Business Process Reengineering & Improvement: Radical vs. Incremental Change

Key Definitions

1. Business Process (BP)

A structured set of activities that transform inputs (e.g., raw materials, customer orders) into outputs (e.g., products, services) to achieve organizational goals.

flowchart TD
    A["Inputs: Orders, Materials"] --> B["Process Activities: Order Entry, Production, Delivery"]
    B --> C["Outputs: Delivered Product, Invoices"]
    C --> D["Feedback: Customer Reviews, Returns"]
    D -->|"Loop"| A

Example: At Pathao, the process starts with a rider’s GPS location (input), processes the ride request (activity), and ends with payment confirmation (output).

2. Business Process Improvement (BPI)

Incremental enhancements to existing processes to increase efficiency, reduce costs, or improve quality without radical redesign.

Key Techniques:

• Lean Six Sigma: Combines lean (eliminating waste) with Six Sigma (reducing defects).
• Kaizen: Continuous small improvements (e.g., NTC’s gradual upgrade of call-center software).
• Benchmarking: Comparing against industry leaders (e.g., Daraz learning from Amazon’s warehouse automation).

Advantages:

3. Business Process Reengineering (BPR)

A radical redesign of core processes to achieve dramatic improvements in performance (cost, speed, quality). Introduced by Hammer and Champy (1993).

Core Principles:

1. Start from scratch: Ignore legacy processes.
2. Focus on outcomes: Not tasks, but results (e.g., "deliver orders in 24 hours").
3. Leverage IT: Automate manual steps (e.g., eSewa’s instant transaction processing).
4. Measure performance: Use KPIs like cycle time, cost per unit.

Example: Nepal Rastra Bank’s digital KYC process replaced paper-based verification with biometric authentication, reducing onboarding time from 7 days to 2 hours.

How BPR and BPI Differ

Steps in Business Process Reengineering

Hammer and Champy’s 5-step BPR model:

flowchart TD
    A["1. Identify the Process"] --> B["2. Analyze Current Process"]
    B --> C["3. Redesign Process (IT-enabled)"]
    C --> D["4. Implement Changes"]
    D --> E["5. Monitor & Optimize"]
    E -->|"Feedback"| A

Worked Example: Daraz’s Order Fulfillment Reengineering

1. Problem: Manual order picking led to 48-hour delivery times.
2. Analysis: Bottlenecks in warehouse sorting and last-mile delivery.
3. Redesign:
   • IT: Barcode scanning + AI-driven route optimization.
   • Structure: Dedicated "micro-fulfillment centers" near cities.
4. Implementation: Trained 500+ warehouse workers in new systems.
5. Result: Delivery time reduced to 12 hours (from 48).

Steps in Business Process Improvement (BPI)

DMAIC Framework (Six Sigma):

1. Define: Problem statement (e.g., "Customer complaints on Ncell’s billing accuracy").
2. Measure: Collect data (e.g., 12% billing errors in last quarter).
3. Analyze: Root cause (e.g., manual data entry errors).
4. Improve: Solution (e.g., automated billing via ERP).
5. Control: Monitor with dashboards.

Example: Nabil Bank’s Loan Processing

• Before: 30-day approval time, 15% loan defaults.
• After: Integrated CRM + AI risk scoring → 7-day approval, 5% defaults.

Tools and Techniques

Visual: Value Stream Mapping for a Bank Loan Process

Challenges in BPR and BPI

Mitigation Strategies:

• For BPR: Pilot in one department (e.g., Ncell testing AI chatbots in customer service before full rollout).
• For BPI: Use change management (e.g., NEPSE training traders on new trading platforms).

In the Real World

1. Daraz’s Supply Chain Reengineering

   • Idea Used: Business Process Reengineering (radical redesign of warehouse and delivery).
   • How: Replaced manual order picking with automated sorting systems and AI-driven route optimization, reducing delivery time from 48 hours to 12 hours.
   • Result: Increased customer retention by 30%.

2. NTC’s Customer Service BPI

   • Idea Used: Business Process Improvement (incremental enhancement).
   • How: Integrated CRM software to track customer complaints, reducing resolution time from 3 days to 24 hours.
   • Result: Improved CSAT scores by 25%.

3. Nabil Bank’s Loan Processing with ERP

   • Idea Used: Process Automation + Data Analytics.
   • How: Migrated from manual forms to digital loan applications with AI-based risk assessment.
   • Worked Example:
     • Before: A farmer in Chitwan waited 30 days for a ₹50,000 loan.
     • After: With ERP, the same loan was approved in 7 days with lower interest (12% → 10%).

Exam Tip

• For Short Answer Questions (SAQs):

  • Define BPR and BPI with one clear difference (e.g., "BPR is radical; BPI is incremental").
  • List 3 steps of BPR (e.g., analyze, redesign, implement) or DMAIC for BPI.
  • Use real examples (e.g., "NTC’s fiber upgrade" for BPR, "Khalti’s UPI addition" for BPI).

• For Long Answer Questions (LAQs):

  • Structure your answer using the 5-step BPR model or DMAIC framework.
  • Compare BPR and BPI with a table (as shown above).
  • Apply to a scenario: If given a case (e.g., ABC Retail’s declining sales), suggest:
    1. Diagnose the process (e.g., manual inventory management).
    2. Propose BPR or BPI (e.g., "Implement an ERP system for real-time stock tracking").
    3. Justify with benefits (e.g., "Reduce stockouts by 40%").

• Common Pitfalls:

  • Mixing BPR and BPI: Always clarify whether the change is radical or incremental.
  • Ignoring IT: BPR requires IT (e.g., automation), while BPI may not.
  • Overlooking stakeholders: Always mention employee training or customer feedback in your answer.

Key Formula to Remember: For BPR success, use the Hammer-Champy Rule:

"If the process cannot be described, it cannot be improved. If it cannot be modeled, it cannot be optimized."

Final Visual: BPR vs. BPI Decision Tree

flowchart TD
    A["Process Needs Change?"] --> B["Is the Change Radical?"]
    B -->|"Yes"| C["Proceed with BPR\n(5-step model)"]
    B -->|"No"| D["Use BPI\n(DMAIC/Lean)"]
    C --> E["Example: NTC’s Network Upgrade"]
    D --> F["Example: Khalti’s Payment Features"]