Chapter 10 The Redefine/Define Concept and Change Management Change is a Very Hot Topic Company articles--Boeing, Sears, Schwab, etc. We live in a word of change, yet we act on the basis of continuity. You have to realize that every out-front maneuver you are going to make is going to be lonely, but if you feel entirely comfortable, then you're not far enough ahead to do any good. That warm sense of everything going well is usually the body temperature at the center of the herd. John Masters Spirit of Feeling of Innovation and Intraprenuering Equipping a company with the latest technology doesn't mean a thing if you don't alter how your employees think and how management leads them. Chad Frost President Frost Inc. As we change what computers can do, we must change what we can do with computers. Max Hopper Senior Vice President Information Systems AMR and American Airlines Redefine Change Define Clarify Companies that achieve a sustainable strategic advantage with information technology generally redefine the factors of competition rather than using technology in a traditional way. Competitive Advantage? Redefine and/or Define: 1. The Business 2. Products and/or Services 3. Business Processes To Provide Value to Customer McDonald’s as Concept Source Peter Drucker’s Assessment: • Defined its products. • Redefined processes to make the product. • Defined customer service as quality, product predictability, fast service, cleanliness and friendliness. • Set standards for these and trained its employees accordingly. • Redefined the “hamburger business.” Redefine and/or Define The Business: • USA Today • American Airlines • American President Companies Products and Services: • Charles Schwab • BancOne Redefine and/or Define Business Processes: • Boeing Airplane Company • L.L. Bean When making a purchase decision does the delivery process become more important than the product or service? Product/Service Delivery Process Product/Service Value Add Process What the Customer Buys Value to Customer Figure 10-1 Value to Customer Analysis: Charles Schwab & Co. Product/Service • Stock, Bond and Mutual Fund Brokerage Service Delivery Process • Computer Based Trades • Client Broker Service Street Smart Telebroker Equalizer • OneSource • Electronic Transfers • Trade Risk Analysis • • • • • Trades Financial Product Options Competitive Fees Timely Execution of Trades and Money Transfer Personal Service Confidence in Financial Custodial Responsibility Value-add Process What the Customer Buys Value to Customer Figure 10-2 Value to Customer Analysis: Mervyn’s Product/Service • Point-of-Sale (POS) System Ticketed Merchandise UPC Scanning Price Look-up Credit Card Approval • Wireless Portable POS • Warehouse System • EDI Systems with Vendors • Infobot Voice Response • Quality Apparel/Home Fashions • Competitive Prices • High Merchandise Availability • Personal Service • Fast, Accurate Check-out • Fast Credit Approval • Access to Credit Information Delivery Process Value Add Process Product/Service What the Customer Buys Value to Customer Figure 10-3 Value to Customer Analysis: Boeing Commercial Airplane Group Product/Service Commercial Aircraft Delivery Process • CAD design system and review process • Customer input through network • Co-design process with customer • Quality control system • Vendor EDI system • An aircraft designed for passenger comfort, operational efficiency and safety. • Flexible design configuration • Competitive price • Logistical support Value-add Process What the Customer Buys Value to Customer Figure 10-4 Product/Service Delivery Process Value-Add Process Product/Service What the Customer Buys Value to Customer Future Success The key to future individual, company and national success is the ability to add value to global economic processes. Important in this context is the ability to conceptualize to solve problems. Competition Computers Complexity Change Definition of Change Implies making an essential difference often amounting to a loss of original identity or a substitution of one thing for another. The Challenge of Change Millions of ordinary, psychologically normal people will face an abrupt collision with the future. Many of them will find it increasingly painful to keep up with the incessant demand for change that characterizes our time. Alvin Tofler Futurist The Law of Change Achieving change, of any significance within an organization, is in inverse proportion to the success that it has had up to the time that management feels a change is needed. The greater the success of the company, the less likely it is to change. Definition of Change Implies making an essential difference often amounting to a loss of original identity or a substitution of one thing for another. Change is a significant alteration or disruption in peoples’ expectation patterns. Why is Change So Important? Time compression: information and communication. Interdependence: one economic world. Technology advances: shorter product cycles. Turbulence: political and social. Old Paradigms Die Hard! They have built in resistance to their own corresponding attitudes, institutions and cultures. Transition Versus Change 1. It goes on inside a person, not outside. 2. It takes much longer. 3. It starts with an ending. 4. It finishes with a new beginning. 5. In between is a neutral zone. This applied to organizations as well as individuals. Burning Platform Decision A burning platform type of decision is at hand when the organization is facing a major, disruptive change in which the cost for the status quo is prohibitively high and there is a significant risk that implementation failure could occur. IT Change Resistance Scale 1. The purpose of the technology is not clear. 2. The targets do not see the need for the change. 3. The targets are not involved in the planning. 4. There is poor communication regarding the change. 5. The cost is very high. 6. The reward is inadequate. 7. The compatibility of the new technology is perceived to be low. 8. Key people are not seen as advocating the new system. 9. The targets perceive a negative impact on their social relations. 10. Targets believe there is inadequate support for the new technology. 11. Targets believe there will be a negative impact on their budget. 12. The new technology is introduced too quickly or too slowly. 13. The habit patterns of targets are ignored. 14. Key job characteristics are changed. 15. The targets have been exposed to meaningless IT changes. 16. There is a fear of failure. 17. There is a tendency to seek security in the past. 18. There is a lack of respect and trust in the system sponsors. 19. There is a lack of respect and trust in the change agents. 20. Excessive pressure is involved. 21. The status quo cannot be reestablished if the new IT proves unacceptable. 22. The targets believe the change will reflect negatively on their past performance. 23. Targets feel that the privacy and security of critical information is being compromised. 24. Targets feel that the new IT will generate negative modifications in their physical work area. Reengineering Reengineering 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. Key words are fundamental, radical, dramatic and processes. Michael Hammer Videotape The father of reengineering. At least the term. Reengineering Methodology Analyze Leverage Points Identify Process Breakthroughs Design Business Processes Implement Business Processes Institute Continuous Improvements Phase 2 Phase 1 Phase 3 •Critical Success Factors •Activity Value Analysis •Benchmarks and Surveys •Processing Modeling •Investment Analysis Process Prototyping and Implementation Phase 4 Phase 5 Performance Reporting Source: ISS Corporation Phase 6 Reengineering Success Factors • Business Imperative. • Strong Sponsorship. • Right Team. • Clear Objectives with a Well Defined Foundation. Reegineering leadership must be: One part visionary One part communicator One part leg-breaker Hewlett-Packard Reengineering Lessons Learned: 1. Goals and accountability must be clear. 2. Process ownership is crucial. 3. Links among business owners, process owners and IS organization are critical. Avon Reengineering Approach Process 1. Stay Focused Culture 1. Analyze (Opposition) 2. Be Specific 3. Deliver Results 2. Educate (Concerns) 3. Motivate (Buy-in to process) American Express • Classic example of a grooved swing that is difficult to change. • Key was new CEO and some financial performance problems. • Announced a $1B cost reduction plan that stunned employees. • Decided that they had to permanently change the basics of the business. American Express • “You can’t have satisfied customers without satisfied employees.” • “If you can’t measure it, you can’t manage it.” • Ownership must capitalize on the best people within the organization. • Success was defined as the undisputed leader in the industry. • Becomes a resource allocation problem and taking things off the table is tough to do. American Express • Upward Feedback for Management. • Leadership Training. • Diversity Training. • Performance Measurement Process. • Incentive Plans. American Express Methodology • Ownership • Teams • Goals • Tracking Moved aggressively to electronic processing! IT Enabled Reengineering Principles 1. Work systems will have a customer focus; internal tasks that do not contribute to meeting customer needs will be minimized. 2. In work reengineering programs, the focus will be on improving and changing the business, not just the organization’s structure. 3. Work activities and processes will be performed in parallel. Reengineering Principles 4. “Whole” jobs with attendant responsibilities and commitments will be created. 5. The role of management is to support those who are dealing directly with customers--the front line. 6. Individual contributors will be able to play more than one role. Reengineering Principles 7. All management support information will be captured as a by-product of doing work and not as an additional set of activities. 8. “Virtual functions” will be created independent of location. 9. Information to answer customer inquiries will be available at all times. A Little Creativity Goes a Long Way 1. Employees need a sense of freedom in their jobs. 2. Employees need to be challenged. 3. Resources needed to do things better need to be provided. 4. Management must provide an environment where it is understood by employees that they are encouraged to take risks. Lessons From NUMMI Automate manufacturing processes only if you have: 1. Harmony within the work force. 2. Discipline in the work place. Soshana Zuboff 1. Automating 2. Informating Systems Analyst as Change Agent 1. Opportunity Oriented--look for the hidden opportunity, the unsolved problems, the unmet need. 2. Strategist--try to anticipate the future and maximize the ability to thrive and prosper in the future with well developed but flexible plans to accomplish this. 3. Unhook Your Prejudices--rid your thinking of preconceived beliefs, biases, thinking ruts and unchallenged assumptions. 4. Trend Spotters--monitor change to spot opportunities before anyone else by concerning yourself with the big picture. 5. Ideas Oriented--gain an edge through the way you work with ideas. Always be on the lookout for concepts that you can borrow and apply from other fields. Develop and experiment with new ideas. 6. Rely Upon Intuition--work on using this to assess risks, read people, spot emerging patterns and influence or make complex decisions. 7. Extraordinarily Persistent--face the heat in pursuit of the passion of your convictions. Think long term. 8. Resourceful--don’t let walls get in your way and draw on any and all necessary resources. Develop and use a people network. 9. Feedback Oriented--constantly poll “customers” to determine what can be improved. Also use feedback as a check and balance mechanism. 10. Superior Team Builder--realize that you cannot succeed alone. Sell don’t tell. Motivate don’t dictate. Change Management 1. Management Sponsorship. 2. Know and understand the difference between change and transition. 3. Assessment of the organization's history of change management and action planning.