Business process re-engineering (BPR)

BPR is a business management strategy, originally pioneered in the early 1990s,

focusing on the analysis and design of workflows and business processes within an
organization. BPR aimed to help organizations fundamentally rethink how they do
their work in order to dramatically improve customer service, cut operational
costs, and become world-class competitors.

BPR seeks to help companies radically restructure their organizations by focusing

on the ground-up design of their business processes. According to early BPR
proponent Thomas Davenport (1990), a business process is a set of logically related
tasks performed to achieve a defined business outcome. Re-engineering
emphasized a holistic focus on business objectives and how processes related to
them, encouraging full-scale recreation of processes rather than iterative
optimization of sub-processes.

Business process reengineering is also known as business process redesign, business

transformation, or business process change management.

Business process reengineering (BPR) is the practice of rethinking and redesigning

the way work is done to better support an organization's mission and reduce costs.
Organizations reengineer two key areas of their businesses. First, they use modern
technology to enhance data dissemination and decision-making processes. Then,
they alter functional organizations to form functional teams. Reengineering starts
with a high-level assessment of the organization's mission, strategic goals,
and customer needs. Basic questions are asked, such as "Does our mission need to
be redefined? Are our strategic goals aligned with our mission? Who are our
customers?" An organization may find that it is operating on questionable
assumptions, particularly in terms of the wants and needs of its customers. Only
after the organization rethinks what it should be doing, does it go on to decide
how best to do it.

Within the framework of this basic assessment of mission and goals, re-engineering

focuses on the organization's business processes—the steps and procedures that
govern how resources are used to create products and services that meet the
needs of particular customers or markets. As a structured ordering of work steps
across time and place, a business process can be decomposed into specific
activities, measured, modeled, and improved. It can also be completely redesigned
or eliminated altogether. Re-engineering identifies, analyzes, and re-designs an
organization's core business processes with the aim of achieving dramatic
improvements in critical performance measures, such as cost, quality, service, and
speed.

Re-engineering recognizes that an organization's business processes are usually

fragmented into sub-processes and tasks that are carried out by several specialized
functional areas within the organization. Often, no one is responsible for the
overall performance of the entire process. Reengineering maintains that optimizing
the performance of sub-processes can result in some benefits, but cannot yield
dramatic improvements if the process itself is fundamentally inefficient and
outmoded. For that reason, re-engineering focuses on re-designing the process as a
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whole in order to achieve the greatest possible benefits to the organization and
their customers. This drive for realizing dramatic improvements by fundamentally
re-thinking how the organization's work should be done distinguishes the re-
engineering from process improvement efforts that focus on functional or
incremental improvement.

SWITCHING COSTS / SWITCHING BARRIERS

The definition of switching costs is quite broad. eg "the costs associated with
switching supplier", or "a consumer faces a switching cost between sellers when
an investment specific to his current seller must be duplicated for a new seller". As
these definitions indicate, switching costs can arise for several reasons.
Examples of switching costs include the effort needed to inform friends and
relatives about a new telephone number after an operator switch; costs related to
learning how to use the interface of a new mobile phone from a different brand;
and costs in terms of time lost due to the paperwork necessary when switching to a
new electricity provider.
Types of switching costs include exit fees, search costs, learning costs, cognitive
effort, emotional costs, equipment costs, installation and start-up costs, financial
risk, psychological risk, and social risk. In the marketing literature, customers face
three types of switching costs:
(1) financial switching costs (e.g., fees to break contract, lost reward points);
(2) procedural switching costs (time, effort, and uncertainty in locating, adopting,
and using a new brand/provider); and
(3) relational switching costs (personal relationships and identification with brand
and employees).
Some of these costs are easy to estimate. Exit fees include contractual obligations
that must be paid to the current supplier and compensatory damages that may be
awarded for breach of contract. Often, vendors combine sign-up incentives with
penalties for early cancellation. Careful buyers who read the fine print should not
be surprised by exit fees. Search costs and learning costs, the effort and expense
required to find an alternative supplier and learn how to use the new product, are
also usually expected.
On the other hand, the psychological, emotional, and social costs of switching are
often overlooked or underestimated by both buyers and sellers. There are several
rules of thumb to help understand why many consumers do not immediately switch
from a product they currently use to the latest innovative improved product, even
if the cost difference is minimal.

1. People are sensitive to the relative advantages and disadvantages of any

change from the status quo. Therefore, a new, improved product, no
matter how great it is on its own merit, must be significantly better than
what the consumer is currently using before he will switch.
2. Different people have different reference points. For example, a high-tech
travelling salesman would evaluate the advantages of a mobile phone over

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 a landline telephone from a much different perspective than a homebound,
fixed-income retiree.
3. People exhibit loss aversion. The pain of giving up a benefit is much more
significant than the pleasure of gaining that benefit. For
example, DIVX technology may have failed, in part, because it offered the
typical consumer no clear benefit to offset the perceived sacrifice of
unlimited viewing time and the cost of having to hook into a phone line.

Customer-relationship management (CRM)

CRM is an approach to manage a company's interaction with current and

potential customers. It uses data analysis about customers' history with a company
to improve business relationships with customers, specifically focusing on customer
retention and ultimately driving sales growth.
One important aspect of the CRM approach is the systems of CRM that
compile data from a range of different communication channels, including a
company's website, telephone, email, live chat, marketing materials and more
recently, social media. Through the CRM approach and the systems used to
facilitate it, businesses learn more about their target audiences and how to best
cater to their needs.

The primary goal of customer relationship management systems is to integrate

and automate sales, marketing, and customer support. Therefore, these systems
typically have a dashboard that gives an overall view of the three functions on
a single customer view, a single page for each customer that a company may have.
The dashboard may provide client information, past sales, previous marketing
efforts, and more, summarizing all of the relationships between the customer and
the firm. Operational CRM is made up of 3 main components: sales force
automation, marketing automation, and service automation.

The role of analytical CRM systems is to analyze customer data collected through
multiple sources and present it so that business managers can make more informed
decisions. Analytical CRM systems use techniques such as data mining, correlation,
and pattern recognition to analyze the customer data. These analytics help
improve customer service by finding small problems which can be solved, perhaps,
by marketing to different parts of a consumer audience differently. For example,
through the analysis of a customer base's buying behavior, a company might see
that this customer base has not been buying a lot of products recently. After
scanning through this data, the company might think to market to this subset of
consumers differently, in order to best communicate how this company's products
might benefit this group specifically.

The third primary aim of CRM systems is to incorporate external stakeholders such
as suppliers, vendors, and distributors, and share customer information across
groups/departments and organisations. For example, feedback can be collected

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from technical support calls, which could help provide direction for marketing
products and services to that particular customer in the future.

A customer data platform (CDP) is a computer system used by marketing

departments that assembles data about individual people from various sources into
one database, with which other software systems can interact.

Total quality management (TQM)

A core definition of total quality management (TQM) describes a management
approach to long–term success through customer satisfaction. In a TQM effort, all
members of an organization participate in improving processes, products, services,
and the culture in which they work.
TQM consists of organization-wide efforts to "install and make permanent a climate
where employees continuously improve their ability to provide on demand
products and services that customers will find of particular value. 
"Total" emphasizes that departments in addition to production (for example sales
and marketing, accounting and finance, engineering and design) are obligated to
improve their operations;
"management" emphasizes that executives are obligated to actively manage quality
through funding, training, staffing, and goal setting.
While there is no widely agreed-upon approach, TQM efforts typically draw heavily
on the previously developed tools and techniques of quality control.

Total Quality Management Principles: The 8 Primary Elements of TQM

Total quality management can be summarized as a management system for a

customer-focused organization that involves all employees in continual
improvement. It uses strategy, data, and effective communications to integrate
the quality discipline into the culture and activities of the organization. Many of
these concepts are present in modern Quality Management Systems, the successor
to TQM. Here are the 8 principles of total quality management:

1. Customer-focused

The customer ultimately determines the level of quality. No matter what an

organization does to foster quality improvement—training employees, integrating
quality into the design process, upgrading computers or software, or buying new
measuring tools—the customer determines whether the efforts were worthwhile.

2. Total employee involvement

All employees participate in working toward common goals. Total employee

commitment can only be obtained after fear has been driven from the workplace,
when empowerment has occurred, and management has provided the proper

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 environment. High-performance work systems integrate continuous improvement
efforts with normal business operations. Self-managed work teams are one form of
empowerment.

3. Process-centered

A fundamental part of TQM is a focus on process thinking. A process is a series of

steps that take inputs from suppliers (internal or external) and transforms them
into outputs that are delivered to customers (again, either internal or external).
The steps required to carry out the process are defined, and performance
measures are continuously monitored in order to detect unexpected variation.

4. Integrated system

 Micro-processes add up to larger processes, and all processes aggregate into

the business processes required for defining and implementing strategy. Everyone
must understand the vision, mission, and guiding principles as well as the quality
policies, objectives, and critical processes of the organization. Business
performance must be monitored and communicated continuously.
 Every organization has a unique work culture, and it is virtually impossible
to achieve excellence in its products and services unless a good quality culture has
been fostered. Thus, an integrated system connects business improvement
elements in an attempt to continually improve and exceed the expectations of
customers, employees, and other stakeholders.

5. Strategic and systematic approach

A critical part of the management of quality is the strategic and systematic

approach to achieving an organization’s vision, mission, and goals. This process,
called strategic planning or strategic management, includes the formulation of a
strategic plan that integrates quality as a core component.

6. Continual improvement

A major thrust of TQM is continual process improvement. Continual improvement

drives an organization to be both analytical and creative in finding ways to become
more competitive and more effective at meeting stakeholder expectations.

7. Fact-based decision making

In order to know how well an organization is performing, data on performance

measures are necessary. TQM requires that an organization continually collect and
analyze data in order to improve decision making accuracy, achieve consensus, and
allow prediction based on past history.

8. Communications

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During times of organizational change, as well as part of day-to-day operation,
effective communications plays a large part in maintaining morale and in
motivating employees at all levels. Communications involve strategies, method,
and timeliness.