IT Doesn't Matter-Business Processes Do: A Critical Analysis of Nicholas Carr's I.T. Article in the Harvard Business Review




It Doesn’t Matter- Business Processes Do, Howard Smith & Peter Fingar

A critical Analysis of Nicholas Carr’s I.T Article in the Harvard Business Review

Appreciation

·       Great Book. A must read book

Most important notes

·       Time is moving responsibilities from IT to business analyst. IT was what happened with spreadsheet and now IT will happened with the Business Process. Microsoft still serves SQL Enterprise and Access. The same will happened with BIZTALK and the future WWF. The difference is that the BPM revolution will happen at the speed of the 4 GHZ versus the 450 MHZ of Pentium 3.

·       Enterprises will have portfolios of business processes constantly analyzed for performance from different angles.

·       BPM is not automation since human interaction can not be automated. In fact BPM will mostly be used to simplify and improve tasks that require interaction of multiree? departments.

·       Processes cast in stone (CRM, ERP, etc.) can be as much as  a liability as an asset. Transformation of the back end will ensue they become an asset. That is the role of the web service.

·       BPM is to IT what CAD/ CAM was to industrial manufacturing.

·       It shouldn’t be the owner of the business process.

·       BPM is digitizing the process.

·       IT will become the provisioner of business processes.

Personalities

Author

Comments

Nicholas Carr

Makes several accurate observations in the IT industry in his publication- “IT Doesn’t Matter”

Arthur C. Clarke

distinguished author of science and fiction including 2001: A Space Odyssey, wrote” Any sufficiently advanced technology is indistinguishable from magic.”

Alan Greenspan

Author of several Economic books.

 

Chapter

Comments

Dangerous Articles

·        Tendency of some corporations, entranced by new computer systems, to believe that further enhancements in productivity could be gained solely by a redeployment of office-automation systems, rather than the much harder tasks o serious and significant organizational re-design.

Carr is Right-In a Wrong Kind of Way

·        IT is an enabler of business processes and practices, not a separate and distinct provider of value.

·        For the first time, the business and IT can work from the same sheet at all points in the process lifecycle.

·        Business process management wins the “triple crown” of saving money, saving time and adding value. It also spans the business and technology gap to create synergy, with proven results. BPM is delivering both short-term return on investment (ROI) and long-term value (VOI).

Application versus Business Process Management

 

·        The paradigm shift from applications to business processes in the world of business automation can be confirmed by observing.

·        The math is pi-calculus and it underpins the computer science of distributed mobile processes.

Grids, Web Services and Computing Utilities

The IT-enabled information society will be driven by visionary companies that see possibilities where others do not and which exploit the low cost, standards-based, plug and play, interconnect-able, networked commodity components to build infrastructures never even predicted.

The Essence of Web Service

·        You can be a laggard for a while, but then you eventually get blown away by companies with better cost structures, that can orchestrate capability better, that have more innovative business strategies and so on.

·        Graphical user interfaces, faster chipset, the Internet, the Web- all gave juice to the sector right when it started to look as if it had peaked.

Best-Practice and Best-in-Class Business Processes

·        Best practice are now quickly built into software or otherwise replicated.

·        The next phase of IT development is being applied to the management of unique, company-differentiated business processes, the very ones that companies use to dominate their markets.

·        The layer of technology that is customizable, and therefore can give a company a competitive advantage, is getting thinner and thinner.

·        BPM will be used both to differentiate (best in class), and to standardize (best-practice).

The IT Buildout

·        IT’s Power is Not Outstripping Business Needs

·        Business processes-the dynamic, expanding, contracting, changing activities of the business- are not so stable or predictable as data and back-office record keeping. In fact, they are extremely messy.

 

·        When the Price of IT Functionality Drops, That’s a Good Thing

·        The next frontier of IT is the little guy, who may never use more than a Web browser and a spreadsheet.

·        Smaller businesses are usually more specialized and offer unique value propositions: either new, exclusive, or exceptional products, or lower prices.

·        Information technology is a killer of bureaucracies and a reducer of overhead expenses;

 

·        The Universal Distribution Network Hasn’t Caught Up With Demand

·        The State of the World Forum reports that as of September 4, 2000:

1.      Human population of the world: 6,094,046,661

2.      World population with access to telephones: 20%

3.      World population connected to the Internet: 2%

It just may be that we are at the infantile stages of building infrastructural technologies.

 

·        The Dot-Com Bubble Has Burst- So What?

·        Arthur C. Clarke, distinguished author of science and fiction including 2001: A Space Odyssey, wrote” Any sufficiently advanced technology is indistinguishable from magic.’

·        Depends on deliberate engineering to ensure that the new technology meets the needs of society and is not a distraction to the activities it is there to support.

A Closer Look at The Last Fifty Years of IT

·        The future of IT; pg 58-59

Beyond Data, On To Process Digitization

·        The vision of process management is not new, but existing theories and IT systems have not been able to cope with the reality of business processes-until now.

·        The breakthrough in business process management (BPM) is its technology engine, the business process management system (BPMS).

A Deeper Look at Commoditization Trends in IT

1. There is no single commodity

·        There is commoditization within the IT stack. Raw storage bits, raw processing power are good examples.

·        Response should not be to cease investment in IT, but rather to eradicate complexity through the intelligent deployment of new approaches such as Business Process Management.

·        Information technologies now provide the primary means for extending the value of a firm’s knowledge capital. They help companies manage the exploding accumulation of scientific, research, customer, engineering, property and intellectual assets. Corporations are confronting increased uncertainty about markets, competition, resources, employee attitudes and the impact of legislation. The corporate environment requires more complex coordination than ever before, and there is less time for taking corrective measures. As a result, there is a need for more and better information technologies.

 

2. Today’s commodity was yesterday’s innovation

·        There are strong reasons to believe that the BPM is going to be just as a successful as the RDBMS, for the BPMS is perfectly suited to exploit the current commodity environment, including public and private networks, and Web services.

·        Connectivity standards provide the value-chain “dial tone” for companies. BPM systems are bases, not on standard processes, but on a standard way to represent (and therefore to create, integrate, customize, transform etc.) all processes.

 

3. Mission-critical versus support

 

4. Value from outsourcing

·        Business Process Outsourcing (BPO) on a global scale, is well underway, and the implications are monumental.

The Invisible “P” in IT Matters

·        Alan Greenspan has argued recently that, contrary to Carr’s beliefs, “there are still significant opportunities for firms to upgrade the quality of their technology and with it the level of productivity.”

·        “I” means  “P” (process= information in context)

·        “IT” is in reality “PT” (or BPM)

·        BT= business technology

·        Technology is a means to an end, and that end is business success and profitability and growth.

·        BPO = business process optimization

·        Value in IT has never been the wire; but what happens over the wire.

·        Business processes put information in the context of its use.

·        It is the combination of digital capabilities that creates new value. It was not the development of the personal computer that led to the personal computing revolution. It was the world’s first spreadsheet, VisiCalc. In the early 1970s, personal computers were the toys of hobbyists

·        and nerds who loved to tinker with programs written in BASIC.

·        The invisible “P” in IT can never be a commodity for companies will always compete on the basic of unique and distinctive business processes. “T” is just a platform and has no value without the “P” in BPM.

Beyond Data Processing, On To BPM

 

·        Executable process models that are aligned with business strategy.

·        Portfolio of excellent business processes.

·        Business process processing should not be confused with automation.

·        Greta ideas are one thing, the ability to execute on them means technology enable business process management.

·        BPM doesn’t automatically mean automation, for in a given situation, all the relevant business processes just may be human-driven processes.

·        “White space on the organization chart”- those elements of work that fall between systems and departments and teams and that are based on communication, coordination and cooperation.

·        Processes cast in stone through point solutions, one-time projects, habitual work practice or the straightjacket of packaged business software can be, as much a liability as an asset, no matter how excellent they may be.

·        Companies must obliterate the business-IT divide, transforming legacy systems into assets, via process digitization, rather than treating them as liabilities. – TRANSFORMING THE BACK-END.

·        Buzz words allowed to BPM- reengineering, process innovation, total quality management, Six Sigma, activity-based costing, value-chain analysis, cycle time reduction, supply-chain management, excellence, customer-driven strategy and management by objectives-have stressed the significance of the business process and its management.

·        Companies are coming to understand that the principles of inter-connected and inter-related processes are the reality behind today’s IT-façade. This change from applications to business processes at the heart of digital systems is structural.

The Process is the Product

·        A company must manage its process portfolio with the same rigor that a venture capital firm uses to manage its portfolio of investments.

·        Organizations today are focusing on a narrowing set of core competencies.

·        Good processes don’t make winning companies; winning companies make good processes, using business ingenuity and IT.

Beyond the IT Shop, On To The Process Office

·        An example is the reduction of cost of claim processing by 20% in a property and casualty insurance company, with the claims processing requiring just one-third the time.

The New Value in “IT of a Different Kind”

 

·        Mot valuable, pg 86

·        BPM is “CAD/CAM” for the IT-Industry- the automation of IT itself based on digital models of business processes. Using BPM, business processes will be created, discovered, designed and deployed more readily than ever before. Hundreds of variants will be generated and tested, now that the cost efficiencies of BPM give designers the luxury of creating processes, the majority of which they will simply throw away as part of the creative and experimental processes. Compare this to today’s long-winded and error-prone software development process.

·        All processes will improve in quality along multiple dimensions: better, faster and less expensive.

·        If companies could improve the efficiency of these cross-organizational administrative processes by 50%, it would result in annual savings of $400 billion.

·        To summarize :

1.      Over time, our definition of IT changes. The “I” in IT originally meant data.

2.      The “I” in IT is continuously re-defined as technology evolves, creating new commodity platforms. Today, the focus of IT is on business processes, and their management.

3.      The new “I” in IT is “P”- the business process- and companies are learning how to use the scale and ubiquity of Old IT to create new value, with their customers and partners.

 

A Catharsis of Sorts for the IT Industry

·      ERP is a flexible as wet concrete before installation, and as flexible as dry concrete after installation.

·      IT’s big challenge these days isn’t getting more speed from its networks or finding better software or greater storage capacity. It is making thinks work.

·      Without BPM, companies will find themselves as the mercy of any company that deploys the same packaged software processes. With BPM the same company will be able to differentiate, yet simultaneously enjoy the advantages of a more standard, yet process-neutral, infrastructure.

·      Just a business people use their email systems to write their own email messages, business processes should be defined and owned by business users, not the IT department.

·      BPM is moving the goal posts and changing the rules of the game, by digitizing processes.

·      BPM systems can manage many of complexities inherent to today’s software stack, allowing the business to focus purely on the specification of the business process, not IT artifacts.

·       Some powerful tools will emerge in the future, such as tools to support Merges and Acquisitions or Value Chain Integration.

·      BUZZ WORDS, pg 93

·      IT will be responsible for the new process-oriented applications that leverage the process design the business deploys on the BPM system.

An Epilog to Data

By adopting ATM technology early, two innovators, Bank of America and Citibank, gained global dominance in retail banking and have helped sustained their lead, building sophisticated services delivered through the ATM networks.

Rebutting the Rebuttals and Alternative Futures

Like all true build outs, as opposed to dot-bomb false starts, the focus now must be on hard work, reliability, industrial-strength end-to-end value-chain solutions, and the management of complexity, security and trust. At the heart of these endeavors will be the business process- the very crux of IT today.

What Should Companies Do?

 

1.      Start with Business Metrics.

2.      Start with Business Processes, Not Technology.

·        Design new business processes from the outside in, starting with the customer and the customer’s customer.

3        Start from the Top-Down, and from the Bottom-Up.

·        Top management must invest in people and BPM platforms that provide the capabilities to fully manage both strategic, top-down and operational, bottom-up business process.

4        Approach BPM as an “Incremental rEvolution,” not a Big Bang.

·        Business process management doesn’t displace what you already have. It leverages your current business and IT assets without duplicating resources or disrupting the value they contribute to customers.

·         Business management represents a Heritage-friendly

·        The key to business process management is do no harm, don’t disrupt your company.

·        Grow your capabilities and resources at a pace that won’t disrupt your company; Start applying BPM to end-end business processes that you know are either broken, or missing.

5        Get Your Own House In Order, and then Grow Incrementally

·        The days of the monolithic ERP and CRM applications are over.

6        Avoid the Major Pitfalls

 

The 90- Days Plan

BPM is growing organically.

The Fifty-Year Plan

 

Postscript on the Economy

·             If you are trained as an MBA, or a lawyer or a middle manager, you can’t be expected to have the imagination to see what’s possible- it’s too complex. It’s going to be IT people showing top management what is possible.

·             Now is the time for business schools to provide their graduates with business process-managed enterprise to drive innovation.