Digital Strategy & Business Process Transformation 2024 (SKEMA)

Session 6: Digital strategy and Business process transformation Digital strategy Two years MSc Course coordinator: Nabila BOUKEF Ph.D. Associate Professor in information Systems and digital transformation SKEMA...

Session 6: Digital strategy and Business process transformation Digital strategy Two years MSc Course coordinator: Nabila BOUKEF Ph.D. Associate Professor in information Systems and digital transformation SKEMA Business School Course schedule  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era Outline for this session  Transform your business  Business processes and business process management  Process decomposition exercise  Individual assignment  Business process reengineering  Practice exercise  Teamwork Assignment Why Drivers of digital transformation ? Analyzing the new rules of the games and opportunities enabled by the digital technologies Create a competitive Strategy approach Digital growth advantage Creating a What Creating a Adapting competitive strategy with sustainable advantage with the constraints competitive ? digital technologies of the environment advantage Transform business with digital technologies How Transforming the processes Session 6 ? Digital capabilities Digital leadership Investing in digital technologies Transforming the organization Managing the ecosystem Case study: DBS Class discussion  Explain how does DBS create a competitive advantage by changing its processes  How does IT impact business processes? Explain how DBS creates a competitive advantage by changing processes  Transforming Business process in order to create a competitive advantage How does IT impact business processes How does IT impact business processes How can Digital technologies be used to improve processes? Source: Earl H. McKinney, Jr. and David M. Kroenke (2014) Processes, Systems, and Information: An Introduction to MIS, Second Edition. How can digital technologies improve productivity?  Efficiency (more bang for the buck)  Output is the same as before, but either:  Reduced resource inputs produce same or more output; or  Same or reduced resource inputs produce more output  Effectiveness (do new and better things)  New kinds or improved quality of output than before:  Successfully creating better quality goods or services  Successfully achieving organizational objectives  Transform business in order to create value for customers Create a competitive advantage with digital technology Clear and transformative ambition Create + value for Create a competitive custome advantage rs with digital technologies Business process and AI use  Use AI to improve an activity: AI-enhanced recruitment process  AI speeds up the recruitment process by automating time-consuming tasks such as resume screening, candidate matching, and initial interviews.  Enhance the recruitment process by improving efficiency and accuracy.  Companies can make better decisions faster. Example of companies: Hilton and Unilever  Improve data flow among activities: Hospital management and patient care coordination Reis, L., Maier, C., Mattke, J., Creutzenberg, M., & Weitzel, T. (2020). Addressing User Resistance Would Have Prevented a Healthcare AI Project Failure. MIS Quarterly Executive, 19(4). Improve control of activities:  Example 1: Audi’s AI-based crack detection system implemented in Ingolstadt and Neckarsulm. Use of automation: using chatbot to interact with customers  AI chatbots can handle routine queries and provide 24/7 support  Human agents can focus on complex issues Improve procedure: AI-improved fraud detection procedure in Banking  AI improves the fraud detection procedure by automating complex tasks, enabling real-time monitoring (use of Machine learning to detect unusual patterns or anomalies), reducing manual effort, and enhancing accuracy, leading to better security for customers and more efficient processes for banks.  Different benefits of using AI can be highlighted such as:  Increased speed (faster than manual procedures)  Accuracy and Precision  Scalability (ability to handle large volume of transactions and fraud cases without needing a proportional increase in human resources)  Proactive prevention (AI helps in preventing fraud rather than just reacting to it). Business process and business process management  Business process How the different tasks are coordinated in order to achieve a business outcome (Why does this process exist for?) Sta Task Task Task Task End rt 1 2 3 4 A series of activities developed within an organization that are Coordinated Designed for a common goal A collection of related, structured activities—a chain of events—that produces a specific service or product for particular clients  Business process illustration: ordering a pizza The execution of a sequence of related steps in response to an event that leads to a clearly defined deliverable or outcome Sta Task Task Task Task End rt 1 2 3 4 Event Dliverable or outcom  Transfom your business: Adopt end-to- end approach  Customer engagement (How can the company create value for customers?)  Operational excellence (How can the company redesign its processes?)  The need to combine both strategies Digital success combines both customer engagement and operational excellence: End- to end approach to provide value to customers Design thinking to create value for customers Empathize (Develop research to better understand users) Define (Reframe Test (get users problems and feedback) define unmet needs) Prototype Ideate (Iterative (Generate new products that and creative allows rapid solutions to the improvements) problem) Business Process Management Business Process Business Business Improvement Process Performance Mapping Measurement Business Process Reengineering Materials Systems Measures Measures Suppliers Clients Input HR Structures Services Output Start End  Business Process Improvement (BPI) and Business Process Reengineering (BPR) Reengineering is typically chartered in response to a desire for a breakthrough for rapid, dramatic improvement in process Performan performance ce 3. BPR: Breakthrough Improvement 4. Continuous improvements refines the breakthrough 2. No further 1. BPI: continuous continuous improvements improvements possible; time to reengineer process Time Present Radical Incremen model change tal change The different steps that you need go through:  Business process decomposition  Write the process as-it-is  Analyze the process (what are the main problems related to the process)  How can you change your process in order to create a competitive advantage?  Write the new process Process decomposition  Business process: ordering a pizza The execution of a sequence of related steps in response to an event that leads to a clearly defined deliverable or outcome A number of role players may contribute to the execution of an end-to-end business process (suppliers of the process) End-to-end business processes may also cross functional boundaries Outcome of Trigger of the process the process Sta Task Task Task Task End rt 1 2 3 4 Inputs Inputs (data, service, product) Suppliers of the process Suppliers of the process Business process components Manages the process Who leads the process? Responsible for achieving (Process Owner) process goals Highlights critical issues and solves problems Negotiates improvements with other managers What is the scope? “Why does the process exist?” (Mission) (client and organization viewpoint) E.g. travel quotation: client point of view, organization point of view Business process components Define the start and the end of the Definition of process’ borders process PROCESS When the When the Process process starts ends Identify suppliers and Identify inputs departments/functions/business units that supply products or services (inputs) that are used in the process Identify clients and Identify who (internal or external) is outputs going to use products/services (outputs) of the process Business process components Interview clients and ask: Identify clients’ needs – Products/services required – Client needs and priorities Design process Describe the process in order to flow – Understand how it works – Standardize activities – Facilitate improvements  Process decomposition exercise (Quiz in K2) You can work in groups but you need to submit individually Travel Plan Quote Process (process decomposition)  The process begins with the receipt of an email message requesting the booking of a travel itinerary.  After the request has been received, a check for the validity of the submitted credit card information is performed.  If there are problems: display fault message to the client – STOP  If no problems: go ahead  Check reservations:  Check hotel reservation  Check flight reservation  Check car reservation  Evaluate reservation results for the “best price”  Collect all data about reservations (hotel, flight, car)  Send the confirmation to the client The owner of the process  Who is the process owner?  Select one:  Bank  Credit card company  Travel agency  Client  Car rental agency  Airline  Hotel The start of the process When does the process start?  Receive itinerary request e-mail  Evaluate best price in reservation results  Check for credit card validity  Collect reservation data (hotel, flight, car)  Send confirmation to client  Check car reservation  Check flight reservation  Check hotel reservation  Display credit card fault message  Book travel itinerary The end of the process When does the process end?  Check hotel reservation  Display credit card fault message  Receive itinerary request e-mail  Evaluate best price in reservation results  Check for credit card validity  Book travel itinerary  Send confirmation to client  Collect reservation data (hotel, flight, car)  Check flight reservation  Check car reservation Information technologies involved What information technologies are involved?  Credit card validation system  Enterprise Resource Planning (ERP) system  E-mail  Car reservation system  Flight simulator  Instant messaging  Flight reservation system  Human resources management system  Hotel reservation system  Web search engine  Accounting system  Customer Resource Management (CRM) system  Travel reservation system  Supply Chain Management (SCM) system The client of the process Who is the client of the process?  Select one:  Client  Travel agency  Hotel  Airline  Car rental agency  Credit card company  Bank The outputs of the process Who or what are the outputs of the process?  List of all flight possibilities  List of all car possibilities  Credit card error message  Confirmation of reservation  Credit card details  Travel itinerary  List of all hotel possibilities  Itinerary request e-mail The suppliers of the process Who or what are the suppliers of the process?  Hotel  Credit card company  Car rental agency  Client  Travel agency  Airline  Bank The inputs of the process Who or what are the inputs of the process?  Flight reservation  List of all hotel possibilities  Travel itinerary  Credit card error message  Itinerary request e-mail  List of all flight possibilities  Confirmation of reservation  Car reservation  Hotel reservation  Credit card details  List of all car possibilities Business process reengineering: The different steps that you need to go through:  Business process decomposition  Write the process as-it-is : Map  Analyze the process (what are the main problems related to the process)  How can you change your process in order to create a competitive advantage? Travel Plan Quote Process (process decomposition)  The process begins with the receipt of an email message requesting the booking of a travel itinerary.  After the request has been received, a check for the validity of the submitted credit card information is performed.  If there are problems: display fault message to the client – STOP  If no problems: go ahead  Check reservations:  Check hotel reservation  Check flight reservation  Check car reservation  Evaluate reservation results for the “best price”  Collect all data about reservations (hotel, flight, car)  Send the confirmation to the client Mapping of the process Mapping the process 1. receive a request from a customer 2. check the validity (if it is valid-> continue, if not-> error message) 3. Check reservation (hotel, car, flight) 4. Evaluate 5. Collect data 6. Send the confirmation Business process reengineering: practice exercise Loan process  A sales force agent calls the insurance headquarters to issue a loan request for a customer. A sales clerk types in the information into a computer system and checks the liability of the customer. This clerk writes down the results of the liability check and hands it over to the next link in the chain: the contracting department.  This department is responsible for customizing the standard loan contract for the customer. The department uses its own computer system. After having finished this work, a contracting agent staples together the request form with the special conditions.  As a next step, a pricing agent in the contracting department enters the information into spreadsheet software and calculates which interest rate applies to the customer. The agent notes this rate on a sheet of paper and hands it on together with the material from the sales department.  Finally, a sales department agent creates a proposal and sends it back to the sales force agent via express mail. Practice process reengineering exercise  Keep things simple: only model the described process and assume that the loan is approved  Describe the step-by-step process flow  Write a series of numbered points  How would you improve the process using digital technologies to create value for customers?  Write a list of areas for improvement (Analyze how do you create value for your customers)  Create a new series of numbered points for your improved process  Use bold or underline to highlight the steps that are new or improved Conclusion Why Drivers of digital transformation Analyzing the new rules of the games and opportunities ? enabled by the digital technologies Use the Framework of D. Rogers (Data, customers, Value, Innovation, competition) Create a competitive Strategy approach Digital growth advantage   Switching Classical approach What Customer   Self-organizing Adaptive approach intimacy   Separation Visionary approach operational   Ecosystem (acquisition, Shaping approach ? excellence reinvent BM  Renewal  partnership, incubator). Leverage existing capabilities Transform your business with digital technologies End-to-end approach to redesign customer experience How (improve customer experience and change processes) ? Digital capabilities Digital leadership Investing in digital technologies Transforming the organization Graded assignment Teamwork: your answer should be provided in ppt format Agent:  “Our agency specializes in organizing personalized travel trips based on customer requests. However, we also offer standard packages (pre- packaged trips) and products of other agencies. When a customer comes to the agency and expresses their wish, we first try to find out if an existing package is suitable. In this case, we make a reservation. When a customer pays, we issue a voucher. If pre-packaged trips aren’t suitable, I write down customer’s wishes and search for other possible offers and contact other agencies and hotels. When I gather enough information (this may take many days), I prepare the proposal for the customized trip (description of the trip and the prize). Then I call the customer to present the proposal. If they decide on a trip, they pay and we issue a voucher” You are in charge of the digital transformation project in this agency. Based on the description of the process by the agent, you need to answer the following questions: 1. Map the process as it is (you need to write down the different steps described in the text) and explain the main problems of this process? 2. Analyze your digital ambition (how are you going to create value for your customers?) 3. Write down the new process that you propose in order to improve customer experience 4. Explain how does the process you proposed improve customer experience? Rubric Exceeds Meets Needs Poor Not expectations expectations improvement acceptable s or not done Process mapping and problem 6 5 3,5 2 0 analysis Digital ambition 5 4 3,5 2 0 New process 6 5 3,5 2 0 Explanation 3 2,5 2 1,5 0 What is next? What’s coming up next  Session 1: Rethinking strategy in the digital era  Session 2: Digital strategy formulation  Session 3: Strategy approaches and ambidexterity strategy  Session 4: Digital platforms strategies  Session 5: Differentiation strategies and competition in the sharing economy  Session 6:Digital strategy and Business process transformation  Session 7: Building digital capabilities and creating digital leadership  Session 8: Digital strategy execution in practice: Fostering innovation in the digital era AT HOME WORLDWIDE* * Chez vous, partout dans le monde