digitalization and bpm- a new look at business process management · digitalization and bpm-a new...
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Digitalization and BPM-A new look at business process management
17th Int. Conf. on Business Process Management3.9.2019 Vienna
Kalle Lyytinen
Distinguished University Professor
Iris s. Wolstein Professor of Management Design
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Value creation difference
Did
the process
Improvement
make
the
Difference?
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Industrial difference
How
much
does
The
Process
Design
Contribute
to such
change?
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Digititalization
The process of encoding information and rules for manipulating information into digital form (digitizing) and its deep embedding this into organizational contexts
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Digitizing work
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digitizing tools and outcomes
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digitizing time & space
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Digitizingrelationships
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digitizing products
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digitizing products as services
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Stru
ctu
re
Leading Swedish Newspaper
Digitizing business
processes
Digitizing
products
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Swedish Newspaper- three waves of digitizing
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We are at turning point?because of the shift in the locus of
innovation and because some of
our core organizing axioms may be
challenged or fundamentally
changed by the digital revolution,
the nature of innovation and
organizational scholarship may be
at a transition point (Brenner and
Tushman 2015 p. 2).
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Classic Industrial Firm Value Model
pu
rch
ase
producer
user
Value Exchange as Transaction
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Creates a need to optimizing and integrating the value chain
(scale and scopeeconomics)
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The Origins of Process Management
Henry Ford
Automation of work flow
by material means
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The origins of process management
Decomposition,
Measurement and reduction
of variance
Optimization of work flow
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Origins of Process management
Operations research models and use of
Analytic techniques to solve operational
Problems (WWII)
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(From Brad Wheeler, Indiana University)
Computing Power
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http://www.storage.ibm.com/technolo/grochows/221.htm
Storage /Cost Capacity
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Integration and scaling of two technologies (70s)
Integrate Data Bases to record
and manage process and product data
Process Rules as software
Encode and glue together related
activities
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Full blown Process Management(90s)
Full blown integration
of all aspects of work flow and
Its monitoring
Scaling and scoping of process
flows
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Logic of Business Process Management
• Incremental / obliterating process design and optimization using WFMSs
• Exploit and monitor firm resources (control variance, fixed/variable task, optimize resources)
• Radical improvements in process execution and integration at intra and inter-firm levels (value chain)
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Management: Routines
Max Weber: Bureaucracy and rules determine legitimate
responses to environment
Trist & Emery: STS enable both variance enhancement
and reduction depending on the environment-
Work system needs to learn and adapt, including change
of its rule systems
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Firm as Organized Routines
March and Simon: Organizations a nexus of evolving routines
that provide responses to environmental stimuli;
Routines evolve as profiles of environmental stimuli change
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Routines
Nelson and Winter: Organizations evolve as their nexus of routines
change through variance, selection and retention
The rate and direction of the process depends on the
interactions between the environment and the firm’s routinized
Responses (individual / organizational level responses)
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Micro-Level: RoutinesLatour: Practices abstract, generalized patterns (ostensive)
which are situationally performed (performative)
Pentland and Feldman: Routines as ostensive and
performative
Ostensive routines as maps, performances the landscape
(leads to N-K type of searches)
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Routines
• Multiple logics and goals, enable coordination and varying responses to the environment
• Critical element of the structural axis of organizing
• Routines are not things (to be just modelled and fixed), evolve constantly and over time
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Summary
• Two approaches form distinct, partially overlapping, explanation for ‘structuring’ organized activity over time
• BPM- machine, computational metaphor
M S
• Routines: social, biological and systems metaphors
SM
Can they be reconciled?
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Digital Intensity and Routines
Digital Intensity: The degree to which activities are digitally
supported and to what extent there are no alternatives for
carrying out the ask
Digital technology an internal element
changing the substance, order, or form of
routines
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Broad Question:
How does a change in digital intensity affect the form and substance of routines?
Configural variation –composition?Sequential variation- ordering?
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Effects of Digital Technology• Different Organizations?
• Different / Similar Organizational Structure?
• Different / Similar Environment?
• Different characteristics of the persons or teams?
• Are routines shaped more by the external environment (technology) or by internal features of the organization?
• “…answers to these questions seem a long way off at the moment… “
(Pentland et al. 2009).
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Composition of RoutinesConfigural variety of (Sociotechnical) Routine:
Actor: Designer X
Activity: Generate
Goal: Design
Tool: Synopsis
Affordance: Create&Analyze
Dataflow: Constraints, RTL; Physical Layout
Location: Co-located
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34
Actor Configuration
Activity Location
Activity Type
Affordance
Tool Modality
Data flow
Object Type
Diagram Notation for Process Analysis
Unit of Analysis: Routine
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Typical work flow in a large system
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Composition of Routines
36
E1 E3 E4 E5 E6 E7E2Elements
E1 E3 E4 E5 E6 E7E2Routine
e.g., place order
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2Meta-routine 1
e.g., POS Transaction
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2Meta-routine 2e.g., Handle customer
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
Meta-routine 3e.g., Process Queue
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Variation among Digitally-enabled Design Routines
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2 E1 E3 E4 E5 E6 E7E2
E1 E3 E4 E5 E6 E7E2E1 E3 E4 E5 E6 E7E2
E6
E4
E4
E4
E1 E3 E4 E6E2
E5
E5
E5
E5
E7
E7
E7
E7
E7
Compare
“Align”
Complex routine
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Clustering of routine components
Two chip design processes using different digital tools with the same task
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Routines vary less within an organization than across organizations
*All p-values for pairwise comparisons are < 0.001
39
Alpha Beta Delta Gamma
Alpha 34%
Beta 47% 33%
Delta 44% 48% 40%
Gamma 46% 48% 43% 31%
Supported:
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Digital Intensity Configural Variation
Supported:-0.258 (t=-12.829,
R2=0.06, p<0.001;
n=623)
Digital Intensity
Variety
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Dynamic analysis
Organization (Type) Beta first half Beta second half ChangeAlpha (Stable Hierarchical) -0.202 -0.109 WeakenedBeta (Stable Networked) 0.612* -0.265 FlippedDelta (Dynamic Networked) -0.869*** -0.962** StrengthenedGamma (Dynamic Hierarchical) -0.513* 0.451 Flipped
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•In general, digital intensity reduces
configural variety in routines
•Organizations predict more
configural variety
•Less variation with increasingly
centralized organizational contexts.
•Volatile environments have less
design routine variation
More Centralized
Less Centralized
Less Volatile
Stable Hierarchical
Stable Networked
More Volatile
Dynamic Hierarchical
Dynamic Networked
Main conclusions
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43 Sequential Variety: First order Markov Chains (This is for one site, but can be statistically compared to multiple
other sites for structural/transitory equivalence.)
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Complex Iterative structures-3 waterfall projects (Thummadi &
Lyytinen, 2019)
NN
RR
EE
.8 .2
.980.004
.95
.025.008
.025
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Digitalization and the evolution of routines
Study of 10 year implementation of Financial
System in NASA
Routines adapted dynamically
to adjust to external shocks created by
introduction by IT systems
Alignment is never ‘complete’ but routines
Act as shock absorbers to integrate
Work flow to organization and vice versa
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46
Rate of Change Decreases over Time
2007 2008 2009 201150% 47% 44%
Digitization and evolution of routines (Gaskin et al 2013)
*Context: Virtual design of complex buildings (like hospitals)
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Summary• Implementing workflow systems change organizational routines
• Change is not automatic and predictable
• Change happens in the substance, form and order of activities
• Generally reduces configurational variation (stasis)
• Effect on sequential variation less predictable and relates to types of systems (strict ordering of activities)- Harem and Pentland (2010) no effect of workflow structuring in accounting activities
• Digitization initially increases variation but the rate of change decreases over time
• Routine structures and their order are reasonable predictors for performance (Lindberg et al 2016)
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Routine Evolution as a response digitalization tensions and
opportunities
Master
Internal production and innovation logic
Advant
Supply-chain production logic, internal innovation logic
Aspect integrator
Supply-chain based production logic and innovation logic
800xA
Platform ecosystem production and innovation logics
ABB
Product
platform
Platform
ecosystem
Re-structuring
Augmentation
OpeningInternal work flow
Internal and
external workflow
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Automation and workflow efficiency forms an element of a broaderbusiness model change
Routine transformation is complementary not substitute of business model change
Digitalization and routines
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Amazon (1998-2010)
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Amazon (1995-2018)
Reuse and
Expansion
of Digital
Assets
Innovate
with business
models
Business
process
Business
Model shift
Business
Model expansion
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Amazon: work flow
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New value (co-)creation process
sig
ns &
sym
bols
pu
rch
ase
producer
user
Value co-creation
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Value Creation Logic
Configuration Logic
Expansion, Push
Alignment, Pull
Business System DesignValue System Design
Digital Design Space
Constant alignment of design-solution pairsBPM sits here
Business model
Innovation sits here
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(R) Evolutionary
Change that covers
Business models
Interactions and capabilities to
reconfigure resources through
work flow design
Design for experience (in
Work flow)
Emerging technologies such
as AI and block-chain form
the new frontier of routine
Change and associated
management of work flow