BUILDING AND MANAGEMENT
SYSTEMS
(MANAGEMENT INFORMATION SYSTEMS,
Dr. Iskandarsyah Madjid, SE, MM)
The
experience of CIMB Group illustrates some of the steps required to design and
build new information systems. Building the new system entailed analyzing the
organization’s problems with existing information systems, assessing people’s
information requirements, selecting appropriate technology, and redesigning
business processes and jobs. Management had to monitor the system-building
effort and evaluate its benefits and costs. The new information system
represented a process of planned organizational change.
CIMB’s
system-building team evaluated alternative system solutions. It selected a
solution that replaces the process of entering customer and account data
manually into a series of four data entry screens with one that obtains most of
the same data by swiping a MyKad smart card. This solution did not replace
CIMB’s existing banking system entirely, but enhanced it with a more efficient
and streamlined user interface. These enhancements improved business operations
by reducing the amount of time to open a new account with CIMB Group and making
the customer experience more pleasant.
PLANNED ORGANIZATIONAL CHANGE
Building
a new information system is one kind of planned organizational change. The
introduction of a new information system involves much more than new hardware
and software. It also includes changes in jobs, skills, management, and
organization. When we design a new information system, we are redesigning the
organization. System builders must understand how a system will affect specific
business processes and the organization as a whole.
SYSTEMS
DEVELOPMENT AND ORGANIZATIONAL CHANGE
Information
technology can promote various degrees of organizational change, ranging from
incremental to far-reaching. Figure 13-1 shows four kinds of structural
organizational change that are enabled by information technology : (1)
automation, (2) rationalization, (3) business process redesign, and (4) paradigm
shifts. Each carries different risks and rewards.
The
most common form of IT-enabled organizational change is automation. The first
applications of information technology involved assisting employees with
performing their tasks more efficiently and effectively. Calculating paychecks
and payroll registers, giving bank tellers instant access to customer
deposit
records, and developing a nationwide reservation network for airline ticket
agents are all examples of early automation.
The
streamlining of standard operating procedures. For example, CIMB Bank’s system
for handling retail banking accounts is effective not only because it uses computer
technology but also because the company simplified the business process for
opening a customer account. CIMB streamlined its workflow to take advantage of
the system’s new user interface and software for importing personal data from
MyKad.
Rationalization
of procedures is often found in programs for making a series of continuous
quality improvements in products, services, and operations, such as total
quality management (TQM) and six sigma. Total quality management (TQM) makes
achieving quality an end in itself and the responsibility of all people and
functions within an organization. TQM derives from concepts developed by
American quality experts such as W. Edwards Deming and Joseph Juran, but it was
popularized by the Japanese. Six sigma is a specific measure of quality,
representing 3.4 defects per million opportunities. Most companies cannot
achieve this level of quality, but use six sigma as a goal for driving ongoing quality
improvement programs.
Rationalizing
procedures and redesigning business processes are limited to specific parts of
a businParadigm shifts and reengineering often fail because extensive
organizational change is so difficult to orchestrate (see Chapter 14). Why,
then, do so many corporations contemplate such radical change? Because the
rewards are equally high (see Figure 13-1). In many instances, firms seeking
paradigm shifts and pursuing reengineering strategies achieve stunning,
order-of-magnitude increases in their returns on investment (or productivity).
Some of these success stories, and some failure stories, are included
throughout this book.
BUSINESS
PROCESS REDESIGN
Like
CIMB Group, described in the chapter-opening case, many businesses today are
trying to use information technology to improve their business processes. Some
of these systems entail incremental process change, but others require more
far-reaching redesign of business processes. To deal with these
changes,
organizations are turning to business process management. Business process
management provides a variety of tools and methodologies to analyze existing
processes, design new processes, and optimize those processes. BPM is never
concluded because process improvement requires continual change. Companies
practicing business process management go through the following steps:
1. Identify processes for change
: One of the most important strategic decisions that a firm can make is not
deciding how to use computers to improve business processes, but understanding
what business processes need improvement. When systems are used to strengthen
the wrong business model or business processes, the business can become more
efficient at doing what it should not do. As a result, the firm becomes
vulnerable to competitors who may have discovered the right business model.
Considerable time and cost may also be spent improving business processes that
have little impact on overall firm performance and revenue. Managers need to
determine what business processes are the most important and how improving these
processes will help business performance.
2. Analyze existing processes
: Existing business processes should be modeled and documented, noting inputs,
outputs, resources, and the sequence of activities. The process design team
identifies redundant steps, paper-intensive tasks, bottlenecks, and other
inefficiencies.
Figure
13-2 illustrates the “as-is” process for purchasing a book from a physical bookstore.
Consider what happens when a customer visits a physical book-
FIGURE 13-2 AS-IS BUSINESS
PROCESS FOR PURCHASING A BOOK FROM A PHYSICAL BOOKSTORE
Purchasing a book from a physical
bookstore requires many steps to be performed by both the seller and the
customer.
store
and searches its shelves for a book. If he or she finds the book, that person takes
it to the checkout counter and pays for it via credit card, cash, or check. If the
customer is unable to locate the book, he or she must ask a bookstore clerk to
search the shelves or check the bookstore’s inventory records to see if it is
in stock. If the clerk finds the book, the customer purchases it and leaves. If
the book is not available locally, the clerk inquires about ordering it for the
customer, from the bookstore’s warehouse or from the book’s distributor or
publisher. Once the ordered book arrives at the bookstore, a bookstore employee
telephones the customer with this information. The customer would have to go to
the bookstore again to pick up the book and pay for it. If the bookstore is unable
to order the book for the customer, the customer would have to try another
bookstore. You can see that this process has many steps and might require the
customer to make multiple trips to the bookstore.
3. Design the new process: Once the existing process is mapped and measured
in terms of time and cost, the process design team will try to improve the
process by designing a new one. A new streamlined “to-be” process will be
documented and modeled for comparison with the old process.
Figure
13-3 illustrates how the book-purchasing process can be redesigned by taking
advantage of the Internet. The customer accesses an online bookstore over the
Internet from his or her computer. He or she searches the bookstore’s online
catalog for the book he or she wants. If the book is available, the
customer
orders the book online, supplying credit card and shipping address information,
and the book is delivered to the customer’s home. If the online bookstore does
not carry the book, the customer selects another online bookstore and searches
for the book again. This process has far fewer steps than that for purchasing
the book in a physical bookstore, requires much less effort on the part of the
customer, and requires less sales staff for customer service. The new process
is therefore much more efficient and time-saving.
The
new process for purchasing a book online might only take several minutes, although
the customer might have to wait several days or a week to receive the book in
the mail and will have to pay a shipping charge. But the customer saves time
and money by not having to travel to the bookstore or make additional visits to
pick up the book. Booksellers’ costs are lower because they do not have to pay
for a physical store location or for local inventory.
4. Implement the new process: Once the new process has been thoroughly modeled
and analyzed, it must be translated into a new set of procedures and work
rules. New information systems or enhancements to existing systems may have to
be implemented to support the redesigned process. The new process and
supporting systems are rolled out into the business organization.
As
the business starts using this process, problems are uncovered and addressed.
Employees working with the process may recommend improvements.
5. Continuous measurement: Once a process has been implemented and optimized,
it needs to be continually measured. Why? Processes may deteriorate over time
as employees fall back on old methods, or they may lose their effectiveness if
the business experiences other changes.
Although
many business process improvements are incremental and ongoing, there are
occasions when more radical change must take place. Our example of a physical
bookstore redesigning the book-purchasing process so that it can be carried out
online is an example of this type of radical, far-reaching
change.
When properly implemented, business process redesign produces dramatic gains in
productivity and efficiency, and may even change the way the business is run.
In some instances, it drives a “paradigm shift” that transforms the nature of
the business itself.
This
actually happened in book retailing when Amazon challenged traditional physical
bookstores with its online retail model. By radically rethinking the way a book
can be purchased and sold, Amazon and other online bookstores have achieved
remarkable efficiencies, cost reductions, and a whole new way of doing
business.
BPM
poses challenges. Executives report that the largest single barrier to successful
business process change is organizational culture. Employees do not like
unfamiliar routines and often try to resist change. This is especially true of projects
where organizational changes are very ambitious and far-reaching. Managing
change is neither simple nor intuitive, and companies committed to extensive
process improvement need a good change management strategy (see Chapter 14).
TOOLS
FOR BUSINESS PROCESS MANAGEMENT
Over 100 software firms provide
tools for various aspects of BPM, including IBM, Oracle, and TIBCO. These tools
help businesses identify and document processes requiring improvement, create
models of improved processes, capture and enforce business rules for performing
processes, and integrate existing systems to support new or redesigned
processes. BPM software tools also provide analytics for verifying that process
performance has been improved and for measuring the impact of process changes
on key business performance indicators.
Some
BPM tools document and monitor business processes to help firms identify
inefficiencies, using software to connect with each of the systems a company
uses for a particular process to identify trouble spots. Canadian mutual fund
company AIC used Sajus BPM monitoring software to check inconsistencies in its
process for updating accounts after each client transaction. Sajus specializes
in “goal-based” process management, which focuses on finding the causes of
organizational problems through process monitoring before applying tools to
address those problems.
For
example, American National Insurance Company (ANCO), which offers life
insurance, medical insurance, property casualty insurance, and investment services,
used Pegasystems BPM workf
Low
software to streamline customer service processes across four business groups.
The software built rules to guide customer service representatives through a
single view of a customer’s information that was maintained in multiple
systems. By eliminating the need to juggle multiple applications simultaneously
to handle customer and agent requests, the improved process increased customer
service representative workload capacity by 192 percent.
A
third category of tools helps businesses integrate their existing systems to support
process improvements. They automatically manage processes across the business,
extract data from various sources and databases, and generate transactions in
multiple related systems. For example, the Star Alliance of 15 airlines,
including United and Lufthansa, used BPM to create common processes shared by
all of its members by integrating their existing systems. One project created a
new service for frequent fliers on member airlines by consolidating 90 separate
business processes across nine airlines and 27 legacy systems. The BPM software
documented how each airline processed frequent flier information to help
airline managers model a new business process that showed how to share data
among the various systems.
The
Interactive Session on Organizations describes how several companies used
similar tools for their business process management programs. As you read this
case, think about the kinds of changes the companies using these BPM tools were
able to make in the way they ran their businesses.
13.2 OVERVIEW OF SYSTEMS DEVELOPMENT
New
information systems are an outgrowth of a process of organizational problem
solving. A new information system is built as a solution to some type of
problem or set of problems the organization perceives it is facing. The problem
may be one in which managers and employees realize that the organization is not
performing as well as expected, or that the organization should take advantage
of new opportunities to perform more successfully.
The
activities that go into producing an information system solution to an organizational
problem or opportunity are called systems development. Systems development is a
structured kind of problem solved with distinct activities. These activities
consist of systems analysis, systems design, programming,
testing,
conversion, and production and maintenance.
