Database Reference
In-Depth Information
The nature and extent of a value addition to a product or service is the best measure of that
addition's contribution to the company's overall goal for competitiveness. Such value expectations
are dependent upon
◾
The customer's experience of similar product(s) and/or service(s)
◾
The value delivered by the competitors
◾
The capabilities and limitations of the base technological platform (see Chapter 1, Section
1.2.1.5 “Increasing Returns and Customer Capitalism”)
However, value, as originally defined by Michael Porter in the context of introducing the concept
of the value chain, is meant more in the nature of the cost at various stages. Rather than a value
chain, it is more of a cost chain! Porter's value chain is also a structure-oriented and hence a static
concept. Here, we mean value as the satisfaction of not only external but also internal customers'
requirements as defined, and continuously redefined, as the least total cost of acquisition, owner-
ship, and use.
Consequently, in this formulation, one can understand the company's competitive gap in the
market in terms of such process-based, customer-expected levels of value and the value delivered
by the company's process for the concerned products or services. Customer responsiveness focuses
on costs in terms of the yield (see Chapter 1, Section 1.2.2.3.1 “Activity-Based Costing (ABC)”).
Therefore, we can perform market segmentation for a particular product or services in terms of the
most significant customer values and the corresponding value determinants, or what we term as
critical value determinants (CVDs) (see Chapter 1, Section 1.3.4 “Value-Add Driven Enterprise”).
Strategic planning exercises can then be understood readily in terms of devising strategies
for improving on these process-based CVDs, based on the competitive benchmarking of these
collaborative
values and processes between the enterprise and customers. These strategies and the
tactics resulting from analysis, design, and optimization of the process would in turn focus on the
restrategizing of all relevant business processes at all levels. This can result in the modification or
deletion of the process or creation of a new one.
7.1.2 Business Process Re-Engineering (BPR)
Although BPR has its roots in information technology (IT) management, it is basically a business
initiative that has a major impact on the satisfaction of both the internal and external customer.
Michael Hammer, who triggered the BPR revolution in 1990, considers BPR as a
radical change
for which IT is the key enabler. BPR can be broadly termed as
the rethinking and change of busi-
ness processes to achieve dramatic improvements in the measures of performances such as cost, quality,
service, and speed
.
Some of the principals advocated by Hammer are as follows:
◾
Organize around outputs, not tasks.
◾
Put the decisions and control, and hence all relevant information, into the hands of the
performer.
◾
Have those who use the outputs of a process to perform the process, including the creation
and processing of the relevant information.
◾
The location of user, data, and process information should be immaterial; it should function
as if all were in a centralized place.
