer on the executive managements incentive program
• The new strategy brings clarity and a sense of direction to Nokia
During 2012, Nokia has faced rapid declines in sales
February 2012, Nokia was laying off 4000 employees to move manufacturing
from Europe and Mexico to Asia
March 2012, Nokia anonunced it was laying off 1000 employess from its Salo,
Finland factory to focus on software
June 2012: 10,000 further job Job cuts amount to a fifth of aall staff
By June 2012, Nokia had lost more than $88bn in market value since Apple
introduced the iPhone in 2007
13. The Case for Radical Change:
Nokia
The “burning platform memo”:
“We fell behind, we missed big trends, and we lost time. At that time, we thought we
were making the right decisions; but, with the benefit of hindsight, we now find
ourselves years behind.
“There is intense heat coming from our competitors, more rapidly than we ever
expected. Apple disrupted the market by redefining the smartphone and attracting
developers to a closed, but very powerful ecosystem.”
“The Shenzhen region of China is able to produce phones at an unbelievable pace.
By some accounts, this ecosystem now produces more than one third of the phones
sold globally – taking share from us in emerging markets.”
“Our competitors aren’t taking our market share with devices; they are taking our
market share with an entire ecosystem.”
“We poured gasoline on our own burning platform. I believe we have lacked
accountability and leadership to align and direct the company through these
disruptive times. We had a series of misses. We haven’t been delivering innovation
fast enough. We’re not collaborating internally
15. Mckinsey 7s Framework
The model used by
Management Consultants
to understand how these
factors are interrelated.
Any change planning to be
implemented in one area
and its wider impact for the
firm is clearly considered by
using this model
