1.PART A - Introduction

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Nov 7, 2013 (3 years and 11 months ago)

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1


1.

P
ART A
-

I
ntroduction


Tidd and Bessant (2009) state that innovation is the process of turning opportunity into new
ideas and putting these into practice. In respect of incorporating new ideas into business
processes the s
ystems approach is a key principle underpinning all BPI methodologies.
Deming (2000) identifies a system as a network of interdependent components that work
together to try to accomplish the aim of the system.
The impetus for BPI initiatives typically
com
e from competitive pressures, firms must improve performance by decreasing costs while
increasing quality

(Khan et al 2007) while at the same time developing the core competences
(Prahalad 1990
) and unique resourc
es
( Barney 1991
) of the firm that will yield sustainable
competitive advantage. The role of knowledge is seen as the key resource of the firm in
achieving this objective (ibid Deming 2000).


The selection
of Lean
, S
ix Sigma and BPM for examination

in this paper
was based on the
following reasons
:

1.

Their
degree of current usage
in industry
and
the proportion with which they comprise
the approaches of practitioners of modern BPI methodologies
.

2.

The a
vailability of sufficient relevant academic research to enable a
well informed
critique
.

2.

The Lean approach to business process innovation

Lean strives to make organis
ations more competitive in the market by increasing efficiency

and
decreasing costs
incurr
ed
. This is achieved
through

the
elimination of non value
-
adding
steps
/activities

from

the
business
processes

(Naslund 2008)
. C
ycle times
are reduced
by
increasing the velocity of the process
by reducing waste
(o
verproduction, waiting,
transportation,
inappropriate processing, inventory
-
WIP, unnecessary motions, defects)

in all
its forms

(
George 2003
)

thereby preserving value

(producing an acceptable standard of
products and services at the lowest cost and

as fast as possible

(Antony

2011
)

)
with less
work.

It requires that all members of the organisation
change their long standing work
practices and ideas

as it is more a way of life leading to a total change in cultu
re
.


For more information on Lean principles
and common Lean tools please see Appendix 1.

2


2.1
Lean implementation within SMEs

Achanga

et al.
(2006)
,

in a study of
ten SMEs based in the East of the UK
,

finds that

t
he
cri
tical success factors are

in order of importance leadership, finance, organisational culture
and expertise
. Stuart
and Boyle
(2007)
,

in a study of
18 Canadian SMEs,

f
ound that
early
implementation and a high intensity of effort are critical to success.

T
he use of
Lean
techniques
alone does no
t in itself constitute being a L
ean organisation and this study found
that few participants implement
true L
ean thinking. In many cases

participants

continued to
examine
Lean
improvement initiatives against some form of standard payback or Ret
urn on
Investment (ROI) method using benefits analysis that was highly restrictive. In
the SMEs
studied

by Stuart

and
Boyle (
ibid 2007)
the

prevailing accounting system and existing project
approval process was an impediment to

advancing L
ean implementatio
n
.
Antony

(2011) finds
that t
he main difficulties companies
(based on
collate opinions from a number of leading
academics and practitioners from five different countries
)
experience in trying to implement
Lean are a lack of direction, a lack of planning and a lack of adequate project sequencing.

2.2

Critical evaluation of

Lean


Positive evidence for Lean:
Bhasin and Burcher (2006)
,

based on an extensive literature
review,

cla
im that implementing lean can reduce waste by 40 per

cent in successful
implementations
. However
issues
specific to
the Lean approach to BPI can be grouped under

the following
headings
.

Ease of application
:
Continued scepticism within SMEs about the
benefits of

lean to their
business is one of the fundamental limitations
that Lean implementation faces

(
Achanga
et al
2006)
.

To achieve
Lean objectives
it is common to include
a combination of techniques
however there is no agreed me
thod
o
log
y

or agreed fr
amework for all the tools

leading to
confusion and uneven outcomes
.

This leads on to the observation that in many cases Lean
implementations have failed to deliver effective bottom line results due poor implementation
by consultants who themselves are ba
dly trained in

the principles of Lean (
ibid
Antony

2011).

Bhasin and Burcher (
ibid
2006)

found that the Lean philosophy was correctly
impleme
nted in only 10% of projects. Antony

(ibid 2011) also notes loss of momentum at the
critical early stages as

n
ormally companies start with a value stream mapping

(VSM)

programme and spend endless time in developing rigorous VSMs without progressing

to Future Stream maps.

3


P
racticality of Obj
ectives
:
Lean in its truest sense m
ay lead to a pointless pursuit of
perfection
.

According to Womack et al (1990

Page:

13
)
“Lean producers, on the other hand,

set their sights explicitly on perfection: continually declining costs, zero defects, zero

inventories, and endless product variety.



Bhasin and Burcher (2006) state that t
he Lean implementation record suffers due
a
the
multiplicity of tools and the fact that Lean is a philosophy
(with significant implications for
company culture)
rather than a

strategy
.

Basis for project selection
:
In the case of many Lean projects
,

w
hile the
reason given
is
customer expectations
,

in many cases
the major driver in project selection
in reality
is “cost
down”.

When cost becomes the major driver
it is possible to

forget the fundament
al business
strategic objectives
. According to
Bendell (
2006) such a

narrow focus on the traditional
toolkit and approach to
implementation means

that

major improvement opportunities may be
missed
.

3.

The Six Sigma approach to business p
rocess innovation


According to Naslund

(2008) t
he purpose of Six S
igma is to reduce cost

caused by defects

by

reducing the variability in

processes

which
in turn
leads to decreased defects


(
with
the
statistical measure “
six sigma
” being the goal,
which
equates to 3.4 defects per million
p
r
ocess opportunities)
. This is achieved

by focusing on
the
process outputs which are cr
itical
in the eyes of customers

(Antony

2011)
.

The Six Sigma’s DMAIC
(define, measure, analyse
,improve, and control)
project methodo
logy is particularly effective for manufacturing
(Bendell 2006).

McAdam
and Hazlett
(2010) state that s
ome writers claim that Six Sigma has
started to develop beyond that of a

technology based statistical process approach towards that
of a broader change

m
anagement philosophy and approach over the past ten years
.

According
to Porter (2002) in all successful Six Sigma implementations committed leadership is the top
priority followed by strategic alignment (with the strategic objectives of the organisation),
development of a cadre of change leaders (who are held accountable within the organisation
and continuous reinforcement.

Basic principles and concepts of Six Sigma along with a
list of common
Six Sigma Tools

may be found
in Appendix 2.


4


3.1
Six Sigma
Implementation

within SMEs

Kumar
and Antony
(200
8
)
,

in a survey of 500 SMEs
,

finds that
the
essential prerequisites to a
Six Sigma implementation are
availability of resources

and

commitment from the top
management to invest in the required resources for successful implementation
,

the critical
success factors were foun
d to be in order of importance m
anagement involvement and
commitment
,

communication, l
ink
age of
quality improvement

to employee
s
,
cultural change
and e
ducation and
training
.
Continuous improvement programs like Six Sigma do not appear
to be easily understood or interpreted by SMEs, which may be a significant contributor to its
low implementation.
According to Kumar
and

Antony
(2008)
t
here is very little evidence of
success of Six Sigma in SMEs context.
T
he requirement of Six Sigma to document standards
of operation in quality system
s such as ISO
9000 preclude many

SMEs

due to the costs and
relevance of ISO 9000 to the average SME (Porter 2002).

3.2
Crit
ical evaluation

of Six Sigma


Positive evidence for Six Sigma:

According to Moosa and Sajid (2010)

Six Sigma is a
positive approach to make breakthrough improvement by in
volving managers at all levels in
any organisation. In their critical analysis of published case studies they found that Six Sigma
can make considerable reductions in defect rates however the degree of success depends on
the complexity of the product (e.g.

shoes versus automobiles).

Shah et al (2008) found, in a
study of 2511 subscribers to industrial magazine (
Industry Week
, targeted at executives and
managers of US manufacturing firms), the group of plants implementing Six Sigma had a
higher manufacturing quality performance than non
-
implementers.
Issues specific to the Six
Sigma approach can be grouped under the following
headings.


Ease of application
: S
ix S
igma may be criticised for a potential tendency towards
complexity
of technique

and analysis

(Bendell 2006). Costs
of

implementing Six Sigma
projects can be high with

black belt training for 20 days

amounting to
£6600 +

VAT (PMI
2011)
.

Practicality of Objectives
:
In Six Sigma projects o
bjectives
can
lack consideration of human
factors and
fail to have a
clear linkage to the strategic objectives

(ibid Moosa and Sajid
2010
)
.

5


Basis for project selection
:

According to
Bendell and Marra (2002) w
hile
GE, one of t
he
main proponent
s

of Six Sigma,

identifie
s

customer satisfaction as the
prime
driver

for project
selection
,

the authors found

in talking to Black Belts that are implementing projects

that

there
is excessive focus

in

projects on “costs down

.
It is also noted that
Six Sigma also o
nly works
in certain environments and certain industries.


4.

T
he Business Process Management (BPM) approach to business
process innovation


BPM is a general methodology that supports the des
ign, management, and improvement of
business processes
, closely supported by information technology,
in order to raise the
productivity of a company

and enable it to maintain a competitive edge
.

According to
Smith

and
Fingar

(
2003
, p73) BPM
is “
the
convergence of management theory ... with modern
technologies
”. BPM

(which evolved from BP

Re
-
engineering)

represents

a goal
-
oriented
management of business processes towards the achievement of strategic and operative
objectives of a company

(Houy
et al
2010)
.



BPM has
evolved
towards techniques that are

incremental, evolutionary and continuous in
nature

(such as TQM) emphasising continuous improvement, customer satisfac
tion, and
employee involvement
thereby

reduc
ing

its focus on
radical, revolutionary
total
process re
-
engineering

(
Rozenfeld
et al
2009
).

Basic principles and concepts of BPM along with a list of common BPM Too
ls may be found
in Appendix 3.

4.1

BPM implementation within SMEs

To
date BPM

init
iatives have been concentrated
in large, well funded organisations. In the
SME population B
PM initiatives have occurred
predominantly in technology hardware or
manufacturing organisations (Khan
et al
2007)
.

Companies implementing a BPM project
should bear in mind

that BPM
-
system implementation is not mainly an IT
-
project, but

should
preferably be initiated by top management
.
Ravesteyn and Batenburg
(
ibid
2010) found
,

in a
survey conducted among 39 Dutch consultants, developers and end
-
users of BPM
-
systems,

that
communication, involvement of stakeholders and governance are the most important
6


factors to BPM project success

in

all company types
.


According to Chong (2007)
the major
factors inhibiting
implementation of BPM initiatives in S
MEs

in the Australian wine industry
are the lack of financial resources, time, and knowledge of
BPM
.

4.2


Critical Evaluation of BPM


Positive
evidence for BPM:

Schiff (2003), in an analysis of a number of case studies, finds
that BPM initiatives can generate high payback and return on investment depending on which
part of the organisation it is implement in.

Issues specific to the BPM approach c
an be
grouped under the following headings.


4.2.1
Ease of application
:
This depends on the degree of BPM be
ing considered, from to
reengine
ering an entire plant.

S
erious problem
s can arise with the
inability to translate
business models into

information
(workflow) m
odels precisely and without
ambiguity

(
Bosilj
-
Vuksic 2006
).

According to Ravesteyn and Batenburg (2010) when implementing
BPM projects a
ligning
third party
software tools to the organi
s
ation

s strat
egy, and reusing

existing information systems and applications
,

can lead to significant difficulties and costs
.

4.2.2
Practicality of Objectives
:
Schiff (2007) states that
there is often a discrepancy
between
the
objectives of
company
strategy and of
measured activity
. In his work he finds
that
i
n some companies a performance
KPI
dashboard takes the financial ratios and statistics
found on old reports and place
s

them on the dashboard.
However this does not deliver on the
true objectives of any BPM proj
ect, t
o truly achieve the full benefits of BPM

senior
management
must
review and update the corporate strategy and define key financial and
operational indicators that measure progress on the path to achieving their strategic
objectives.

4.2.3
Basis for pr
oject selection
:
In common with other BPI approaches most BPM projects
are focussed on cost reduction in practice. According to
Ravesteyn and Batenburg (ibid 2010
)
there is an over focus in project selection on
IT,
m
ost IT vendors and

resellers seem to
neglect the specific implementation aspects of BPM
-
systems as they

tend to use existing
software development methodologies and project management

principles during BPM
-
implementations.

Hence, the

implementation of a BPM
-
system

is mainly regarded as a
standard software development project
.

Hedge (2005) states that many BPM projects fail in
the
early stages due to faulty project selection and
“automating a bad process just makes a
7


bad process faster
”. Hedge
(ibid 2005)
also highlights the influence of power groups within
the organisation in manipulating project selection via framing

(
thereby undermining the true
impact of the project and the potential implications for those power groups).

5.

Compare and

contrast

the three approaches


It was felt that a table served best as a means of contrasting the three approaches, please see
below.

A detailed comparison

on the basis of Novelty, Numbers Bias,
Implications for
Innovative Capability and Absorptive
Capacity, Common Success Factors, the Role of
People and Questionable Assumptions

of the three approaches is contained in Appendix 4.


Table
1
: Comparison of
the
three approaches to BPI


Business P
rocess
M
anagement

Lean

Six Sigma

Degree of risk

Moderate,

individual
processes can be
improved
incrementally
through continuous
improvement.

High as requires radical
change, seeks radical
initial change in culture
and processes followed
by
continuous
improvement.

High as it may have
unintended
consequences (such

as
in the case of 3M

where
Six Sigma undermined
the firms capability to
innovate
) or if
implementation fails
there are considerable
costs associated with the
Six Sigma project.

BPI Approach
and the Service
Industry

According to
Luyckx (2010)
BPM
implemen
tations
are well
represented in
industries from
technology to
Lean philosophy lends
itself well to services
with its focus on
building staff
commitment and trust
and training of staff

(Ge
orge 2003).

Applications in the
service sector have
focused, in particular,
on financial services,
travel and more recently
the public sector

(George 2003). The
approach has
proved
8


consulting services
with lower
incidence in the
healthcare sector.


itself

highly effective in
successful
implementations in
terms of deliverin
g cost
savings and, increas
ed
customer satisfaction
.


Origins

Manufacturing

Manufacturing
-

cars

Manufacturing


computer chips

Initial impetus

Evolved
in the US
as a process re
-
engineering
method for
downsizing
manufacturing
processes

Evolved
in Japan
as a
method for optimising
manufacturing to
reduce cost and lead
time

Evolved
in the US
as a
quality initiative to
eliminate defects

Financial
Cost to
implement

Moderate(depends
on scale and size of
firm)

High if intend to
achieve successful
implement of
the Lean
philosophy

High if intend to
implement the correct
Six Sigma methodology

Potential gains

Moderate (if only
applied to certain
processes) to high (if
applied across the
whole organisation)

High if correctly
implemented across the
whole organisati
on

High if correctly
implemented across the
whole organisation

Key
Requirements

Defining the
organisation's
strategic goals and
purposes


Determining the
organisation's
customers (or
stakeholders)

Value stream mapping


Elimination of waste
(muda)


Taking action on
deviations to maintain
process control


Processes must be in place


The processes must be
predictable (in statistical
control with normal
distribution)


The process must be
reducing variation
9




Aligning the
business processes to
realise the
organization's goals

(continuous improvement)


Dat
a

availability

is
required


Threat to
capacity of firm
to innovate or
deal with
unexpected
crises

post

project
completion

Depends on the scale
of the
BPM

initiative
being undertaken

High

threat

in that all
“waste” or float is
removed leaving the firm
with less resources for
non
-
essential work

Moderate, depends on the
scale of the project
however as it works on a
project by project basis
there is less th
reat to the
firm’s overall innovative
capacity

unless it is
implemented across the
entire firm’s activities.

Degree of People
involvement

High

High

Low

to moderate
, the
key work is
concentrated in the
Black and Green Belts

Locus of focus

Business goals

P
rocess flow with
minimum Waste

Process flow with
minimum Variation

Expected results

post
implementation
on
company
processes

A f
ocus on
activities that
deliver the right
results for
Customer and
Stakeholders.

High process speed (by
reducing cycle time)
and efficiency (minimal
time, capital
invested
and cost) in

process
es

Minimal defects in the
outputs of processes,

Six Sigma is about
precision and accuracy

Prime driver

according to the
methodology

Business st
rategy

Operational effic
i
ency

Quality control

Approach and
Potential to
Potential to improve
Potential to improve
10


knowledge
management

(KM)

improve
KM

however has the
potential to
undermine
absorptive capacity
depending on the
nature of the
project

KM

however has the
potentia
l to undermine
absorptive capacity
depending on the
degree of success of
implementation of the
philosophy

KM

in respect of
process however has the
potential to undermine
absorptive capacity

Approach

Continuous Process
Improvement with

culture change

Continuous Process
Improvement with
culture change

Six Sigma uses a
“divide and conquer”
approach

Time period in
which
techniques
became public

Nordsieck 1934

in
the book

Fo
u
ndations of
Organisation
Theory


commenced the
thinking on
business processes

on which BPM is
based.

The term Lean as
applied to business
processes first appeared
in the book “The
Machine that Changed
the World” (Womack et
al., 2007) which
outlined the group of
techniques pioneered
by To
yota.

Publication of
information by
Motorola
in
1987

Applicable to

Can be applied to
individual
processes or an
entire
organisation’s
systems.

An entire system
including suppliers

Key elements of a
process where variation
has been observed.

Degree of
change
management
required

High

High

High

Appropriateness
to typical small
businesses

Moderate

Low

Low

11


Implementation
horizon

Can be
implemented in a
modular manner

Is a long term
companywide

commitment

Is a long term

approach

Contribution to
an
innovation
culture

Moderate

when
implemented with
knowledge
management
processes.

High

when culture
aspects are correctly
implemented and
projects do not lead to
excessive downsizing.

Low
, are data driven
methods focussed
predominantly on
solving process
p
roblems.



6.

BPI and Change Management

All BPI initiatives involve change and change

can be

a cause of stress to staff. Deming
(ibid
2000)
draws attention to the key psychological aspects necessary to the success of BPI
initiatives. Change Management is the

process whereby the transition from the old
position/process to the new is effected

in a structured manner
.
Any discuss
ion of BPI needs to
address
Change Management

due to the impact that human factors have on the success or
failure of such initiatives
.
K
otter (1990)

identifies that the reasons improvement initiatives
fail include
complexity, lack of clear vision, lack of communication,

lack of planning and
failure to anchor changes in corporate
culture.

His book

Leading Change


(1995)

identifies
eight st
eps for leading change which are

identified in Appendix
5
.



7.

BPI and Key Performance Indicators

Key Performance Indicators (or KPIs) play a key role in BPI as they are often selected as the
benchmark measures against which
company
performance is assessed

post BPI project
completion
.
Schiff (2007) states that KPIs should define key financial and operational
indicators that measure progress on the path to achieving the firm’s strategic objectives.
Th
e
objective is to
identify the key business objectives and

then pick

the KPIs to measure
progress against those objectives.

Common problems with establishing useful KPIs are
identified in Appendix 6.


8.

Knowledge Management

and its role in

Business Process Innovation

Knowledge is the combination of data and information to which is added expert opinion,
skills and experience.

A firm’s knowledge
, inter alia,

resides in its business processes,
12


bus
iness rules and employees and may be both

tacit and explicit.
Nonaka

and Um
emoto

(
1996
)

focuse
s

on
knowledge conversion mechanisms
,

between

tacit and explicit
knowledge,

that help

build a learning organisation
while
a firm’s “
ability to recognize the value of new
information, assimilate it, and apply it to commercial ends”

(Cohen and Levinthal 1990)
underpin
s

the absorptive capacity model

of how a firm embeds
the

dynamic capability
relating

to knowledge creation and utilisation that enhances a firm's ability to gain and sustain
a competitive advantage
.


Zahra and George
(2
002)

the Absorptive Capacity

model
whereby
a series of indicators can
be use to evaluate each element of absorptive capacity compris
ing

acquisition

(ability to
identify and acquire externally generated knowledge critical to its operation), assimilation

(the firm's routines and processes that allow it to analyse, process, interpret, and understand
that information), transformation

(ability to develop and refine the routines that facilitate the
combination of existing knowledge and the newly acquired and a
ssimilated knowledge) and
exploitation

(the routines that allow firms to refine, extend, and leverage existing
competencies or to create new competencies by incorporating acquired and transformed
knowledge into its operations)
.


Moffett and McAdam (2006)

developed a prescriptive, conceptual model of KM which
outlines five factors that in
fluence the adoption of KM
, namely the MeCTIP model (Me
Macro Environment,

C Culture,

T Technology,

I Information,

P People).

It was found in a
survey of
approximately 90

c
ompanies
in the engineering, hi
-
tech and financial services
industries
that human intervention is an all
-
pervasive and essential element of KM, irrelevant
of organisation size(ibid 2006).


In terms of the relationship between BPI and KM
all

process management system
s

include
the decision
-
making tools, techniques, and infrastructure for “
design, control, improvement,
and redesign of

processes”
(Silver, 2004, p. 274).
All processes are underpinned by
o
rgani
s
ational routines
which
play a key ro
le in encoding organisational
knowledge;

this in
turn
contribut
es
to the knowledge creation process.
The intentional improvement to business

processes creates
new organis
ational knowledge

which must be captured
(Linderman 2010)
.

However a
ccording to Bosilj
-
Vuksic (2006) an approach that explicitly integrates knowledge
management activities into the business process environment is still missing.
The continued
13


development of BPI

and KM software tools should enable the transformation of the integral
business p
rocesses model into the knowledge repository.


Therefore in conclusion of Part A

of this paper

it is clear that

evidence for the
degree of
success and appropriateness of each
BPI
approach remains divided.
I
t is
also
clear that

KM
and change management are key

to the success of any
BPI

initiative. The paper
will now
move to examining the application of one of the BPI approaches
, the BPM approach,

to
Novara Technology Limited.

When it came to ch
oice of BPI approach at Novara

both

Six
Sigma and Lean were felt to be excessively manufacturing orientated and not suitable for the
specific
requirements of th
e firm
.

9.

PART B
-

Introduction to Novara Technology

Limited

Novara Technology
Limited
was a provider of web hosting and data

centre

services to ex
c
ess
of 10,000 clients (including organisations such as Jurys Doyle, the Department of Justice,
98FM, EBS Building Society, the Department of Agriculture and London Stock Exchange
list
ed Eco Securities). Surveys carried out by the company fo
und
high level
s

of customer
satisfaction
.

In 2005 Novara
a
cquired the business of

Tornado Hosting in order to
complement their data

centre services offering.


Novara
was majority o
wned by Eoin Costello. External investors included Dublin Business
Innovation Centre, Dublin City Enterprise Board and Bank of Ireland. One of Ireland’s
largest ISP’s (Digiweb) acquired Novara in 2008.
At the time of sale Novara had grown to
second largest

hosting company in Ireland (overtaking Eircom in the process),
had fifteen
staff,
was highly profitable with zero debt and had one of the best staff to sales ratios in the
industry thanks to Novara’s considerable investment in in
-
house developed automatio
n
software.

Novara was a scale intensive firm

(Tidd and Bessant 2009)

in a volume driven sector
exhibiting positive returns to scale
, technological accumulation was generated by the design,
building and o
peration of the process

systems
(a combination of hu
mans and software
applications) underpinning the services offered
.
The majority of

products
sold
were

services
due to their virtual nature

(domain name registration, hosting accounts)
.
The company
14


operated in a highly competitive market where
an approximation of
perfect competition
existed. Therefore the capability to
successfully
in
novate was critical to survival.


10.


The
Objectives of
PART B

In Part B of this paper it is proposed to examine how the BPM and KM initiatives undertaken
over the
eight years of the firm’s

lifetime
contributed to the evolution of the company

as an
innovative organisation

that generated a sustainable competitive advantage
. The objective is
to assess whether the experience of the firm fits with the models outlined by
Tidd and
Bessant (outlined in 10.1 below) and Churchill and Lewis (outlined in 10.4)
. Further
objectives include seeking if Novara’s experience conforms to the findings of McAdam
et
al.
(2000
)
whereby
SMEs

which had

adopted a culture of
Continuous Improvement

found that

this

could provide a solid foundation on which to build a culture of effective business
innovation.


In order to
carry out the analysis of

the role
that
BPM and KM
played in the evolution of
Novara
it

will be necessary to make use of

the following models:


10.1

Stage of Innovative Capacity:

The
methodology proposed by Tidd and Bessant (2009)
will be used to denote
which

stage of the development of the
firm
’s innovate capacity

had
been achieved
.

Novara
was not in the situation of Type 1 Firms (

D
on’t know what or how to
change

) and therefore commenced
in the
Type 2 firm

quadrant
.

10.2
Key drivers

for change
:

Kumar
and Antony
(2008)
find that firms,

in deciding their
strategic objectives
,

see

profitability, quality, and cost

as the main criteria
. For each stage the
dominant driver will be identified.

10.3
Change Management Methods:

During the lifetime of the company the techniques
which were used to effect change management

included mechanistic methods (routines and
rule based systems introduced focussed on key objectives) and soft methods (face to face
staff meetings and the like). For each stage of the firm’s progress the framework provided by
Kotter (please see section 6)

will be utilised.

10.4
Firm lifecycle stage:

In order to put t
he

stages of evolution that BPM and KM
facilitated

in context,
the
Churchill and Lewis (1983) lifecycle stage model
will be
referenced.

Due to the fact that Novara commenced operations with th
e customer base of a
prior business Stage 1 (
E
xistence
) was bypassed.

15


10.5

The
role

of Critical Incidents:

McAdam and Mitchell (
2010) found
,

in a
longitudinal

study of 13 SMEs
,

that
critical incidents

can act
(dependent upon the firm’s lifecycle stage)
as
catalysts for developing more radical innovation. Therefore critical incidents

within
each

life cycle stage will be identified

and th
eir contribution to
the creation of an
innovation
culture identified
.

10.6
Sophistication of Absorptive Capacity:

T
he
Zahra and George
Absorptive

Capacity
Framework
outlined in section 8
will be used to indicate the degree of innovative absorptive
capacity the firm embodied at each stage.

10.7

Installation of
Knowledge Management
: According to

Tidd

and Bessant
(2007)
mana
ging knowledge involves 5 critical tasks. The progress towards completion of each of
these tasks will also be tracked.

The typologies used in
Nonaka’s model of Knowledge
Creation and Transformation
will be used in respect of the knowledge activities that
a
ccompany each stage

in order to identify the activities involved in managing the knowledge
of the firm
.


THE FOLLOWING SECTIONS REMOVED FOR COMMERCIAL REASONS


14.

Conclusion


While t
here is increasing evidence that BPI
projects
can be
success
ful
ly
implemented in

SMEs
outside

the manufacturing sector
,

a
ll approaches to
BPI
implementation
in SMEs

continue to suffer from criticism

and divided opinion.
McAdam
and
McClelland

(2002)
found

that
,

in respect of innovative practices
,

efforts to apply these at

SMEs have suffered
from applying large organisational process innovation method
o
logies in an SME context
without sufficient modification or questioning of the underlying assumptions.
This is also
found to be the case in respect of BPI initiatives (
Antony
2011
). Meanwhile s
ome argue that
Six Sigma and L
ean are

Scientific Management in disguise”

or
repackaged versions

of
previously popular methods such as
total quality management and just
-
in
-
time
(Naslund
2008)
while BPM

is claimed to be
a sanitised version

of BPRe
-
engineering
.


For SMEs the
selection
of

BPI approach
should primarily
depend
upon the issues that the
organisation is facing and its nature, as well a
s

being influenced by the organisation’s and
individual’s

aspirations and perceptions

(Bendell 2006)
.

16



In general terms implementation of BPI initiatives in the service industry have lagged that of
manufacturing. In manufacturing the ability to physically see and trace the flow of work,
manufacturing processes renders it mo
re amenable to
re
-
organisation
whereas people are the
dominant component of processes in service business and as such require far more resources
in terms of change management and training. Also in services, work is often largely invisible
(George 2003). In services many
processes evolve organically with no initial plan and
become unnecessarily complex over time.


Part B of t
his paper has
found that
t
he
frameworks offered by
Tidd and Bessant (
2009
)

and
Churchill and Lewis (1983)
offer an accurate and realistic
structure

in

the case of
the
lifecycle of
Novara Technology

and they may
act as a
guide
to
the
evolution

of
a BPM
regime leading
to the creation of

an innovative organisation
.
The finding by McAdam
et
al.
(
2000
)

was
also
borne out by the experience of Novara, once the firm had moved to a
culture supporting
Continuous Improvement

the managing director found that
this
facilitated
the building of

a culture capable of generating

increasingly radical business innovation.



Furthermore the BPM initiatives
at Novara
were key to the firm
maintain
ing

its competitive
advantage in a very competitive industry.

W
hen Novara commenced
it was in eight position
and

charging the same price as
the number
two

in the market
(
Irish Domains
)

for key
services. O
ver the period of the intervening years both companies
continued to
match each
other’s

prices however Irish Domains fell to 6
th

while Novara rose

to 2
n
d


position in the
market
.












17













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APPENDIX 1


Basic
principles, concepts and tools of Lean


Womack and Jones (1996) ident
ify five key principles of the L
ean organisation:

(1) Value: the elimination of waste (or muda in Japanese).

(2)Value stream: the identification of the value stream(in order to identify
where waste can
be removed.).

(3) Flow: the achievement of flow through the process.

(4) Pull: pacing by a pull (or kanban in Japanese) signal.

(5) Perfection: the continuous pursuit of perfection.


The practical implications of these Lean principles incl
ude:

1.

Lead time minimised and process speed maximised: Lead time is how long it takes
you to deliver a service/product once the order is triggered. According to George
(2003) understanding the drivers of lead time is helped by the Little’s Law equation:


Lead time = Amount of Work in Progress/Average completion rate


21


Work in Progress in a services business can be customer requests, phone calls to
return, reports to write etc.

2.

Minimise In queue time: Where there is Work in Progress that is work that is in
queue
waiting to be worked on. In Lean any time that work sits in queue is counted as a
delay, no matter what the underlying cause.

3.

Minimise non
-
value add activity: When the flow of work in a process is tracked it
may emerge that some of the activities to
not add value in the eyes of end customers
and hence should be treated as waste and removed from the process.


According to George

(2003)

the improvement efforts in Lean implementations should
concentrate on WIP first as this only costs intellectual capit
al to reduce WIP whereas it takes
the investment of capital or payroll to increase the average completion rate.
George (ibid
2003) suggests that w
hat lean teaches is that
one

can only speed up process time by
controlling and prioritising (on the basis of p
arameters such as gross profit) the release of
work into the process
.

Common Lean Tools

5S
:

A methodology for organizing, cleaning, developing, and sustaining a productive work
environment. Improved safety, ownership of workspace, improved productivity and improved
maintenance are some of the benefits of 5S program.
(Sort


seiri,

Set


seiton,
Shine


seiso,
Standardize


seiketsu, and Sustain


shitsuke)


Just in Time (
JIT
)
: A philosophy of manufacturing based on planned elimination of all waste
and continuous improvement of productivity. It encompasses the successful execution of all
manufactu
ring activities required to produce a final product.


Kaizen: The Japanese term for improvement; continuing improvement involving everyone
-

managers and workers. In manufacturing kaizen relates to finding and eliminating waste in
machinery, labo
u
r or prod
uction methods.
Kaizen creates a culture that allows employee
creativity and ideas to flourish, the result

is that SMEs will be able to react quickly to change
and react better or differently across

major company functions. Teamwork, empowerment
and

traini
ng are key elements of kaizen and these concepts can aid in the change process
. For
more information please see McAdam et al., 2000
.

22



Kanban: Kanban is a simple parts
-
movement system that depends on cards and
boxes/containers to take parts from one worksta
tion to another on a production line. The
essence of the Kanban concept is that a supplier or the warehouse should only deliver
components to the production line as and when they are needed, so that there is no storage in
the production area.


Lean Perform
ance Indicator is a consistent method to measure lean implementation
effectiveness.


Theory of Constraints: A management philosophy that can be viewed as three separate but
interrelated areas
-

logistics, performance measurement, and logical thinking. TOC

focuses
the organizations scarce resources on improving the performance of the true constraint, and
therefore the bottom line of the organization.

Value Stream Mapping: Value stream mapping is a graphical tool that helps you to see and
understand the flow

of the material and information as a product makes its way through the
value stream. It ties together lean concepts and techniques.


Visual Management: Is a set of techniques that makes operation standards visible so that
workers can follow them more
easily. These techniques expose waste so that it can be
prevented and eliminated.


Workflow Diagram: Shows the movement of material, identifying areas of waste. Aids teams
to plan future improvements, such as one piece flow and work cells.


V
alue
Stream M
apping (VSM
):

is a technique used to analyse the flow of materials and
information currently required to bring a product or service to a consumer.


Total Quality Management (
TQM
)
:
TQM is an integrative philosophy of management for
continuously improving th
e quality of products and processes.


APPENDIX 2

Basic principles,
concepts
and tools
of Six Sigma

23


The six sigma methodology is based on the DMAIC cycle (define, measure, analyse
,improve, and control) which is broadly based on the Shewhart plan
-
do
-
check
-
a
ct cycle and
the belief that the outcomes of any process are the result of what goes into that
process(George 2003). In terms of a simple equation this can be expressed as Y is a function
of X where outputs (Y) is a result of inputs or process variables (
Xs):


Y=f(X1,X2,X3,……)


According to Bendell (ibid 2
0
06) Six Sigma focuses around Juran’s concept of project
-
by
-
project improvement with clear responsibilities and authority.


According to Porter (2002) the Six Sigma approach takes the key processes throug
h the
following five stages:


Phase 1: Define: Defining the scope and the goals of the improvement project in terms of
customer requirements and the process that delivers these requirements.

Phase 2: Measure: Measure the current process performance, input,

output and process and
calculating the sigma capability for short or longer term process capability.

Phase 3: Analyse: Identify the gap between the current and desired performance, prioritising
problems and identifying root causes of problems. Benchmarkin
g against recognised
benchmark standards of performance may also be carried out.

Phase 4: Improve: Involves generating the improvement solutions and fixing problems to
prevent them from reoccurring so that the required financial and other performance goals

are
met.

Phase 5: Control: involves implementing the improved process in a way that “holds the
gains”. Standards of operations will be documented in quality systems such as ISO 9000.


The cycle is repeated if further performance shortfalls are identified.

The Six Sigma approach
is based upon project
-
by
-
project improvement, with projects led by full
-
time Six Sigma
qualified improvement engineers or managers termed “Black Belts” or “Green Belts”.


Six Sigma tools can be broadly categorized into three groups
as per their utility and nature.

1.Statistical tools: CPM (Critical Path Method)

2.Analytical tools: Failure Modes and Effects Analysis
-
traces all the ways a product or
24


process could fail. It also lists the possible consequences of each type of failure

3.
Judgmental tools: Ishikawa Root Cause Analysis Diagram (Fishbone diagram,)


Charts:
Six sigma chart tools include Pareto charts, SPC charts and run charts. The

Pareto principle states that 80 percent of all defects are caused by 20 percent of the root
causes. Pareto charts are graphs that show which causes result in the greatest number of
defects.

The tools include:

Statistical Process Control charts are called SPC charts. Run charts and SPC charts plot a
variable like weight over time. SPC charts will

have an upper and lower acceptable limit
while run charts only show the average.


Check Sheets: Six sigma analysis can begin with a check sheet. A check sheet can be a check
lists or a defect diagrams. C
heck sheets can be attribute check sheets,
location

check sheets,
and variable check sheets.


Diagrams are used to show all of the causes and factors that affect quality. Cause and effect
diagrams list all causes o
f a bad effect. Examples include Fishbone diagrams.


APPENDIX 3

Basic principles, concepts and tools of BPM

The basic principles underpinning BPM are:



Defining the organisation's strategic goals and purposes
(Who are we, what do we do,
and why do we do it
?)



Determining the organization's customers (or stakeholders)
(Who do we serve?)



Aligning the business processes to realise the organization's goals under the control of
process owners using benchmarks
(How do we do it better?)

According to Bae

and Seo

(2007) a process model is conceived as being related to two
different phases. In build
-
time, a process and its structure are designed so that it can be ready
for execution. That is, activities and their attributes are defined, and precedence relations
bet
ween the activities are also defined. In run
-
time, build
-
time process models are interpreted
25


and executed. BPM also entails a software system that implements the

concept. The
computeri
s
ed flow of a business process is called workflow
.


Common BPM Tools

Acc
ording to Bosilj
-
Vuksic (2006) t
he most important influences from the business domain
in terms of tools
are total quality management (TQM) and business process reengineering
(BPR)
,

Workflow Management (WFM) systems, XML business process languages and ERP
s
olutions
.


Many BPM concepts and tools have been incorporated into Software as a Service offerings
from SaaS and Netsuite. These offer firms the opportunity to move key processes onto web
enabled monitoring systems.


APPENDIX 4


Compare and contrast the
three approaches


Novelty:
According to Bendell (2006) both Lean and Six Sigma methods have origins in
aspects of Japanese improvement practise, but have been to a large extent moulded in North
America. He believes that there i
s nothing fundamentally new i
n Six S
igma. It is just a very
clever package of techniques that existed previously. According to Dag (2008) the Deming
wheel of TQM is basically the same as the DMAIC cycle. Shah (2008) found that in
academic literature a broad set of practices that are f
requently included under the Lean
production umbrella

have been in use for decades whereas i
n contrast

he claims that
Six
Sigma is an emerging concept and
that
research related to it is at an exploratory stage.


Numbers bias:
According to Bendell (ibid 200
6) both Lean and Six Sigma focus on the use
of statistical techniques and other “left
-
brain” tools. This may be both the great strength and
the great weakness of much of six sigma and lean methodology. Bendell
(ibid 2006)
believes
that “right
-
brain” thinki
ng, creativity and innovation can co
ntribute greatly to successful Six
Sigma and L
ean implementation. Linderman (2010) finds that some implementations focus
primarily on the process
-
improvement technique without paying sufficient attention to the
infrastru
cture (social support and technical support).


26


Implications for Innovative Capability and Absorptive Capacity:

With all three
approaches post the successful implementation of the project the company may be less able to
innovate (
as the
float of people nee
ded now removed) and tacit knowledge may be lost with
the removed people. The

downsides of Lean and BPM are reduced /eliminated creativity and
ability to cope with the unexpected.


Unity of approach in

implementations:
A
ll approaches suffer from uneven
implementations in industry and
exaggerated expectations regarding the potential benefits
from a BPI initiative and consequently failure to achieve the expected results
. Thomas et al
(2008) found in respect of Lean Six Sigm
a implementations that
these business improvement
strategies are still implemented primarily in a sequential manner and the results of the survey
included in this paper identify the fact that little information exists regarding the integration
of these app
roaches to provide a single and highly effective strate
gy for change in companies.
Antony

(2011) claims that
Six Sigma benefits from a clearer and better structured approach
which maintains momentum and has a clearer set of application tools which allows
c
ompanies to resolve issues quickly. He states that the perennial problem still surrounds Six
Sigma (which does not hinder Lean in the same way) in that it is seen as a highly analytical
methodology which requires many years of statistical training and deve
lopment before it can
be effectively applied.


Common Success Factors:
A feature common to all approaches are the common success
factors which include top management commitment and support, effectively trained
reengineering teams, specific outcomes identi
fied, empowerment of the process owners and
the project must be straightforward and practically implementable.


The role of people:

All approaches can suffer the issues identified in
the Innovation in
Practice
Module, developed by engineers/technologists,
mechanistic and IT driven, more
process and technology than people with an ignorance of power/politics and culture. This can
result in coercion rather than empowerment for the people working the process. While Zhang
(2000) finds that both Lean and Six Sigm
a emphasise the importance of

top management commitment and employee involvement in reality the implementation of Six
Sigma initiatives usually involve Black Belts only. This may reflect Six Sigma’s origins from
within US organisation’s (Deming was critica
l of the US approach to business management
and he was an advocate of worker participation in decision making).

27



Questionable Assumptions:

All methods assume hierarchy is flattened, that it will result in
increased empowerment, that you are starting with a

well educated work force. All the
approaches assume that the organisation will rise above silos and implement improvements
across an entire process (regardless of dep
artmental boundaries however Naslund (2008)
finds that most organisations approach these
change methods in a functional, operational
and/or ad hoc manner rather than in a
holistic or systemic way. The Lean and Six Sigma
approaches when implemented
focus on "doing things right" more than it does on "doing the
right thing", none of the approach
es have an integrated approach to strategy selection and
ensuring projects complement this.


APPENDIX 5

Why change management fails according to Kotter

In his book “
Force for Change: How Leadership Differs from Management
“(1990), Kotter
lists the following as the main reasons why change in company fails:



Allowing to much complexity.



Understanding the need for a clear vision.



Failing to clearly communicate the vision.



Not planning and getting short
-
term wins.



Not anchoring changes in corporate culture.

His book Leading Change (1996) he identifies eight steps for leading change which are:


Step One: Create Urgency:
Open an honest and convincing dialogue about what's happening in
the marketplace and with your co
mpetition. Kotter suggests that for change to be successful,
75% of a company's management needs to "buy into" the change. It is important to Step One,
and spend significant time and energy building urgency amongst the staff and management,
before moving o
nto the next steps.

Step Two: Form a Powerful Coalition:
Convince people that change is necessary. This often
takes strong leadership and visible support from key people within your organization.
Managing change isn't enough


you have to lead it.
To lead
change, you need to bring
together a coalition, or team, of influential people whose power comes from a variety of
sources, including job title, status, expertise, and political importance.

28


Step Three: Create a Vision for Change:
A clear vision can help ev
eryone understand why you're
asking them to do something. When people see for themselves what you're trying to achieve,
then the directives they're given tend to make more sense.

Step Four: Communicate the Vision:
What you do with your vision after you cr
eate it will
determine your success. Your message will probably have strong competition from other day
-
to
-
day communications within the company, so you need to communicate it frequently and
powerfully, and embed it within everything that you do. It's also
important to "walk the talk."
What you do is far more important


and believable


than what you say. Demonstrate the
kind of behavior that you want from others.

Step Five: Remove Obstacles:
Put in place the structure for change, and continually check for
barriers to it. Removing obstacles can empower the people you need to execute your vision,
and it can help the change move forward.

Step Six: Create Short
-
term Wins:
Nothing motivates more t
han success. Give your company a
taste of victory early in the change process. Within a short time frame (this could be a month
or a year, depending on the type of change), you'll want to have results that your staff can see.

Step Seven: Build on the Chang
e:
Kotter argues that many change projects fail because victory
is declared too early. Real change runs deep. Quick wins are only the beginning of what
needs to be done to achieve long
-
term change.

Step Eight: Anchor the Changes in Corporate Culture:
Fina
lly, to make any change stick, it should
become part of the core of your organization. Your corporate culture often determines what
gets done, so the values behind your vision must show in day
-
to
-
day work.

Extracts based on Mindtools (2011).


APPENDIX
6


Schiff (2005) identifies three key problems with implementing KPIs.

1.

Some executive teams choose KPIs that are outcomes rather than causes (i.e. results
rather than drivers of success). In this regard they mirror financial reporting and do
not drive opera
tional results therefore a 50/50 split between operational and financial
measures is recommended.

2.

What to measure: When KPIs are too high
-
level they might not reliably correlate to
actual results. On the other hand too many individual KPIs may result in a

lack of
management focus.

29


3.

Who decides on the KPIs: How does the company get to that short list of agreed key
measures for performance? Staff need to be involved and it needs to work down from
the firm’s strategy to determine the key business drivers. Als
o the fact that
approximately 70 to 80 per cent of the key metrics for a company are nearly identical
to those of other companies in their industry should lead to less debate over common
measures.



APPENDIX

7

Novara Customer Management

(NCM) System:


A comprehensive online customer management
system was developed in
-
house giving Novara
customers the ability to manage all their services
online and in real time (
contact details can be
changed, invoices located and printed out etc).


This innovative application won the Colleran Award
for Enterprise



Patrick J. Lynch (Chair of Dublin City
Enterprise Board) presents the
Colleran Award for Enterprise to Eoin
Costel
lo


APPENDIX 8


THE REMAINDER OF THIS DOCUMENT REMOVED FOR COMMERCIAL REASONS