Adapting organizations: the instance of business process re-engineering.
What drives companies to restructure their organizations repeatedly? Almost everyday, press releases announce cut-downs, alliances, restructuring of organizations as a reaction to changing conditions. These initiatives mostly intend to reduce operational costs and the costs of developing new products through enlarging the scale, for example Boeing, Mercedes-Chrysler, Hewlett-Packard during recent years. The continuous stream of announcements makes us believe that organizations do adapt (1) themselves to the environment. Yet, the question remains whether the efforts of restructuring, often referred to by companies as necessary due to external changes, increase overall competitiveness on the long-run and at the short-term.
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One clue to answer this question can be found in the systems hierarchy of Boulding (1956). It describes levels of systems complexity stating that for each higher level in this hierarchy laws might apply from lower levels (see Figure 1), even though the structures differ. The analogy between organisms and organizations becomes only possible if a company compares with a specimen (entity) and an industrial branch with a family (set of entities), leaving out the stages of species and genera (partial sets of entities). Species and genera would compare with companies aiming at niches or specific product-market combinations to bridge the gap between a general industry branch and a specific company. Considering the act of restructuring as a mutation at the level of individual companies will allow drawing an analogy with phenomena in evolutionary biology. This paper will use this particular analogy to appraise Business Process Re-engineering as one avenue for restructuring from an evolutionary (biological) perspective.
Business Process Re-engineering
During the 1990's, Business Process Re-engineering emerged as a concept for integrating information technology into business processes with a cross-functional perspective (Childe et al., 1994, p. 22). The movement of Business Process Re-engineering aims at reviewing and improving the utilization of resources: The fundamental rethinking and radical redesign of business processes to achieve dramatic improvements in critical contemporary measures of performance such as cost, quality, service and speed (Hammer and Champy, 1993, p. 32). Therefore, companies should reorganize their tasks around business processes reducing the coordination efforts, which they tell. Childe et al. (1994, p. 22) point out that this movement holds a different view than traditional improvement schemes, which often fail to go beyond functional boundaries that exist in organizations. Business Process Re-engineering perceives business processes as horizontal flows of activities, while most organizations are formed into vertical functional groupings. Business Process Re-engineering might work in two ways: it enables an organization to cope with external changes and it enhances competitiveness affecting the competitive landscape.
Since its emergence, many have propagated the merits of Business Process Re-engineering and many have expressed doubts (Clemons, 1995, p. 62). Hammer & Champy (1993, p. 200) estimate that only 30-50% of the efforts succeed, while a study by Jarrar and Aspinwall (1999) shows that only 25% of Re-engineering cases reaches acceptable performance improvements. Sabherwal et al. (2001, p. 193, 195) point out that alignment between strategy and structure is hardly achieved, and that a redesign is often inhibited by cultural and structural inertia. Some, like Bryant and Chan (1998, p. 52), attribute the low success rate to Business Process Re-engineering as a covert way for downsizing. Most of all, many writers attribute the failure of Re-engineering efforts to leadership, culture, change management etc. (e.g. Braganza and Myers, 1996; Campbell and Kleiner, 1997; Choi and Chan, 1997, pp. 44-46; Drago and Geisler, 1997, pp. 298-300). Change management has been integrated into some of the methods (e.g. Davenport, 1993; Vakola and Rezgui, 2000, pp. 245-246). Additionally, authors have already pinpointed that many different approaches exist--for example, Hess and Oesterle (1996) evaluate 12 methods-which makes it difficult to define what exactly Business Process Re-engineering constitutes (Braganza and Myers, 1996; Choi and Chan, 1997, p. 40; O'Neill and Sohal, 1999, p. 579) and to define its methodology (Childe et al., 1994, p. 23, 32). Al-Mashari and Zairi (2000, p. 11) conclude that all the definitions emphasize redesigning business processes using a radical IT-enabled approach to organizational change, which is taken as point of departure in this paper.
Generally, there seems to be a deficiency in empirical research in Business Process Re-engineering efforts (as already noted by Kettinger & Grover (1995, p. 10), Motwani et al. (1998) and O'Neill and Sohal (1999)) in conjunction with a lack of underpinning theory (Melao and Pidd, 2000, p. 125) and adequate descriptions (like for business processes (Lin et al., 2002, p. 39)). Even today, empirical research on Business Process Re-engineering is scarce (e.g. Bensabat and Zmud (1999); Kallio et al. (2002)). However, it is the intention of this paper not to expand on failure and success rates directly (others have done so, e.g. Al-Mashari and Zairi (1999); Kallio et al. (2002)) but to add to empirical research and to appraise Business Process Engineering and kin as a radical change in evolutionary biological perspectives.
Delft School Approach
The Delft School Approach can be considered akin the ones of Business Process Re-engineering, although it roots in the earlier rise of system theories during the 1960's and the movement of socio-technical design. Many more systems theories came about during the fertile 1960's and 1970's, like the Soft Systems Methodology (Checkland, 1981) and the Viable Systems Model (Beer, 1972). All these have been applied to a variety of domains (Laszlo and Krippner, 1998). The development of systems theories at Delft University of Technology has cumulated in a cybernetic approach to organizations, sublimated in the writings of in 't Veld (1998) (2) and the follow-up Applied Systems Theory (Dekkers, in press), especially the steady-state model to describe recurrent processes (see Figure 2). Redesigning organizations based on the primary process of organizations connects Business Process Re-engineering to systems theories, hence, also to the Delft School Approach with its cybernetic systems perspective.
Additionally, it shares the notion that the flow of activities is at the centre of structuring organizations. The focus on the primary process came about through the thought that merely the redesign of a hierarchy does not meet performance requirements, which became already clear during case studies performed in the 1970's; organizational changes should affect working processes to be viable (Mervis and Berg, 1977). The main features of the design methodology of the Delft School Approach constitute its method for analysis and its notion of the organelle structure (in 't Veld, 1998) (see Figure 3 for an example). The organelle structure connects the strategy to the product flow (Dekkers, 2000) and the configuration of the primary process; (3) it comprises the grouping of activities, for example in a process-flow orientation or a functional structure (not viewed from the hierarchy, the so-called vertical departmental silos; the hierarchical structure is considered the final step, after the design of the organelle structure). A design methodology, see Figure 4, has been developed for the successive steps of restructuring an organization: the primary process, its control and the organelle structure (Bikker, 1993). The redesign principles of the control processes and the cross-functional perspective (embedded in notion of the organelle structure) link the Delft School Approach to Business Process Re-engineering and therefore it will be also reviewed from an evolutionary perspective.
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Formulation of Hypotheses
Since both Business Process Re-engineering and the Delft School Approach take the restructuring of the primary process as a redesign, this can be split in two components: (a) the homeostatic nature of primary and control process design and (b) the redesign as an one-time intervention. The homeostatic maintenance of a characteristic state or the seeking of a goal, based on feedback (originated by: yon Bertalanffy, 1973, p. 46), underpins the design by many systems theories and information technologies. Additionally, maintaining homeostasis causes not seeking for change at all. This implies that organizations might even delay adaptation, inherent to the dosed character of organizations, found in autopoietic theories. This thinking leads to the first hypothesis that the design itself of an organization, which incorporates features of feedback aiming at homeostasis, limits adaptation.
Main Hypothesis A
Hypothesis 1: The principle of boundary control based on homeostasis limits the evolution of organizations in response to the dynamics of the environment.
In contrast, the radical nature of Business Process Re-engineering methods and kin, might oppose adaptation as a continuous process. The discussion about revolutionary processes and continuous--or evolutionary--processes has always attracted interests of scientists (especially in technology and innovation management, e.g. Phaal et al. (2004), O'Shea (2002) and about the punctuated equilibrium in change management, e.g. van de Ven and Poole (1995); Sabherwal et al. (2001)). So far, the approach has never been fundamentally connected to Business Process Re-engineering. Thereto, the second hypothesis reads:
Main Hypothesis B
Hypothesis 2: Adaptation to the environment constitutes continuous processes within the organizations rather than one-time interventions.
Both hypotheses are difficult to test in their present form and, therefore, they need refinement.
To arrive at more refined models for adaptation, the research has studied evolutionary biology, particularly theoretical models (this paper will mention only the leading papers). The research has taken a different route than other research in this field, following the statements of Paul Feyerabend that unconventional routes might yield new insights (Leavitt, 2001, p. 4). In addition, Kuhn (1988) has indicated that breakthroughs in theories can only be achieved by deviating from known paths. The research presented here arrives at new insight by looking at models from evolutionary biology.
1. The analogy between organisms and organizations has led to a reference model to describe patterns of evolution for assessing management approaches and for conducting case studies.
2. The research has explored existing literature on Business Process Re-engineering. Additional literature on process innovation has been included to compensate for a lack of adequate empiric research in Business Process Re-engineering. The reference model served as a basis for classifying results and reviewing these studies.
3. Six case studies have been conducted using the Delft School Approach. Although each of these case studies is quite different, the reference model assisted in distilling the necessary data to assess the development of these companies is a snapshot.
The contribution of this study to existing literature has been the conversion of evolutionary biological models to the domain of organizations and the appraisal of Business Process Re-engineering and its kin from that perspective. Recent developments in evolutionary biology allow an integral approach to the evolutionary process, connecting the generation of variation to selectional forces (e.g. fitness landscapes by Kauffman (1993) and Adaptive Dynamics by (Geritz et al., 1997)). The predictive power of these theories extends to the field of management science accounting for the similarities and differences between organisms and organizations.
Such an analogy might be helpful since management literature starts to pay more attention to evolutionary models (e.g. McCarthy (2005)), although not always studying this topic profoundly (Bergh and Dekkers, in press); especially, literature on strategy has taken notion of evolutionary perspectives (Burt, 2003; Holbrook, 2003), though hardly residing in biological theories (e.g. Barnett and Burgelman, 1996; Smeds, 1996). Another phenomenon, the punctuated equilibrium, has been transferred to the domain of organizations (e.g. Brown and Eisenhardt (1997); Gersick (1991); Romanelli and Tushman (1994); Wollin (1999)), though some have ignored the biological meaning (Eldredge, 1997). Hence, the proposed reference model in this paper based on patterns of development--through mutations--can be considered a more profound description than presently existent in literature on organizations.
Comparison Between Organizations and Organisms
An analogy in patterns for development only becomes possible when sufficient similarities constitute a basis for transferring the models of evolutionary biology to the domain of organizations. This particular study has found these similarities:
* Selection acts on mutations. Biological evolution generates a variety of phenotypes, and the environment selects phenotypes for survival. Such a process exists also for organizations where the selection process finds itself in the competition for the customer base, the acquisition of resources, for example suppliers, and the changes in the ecological system of which a company is a part.
* Organizations and organisms are structurally closed. The relationships between the internal components determine how the entity absorbs perturbations by the environment (organizations constitute allopoietic systems (Dekkers, 2005, p. 148) and organisms autopoietic systems (Maturana and Varela, 1980); see Mingers (1989) for the application of autopoiesis to organizations).
* Organizations have the possibility of self-cognition and learning, also found in organisms: the 6th and 7th level of Boulding (see Figure 1). The latent changes are present in the structure of the entity and the environment may induce these changes. Learning becomes possible because both organizations and organisms will deploy a set of sensors to acquire information about their behaviour (see de Geus (1999) and Senge (1992) for organizational applications) although self-reference limits the possibilities to detect all changes and perturbations in the environment.
* Developmental pathways seem to exist for both organizations (Teece et al., 1997, pp. 522-523) and organisms (e.g. Maynard Smith et al., 1985, pp. 265-266). Organisms can increase their fitness by undertaking an adaptive walk in a fitness landscape (Kauffman, 1993, pp. 36-67) where selection acts on the phenotypes. Organizations can also create mutations and thereby commence an adaptive walk.
Nevertheless, some differences with the development of organisms exist, which call for caution when applying models from evolutionary biology to the domain of organizations.
* Organizations do not have the possibility for self-reproduction in contrast to living entities. Reproducing through recombination has very positive effects on finding fitness peaks in the adaptive landscapes as demonstrated through the NK-model developed by Kauffman (ibid, pp. 40-54); N indicates the number of genes and K the links between genes. The deployment of genetics to the domain of organizations carries the danger that the study might end up as a metaphor rather than an analogy.
* Organizations have the capability for foresight (4) already latently present at the level of animals and present at the level of human beings. Through senses, organisms acquire information about the effects of actions, and have the capability to learn by self-reference embedded in the structure of the entity. However, the evolution of organisms depends on the creation of mutations and selection of these by the environment. At the level of organizations, it becomes possible to influence the behaviour of other organisms, and to include foresight in the evolutionary process.
* Organizations have fuzzy boundaries. Organisms as autopoietic systems not only reproduce, they also retain a boundary to the environment, they consist of components that compose a total functional entity, and they are structurally closed. Through these boundaries, the environment can only induce changes that are already present in the composition and structure of the entity. Organizations have boundaries too but have the capability to shift these.
While these differences exist, the study has revealed a large number of conceptual models for the origin and diversity of life as well as biological models for adaptation to the environment based on the similarities. What became apparent during the study is that organizations need to create variety in their phenotype, visible traits to the environment, to expose these mutations for selection by the environment (a thought supported by van den Bergh (2003, p. 3)).
Especially, the effect of macromutations (Jablonski, 2000), complex mutations involving concurrent alteration of numerous characteristics of species, deserves attention for the domain of evolution of organizations. Firstly, the emergence of these macromutations follows developmental pathways due to the existence of related networks of regulatory genes. Following this thought of evolutionary biology, genes relate to each other and at certain moments genes controlling other genes might topple and quickly provoke changes taking part in a large part of an organism; this cascade of changes might prevail above the gradual change of individual pool sets of genes. Such toppling might also result from the accumulation of many changes in genes at lower levels. Genes do not exist in organizations as an analogy, but control networks and aggregates do. The developmental pathways specify the possible routes that organizations might have to follow since each step should ideally result in higher fitness. Second, heterochrony (a deviation from the typical embryological sequence of formation of organs and parts as a factor in evolution) and heterotopy (a displacement in or difference of position of an organ from the normal position) as specific forms of macromutations indicate the possible effects of viable deviations during development on the timing and the positioning of organelles and the structure of organisms. Organizations might profit from such an approach because the relocation of components and organelles together with the change of structure can create new capabilities. Third, the mechanism of epigenetics, development involving gradual diversification and differentiation of an initially undifferentiated entity, tells that integrating mechanisms, such as structures, serve as a powerful source for adaptations to the dynamics of the environment. An integrating mechanism ties all the loose components together and shapes it into a meaningful whole. The recognition of the importance of heterotopy and heterochrony for evolutionary biology does not directly translate to models for organizations; they resemble one-time interventions, in that case interventions have little chance for survival. The existence of developmental pathways, epigenetics and regulatory genes carries more resemblance to possible processes of adaptation in organizations. It appears that developmental pathways seem to rule all possible changes, and the search for increased fitness strongly determines the route and development of organizations; this raises doubts to the effectiveness of the often-radical approach of Business Process Re-engineering.
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For the refinement of the hypotheses, the development of organizations might follow universal laws that arrive from the conversion of models from evolutionary biology. Hence, a reference model has been developed to describe the interaction between organization and environment (see Figure 5), consisting of two intertwined cycles: the generation of variation and the selection by the environment (which differs from the popular model of Campbell (1969), which is incomplete in contemporary biological views). Some suggestions have been made to what to consider the equivalent of the genes and the genome on which the biological evolutionary mechanisms build. One possible view concentrates on the division of an organization in departments, groups, individuals etc. Morgan (1997, p. 34, 43) did propose such when introducing the image of an organization as an organism. Another view would be to look at organizations as a collection of resources with skills and knowledge present, expressing itself in the form of capabilities (capabilities express themselves in function trajectories), like Nakane (1986). Dawkins (1989, p. 192) has proposed memes as unit for imitation and recombination. Memes constitute elements of a culture or system of behaviour that may be considered passing from one individual to another by non-genetic means, especially imitation. Dawkins extends this concept to a wide variety of topics like ideas, artifacts, including people, products, books, behaviours, routines, knowledge, science, religion, art, rituals, institutions and politics. In organizational studies, memes enjoy a high degree of popularity and received criticism (Gil-White, 2005). Kauffman et al. (2000) take technology as starting point for recombination. That way they connect the development of technology as genetic evolution to fitness landscapes. The study of Nelson and Winter (1982) uses organizational routines as unit for selection. Knudsen (2002, p. 459) remarks that Nelson & Winter draw on the term routine as replicator (routines as the genes of the organization) and as interactor (routines as recurrent patterns of behaviour among interacting social agents). The choice for which term should substitute the biological genome will depend on the object of study and does not directly affect the outcomes for
this particular study (conform Gil-White's position).
The following issues complement the reference model for adaptation by organizations:
(i) The distinction between phenotype and genotype. At the level of the interaction between entity and environment, the phenotype contains the visible traits on which selection by the environment operates. Variation leads to mutants, and the environment selects these entities that display the combination of traits that it favours. The phenotype of a company then also requires the development of the underlying subset of the elements of the genotype.
(ii) The undertaking of adaptive walks and the constraints imposed by developmental pathways. Through linked mutations, organisms search for optimization in the fitness landscape. The combined effects of mutation, selection and recombination allow effective searches. Organizations might exert adaptive walks to increase their fitness as selection acts on individuals rather than on species or any other combination of entities. These adaptive walks take the form of one-step mutants, more-step mutants or long jumps. One-step mutants prove less effective than more-step mutants (from two to five steps per mutation) for reaching local fitness peaks, which means that gradual but not extreme changes in companies fit the search for continuous optimization. Long jumps, forced macromutations might prove very effective on rugged landscapes, where many fitness peaks exist, though they become a weak strategy as the complexity (diversity and numbers) increases.
(iii) The assessment of the capability of sustained fitness. Two main criteria determine the extent of sustained fitness: local evolutionary stability, as indicator of the stability of a singular strategy, and convergence stability, as indicator for organizations reaching a stable strategy. When attaining a local optimum, the effect of each step reduces by half and the efforts increase by a factor two (Kauffman, 1995, pp. 178, 193-194). In addition, the theory of Adaptive Dynamics (Geritz et al., 1997) indicates that each next step has less effect (asymptotic functions). In an evolutionary stable point or at an Evolutionary Stable Strategy, organizations are trapped; moving in each direction will decrease fitness.
(iv) The evolvability of organizations. This capability depends on the assessment of two criteria: the invading potential, as a capability to disperse and penetrate into new habitats, and the protected dimorphism instability, as the possibility for splitting lineages. Dispersal, seen as invading other habitats, decreases the sensitivity of organizations against environmental catastrophes. Bifurcation opens the possibility for the founder effect and further evolution but also requires the capability to deal with increasing complexity since the dimensions of strategies increase.
(v) The emergence of self-organization. Phase transitions during which organizations intensively absorb and dissipate through relationships with the environment, provide the possibility of emergent behaviour and emergent structures to adapt to changes within that environment (Nicolis and Prigogine, 1997). At such a state of transition, adaptation that meets the criteria of sustained fitness and evolvability provide most opportunities.
It should be noted that in landscapes that change heavily and rapidly in time, uncorrelated fitness exists forcing the organization to assess evolvability. In slower changing landscapes, local search prevails (sustained fitness).
Some management scientists, like Lewin et al. (1999, pp. 536-538) and Volberda (1998, pp. 268--275), strongly advocate the distinction between the process of exploitation and exploration to describe the evolution of individual companies and industrial branches. This differs from the introduced reference model for several reasons. Firstly, the reference model contains criteria rather than processes such as exploitation and exploration, and the model sets constraints to the outcomes of these. Second, evolvability and exploration are not exactly congruent. Evolvability describes particularly the invading potential, very similar to the potential results of exploration, and dimorphisms as base for splitting lineages. Within population ecology and hence organizational evolution, bifurcation drives evolutionary processes. This should be considered. Third, sustained fitness resembles exploitation but its distinction between evolutionary stability and convergence stability increases the descriptive capability of models for evolutionary processes. Exploitation might simply be the input and output of a company, a far more limited description in view of evolutionary models. The co-existence of both criteria, sustained fitness and evolvability, is linked to each step, each mutation in an adaptive walk and therefore the separation into two independent processes seems hardly realistic.
BUSINESS PROCESS RE-ENGINEERING AND PROCESS INNOVATION
Bearing this in mind, the reference model has been used to look at existing research in process innovation and Business Process Re-engineering, and for case studies of the Delft School Approach. To do so, the research has formulated refined hypotheses based on the reference model (see Table 1); these refinements are directly linked to evolutionary models for organizations and represent adaptation strategies (A1, A2, B.1.A, B.1.B) and criteria for evolutionary development (B.2.A, B.2.B, B.2.C). To perform an assessment features have been listed for each hypothesis on which the literature and case studies can be reviewed.
The archival research has covered the scarce empirical research on Business Process Re-engineering and process innovation. Not every paper qualifies for consideration in this research, many do not question the assumptions and many are justifications of chosen approaches. Only the research that conducted quantitative research across industries covered a relatively high number of cases studies, or performed profound in-depth case studies elected for consideration. Each of the selected publications has been connected to the reference model and consecutively to the hypotheses (see Table 2). From the evidence for the refined hypotheses it can be inferred that Business Process Re-engineering constitutes the search for increased fitness (Hypotheses B.1.A and B.2.A), that it happens through developmental pathways (B.1.B) and that the radical change is difficult to manage (B.1.B). The overall results indicate that radical change finds less support than mostly assumed, and that Business Process Engineering efforts might yield most results when connected to external opportunities for dispersal into (new) product-market combinations (B.2.B).
For some of the refined hypotheses, insufficient information became available during the archival research. That concerns the ones for hypothesis A and refined hypothesis B.2.C. It might be inferred that the interaction with the environment has got insufficient attention in these studies making it difficult to relate improvement through Business Process Re-engineering to external opportunities. The complexity error catastrophe represents a particular phenomenon again related to the external environment of a company (McKelvey, 1999). Further studies would be required to assess this; the case studies of the Delft School Approach have accounted for information on these points.
Case Studies Delft School Approach
For establishing the effectiveness of the design methodology of the Delft School Approach, and of revealing its weak points and strongholds, six cases have been reviewed 2 years after their execution (see Table 3 for a concise description). These cases have been drawn from the reports at the Section Industrial Organization and Management, Delft University of Technology. Typically, each study consisted of two phases: the analysis of the current situation, and the design of a solution; the total period of a study covered about 9 months providing ample time to conduct interviews within the company, collect data, verify the solution etc. Therefore, the reviews of these six case studies represent in-depth studies of companies.
The first company (AgriCo) concerns a manufacturer of agricultural equipment that experiences problems with aligning stocks to seasonal demands and manufacturing set-ups. The second case (EngOf) concerns an engineering office for capital equipment, specialized in power technology and process automation, for which market demands call for different internal management of processes. ToolIt, a company supplying electric hand tools to mainly the consumer market, constitutes the third case. The dispute handling system of PlastiCo has seen an increase in customer complaints about delivery, the fourth case. Blue Sky is the fifth case, an airline with efficiency losses due to a tight flight schedule, sub-optimization of resource usage leading sensitivity for disruptions. The sixth and final case study was about CompuIt; a move from the strong orientation on product divisions towards a customer orientation meant a change how to handle customer data.
Two years after the studies generated solutions, two of the proposals have been implemented (ToolIt, PlastiCo), two rejected (AgriCo, EngOf) and on two, no information was available (Blue Sky, CompuIt); in the case of Blue Sky, indirect information revealed that the solution had not been implemented. Each of these case studies has been linked to the features listed in Table 1 and has been judged on whether it supports or refutes the hypotheses (see Table 4). There seems to be limited rebuttal of Hypothesis A.1 and no support for A.2. Furthermore, there is limited backing for adaptation through developmental pathways (B.1.A); and, the Delft School Approach seems not congruent with long jumps, rather it has a more gradual character in practice than its re-engineering principles indicate (B.1.B). Additionally, it appears that although each of these cases differs quite from the other ones, most efforts are directed towards sustained fitness rather than evolvability (B.2.A and B.2.B). Finally, no evidence is found for the complexity error catastrophe (B.2.C).
From the results of the case studies, it can be inferred that the application of the Delft School Approach to organizations emphasizes optimization and gradual evolvement. In part, this is inherent to the nature of the studies and their scope. However, none of these studies relate their improvements directly to market opportunities, even though the methodology of the Delft School Approach does cover the analysis linked to market requirements and strategies of companies. This indicates the limited reach of the Delft School Approach.
DISCUSSION OF FINDINGS
Nevertheless, the results from the limited number of case studies denote that the Delft School Approach might have slightly better rates of success than Business Process Engineering. This might be attributed to the Delft School Approach's more defined analysis and design methodology, its normative model for steady-state processes (based on cybernetics) and its feature of the organelle structure. In addition, the evaluation of the implementation of generated proposals shows similar results. When not implemented, companies still struggle with the same problems that constituted the source for the case studies. In the two case studies where the proposals were not implemented, AgriCo and EngOf. In the first case, a new director had favoured an ERP-system (rendered as the possibility with a negative impact in the case study) and in the second case the culture of working had not yet adapted to fully implement more sophisticated information technology. This aligns with findings of Sabherwal et al. (2001, p. 193, 195) that structural and cultural inertia prevent the successful implementation of re-engineering initiatives.
In fact, the companies seem not to get a grip on changing customer demands (a consequence of the focus on optimization). The information obtained from the archival research show that Business Process Re-engineering might yield better performance, if connected to external opportunities, yet companies undertaking such an effort might experience setbacks before reaping benefits. A focus on critical success factors, as derived from literature (Larsen and Myers, 1999), might even create short-term success but on long-turn disappoint. Hence, it might be concluded that both Business Process Re-engineering and the Delft School Approach do not seem to yield the results they intend to achieve.
The claim of the necessarily radical approach of Business Process Re-engineering, often taken as starting point, seems doubtful. For both the case studies and the archival research show that organizations intended to implement radical change, the results show they hardly seemed to achieve that. The contribution of Business Process Re-engineering is largely direct towards optimization though one might argue that this is necessary. Melao & Pidd (2000, p. 108) did note that even the founders of Business Process Re-engineering have aborted the belief of radical change in favour of business process management and Knowledge Management, both more gradual approaches. This indicates that organizations cannot be coerced into drastic change as fast as a radical approach would predict and that management science needs models that adequately describe the evolution of companies; this finding supports the application of the reference model.
Evolutionary Models For Organizations
No doubt, efforts in Business Process Re-engineering and process innovation assist companies to adapt to the environment, but mainly by addressing sustained fitness (i.e. optimization). The results of such actions increase competitiveness but they hardly yield a competitive advantage to the companies on the long-run, and if they contribute then it is by a reduction of processing times or improvement of on-time delivery, like other studies indicated (e.g. Braganza and Myers, 1996, p. 39). A study by Laitinen (2000) confirms this thought. His comparative study shows that in the medium term, investment in product development, marketing and acquisition proves the most successful strategy, while a strategy heavily based on negotiating finance contracts and restructuring was the most unsuccessful. However, many will argue that a strategy of restructuring is a necessity for catching up. However, a similar reasoning as in this paper is found in Chaharbaghi & Willis (1998, p. 1025) when they talk about continuous revolution and constant evolution. The notions underline the necessity to address both sustained fitness and evolvability, the realm of the evolutionary models.
The evolutionary pathways of Business Process Re-engineering and process receive little attention, in theory and practice. Viewed from the framework of evolutionary adaptation, the following observations are made:
* The pathways of Business Process Re-engineering seem to be based on long-jumps with inherent risks of misfits (that is consistent with a reported failure rates while insufficiently accounting for long term effects), which in the literature of fitness landscapes is considered a difficult strategy in rugged landscapes (those landscapes that have but a few optimal positions). If not, the efforts concentrate on achieving sustained fitness and sighting is lost from evolvability, connecting to external opportunities.
* The accumulation of changes and subsequently creating momentum for toppling, the principle of regulatory genes similar to the innovation modes of architectural and modular innovation, have been hardly addressed in literature and managerial practice. The learning during implementation, that is adaptation cycles (Leonard-Barton, 1988), like the regulatory genes in evolutionary biology, has not been sufficiently noticed in management literature.
* The extensive interaction with the environment to create dissipative structures has hardly been elaborated in literature and managerial practice, only a few do (Mitleton-Kelly, 1997; Macintosh and MacLean, 1999).
Connecting the theories of Business Process Re-engineering and process innovation to evolutionary impact might yield more valuable theories than currently available; Clemons (1995, p. 70) proposes scenario analysis to meet the criterion of evolvability (which is the capability of foresight). The efforts taken into this direction require that companies integrate their redesign very well into the organizational structure. Process improvements come along with managing change in an organization (Marjanovic, 2000). Furthermore, it is mentioned that Business Process Re-engineering is often followed by Continuous Improvement efforts (Childe et al., 1994, p. 32).
This paper has presented a more complete model to describe evolution of companies. The description became more complete by integrating the concepts of fitness landscapes and Adaptive Dynamics into the intertwined cycles of the generation of variation and selection by the environment. This model extends beyond the more commonly used model of Campbell: variation, retention and selection. Especially, in technology and innovation management more research has been done into evolutionary approaches (e.g. Granstrand, 1998; Metcalfe et al., 2002). However, in these approaches radical change is often confused with positive feedback--that is, the emergence of market opportunities and niches--and instability (as present in the theory of Adaptive Dynamics). Hence, the implications of the reference model stretch beyond Business Process Re-engineering and kin, and the model could be used to understand patterns of change and evolution for organizations.
Outlook For New Models
Coulson-Thomas (1996, p. 20) remarks that the findings in his project suggest that many organizations have a clear preference for incremental and evolutionary change. Yet, only few models do account for incremental and evolutionary change, especially connecting Business Process Re-engineering efforts to the life-cycle of companies has got little attention (e.g. the well-known life-cycle model of Greiner (1998)); the follow-up of Business Process Re-engineering by continuous improvement indicates the necessity to integrate approaches, that way meeting both criteria of sustained fitness and evolvability. This research proposes to investigate models to connect organizational changes to the life cycle of companies, (5) for example, the design issues of the Delft School Approach.
Following this thought, integrated approaches are a keystone for effective Business Process Re-engineering efforts, yet integrative approaches are scarce. The research by Boer & During (2001, pp. 96-97, 100) on the implementation of the flexible manufacturing systems indicates the technical aspects of the innovation get most attention; in fact, the implementations are not merely the introduction of a new piece of equipment but require a techno-organizational innovation. Models should have been developed to connect improvements in business processes on the impact for the organization. Both the necessary integrative character of process improvements and the management of the dynamics of change will allow Business Process Re-engineering and related approaches to act as a change agent.
Additionally, it seems that systems theories have insufficiently addressed adaptation processes. For example, the systems theories of the Delft School Approach and the Soft Systems Methodology (Checkland, 1981) have directed their efforts to one-time analysis and design of the organization, ignoring the continuous adaptation cycles. No, this is not about Systems Dynamics, which directs itself at understanding the known dynamics in a certain product-market domain, like Ashayeri et al. (1998) do. For such fluctuations, in analogy to evolutionary biology, entities will find solutions (e.g. the variation in length of some species in response to long-term cyclical effects), as for example described by Lotka-Voltera dynamics. Rather, it is about addressing the continuously changing environment, emergence, order and chaos, for example, found in the science of complexity (Dekkers et al., 2004). The further research should stretch the notions beyond sometimes vague, rallying metaphors that yield at best new perspectives at known phenomena, as Wilson (1998, p. 88) captures the contribution of the science of complexity so far. Yet, it might improve the understanding of how companies evolve over time.
Both the archival research and the case studies, though limited in number, confirm that the development of companies might enfold at lower speeds than expected (also, driven by the failure rates of any type of process innovations), although both should be considered an initial study. This supports expectations when drawing analogies with evolutionary biological models. From the two criteria for evolutionary development, sustained fitness prevails the search for local optimization. On the long-run, both evolvability and sustained fitness should be met. Combining these requires different approaches than we are used to; mostly managing sustained fitness and evolvability are seen as two separate issues. The reference model also contains the concepts of developmental pathways, different from publications so far, and adaptive walks. In general, the methods of Business Process Re-engineering do not account for these evolutionary processes. In the evolutionary perspective, Business Process Re-engineering as a radical approach compares to specific macromutations and long jumps, both phenomenon having low rates of success in evolutionary biology that would explain the failure rates of Business Process Re-engineering and its kin. Additionally, it would also make us understand why many proponents of Business Process Re-engineering have opted for the more gradual approach of business process management and Knowledge Management. Yet, to increase the success rates of Business Process Re-engineering and its kin, methods should embrace the concept of evolutionary pathways to meet simultaneously the criteria of sustained fitness and evolvability. Within this context, if efforts are taken, they should preferably link to new or extended market opportunities. It is proposed to upgrade the methodology of the Delft School Approach to increase its effectiveness (the cases indicate that the successful implementation is similar to that of Business Process Re-engineering).
The author is indebted to the two anonymous reviewers for the helpful comments to complete this paper.
Received 2 November 2005
Accepted 10 April 2007
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Rob Dekkers *
Division Management and Business Economics, Business School, University of the West of Scotland, Paisley, UK
* Correspondence to: Rob Dekkers, Division Management and Business Economics, Business School, University of the West of Scotland, Paisley Campus, Paisley PA1 2BE, UK. E-mail: email@example.com
(1) Adaptation: biological process by which advantage is conferred on those organisms that have structures and functions enabling them to cope successfully with the conditions of the environment.
(2) The first edition appeared in 1975.
(3) Akin the socio-technical movement in the 1960's, especially the work of Emery and Trist (1972). Similarly, Emery & Trist as well as in 't Veld deploy systems theories as base for both describing and improving the organizational structure. Secondly, Emery & Trist (ibid, p. 293) use the terminology: differentiation and grouping to point to what in 't Veld (1998, pp. 283-292) calls the architecture of the organelle structure (grouping of resources into units, departments without considering the hierarchy).
(4) The capability for foresight resides within the individuals in an organization. They have the capability to create within that foresight (products, modifications of the organization etc.). Please note that this study does not look at analogies in structure but at analogies in laws, patterns.
(5) Growth in size and longevity are seen as key drivers for an individual organization since the work of Hannan and Freeman (1977). This notion induces the emphasis on the life cycle of organizations.
Table 1. Listing of hypotheses of the research and the relevant parameters for the archival research and cases studies Hypothesis Features A.1 Mutations Visible traits should change The organization maintains Product, market, performance its homeostasis through the Nearby local fitness peak introduction of small changes to present its phenotype, outer traits, to Gradual change of customers adapt to the dynamics of the base and requirements environment. It allows adaptation on smooth landscapes to increase its fitness A.2 State transition Dynamics of the environment In dynamic environments, Changes in competitiveness organizations should or industry increase their exchange Dissipative structure with the environment and Intense interaction create a dissipative structure with customers, suppliers through which new behaviour and structures arise B.1.A Adaptive walks Adaptive walks result An organization undertakes in increased fitness continuous adaptive walks Fitness of solutions in to increase its fitness in comparison to current the landscape it operates situation thereby taking the Landscapes characteristics characteristics of the (rugged, smooth) landscape into account. Developmental pathways These adaptive walks Accumulation of internal follow developmental changes pathways by which the Combining these into major fitness increases changes B.1.B Long jumps One-time interventions An organization exerts one-time Severe organizational changes interventions taking into account of processes, structures etc. the Hamming distance they exceed Hamming distance the differences necessary for New structure deviates much reaching a nearby adaptive peak from current operations in the landscape B.2.A Sustained fitness Small changes of phenotype The organization maintains its Product, market, performance homeostasis through the Reaching local fitness peak introduction of small changes Effect of changes to its phenotype, outer traits, Stability (at local fitness to find a local optimum. Through peak) or convergence gradual steps, it becomes (approaching) gradually harder to reach the local fitness peak B.2.B Evolvability Dispersal and invading A company moves into new New products, new markets adaptive zones either by Bifurcation deploying an appropriate Internal specialization strategy, dispersal and invading, or by bifurcation B.2.C Complexity error catastrophe Market An increasing number of Increasing number of competitors, mutations, competitors, of new products diversity in the product- Repositioning market combination(s) Strategy forces a company to reposition itself by choosing either to increase sustained fitness or to search for a nearby local fitness peak Table 2. Overview of authors and their findings Author(s) Study Findings Beatty (1992) Case studies of the Implementation of these implementation technologies requires a of CAD/CAM in skilled champion of change 10 companies management processes. Companies need a plan for integration. Cooperation necessary between departments Boer and Seven in-depth Introduction of FMS's During (2001) longitudinal case mostly considered as studies into process technical problem; innovation (FMS) manufacturing engineers and management dominated the implementation. Little involvement of other departments Lack of organizational adjustments that needed to be made. Adjustments difficult to manage Two in-depth case Sufficient attention to interview-based formal aspects (tasks, survey in a sample instructions, of 98 companies responsibilities, (TQM) authority), less on culture and leadership. Internal diffusion largely neglected Jarrar and Review of 79 cases Only 25% of BPR aims at Aspinwall of Business customer benefits. (1999) Process Re-engineering Successful organizations install continuous improvement after BPR. Results from BPR are rather poor Leiponen (1997) Comparative study Process innovation links between Finnish to better performance. On innovating and the long-run product non-innovating firms innovation should too Leonard-Barton Twelve in-depth case Implementation of new (1998) studies of new technologies is dynamic technology (large process of mutual corporations) adaptation between technology and environment. Adaptation cycles necessary Llorca (2002) About 2000 Spanish Process innovation has firms on productivity biggest influence on firms' productivity McGahan and Analysis of U.S. patent General level of patent Silverman activity 1981-1994 activity is not lower in (2001) mature industries than in emerging industries. No evidence fro shift from product to process innovation Romanelli and Investigation of Organizational Tushman (1994) 25 minicomputer transformations occur in manufacturers short, discontinuous bursts Tyre and Three case studies of Ongoing adaptation is an Orlikowski manufacturing and important success factor (1993) service organizations for implementing and using adapting new new technologies. More technology (U.S. and experience, more relying Europe). on established routines Comparative study and habits with Japanese practices Episodic cycles of change and stability might benefit the introduction of new technologies Yung and Chan Case of small Business Process (2001) manufacturer Re-engineering most (Hong Kong) effective when linked to external opportunities Relation to reference Evidence for refined Author(s) model hypotheses Beatty (1992) The stressing of the integrative character of process innovations Boer and Necessity of During (2001) integration points to developmental pathways to be followed Resembles concepts Opposes B.1.B: of epigenetic and organizational changes regulatory genes difficult to manage connected to developmental pathways Jarrar and Adaptive walks Supports B.2.B: BPR Aspinwall undertaken by changes efforts have most chances (1999) in phenotype necessity when linked to external opportunities Leiponen (1997) Process innovation Supports B.2.A: Process links to sustained innovation contributes to fitness, and product firm's performance innovation to evolvability Leonard-Barton Refers to concept of Supports B.1.A: increased (1998) adaptive walks and fitness through developmental pathways developmental pathways can be applied to both sustained fitness and evolvability Llorca (2002) Process innovation linked to sustained fitness McGahan and Equal attention for Silverman both product and (2001) process innovation indicated integrative character of innovation Romanelli and Model of punctuated Supports B.1.B: punctuated Tushman (1994) equilibrium for equilibrium indicates long individual jumps organizations Tyre and Points to managing both Supports B.1.A: increased Orlikowski sustained fitness and fitness through (1993) evolvability. Ongoing developmental pathways adaptation is a continuous process Although presented as discontinuous, adaptation is continuous Yung and Chan Adaptive walks Supports B.2.B: BPR (2001) undertaken by changes efforts have most chances in phenotype necessary when linked to external opportunities The last two columns relate the findings to the reference model and the hypotheses. Table 3. Overview of key date from the case studies Company AgriCo EngOf Main business area Agricultural Power technology equipment and Process Automation Customer Seasonal sales, Fixed-price contracts requirements price-oriented market, quick delivery Bottle-neck Levels of inventory Increase of of final products, engineering hours reconfiguration of despite investments completed products in IT Tools Problem statement of Reduce levels of Evaluation of IT case study inventory (of Tools finished products) Solution Change of order Generic method for entry point. evaluation of Assembly in docks. software tools for Production control integrated working. Modifications of software Implementation No No of solution Modifications Current challenges Reduce stock levels Company TooIt PlastiCo Main business area Electric power Engineering tools (DIY) thermoplastics Customer Competitive Delivery on order requirements quality/price Bottle-neck Disruption in Logistics dispute production due to handling system changes of products due to change of and processes delivery system Problem statement of Processes for control Evaluate and design case study of changes in logistics dispute production handling system Solution Change process Control processes management for dispute handling. model Organizational structure Implementation Yes Yes of solution Modifications Minor (adjustments) Minor (integration into software) Current challenges Shift from projects Competitive industry to process management Company Blue Sky Compult Main business area Airline Medical equipment, test solutions, software Customer Adherence to Customer demands, requirements flight schedule customer orientation Bottle-neck Disruptions Internal focus on during execution innovation, no of flight schedule, assessment of maintaining customer demands efficiency Problem statement of Minimize disruptions Implement customer case study and reduce adverse relationships interventions management Solution Spare capacity. CRM-model. Monitoring of Introduction of relevant process team working parameters Implementation ? ? of solution Modifications ? ? Current challenges Efficiency ? Table 4. Findings of the case studies related to the hypotheses Hypothesis AgriCo EngOf A.1 Mutations No new products, Shift in request for markets. Performance projects by customers improvement in price (lump sum--turn and delivery; key); increased will increase competitiveness. (Yes) competitiveness. (No) A.2 State Ongoing competition, Reduced interaction transition continuous pressure on with customer. (No) price and delivery time. (No) B.1.A Adaptive Complexity of products Proposal supports walks increases. Proposed required working solution will increase methods. Actually, no fitness. Management changes happen in policy will not. working methods. Slowly changing, Changing and rugged landscape. (No) uncorrelated landscape. (No) B.1.B Long No severe Intended integration jumps intervention, more of management, control of capacity processes, tools, allocation needed. people. Factually, no Management proposal change taking place. has more profound (No) effects on organization but limited reach. (No) B.2.A Sustained Performance will Managing of deadline fitness improve: reliability and integral of delivery and performance of higher flexibility. product. Proposal Convergence. (Yes) should contribute to increased performance, affects only partial processes. Convergence. (Yes) 13.2.13 Evolvability Customers buy Address different according to price and market needs, fast delivery; fierce but no different competition. (No) product-market combination as such. (No) B.2.C Complexity Companies launch To address market error catastrophe regularly new needs. (No) products. (No) Hypothesis Toollt PlasrtiCo A.1 Mutations Continuous Quality performance. introduction of new Reliability of products (variants). performance. Customer Increased product orientation becomes flexibility. (Yes) more important. (No) A.2 State Competition for retail (No) transition outlets. (No) B.1.A Adaptive Proposal increases Better performance walks productivity but does (quality and not increase fitness delivery). Delivery as such. Rugged becomes bottle-neck landscape. (No) after quality drive. Smooth landscape. (Yes) B.1.B Long Fits into current Fits into current jumps organizational organizational routines. (No) routines. (No) B.2.A Sustained Product flexibility Quality of fitness increases. Increased performance. productivity for Reliability of creating product delivery. Decrease of flexibility. disputes. Convergence Stability. (Yes) towards optimal points. (Yes) 13.2.13 Evolvability Easing the existing (No) stream of products; does not create new markets or products. (No) B.2.C Complexity Regular introduction Clients request new error catastrophe of new products. (Yes) products tailored to specifications. (No) Hypothesis Blue Sky Compult A.1 Mutations Better performance Coherent approach expected at lower necessary towards prices. Customer clients. (No) orientation becomes more important. Not implemented. (No) A.2 State Increased Fierce competition. transition competition. (No) Defining needs of clients necessary. (No) B.1.A Adaptive Better performance Increased sales walks needed. Financial performance. orientation hinders Proposed solution improvements. should contribute. Gradual changes (Yes) were not effective. Rugged and correlated landscape. (No) B.1.B Long Orientation on more Availability of jumps flights rather than information. (No) resource utilization. (No) B.2.A Sustained Better performance Coherent approach fitness for lower prices necessary towards expected. Increase clients. Increase of of reliability of effectiveness towards flight schedule. customers. (Yes) Convergence. (Yes) 13.2.13 Evolvability (No) Introduction of products. Defining needs of clients. Does not yield directly new products. (No) B.2.C Complexity Niche market operators Streams of new error catastrophe appear; fierce products. (Yes) competition on price and routing. Mergers happen also. (Yes)
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