Business processes are the activities or tasks that organizations perform to achieve business goals. They’re a collection of functions and activities that enable enterprises to produce their core products and services (core processes), support the core processes (support processes like procurement, HR, finance, etc), and ensure they’re doing things effectively and efficiently (management processes).
Sometimes, however, the way a business has been accustomed to doing things can become outdated or obsolete over time. When this happens, strategies for improving business processes, like business process improvement and business process-re-engineering, are vital to ensuring a company can pivot, realign or change its processes as needed.
Business Process Improvement (BPI)
Business process improvement is a strategy that aims to improve business outcomes by making incremental enhancements to existing business processes.
Business Process Improvement: A Few Examples
A coffee processor keeps paper records. While its files are well-organized and its staff is efficient, problems arise when a record is misplaced or when the staff-in-charge is absent. Whenever this happens, farmers do not get paid, invoices do not get dispatched, and orders and reports get delayed – and these tend to hold up procurement, coffee processing, and decision-making.
To resolve this, the company decides to digitize its existing records, converting paper records into computer data. This makes it easy to glean valuable information, such as what percentage of their production every farmer-supplier accounts for, which buyer pays promptly, which logistics provider provides the best value for money, etc. Based on historical data, they can also make demand and supply projections, which means less understocking and overstocking issues.
Additionally, the company equips its offices with computer equipment and an easy-to-use interface through which they can input new transactions and access digital records. This makes it easier to log information, removing the need to transfer information from paper forms. It also speeds up finding information and ensures data is always accessible, regardless of the presence or absence of personnel.
In this example, the way the coffee company transacts business with farmers and suppliers remains essentially the same. However, by digitizing old records and ensuring all new transactions are digitally recorded, it is able to increase its speed and efficiency at keeping and accessing its information.
What Is Business Process Improvement?
Business process improvement is exactly what the name suggests and what the example above portrays. It’s improving a process so it can produce better results. Are you losing time because you can’t find information on an old transaction? Improve the way you store and access information.
BPI entails identifying inefficiencies and bottlenecks and making small, targeted adjustments to eradicate them. The goal is to increase the efficiency of the process’s functions and activities, reduce the cost of its inputs, and improve the quality of its outcomes.
BPI involves changes to an existing process. You don’t replace the process; you improve it and make it better, and you do this by making minor changes. It’s switching from written records in a logbook to data entry in a computerized form.
Approach
BPI involves continuous monitoring and iterative and ongoing improvements using techniques like lean, Six Sigma, and total quality management (TQM).
It usually involves the following steps:
- Identification and definition of the process that will be improved: The existing process is mapped, and the current process flows are documented using flowcharts and process maps. At this stage, key performance indicators (KPIs) are established.
- Process analysis: Data is collected to understand process performance. The process is analyzed to identify inefficiencies and causes of waste.
- Identification of opportunities for enhancement: Opportunities for improvement are identified using industry benchmarks, best practices and ideas and suggestions from consultants and people in the field.
- Improvement plan development: Once the opportunities for improvement have been identified, it’s time to create a detailed improvement action plan.
- Implementation of changes: The action plan is communicated to everyone, especially those who will implement it. Training is conducted to ensure everyone knows how to use the new tool or perform the new procedure. The changes are implemented first at a smaller scale and then, if all goes well, at a larger scale.
After the change has been fully implemented, the BPI team in charge continuously monitors the enhanced process to ensure it is effective and meets KPIs. If the process improvement is deemed successful, standard operating procedures development commences, making the changes a permanent part of the process.
Business Process Re-Engineering (BPR)
Business process re-engineering (BPR) is a strategy that involves making radical or sweeping changes to one or more business processes. The goal remains improved efficiency, reduced costs, and better quality, but BPR aims to achieve drastic improvements rather than incremental gains.
Business Process Re-Engineering: An Example
Think back to the business process improvement example above about the coffee company that used to keep paper records. If BPI is digitizing data and using computer forms to speed up information search and access, BPR is rethinking all processes impacted by company records.
For instance, the company can implement robotic process automation (RPA) on administrative processes. Software takes over routine and repetitive tasks like extracting information from various data sources, filling in forms and proposals, creating invoices, preparing procurement orders, handing over documents from one department to another, and filing paperwork inside the correct folders. It does this based on rules set initially.
Software does not get wearied out by performing tedious, repetitive tasks, so RPA reduces encoding mistakes, filing blunders, information omissions, and other errors. RPA also leaves human resources free to perform complex and strategic work.
The company may enhance its RPA system with artificial intelligence, machine learning, data analytics, and computer vision. A successful implementation means an intelligent system that learns and thinks, so it no longer makes decisions based solely on its initially programmed rules but also on what it has learned over time. Eventually, it may even change the workflow to improve efficiency.
What Is Business Process Re-Engineering?
Business process re-engineering is making fundamental changes to a business process. It doesn’t introduce minor alterations to specific aspects of an existing process. Instead, BPR transforms the process, sometimes so extensively the process becomes unrecognizable. Business process re-engineering also often encompasses multiple processes.
Approach
Business process re-engineering requires returning to the drawing board and rethinking a process from the ground up. It’s asking, “Is this really the best way of doing things?”
- Preparation: BPR is leadership-initiated or sponsored because it will accomplish high-level business goals. BPR is not task-focused like BPI. A cross-functional team is assembled to lead the project.
- Process identification: The BPR team focuses on high-impact processes and identifies those that need redesign.
- Process analysis: The target process is studied and analyzed. What led to its current design? What are its performance issues?
- Process design: The BPR team, typically with help from third-party business consultants, brainstorms on a better process design. At this stage, the BPR team asks questions like: should this be done this way, and what can be a better way of doing it?
- Implementation planning: Once the new design has been conceptualized, the BPR project team draws up a BPR action plan, identifying the people involved, the resources needed, the implementation timeline, the step-by-step procedures, and any organizational realignment required.
- Execution: The plan is implemented according to the execution plan.
Once the BPR plan has been executed and implemented, the BPR team continues to monitor and review the redesigned process to ensure it is accomplishing its goals.
Business Process Improvement vs Business Process Re-Engineering
Business process improvement is making minor changes to an existing process to increase its efficiency, reduce its costs and improve the quality of its outcomes.
Business process re-engineering is redesigning a process (or multiple processes) to drastically improve efficiency, cost-effectiveness, and quality.
BPI is easier to implement and less risky than BPR, but BPR – with the proper guidance and strategic consultation – is so much more rewarding than BPI.