Maria Raffai PhD:

Chance for Survival in the CEE Region - RTEBP the IT-Oriented BPR Methodology for the CEE Business Cultures

Proceeding on the 16. IFIP WCC World Computer Congress

Information Technology for the Business Management Conference
    Beijing, China 2000.

presentation slides

Abstract

By the end of the 20th Century information has become one of the most important resources and motivating powers of both social and business life. In this situation enterprises are no longer able to improve and produce dynamic development unless they take into consideration national and global environments, the business conditions and evolving trends. The last dec-ade has brought another revolution for the post-socialist countries in Central and Eastern Europe (CEE) as they start to build out their capitalist systems. This free economy can, how-ever, only succeed when it follows up the new paradigm with the application of up-to-date technologies and access to expert knowledge. In 1997-1998 I performed a survey among the managers of 865 enterprises. I analyzed the results of these interviews, studying the methods and application-experiences of more then 80 BPR projects. Starting from an in depth knowledge of the CEE Business Culture I found it necessary to develop a new model of re-engineering methodology. The RTEBP framework (the acronym means: Re-engineering Technology for Effective Business Processes) is a BPR methodology adapted for the CEE business environments. In my presentation I am going to speak about the results of the survey, the conclusions of the empirical analysis and point to the need for an effective improvement method in the CEE region. Finally I will present the main characteristics and advantages of the RTEBP re-engineering methodology in the context of their paradigm, methods and proposed techniques.

1. Introduction

Due to the building of the information society - the rapidly growing telecommuting facilities, the continuous pressure to adjust to the new
conditions and the need to combat everyday threats - enterprises have great difficulties adapting themselves to the rapidly changing cir-cumstances. In this new situation we have to take into consideration the components and the impact factors of the value chain [16], the business processes must strongly focus on the cus-tomers’ requirements. The globalization process has resulted in the development of new forms of cooperation and virtual enterprises are coming into existence. Information technology (IT) now has a key role in the business processes [6], and has become the most important driving force for survival and continued competitiveness [13], [15]. Besides this development, there was an additional important reason to deal seriously with these questions. The socialist re-gimes are in the process of a great transition to the free economy, and not only Hungary but the larger set of the Central and Eastern European (CEE) countries  having numerous unique features and requirements [12] need effective and common solutions to survive and to fit into the global market. These factors induced me to find a well-defined solution for this transition process [20].

The scope of the research

The management responsible for innovation has to face to the changed circumstances, they have to fight against both technological and economic power. To realize their business goals in the new environment they have to change their philosophical outlook, they need a new paradigm, and they have to find the best solutions. As I have extensive experience with or-ganization development (OD) projects, I was forced to take active part in changing the way of thinking and dealing with the organizational structure and business culture in Hungary [17], [23]. Although my research work is methodology based I was motivated to develop material for two different, and separate, purposes:

• first of all I have developed a model which reflects the characteristics of CEE business life. This was based on an empirical survey of Hungarian organizations, and
• having studied and analyzed the leading re-engineering methodologies and applications I have developed an IT-oriented business process re-engineering (BPR) methodology adapted to the business cultures of CEE.

• business culture in the CEE region is different from those in the developed countries [2], [1], [12], and
• less than 50% of the BPR applications in the world have been successful [8], [24].

The method and the process of the research program

Since effective business solutions unify results from different scientific disciplines, BPR methodologies have to span the economic, social and technical sciences. To obtain this inter-disciplinary knowledge requires basic research in the field of the business processes, an analysis process for the impact of IT as well as discussions concerning the social questions [14]. Besides studying and analyzing the publications and contributions in the mentioned subjects, I developed a survey to evaluate the Hungarian and in general the CEE business model. To aid in this process, I also developed and used a special computer aided data proc-essing and evaluating program package implemented in Delphi. The application is based on mathematical-statistical analysis methods such as two-step proportional layered sampling, the contingency test, cluster analysis, association-coefficient analysis, classification, independence-test, 2 hypothesis-test, portfolio-analysis etc. With the help of this software I obtained and collated useful and valuable information from the interviews and questionnaires [20]. Analyzing, benchmarking and classifying the BPR methods and application results I could support most of my hypotheses concerning the social-economic situation at the end of this century [21]. The theses basically prove the need for the development of a new, adapted re-engineering methodology. As this research program has taken more than 4 years of work and consisted of several different tasks it is useful to see a process-flow.
 

2. Background of the research

The essential core of my research is the group of research supported which reflect the social-economic situation at the beginning of the 21st century. Some of the theses have already been proven in several publications by researchers and analysts, but from another aspect or approaching the problem from another point of view. The main difference is the basis, the subject of the analysis. Let us discuss the most important theses!

2.1. The theoretical aspect

A new social-economic structure currently being formed is definitely different from all other earlier systems. The Information Society is based on the results of IT and telecommunication (TC). We can see great changes such as:

• geographic borders are disappearing due to the use of computer networks,
• as real-time communication becomes a reality all over the world, necessary information is available whenever needed for both business and private life,
• our conventions, habits and behavior change continuously.

H1: The IT revolution forces paradigm and organizational change!

Information, by its influence on the society and the economy, is the engine of economic growth. The statistics on creating, increasing, maintaining, querying and using databases show dynamic progress, and on-line services suggest continuous evolution. The most progressive sector is that of information service [9].
By the end of the recession the European Union (EU) has a great responsibility to get Europe afloat on the right way in development, and to work out something to offset it’s backwardness as compared to USA and Japan [4]. In today's CEE transition process we have to take into consideration the international efforts towards building up a modern information infrastructure, and we have to plan the right strategy to react to the great challenge [7]. This is the only possibility to get closer to the developed countries, and to join the economic circulation of the global-society.
The existing traditional viewpoint of the managers in CEE countries:

• the thinking in terms of functions rather than processes and
• the command-oriented leadership
• requires radical changes in
• the traditional hierarchical organization structures,
• the outdated product structures and
• the outdated manual technologies.

H2a: The only innovative way to adapt to the fast-changing conditions is radical improvement - the business process philosophy.
Organizational change is not “happening, but intentional, usually triggered by external events to the organization. Planned change can be effected incrementally or revolutionary [26]. Comparing the innovation solutions such as TQM, continuous improvement and the BPR we have to state, that any company that ignores its business processes or fails to improve them risks its future.
In order to develop an effective method I studied, analyzed and classified the well-known and most popular BPR methodologies [10], [13], [6], [25]. The methods differ from each other in features (paradigm, proposed methods and techniques, scenarios, details etc.), in numbers, in purposes and in content of the proposed phases [23]. Reviewed and compared 18 methodologies from the academic, consulting and user fields, I could classify them by their emphasized characteristic in 5 different groups as follows:

vision oriented, mission critical,

diagnose-based,

based on case studies,

based on brain storming and

the IT-oriented methodologies.

H2b: In using a BPR project it is important to take into consideration the success and the barrier factors of the previous applications. We have to learn from the experiences of others.
To learn from others’ cases and experiments is very important and useful [25]. I have studied more than 80 applications and I have analyzed them from different aspects. I realized (and it is confirmed by most of the similar papers in this theme [1]-[3]), that only 45% of the BPR projects are successful, the others are considered to have failed. From the benchmarking analysis of 57 American and 25 European BPR applications [24], [8] and from the other publications dealing with analysis of successful applications [11], [27], [19] I determined the most frequent and important factors for success. In the first place we should mention the importance of positive attitude and the active help of the employees (say 25%). The second factor is selecting the right improvement methodology and having effective project-, and change management (22%), and the third success factor consists of taking into consideration the cultural background, organizational inheritance and intelligence and the loyalty to the enterprise (15%). There are also negatively correlating factors. The most frequent problems can be derived from badly defined business- and project goals and strategies. Other significant factors are negation of the human factor and cultural background, the lack of employee’s persuasion, managers’ wrong and/or traditional way of thinking, difficulties in the economic environment, problems in the sales processes and economic crises.  Any of these factors may cause the unsuccessful completion of BPR projects [5], [26].

2.2. The CEE business model

As my methodology is intended to improve the business processes in the CEE region and to provide an effective solution to the transition process I had to resolve some very important questions, as follows:

H3:  The CEE organizations are underdeveloped in structure and in the way of thinking, they have an urgent need to re-new and re-engineer
This hypothesis is conceptually and empirically supported by proving some sub-statements.

H3a: Most of the enterprises in the CEE region are working with old equipment and technologies
They do not take advantage of available IT solutions and most of them do not use on-line services and the world-nets. The improvement process is slow because of the lack of capital.
Analyzing the methods of communication I have to point to the relatively high ratio of  personal contact which is 33% at the domestic owned firms and 28% at the firms working internationally. Telephone calls also play a large role (46% and 41%) , and the employees usually write traditional, so called "snail mail" letters (14% and 21%). The use of  faxes is growing, but it is still at a relatively low level (6% and 9%), the use of electronic mail at the enterprise level is not yet widespread, and only 1-2% of the enterprises choose this form of communication.
Let us examine the today's Hungarian situation by looking at some interesting numbers ! Only 3% of the firms use on-line banking services, but 87% of the CEOs expressed their intention to use the network banking possibilities in the near future. According to the survey the 52% of the enterprises mainly pay by cash, 45% make their payments in the traditional way. These ratios do not show significant differences even if we examine the businesses in different classifications (for example grouped by sale value).

H3b: The majority of managers in the CEE region are able to recognize the strength and the weaknesses of their business, and the need for change to survive or to gain competitive advantages.
Most of the Hungarian CEOs are conscious of the most important factors relating to competitive advantages and reaching success. During the interviews they have spoken about their problems, the weaknesses inherent in-, and the threats to- the organization. The most often emphasized factors (see Table 1.) have to be taken into consideration because they play a great role in the improvement process [18].

H4: The re-engineering methodology adapted to the CEE has to take into consideration the different business cultures.

The results of several surveys made for different reasons and covering different aspects [1]-[3], [22] have shown the fact that enterprises operate in different fields and different environment and competitive situations. They function in various geographical locations, in different political environments, and they show unlike developmental levels in the respective economies. The most important point, however, is that they have different cultures. I am convinced that there can not be a definitive unique sequence of the tasks and procedures, which lead the OD to success in all cases.
What are the concrete specialties we can specify in the case of the CEE region?

socialist economic system during 4 decades
traditional, multi-level hierarchical organizational structure
traditional, outdated working culture and technologies
lack of capital
changed business values, such as:
quality instead of quantity
unemployment instead of secure jobs
team work instead of directions
mixed business cultures in the foreigner owned enterprises
novelty features of the free economy

3. The RTEBP framework

3.1. The conceptual approach

The method has been developed for the changing social-economic climate of the post socialist region, in which the enterprises have to react very fast to the continuously growing customer requirements and to the rapidly changing legal and financial rules and laws. Although the substance of a BPR project is in radicalism, in revolutionary change, nevertheless the methodology has to suggest for the CEE countries a little bit slower and more gradual path, emphasizing a focus in empowerment. As it is proven by the above-mentioned researches, the most important factor in the success of a BPR project in CEE countries is the people themselves and their loyalty to their organization. According to the other special feature in the RTEBP philosophy, the CEO creates a vision and shows the way not from the point we are now, but Back to the present. It means that first we define the goals we want to reach, and from this knowledge we specify backwards the path, the process, the conditions, the necessary resources and the tasks we have to accomplish.

The most important paradigm of RTEBP is the following:

1. General methodology paradigm:

• well-defined steps in a structured development procedure
• well defined proposal of methods, techniques and visualization tools
• object-orientation during the whole development life cycle
• visualization, usage of standards

2. The paradigm relating to the RTEBP project

• mission critical vision-oriented approach
• the re-engineering process is based on the survey and the diagnosis of the “is”-model
• the fully radical solution results in barriers, so it is better to reduce its degree
• result-oriented Rapid Application Development emphasizes the importance of productivity and other measurements, and so increases the efficiency of the BPR project
• without the CEO’s approval and support the project will fail
• empowerment guarantees the aid and the co-operation of the employees.

From my earlier experiences I am convinced that developers like to follow clear steps, precisely specified tasks, and that they like to use
techniques illustrated with samples. That is why I used a structural philosophy during the RTEBP development process. This way the project tasks are divided into unambiguous parts: there are 6 phases, each phase is divided into stages, and the smaller parts of these stages are the prescribed procedures. The proposed scenario, the methods and techniques of each development task are set down in the methodology User’s Guide. In this book the reader can study not only the detailed tasks of the RTEBP project, but also a sample case study of a successfully realized Hungarian BPR project.

Let us discuss the main features of the RTEBP methodology in the context of the phases.

1. The first phase is to emphasize the importance of the vision and the business strategy, and the understanding the business problem. In this context the tasks are concerning to solve these problems as follows: problem definition, specification of the project objectives and project plan, the organizational requirements, creation of the business strategy. The stages of Phase 1 are:

• problem definition, requirements specification
• decision about starting the BPR project, project team and project plan, and the key participants of the project
• the Benchmarking stage is going to point to the importance of the knowledge obtained from other applications of BPR. It is necessary to select the appropriate sample applications, then to analyze the solutions and the results, and finally to define the usable components and features.
• project-tasks specification
• resource planning (human, technical, financial and others)
• develop the project-organization
• risk management
• define the organization objectives (mission, vision, strategy)
• create mission and vision
• strategy definition process
• implementation, feedback

• analysis of the organizational structure
• purchaser registration list, customer’s requirements
• creation of the enterprise process model
• specification of organization, roles, functions
• information system, information demand, data sources and data processes
• process analysis: definition of the business processes, specification of the critical ones
• application portfolio
• define the requirements specification, problem management
• requirements specification
• problem management

• design the dynamic model: functions, activity, processes
• prototype development, interface design, implementation
• design the technological environment (production and IT)

5. The implementation and the transition phase: The transition can not miss an integration plan for the business process model, the technological background and for the human factors, the training, the employment plan and the definition of the radical or roll-out changeover’s conditions. Having the transition plan it is time to realize the improvement process. The first task is to prepare the action plan for the transition process, then it is required to install the new equipment and technologies, to re-organize the new organizational structure.

6. The monitoring phase is responsible for the continuous review, monitoring the re-engineered processes and the organization, and measuring of the results. If the actual and the expected results differ each other the engineers have to intervene in the business processes, we can say there is a feedback in the improvement process. Studying the BPR projects I stated that most of them omit this phase and finish the innovation process after the implementation. I am convinced, it is a great mistake!

Summary – RTEBP advantages

The RTEBP methodology is a new model adapted for Central and Eastern European countries which has been derived based on (1) the results of analysis of the popular BPR methodologies, (2) the experience of more than 80 BPR applications and (3) the results of a region-wide survey.
Summarizing the facts I am going to emphasize the advantages of RTeBP, which have already been evident during its applications in BPR projects. In these cases the organizations have gained several advantages:

• they can react quickly to the challenge of competition. The  result: satisfied customers and wider scale in products
• the CEO is able to focus on the critical business processes and can optimize the process structure and the process flow
• the innovation project results reduction in the number of physical processes. By introducing new technologies routine day-to-day work is made easier, and the inventory level and direct and fixed costs are reduced
• the RTEBP project results in growing productivity and efficiency
• the improvement makes it possible to use the most up-to-date IT possibilities in order to develop an integrated information system which gives a lot of help to the managers in planning and decision making
• RTEBP focuses on the quality assurance in the whole life cycle
• by emphasizing the social aspect and empowerment, the project takes care of the employees who can take an active part  in the innovation processes and who are interested in the business results.

4. Scientific results, conclusions

Since I finished the research at the end of June 1999, I could not report on the final experiences and results of the application. I would like to stress the importance of the widespread serious interest in my methodology.  There are several high-profile domestic and international consulting ventures that are already managing their BPR projects using the RTEBP methodology in Hungary, Russia and Poland. These projects started in 1999, and they will finish, at the earliest, by the end of this year. These professionals have a very good opinion of the RTEBP methodology, and they are looking forward to see the first results of the RTEBP re-engineering project.

What can we expect as result of applying RTEBP? At the 6th phase of the project the organization has to continuously measure all the parameters and results which are indicators of the expected efficiency of the BPR project. Such achievements could be for example: the vendor’s satisfaction, shortened lifecycles, cost-effective processes and activity, or rising productivity and income. Last, but not least, the most important is the human factor: employee welfare and loyalty.

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