A Value-Chain Based Process Model for Supporting Business Process Reengineering

Constantly envisioning how the rapid developments in informationtechnology offer new opportunities, and engineering business processesaccordingly will continue to be a difficult problem for senior management.An important observation by Keen (1991) is that over the lastthree decades, effective use of rapidly changing technology has laggedits availability. A central problem is that of justifying the technology,measuring its business value. The value-chain model articulated byPorter (1985) is a natural candidate in providing a basis for this evaluation.It is based on the simple economic theory that a firm remainscompetitive by virtue of being a low cost producer or differentiatingits products/services to the customer, that is, by providing customersatisfaction. It is intuitive to think of "the customer" as the enduser of a product or service. However, projecting this definition intothe organization, where all pieces of work within it have a customerthat needs to be satisfied provides a good basis for work design andits implementation. As technology evolves, forcing the organization toreassess its customers, the work must be redesigned. This is becomingknown increasingly as "process reengineering" .Porter's model has found widespread appeal among practitionersat the strategic level due to its theoretical simplicity and commonsenseappeal. Several methodologies have been designed around thismodel that encourage executives to "think through" and identify technologiesthat could provide competitive advantage. However, thesemethods have some serious limitations due to the lack of a soundconceptual underpinning and their inability to link explicitly, technologyto business value metrics. Based on an analysis of one specificindustry (insurance) we have found that simple process oriented modelssuch as BSP, when extended to deal with value (in terms of costor product/service differentiation to the customer), provide a soundbasis for exploring process reengineering. An implementation of thismethodology should enable management to simulate how a systemwould "react" to various types of inputs in terms of specific metricsof interest.