This document outlines 5 levels of IT-enabled business transformation from lower to higher degrees of transformation:
1. Localized Exploitation - Leveraging IT in focused operational areas for efficiency.
2. Internal Integration - Using IT to create seamless internal processes.
3. Business Process Redesign - Redesigning key processes for future capabilities.
4. Business Network Redesign - Leveraging relationships and learning from an extended business network.
5. Business Scope Redefinition - Redefining the corporate scope through new business arrangements and competencies enabled by IT.
4. Business Logic Evolution
1970s and 1980s:
exploiting experience curve for achieving low
relative cost through vertical integration
(efficiency enhancement).
1990s:
low cost, high quality, and fast/flexible
response to customers’ need (capabilities
enhancement).
5. Localized Exploitation
Internal Integration
Business Process Redesign
Low
Low
High
Range of potential benefit
Degree
of
business
transformation
High
Evolutionary
Levels
Revolutionary
Levels
Business Network Redesign
Business Scope Redefinition
Five levels of IT-enabled business
transformation
6. Level 1
Localized Exploitation
• Leveraging of IT functionality to
design focused, high-value areas of
business operations
• Example:
– Customer Order Entry System
– Toll-free Customer Service System
7. Level 1
Localized Exploitation
• Strength
– Easy to identify and exploit potential IT
capability
– Minimal organizational resistance to change
• Weakness
– Potential duplication of efforts with in the
same organization
– Lack of organizational learning
8. • Management Challenges
– Identification of high-value areas
– Benchmark against best practice
– Redesign performance assessment
Level 1
Localized Exploitation
9. Level 2
Internal Integration
• Leveraging of IT capability to create
a seamless process ----both technical
interconnectivity & business process
interdependence
• Example
-Lexus and Infiniti
10. Level 2
Internal Integration
• Strengths
-Supports the total quality movement
-Streamlines the organization process to deliver
improved customer service
• Weaknesses
-limited impact if competitors using newer logic of
organizing
11. Level 2
Internal Integration
• Management Challenge
-business process interdependence and technical
interconnectivity
-Performance reassessed criteria
-Benchmark results against best-in-class
12. Enablers and Inhibitors
*Technological Enablers *Technological Inhibitors
1. Favorable cost-performance trends 1. Obsolescence of technologies
2. Enhanced connectivity capabilities 2. Lack of established standards
*Organizational Enablers *Organizational Inhibitors
1. Managerial awareness 1. Managerial resistance
2. Leadership 2. Financial constraints
Enablers and Inhibitors of Evolutionary Level of Transformation
13. Level 3
Business Process Redesign
• Redesign key process for competing
in the future
• Use IT capability for future
organization capability
14. • Strengths
-First mover advantage
-Not be hindered by historical process
• Weakness
-Redesigning process might be
obsolete or outsourced to partners
Level 3
Business Process Redesign
15. • Management Challenge
– Articulate business rationale for redesign
– Recognize organization issues and challenges
Level 3
Business Process Redesign
16. Level 4
Business Network Redesign
• Leverage related participants in the
business network to provide products
and services
• Exploiting IT functionality for
learning from extended network
17. • Strengths
– Elimination of activities where the focal
organization may not have required level of
competence
– Streamlining business scope to remain flexible
and responsive to fast-changing and diverse
customer needs
– Exploit sources of competence in the larger
business network
Level 4
Business Network Redesign
18. • Weaknesses
– May not provide the requisite source of
differential advantage if the participants in
the business network not well-coordinated
– Lack of a streamlined internal IT
infrastructure could hinder the ability to learn
from extended business network
Level 4
Business Network Redesign
19. Level 5
Business Scope Redefinition
• Redefining corporate scope enabled
and facilitated by IT functionality
• Example: McGraw-Hill
20. • Strengths
– Opportunity to Create a more flexible and
effective business entity
– Substitution as an effective alternative to
vertical integration
• Weaknesses
– Not developing a consistent competence for
the future
– Possibility of “Hollowing” the corporation
Level 5
Business Scope Redefinition
21. • Management challenge
– Creative mix of internal activities, external
relationship and business arrangement
– Assessing business success by measuring
return on value added or return per employee
Level 5
Business Scope Redefinition
22. Localized Exploitation
Internal Integration
Business Process Redesign
Low
Low
High
Range of potential benefit
Degree
of
business
transformation
High
Business Network Redesign
Business Scope Redefinition
Conclusion—
Alternative Approaches to BPR
Seek
Efficiency
Enhance
Capabilities
