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Business operations are those ongoing recurring activities involved in the running of a business for the purpose of producing value for the stakeholders. They are contrasted with project management, and consist of business processes. The outcome of business operations is the harvesting of value from assets owned by a business. Assets can be either physical or intangible. An example of value derived from a physical asset like a building is rent. An example of value derived from an intangible asset like an idea is a royalty. The effort involved in harvesting this value is what constitutes business operations.Business operations encompasses three fundamental management imperatives that collectively aim to maximize value harvested from business assets this has often been referred to as sweating the assets Generate recurring income. Increase the value of the business. Secure the income and value of the business.All three imperatives are mutually dependent. The following basic tenets illustrate this interdependency The more recurring income an asset generates, the more valuable it becomes. For example, the products that sell at the highest volumes and prices are usually considered to be the most valuable products in a businesss product portfolio.
The more valuable a product becomes the more recurring income it generates. For example, a luxury car can be leased out at a higher rate than a normal car. The intrinsic value and incomegenerating potential of an asset cannot be realized without a way to secure it. For example, petroleum deposits are worthless unless processes and equipment are developed and employed to extract, refine, and distribute it profitably.The business model of a business describes the means by which the three management imperatives are achieved. In this sense, business operations is the execution of the business model.Generating recurring incomeThis is the most straightforward and wellunderstood management imperative of business operations. The primary goal of this imperative is to implement a sustained delivery of goods and services to the businesss customers at a cost that is less than the funds acquired in exchange for said goods and services in short, making a profit.The funds directly acquired by the business in exchange for the goods and services it delivers is the businesss revenue.The cost of developing, producing, and delivering these goods and services is the businesss expenses.A business whose revenues are greater than its expenses makes a profit. Such a business is profitable. .
Desirability or demand for its goods and services Ability of its customers to pay for its goods and services Uniqueness and competitiveness of its business model Control exerted over the quality and efficiency of production activities Public regard for the business as a member of the communityA business that can harvest a significant amount of value from its assets but cannot demonstrate an ability to sustain this effort cannot be considered a viable business.HistoryIn , Michael Hammer, a former professor of computer science at the Massachusetts Institute of Technology MIT, published an article in the Harvard Business Review, in which he claimed that the major challenge for managers is to obliterate nonvalue adding work, rather than using technology for automating it Hammer . This statement implicitly accused managers of having focused on the wrong issues, namely that technology in general, and more specifically information technology, has been used primarily for automating existing work rather than using it as an enabler for making nonvalue adding work obsolete.Hammers claim was simple Most of the work being done does not add any value for customers, and this work should be removed, not accelerated through automation. Instead, companies should reconsider their processes in order to maximize customer value, while minimizing the consumption of resources required for delivering their product or service. A similar idea was advocated by Thomas H. Davenport and J. Short , at that time a member of the Ernst & Young research center, in a paper published in the Sloan Management Review the same year as Hammer published his paper.
This idea, to unbiasedly review a company’s business processes, was rapidly adopted by a huge number of firms, which were striving for renewed competitiveness, which they had lost due to the market entrance of foreign competitors, their inability to satisfy customer needs, and their insufficient cost structure. Even well established management thinkers, such as Peter Drucker and Tom Peters, were accepting and advocating BPR as a new tool for reachieving success in a dynamic world. During the following years, a fast growing number of publications, books as well as journal articles, was dedicated to BPR, and many consulting firms embarked on this trend and developed BPR methods. However, the critics were fast to claim that BPR was a way to dehumanize the work place, increase managerial control, and to justify downsizing, i.e. major reductions of the work force Greenbaum , Industry Week , and a rebirth of Taylorism under a different label.Despite this critique, reengineering was adopted at an accelerating pace and by , as many as % of the Fortune companies claimed to either have initiated reengineering efforts, or to have plans to do so. This trend was fueled by the fast adoption of BPR by the consulting industry, but also by the study Made in America, conducted by MIT, that showed how companies in many US industries had lagged behind their foreign counterparts in terms of competitiveness, timetomarket and productivity.
This article or section contains too many quotations for an encyclopedic entry.Please improve the article or discuss proposed changes on the talk page.You can edit the article to add more encyclopedic text or link the article to a page of quotations, possibly one of the same name, on Wikiquote. See Wikipedias guide to writing better articles for further suggestions. April Different definitions can be found. This section contains the definition provided in notable publications in the field.Hammer and Champy define BPR as. 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.Thomas H. Davenport , another wellknown BPR theorist, uses the term process innovation, which he says ”encompasses the envisioning of new work strategies, the actual process design activity, and the implementation of the change in all its complex technological, human, and organizational dimensions”. Additionally, Davenport ibid. points out the major difference between BPR and other approaches to organization development OD, especially the continuous improvement or TQM movement, when he states Today firms must seek not fractional, but multiplicative levels of improvement – x rather than %. Finally, Johansson et al. provide a description of BPR relative to other processoriented views, such as Total Quality Management TQM and Justintime JIT, and state Business Process Reengineering, although a close relative, seeks radical rather than merely continuous improvement. It escalates the efforts of JIT and TQM to make process orientation a strategic tool and a core competence of the organization. BPR concentrates on core business processes, and uses the specific techniques within the JIT and TQM ”toolboxes” as enablers, while broadening the process vision.In order to achieve the major improvements BPR is seeking for, the change of structural organizational variables, and other ways of managing and performing work is often considered as being insufficient. For being able to reap the achievable benefits fully, the use of information technology IT is conceived as a major contributing factor. While IT traditionally has been used for supporting the existing business functions, i.e. it was used for increasing organizational efficiency, it now plays a role as enabler of new organizational forms, and patterns of collaboration within and between organizations.BPR derives its existence from different disciplines, and four major areas can be identified as being subjected to change in BPR organization, technology, strategy, and people where a process view is used as common framework for considering these dimensions. The approach can be graphically depicted by a modification of Leavitt’s diamond Leavitt .
Business strategy is the primary driver of BPR initiatives and the other dimensions are governed by strategys encompassing role. The organization dimension reflects the structural elements of the company, such as hierarchical levels, the composition of organizational units, and the distribution of work between them. Technology is concerned with the use of computer systems and other forms of communication technology in the business. In BPR, information technology is generally considered as playing a role as enabler of new forms of organizing and collaborating, rather than supporting existing business functions. The people human resources dimension deals with aspects such as education, training, motivation and reward systems. The concept of business processes interrelated activities aiming at creating a value added output to a customer is the basic underlying idea of BPR. These processes are characterized by a number of attributes Process ownership, customer focus, value adding, and crossfunctionality.The role of information technologyInformation technology IT has historically played an important role in the reengineering concept. It is considered by some as a major enabler for new forms of working and collaborating within an organization and across organizational borders.
The early BPR literature, e.g. Hammer & Champy , identified several so called disruptive technologies that were supposed to challenge traditional wisdom about how work should be performed. Shared databases, making information available at many places. Expert systems, allowing generalists to perform specialist tasks. Telecommunication networks, allowing organizations to be centralized and decentralized at the same imeDecisionsupport tools, allowing decisionmaking to be a part of everybodys job. Wireless data communication and portable computers, allowing field personnel to work office independent. Interactive videodisk, to get in immediate contact with potential buyers Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found. High performance computing, allowing onthefly planning and revisioningIn the mid s, especially workflow management systems were considered as a significant contributor to improved process efficiency. Also ERP Enterprise Resource Planning vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned their solutions as vehicles for business process redesign and improvement.BPR, if implemented properly, can give huge returns. BPR has helped giants like Procter and Gamble Corporation and General Motors Corporation succeed after financial drawbacks due to competition. It helped American Airlines somewhat get back on track from the bad debt that is currently haunting their business practice. BPR is about the proper method of implementation.
General Motors Corporation implemented a year plan to consolidate their multiple desktop systems into one. It is known internally as Consistent Office Environment Booker, . This reengineering process involved replacing the numerous brands of desktop systems, network operating systems and application development tools into a more manageable number of vendors and technology platforms. According to Donald G. Hedeen, director of desktops and deployment at GM and manager of the upgrade program, he says that the process lays the foundation for the implementation of a common business communication strategy across General Motors. Booker, . Lotus Development Corporation and HewlettPackard Development Company, formerly Compaq Computer Corporation, received the single largest nongovernment sales ever from General Motors Corporation. GM also planned to use Novell NetWare as a security client, Microsoft Office and HewlettPackard printers. According to Donald G. Hedeen, this saved GM % to % on support costs, % to % on hardware, % to % on software licensing fees, and increased efficiency by overcoming incompatibility issues by using just one platform across the entire company. Michael Dell is the founder and CEO of DELL Incorporated, which has been in business since and has been the worlds fastest growing major PC Company. Michael Dells idea of a successful business is to keep the smallest inventory possible by having a direct link with the manufacturer. When a customer places an order, the custom parts requested by the customer are automatically sent to the manufacturer for shipment. This reduces the cost for inventory tracking and massive warehouse maintenance. Dells website is noted for bringing in nearly $ million each day in sales.Smith, . Michael Dell mentions If you have a good strategy with sound economics, the real challenge is to get people excited about what youre doing. A lot of businesses get off track because they dont communicate an excitement about being part of a winning team that can achieve big goals. If a company cant motivate its people and it doesnt have a clear compass, it will drift. Smith, Dells stocks have been ranked as the top stock for the decade of the s, when it had a return of ,% Knestout and Ramage, . Michael Dell is now concentrating more on customer service than selling computers since the PC market price has pretty much equalized. Michael Dell notes The new frontier in our industry is service, which is a much greater differentiator when price has been equalized. In our industry, theres been a pretty huge gap between what customers want in service and what they can get, so theyve come to expect mediocre service. We may be the best in this area, but we can still improve quite a bit—in the quality of the product, the availability of parts, service and delivery time. Smith, Michael Dell understands the concept of BPR and really recognizes where and when to reengineer his business.