Strategic and competitive implications of business process redesign: analyzing the impact of information systems and organizational design

We analyze the competitive and economic implications of information system design, allocation of decision rights, and task bundling during business process reengineering. The popular reengineering literature advocates employee empowerment-decentralizing decision authority and consolidating tasks-as complementary process redesign strategies. Our analysis reveals, however that decentralization and consolidation decisions can occur separately, or together; the optimal combination depends on the relative effectiveness of the technology aimed at skill enhancement and the sensitivity of customers to delivery time and quality. We identify those process parameters that can cause decentralization and consolidation to have opposite effects on process performance; we also point at other parameters such as customer to customer variability which can cause them to complement one another. Finally, we explain why in a time based competitive marketplace, firms are more likely to centralize their decision making while concentrating their information technology investments on enhancing productivity and intra-organizational communications.