1. PART A - Introduction

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 systems 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

come 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 resources ( 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, Six 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 availability of sufficient relevant academic research to enable a well informed

critique.

2. The Lean approach to business process innovationLean strives to make organisations more competitive in the market by increasing efficiency

and decreasing costs incurred. This is achieved through the elimination of non value-adding

steps/activities from the business processes (Naslund 2008). Cycle times are reduced by

increasing the velocity of the process by reducing waste (overproduction, 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 culture.

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

1

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 the

critical success factors are in order of importance leadership, finance, organisational culture

and expertise. Stuart and Boyle (2007), in a study of 18 Canadian SMEs, found that early

implementation and a high intensity of effort are critical to success. The use of Lean

techniques alone does not in itself constitute being a Lean organisation and this study found

that few participants implement true Lean thinking. In many cases participants continued to

examine Lean improvement initiatives against some form of standard payback or Return 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 Lean implementation. Antony (2011) finds

that the 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, claim 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 methodology or agreed framework 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 badly trained in the principles of Lean (ibid Antony

2011). Bhasin and Burcher (ibid 2006) found that the Lean philosophy was correctly

implemented in only 10% of projects. Antony (ibid 2011) also notes loss of momentum at the

critical early stages as normally companies start with a value stream mapping (VSM)

programme and spend endless time in developing rigorous VSMs without progressing

to Future Stream maps.

2

Practicality of Objectives: Lean in its truest sense may 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 the 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, while 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 fundamental 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 process innovation

According to Naslund (2008) the purpose of Six Sigma 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

process opportunities). This is achieved by focusing on the process outputs which are critical

in the eyes of customers (Antony 2011). The Six Sigma’s DMAIC (define, measure,

analyse ,improve, and control) project methodology is particularly effective for

manufacturing (Bendell 2006). McAdam and Hazlett (2010) state that some writers claim that

Six Sigma has started to develop beyond that of a technology based statistical process

approach towards that of a broader change management 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.

3

3.1 Six Sigma Implementation within SMEs

Kumar and Antony (2008), 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 found to be in order of importance management involvement and

commitment, communication, linkage of quality improvement to employees, cultural change

and education 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) there is very little evidence of

success of Six Sigma in SMEs context. The requirement of Six Sigma to document standards

of operation in quality systems such as ISO 9000 preclude many SMEs due to the costs and

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

3.2 Critical 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 involving 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: Six Sigma 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 objectives can lack consideration of human

factors and fail to have a clear linkage to the strategic objectives (ibid Moosa and Sajid

2010).

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Basis for project selection: According to Bendell and Marra (2002) while GE, one of the

main proponents of Six Sigma, identifies 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 only works

in certain environments and certain industries.

4. The Business Process Management (BPM) approach to business

process innovation

BPM is a general methodology that supports the design, 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 satisfaction, and

employee involvement thereby reducing 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 Tools may be found

in Appendix 3.

4.1 BPM implementation within SMEs

To date BPM initiatives have been concentrated in large, well funded organisations. In the

SME population BPM 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

5

factors to BPM project success in all company types. According to Chong (2007) the major

factors inhibiting implementation of BPM initiatives in SMEs 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 can be

grouped under the following headings.

4.2.1 Ease of application: This depends on the degree of BPM being considered, from to

reengineering an entire plant. Serious problems can arise with the inability to translate

business models into information (workflow) models precisely and without ambiguity

(Bosilj-Vuksic 2006). According to Ravesteyn and Batenburg (2010) when implementing

BPM projects aligning third party software tools to the organisation’s strategy, 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 in some companies a performance KPI dashboard takes the financial ratios and statistics

found on old reports and places them on the dashboard. However this does not deliver on the

true objectives of any BPM project, to 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 project 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, most 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

6

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 Process

Management

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

implementations

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

(George 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

7

consulting services

with lower

incidence in the

healthcare sector.

itself highly effective in

successful

implementations in

terms of delivering cost

savings and, increased

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 organisation

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

(continuous improvement)

8

Aligning the

business processes to

realise the

organization's goals

Data 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 threat 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 Process flow with

minimum Waste

Process flow with

minimum Variation

Expected results

post

implementation

on company

processes

A focus 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 processes

Minimal defects in the

outputs of processes,

Six Sigma is about

precision and accuracy

Prime driver

according to the

methodology

Business strategy Operational efficiency Quality control

Approach and

knowledge

management

(KM)

Potential to

improve KM

however has the

potential to

undermine

absorptive capacity

Potential to improve

KM however has the

potential to undermine

absorptive capacity

depending on the

degree of success of

Potential to improve

KM in respect of

process however has the

potential to undermine

absorptive capacity

9

depending on the

nature of the

project

implementation of the

philosophy

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

“Foundations 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 Toyota.

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

Implementation

horizon

Can be

implemented in a

modular manner

Is a long term

companywide

commitment

Is a long term approach

Contribution to

an innovation

Moderate when

implemented with

High when culture

aspects are correctly

Low, are data driven

methods focussed

10

culture knowledge

management

processes.

implemented and

projects do not lead to

excessive downsizing.

predominantly on

solving process

problems.

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 discussion of BPI needs to

address Change Management due to the impact that human factors have on the success or

failure of such initiatives. Kotter (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 steps 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. The

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,

business rules and employees and may be both tacit and explicit. Nonaka and Umemoto

(1996) focuses 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)

underpins the absorptive capacity model of how a firm embeds the dynamic capability

11

relating to knowledge creation and utilisation that enhances a firm's ability to gain and sustain

a competitive advantage.

Zahra and George (2002) the Absorptive Capacity model whereby a series of indicators can

be use to evaluate each element of absorptive capacity comprising 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 assimilated 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 influence 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 companies 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 systems 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

organisational routines which play a key role in encoding organisational knowledge; this in

turn contributes to the knowledge creation process. The intentional improvement to business

processes creates new organisational knowledge which must be captured (Linderman 2010).

However according to Bosilj-Vuksic (2006) an approach that explicitly integrates knowledge

management activities into the business process environment is still missing. The continued

development of BPI and KM software tools should enable the transformation of the integral

business processes 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. It is also clear that KM

and change management are key to the success of any BPI initiative. The paper will now

12

move to examining the application of one of the BPI approaches, the BPM approach, to

Novara Technology Limited. When it came to choice 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 the firm.

9. PART B - Introduction to Novara Technology Limited

Novara Technology Limited was a provider of web hosting and data centre services to excess

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

listed Eco Securities). Surveys carried out by the company found high levels of customer

satisfaction. In 2005 Novara acquired the business of Tornado Hosting in order to

complement their data centre services offering.

Novara was majority owned 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 automation

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 operation of the process systems(a combination of humans 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

operated in a highly competitive market where an approximation of perfect competition

existed. Therefore the capability to successfully innovate was critical to survival.

10. The Objectives of PART BIn 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

13

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 (“Don’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 the 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 the customer base of a

prior business Stage 1 (Existence) was bypassed.

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 their contribution to the creation of an innovation

culture identified.

10.6 Sophistication of Absorptive Capacity: The 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.

14

10.7 Installation of Knowledge Management: According to Tidd and Bessant (2007)

managing 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

accompany 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 there is increasing evidence that BPI projects can be successfully implemented in

SMEs outside the manufacturing sector, all 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 methodologies 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 some argue that

Six Sigma and Lean 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 as being influenced by the organisation’s and

individual’s aspirations and perceptions (Bendell 2006).

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 more 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.

15

Part B of this paper has found that the 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 maintaining its competitive

advantage in a very competitive industry. When Novara commenced it was in eight position

and charging the same price as the number two in the market (Irish Domains) for key

services. Over the period of the intervening years both companies continued to match each

other’s prices however Irish Domains fell to 6th while Novara rose to 2nd position in the

market.

16

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APPENDIX 1

Basic principles, concepts and tools of Lean

Womack and Jones (1996) identify five key principles of the Lean 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 include:

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

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.

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According to George (2003) the improvement efforts in Lean implementations should

concentrate on WIP first as this only costs intellectual capital to reduce WIP whereas it takes

the investment of capital or payroll to increase the average completion rate. George (ibid

2003) suggests that what lean teaches is that one can only speed up process time by

controlling and prioritising (on the basis of parameters 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

manufacturing 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, labour or production 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 training are key elements of kaizen and these concepts can aid in the change process. For

more information please see McAdam et al., 2000.

Kanban: Kanban is a simple parts-movement system that depends on cards and

boxes/containers to take parts from one workstation 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.

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Lean Performance 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.

Value Stream Mapping (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 the quality of products and processes.

APPENDIX 2

Basic principles, concepts and tools of Six Sigma

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-act

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):

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Y=f(X1,X2,X3,……)

According to Bendell (ibid 2006) 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 through 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. Benchmarking 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

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

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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. Check 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 of 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

between the activities are also defined. In run-time, build-time process models are interpreted

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

computerised flow of a business process is called workflow.

Common BPM Tools

According to Bosilj-Vuksic (2006) the most important influences from the business domain

in terms of tools are total quality management (TQM) and business process reengineering

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(BPR), Workflow Management (WFM) systems, XML business process languages and ERP

solutions.

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 is nothing fundamentally new in Six Sigma. 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 frequently included under the Lean

production umbrella have been in use for decades whereas in 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 2006) 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” thinking, creativity and innovation can contribute greatly to successful Six

Sigma and Lean implementation. Linderman (2010) finds that some implementations focus

primarily on the process-improvement technique without paying sufficient attention to the

infrastructure (social support and technical support).

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 needed 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.

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Unity of approach in implementations: All 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 Sigma 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 approaches to provide a single and highly effective strategy 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

companies 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 development 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 identified, 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 Sigma 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 critical of the US approach to business management

and he was an advocate of worker participation in decision making).

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 departmental boundaries however Naslund (2008)

finds that most organisations approach these change methods in a functional, operational

26

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 approaches 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 competition. 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 onto 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.

Step Three: Create a Vision for Change: A clear vision can help everyone 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 create 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

27

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 than 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 Change: 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: Finally, 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 operational 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.

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. Also 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.

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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

Costello

APPENDIX 8

THE REMAINDER OF THIS DOCUMENT REMOVED FOR COMMERCIAL REASONS

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