Advances in Information Systems and Business Engineering

Transcription

1 Advances in Information Systems and Business Engineering Edited by U. Baumöl, Hagen, Germany J. vom Brocke, Vaduz, Fürstentum Liechtenstein R. Jung, St. Gallen, Switzerland

2 The series presents current research findings based on diverse research methods at the interface between information systems research, computer science, and management science. The publications in this series aim at practical concepts, models, methods, but also theories which address the role of information systems in the innovative design and sustainable development of organizations. Contributions are selected which on the one hand propose innovative approaches how modern information and communication technologies can enable new business models. On the other hand, contributions are eligible which present considerable improvements to existing solutions. The publications are characterized by a holistic approach. They account for the socio-technical nature of work-systems and suggest that the development and implementation of information systems need to consider the multifaceted organizational context driven by people, tasks, and technology. Edited by Prof. Dr. Ulrike Baumöl FernUniversität Hagen, Germany Prof. Dr. Reinhard Jung, Universität St. Gallen, Switzerland Prof. Dr. Jan vom Brocke Universität Liechtenstein, Vaduz, Fürstentum Liechtenstein

3 Tor Tønnessen Managing Process Innovation through Exploitation and Exploration A Study on Combining TQM and BPR in the Norwegian Industry

4 Tor Tønnessen Center for Industrial Production Aalborg University, Denmark Dissertation, Center for Industrial Production, Department of Business and Management, Aalborg University, Denmark, 2012 ISBN DOI / ISBN (ebook) The Deutsche Nationalbibliothek lists this publication in the Deutsche Nationalbibliografie; detailed bibliographic data are available in the Internet at Library of Congress Control Number: Springer Gabler Springer Fachmedien Wiesbaden 2014 This work is subject to copyright. All rights are reserved by the Publisher, whether the whole or part of the material is concerned, specifically the rights of translation, reprinting, reuse of illustrations, recitation, broadcasting, reproduction on microfilms or in any other physical way, and transmission or information storage and retrieval, electronic adaptation, computer software, or by similar or dissimilar methodology now known or hereafter developed. Exempted from this legal reservation are brief excerpts in connection with reviews or scholarly analysis or material supplied specifically for the purpose of being entered and executed on a computer system, for exclusive use by the purchaser of the work. Duplication of this publication or parts thereof is permitted only under the provisions of the Copyright Law of the Publisher s location, in its current version, and permission for use must always be obtained from Springer. Permissions for use may be obtained through RightsLink at the Copyright Clearance Center. Violations are liable to prosecution under the respective Copyright Law. The use of general descriptive names, registered names, trademarks, service marks, etc. in this publication does not imply, even in the absence of a specific statement, that such names are exempt from the relevant protective laws and regulations and therefore free for general use. While the advice and information in this book are believed to be true and accurate at the date of publication, neither the authors nor the editors nor the publisher can accept any legal responsibility for any errors or omissions that may be made. The publisher makes no warranty, express or implied, with respect to the material contained herein. Printed on acid-free paper Springer Gabler is a brand of Springer DE. Springer DE is part of Springer Science+Business Media.

5 Preface and Acknowledgements Managing processes is important for driving enterprise performance. In order to stay efficient companies need to improve their business processes on a continuous basis. To ensure competitive edge companies need to change radically when new business opportunities occur and when external demands change. Exploitation is about continuous improvement of the existing. Exploration is about radical change. Companies need to do both. However, experience and research show that companies have difficulties managing exploitation and exploration in the same system at the same time. Why is this so difficult, and how can the two development logics be integrated in a mutually supportive manner? This is theme of the book. To operationalize exploitation in an industrial setting, I use TQM as an approach to continuous process improvement. To operationalize exploration I use BPR as an approach to radical process change. The question of how to integrate the business development approaches that the quality movement and BPR represent is an important enabling factor in the further development and success of other current and actual change concepts such as Business Process Management (BPM). The book contributes to the understanding of the challenges of this integration and ways to accomplish it. The point of departure for the book is my PhD study at Center for Industrial Production at the University of Aalborg and case study research in Norwegian industry. Many people have given their contributions to this book. First of all I thank my PhD advisor Professor Dr. Harry Boer for all his good comments, discussions, encouraging support, patience and guidance. His approach to Continuous Innovation made me see how many business development puzzles can fit together into an adequate way. I thank Associate Professor Dr. Bjørge Laugen for important contributions in discussions about theoretical and methodical issues, and for having given me quick and good comments along the way. My colleagues for many years, Professor Dr. Tor Claussen, Dr. Trond Haga, Senior Advisor Ove Gandrud and Senior Advisor Rolf Sjursen have contributed in important ways to develop my skills as a researcher and to widening of my theoretical perspectives. Many years of close cooperation with Pål Lynne Hansen from LO has made me see the importance of employee participation in change. I thank my case companies, Aker Stord, Serigstad and Titania for opening their doors to my research. I also thank my former employer IRIS for the opportunity to start up and carry out the work with my PhD, and my present employer Statoil for the opportunity to finish it. Dr. Sturle Næss at Statoil has supported me refining and clarifying my theoretical discussions and contributions. I thank Professor Dr. Jan vom Brocke for important contributions to the process of transforming my PhD thesis into a book. Finally, I thank my wife Sigrunn and my children Espen, Marianne and Ellen for their patience with a husband and father who spent too many hours at the computer the last years. Stavanger Tor Tønnessen

6 Résumé Maintaining an appropriate balance between exploration and exploitation is a primary factor in system survival and prosperity (March 1991:71). Both exploration for new possibilities and exploitation of the existing are necessary development strategies for organizations to survive and prosper (March 1991). According to March, this balancing is not easy, and the two strategies compete for scarce resources as a trade-off. In other words, they are considered mostly antithetical, where investing more resources in one of these development strategies may result in having less to invest in the other. This way of balancing can be accomplished by separating the two in time, at organization levels or by departments (Volberda 1998). Lately, some scholars have questioned whether March s theory of balancing the two mostly as a trade-off is always correct, and argue for a synergistic approach as a better alternative in many situations (Sutcliffe et al. 2000, Cole 2002, Boer & Gertsen 2003, Osri et al. 2005, Boer et al. 2006, Greve 2007, Isobe et al. 2007, Un 2007). More empirical research and evidence are needed to give insight into and further develop the theory on the balancing of exploitation and exploration (Sutcliffe et al. 2000, Cole 2002, Oshri et al. 2004, Boer et al. 2006, Andriopoulus & Lewis 2009, Fang et al. 2010, Raisch et al. 2010). My research contributes to current knowledge through exploratory empirical research. In order to make the theoretical constructs exploitation and exploration operational in an industrial setting, and to discuss and further develop March s balancing theory, I have chosen to use two business development concepts to represent forms of exploitation and exploration: Total Quality Management TQM (Deming 1986, Juran 1989) and Business Process Reengineering BPR (Hammer & Champy 1993), respectively. TQM and BPR have a strong influence on the way in which organizational development and the striving for business excellence are being carried out in Norway. In particular was this very visible in the decade before the turn of the century (Røvik 1998, Rolfsen 2000, Neerland 2000, Moltu 2000). TQM and the quality movement is very much associated with continuous incremental improvement. It is important to keep costs and production under control, and to eliminate mistakes and reduce variability and other elements related to the idea of exploitation (March 1991). BPR is associated with radical change. As the name indicates it focuses on processes, like TQM does as well. However, it is not continuous incremental process improvement that is in focus. It is thinking fundamentally new, seeing things in new ways and searching for dramatic changes, new possibilities and other aspects related to March s idea of exploration. Even if processes are in focus, the goal and the outcomes of change processes can also be radically and dramatically directed towards other innovation areas such as technology, markets, raw materials and organization. I use BPR to represent explorative process innovation.

7 VIII Résumé The specific setting that I am referring to is Norwegian industry. Prevailing management traditions and concepts of business excellence are international and have been developed elsewhere within other industrial traditions. Norwegian companies are being exposed to these international concepts and use them to achieve business excellence and innovation. A challenge both from an academic as well as a managerial perspective is to see whether these international management concepts can be combined synergistically. Where do TQM and BPR conflict? What do they have in common? Do we have to choose between them, or can they work in a reciprocally reinforcing manner to increase companies innovation capability? If adjustments are needed, what kinds of adjustments and what enabling factors seem to be important? My specific contribution is to propose theory on the balancing of these two concepts. Over the last two decades, these two approaches to process improvement have gradually merged and constitute important elements in Business Process Management (BPM). BPM is a concept for managing business performance by managing end-to-end business processes for successful enterprise performance (Hammer 2010). Consequently, BPM can be considered as one approach to the integration of forms of exploitation and exploration. This book contributes with insight in the challenges of integrating TQM and BPR, provides examples of how to do it and with knowledge of enabling factors. Managing the integration of the kinds of approaches that the quality movement and BPR represent is decisive for successful BPM, which is still in its infancy (Hammer 2010). My research is part of the two Norwegian national research programs Business Development 2000 and Value Creation These two programs are action research programs, and have been the most comprehensive research efforts related to combining international management concepts and Norwegian industrial traditions over the last decades. Through my involvement in these two research programs, I have facilitated and participated in development processes in a large number of individual companies and in companies cooperating in networks. The exploratory research reported here is based on three of those projects, one of which is best characterized as a longitudinal case study, while the other two are forms of action research. In the longitudinal case study I describe and analyze a company s efforts to combine TQM and BPR into one development process. Various methods of data gathering have been used, such as observations, field notes, interviews, reports from meetings and company conferences, analysis of documents from the participating companies and statistics. The results from the case study are discussed in relation to and compared with the results from a national survey on quality management that was carried out together with the University of Stavanger and Norsk Forening for Kvalitet og Ledelse NFKL (Norwegian Association for Quality and Management). TQM and BPR are analyzed in relation to where and how they conflict with and/or support each other. After having identified conflicting and reciprocally supporting elements, I will

8 Résumé IX present my efforts to combine these two management concepts into one approach in Norwegian industrial context. An important question is whether this kind of combination in the same system is advisable. And if so, what further developments of TQM and BPR practices are necessary in order to promote both incremental and radical innovations, and which enabling factors seem to be important? How can this contribute to the further development of the theory of exploitation and exploration? Thus, my research objective is to contribute to the further development of the theory of exploitation and exploration through proposing theory on the balancing of TQM and BPR. More specifically, my research question is: Can TQM and BPR be combined synergistically, if so, how? After having discussed and presented my approach, I will give examples of the kinds of change techniques and methodologies that I believe are needed to pursue a new approach to combining characteristics of TQM and BPR synergistically. I will try out some steps towards this new approach and also show the practical use of what I regard as the most important elemens and change techniques. Two of the new techniques that I developed to pursue my approach will be discussed and analyzed in detail. The Enterprise Development Conference is a technique for enabling employee participation in higher-level strategy discussions and innovation. This will be followed by a presentation and discussion of a technique that I have developed to strengthen employee participation in process innovation, the Actor-Process Diagram. These two techniques and my approach to combining TQM and BPR synergistically are tested through action research. The results from the action research projects are presented and discussed in relation to theory. My main findings are that exploitation capability can support exploration capability, and thereby support exploration, and that TQM and BPR can work reciprocally supportive in the same development process. An industrial democracy (ID) context and a strong management commitment seem to be important enabling factors, and support the synergistic combination of characteristics of exploitation and exploration, thereby promoting both incremental and radical innovations in the same system at the same time. Thus, March s (1991) mostly antithetical theory of balancing exploitation and exploration should be modified. Finally, important limitations of my research design are summarized, and directions for further research identified.

9 Contents 1 Introduction Combining exploitation and exploration Research question Structure 3 2 Theoretical departure and approach balancing exploitation and exploration Process models Exploitation and exploration capabilities. Trade-off or mutually reinforcing? Summary 16 3 Total Quality Management Background Definitions Quality defined Total Quality defined Total Quality Management defined TQM as a complete management concept The EFQM Excellence model Some challenges TQM as one approach to the building of exploitation capability Summary 25 4 Business Process Reengineering The process hierarchy Some challenges, contradictions and vagueness in the BPR concept Common stages in BPR processes BPR as one approach to the building of radical process exploration capability Summary 33 5 Is a synergistic approach to the combining of TQM and BPR appropriate? The interdependence between radical innovations and continuous improvement Slow or fast growing economies different needs at different times, or? Learning as a driving force to a synergistic combining of continuous improvement and radical innovation Business Process Management (BPM) 41

10 XII Contents 5.5 Summary 42 6 Research model and definitions Research Model Clarifications and definitions Innovation Exploitation and exploration Incremental and radical innovation Contrasting characteristics of TQM and BPR Summary 48 7 Research design Background and historical lines. The Norwegian Action Research tradition and the national research programs this research is part of The heritage from Kurt Lewin Enterprise Development The RF module and the cooperation with the industry network in Sunnhordland Value Creation The VC 2010 main project in the Development Coalition Hordaland & Rogaland Overall research objective for the action research at IRIS Methodological choice; case study design Advantages of choosing a case study design in my research setting compared to alternative methods Research challenges and case study strategy Intrinsic or instrumental? The choice of a single compared to a multiple case study design? Exploratory, descriptive and explanatory purposes The components of my case study designs The study s questions The study s propositions Units of analysis Linking data to propositions The interaction between research phases Validity and reliability challenges Construct validity Internal validity 72

11 Contents XIII External validity Reliability Additional and specific aspects of doing case studies through action research Action Research as a co-generative process My role as the friendly outsider in the co-generative process Where does action research differ from consulting? The case study comments to common criticism Summary 82 8 Combining TQM and BPR synergistically, Aker Stord a case study Start-up of TKA at Aker Stord and timeline TKA: The basic philosophy and strategy. The importance of employee participation Interpreting employee participation in TKA Theoretical definition Operational definition Three stages of participation in the TKA process Two ways to participate Five organizational levels of participation in TKA Employee participation in general TKA activities at Aker Stord Departmental Committees (DC) as the coordination body for local improvement activities at Aker Stord The practical carrying out of the audits Employee participation in TKA Results from the first audit. Employee participation in TKA at Aker Stord in A summary of the results of the 1996 audit Observations Direct information from own manager Introductory training in TKA for all employees Recommendations from the 1996 audit Employee Participation in TKA The Aker Stord EFQM Self Evaluation Introducing BPR at Aker Stord The BPR project Procurement Personnel Time series repeating the audit Employee Participation in TKA in 1997 and 1998/ The 1997 audit on employee participation in TKA. Important changes. 120

12 XIV Contents The situation at Aker Stord in Observations Changes from 1996 to 1997 summarized The 1997 audit conclusions Important changes the BPR project The Future Workplace and the Prefabrication of Pipes reengineering project The 1998/99 audit on employee participation in TKA and important changes Information/training Participation in problem identification and idea generation Participation in implementation and follow-up of improvement projects Changes from /99 summary The challenges of combining TQM and BPR synergistically empirical analysis TQM and BPR. Trade-off or reciprocally supportive? The importance of organizational learning The importance of leadership Employee participation in TKA Factors explaining employee participation in TKA TKA and arenas for company-union cooperation What to choose The individual-oriented suggestion box system or the collective-oriented DC system? The change of focus from TQM to BPR Autonomy Aker Stord s participatory TKA practice in relation to quality management practice in Norway a national survey Direct employee participation in quality management Indirect employee participation in quality management The relationship between indirect and direct employee participation in quality management Summarizing the national survey Summarizing the Aker Stord experiences and way forward Main findings and conclusions from the Aker Stord case study discussion briefly summarized Some important shortcomings of today s participatory practice that need to be researched 171

13 Contents XV 9 Towards a synergistic combining of TQM and BPR in a Norwegian industrial setting Approach to the synergistic combining of TQM and BPR Industrial democracy Employee participation defined Industrial democracy, definition and limitations Industrial democracy in Norway a practical approach Democratic dialogue Characteristics of Industrial Democracy in Norway and my approach summarized ID as an enabler for TQM and BPR A framework for the organizing of employee participation in the further development of an approach to the synergistic combining of forms of TQM and BPR Basic conditions for employee participation in a synergistic combining of TQM and BPR motivation, ability and opportunity Motivation to participate Employees ability to take part in innovation processes Employees possibilities to take part in innovation processes Coordination between direct and indirect participation in innovation Direct employee participation in innovation Indirect participation in innovation New tools to support a synergistic combining of TQM and BPR Tool 1. The Enterprise Development Conference Background The ED Conference as a tool for planning incremental and radical innovation synergistically The Titania case identifying future challenges Background and planning The Titania conference Results and following up The ED Conference basic principles and methodology Developing incremental and radical innovations synergistically through the ED Conference empirical analysis The ED Conference at different stages in a strategy process Identifying innovation initiatives for the development and the concretization of the company s strategy 219

14 XVI Contents Improvements in the companies ability to continuously innovate through employee participation Success criteria for achieving employee participation in innovation The combining of direct and indirect employee participation in innovation Initiating incremental and radical innovations synergistically Tool 2. The Actor-Process Diagram and the combining of TQM and BPR characteristics synergistically Business process redesign and the combining of TQM and BPR synergistically at Serigstad Background: Productivity challenges at Serigstad Iron Foundry Organizing the redesign project at Serigstad Mobilizing for the redesign process Starting up the redesign process at Serigstad The Actor-Process Diagram background The Actor-Process Diagram for mapping, evaluating and redesigning work processes basic principles Following up the results from the Actor-Process Diagram analysis of the existing production process at Serigstad The redesign process and widening the scope Important changes Results Marketing and sales problems Empirical analysis: The Actor-Process Diagram and the combining of TQM and BPR characteristics synergistically Building a process oriented organization. How much employee participation? The comprehensiveness of the participation A new world of work and organizational performance Lessons learnt for ensuring employee participation in business process redesign and for the reciprocally reinforcing combining of direct and indirect employee participation Towards the synergistic combining of TQM and BPR Discussion and conclusion Discussion Combining TQM and BPR TQM, BPR and ID The need for adaptations and further methodological development 258

15 Contents XVII The synergistic approach Propositions Methodological reflections and limitations The quality of a single case study design. The question of validity and reliability Action research and the bias challenge Case studies and scientific knowledge Further research Main findings and conclusion 274 References list 277 Appendices Appendix 1 The VC 2010 regional partnership Hordaland & Rogaland and the local networks 297 Appendix 2 Employee participation in TKA. Interview guides Aker Stord Appendix 3 Survey. Quality Management in Norway 312