COMMUNITY OF PRACTICE INTEGRATION IN

COMMUNITY OF PRACTICE INTEGRATION IN BUSINESS PROCESS IMPROVEMENT PROJECT: A CASE STUDY

by

Agus Nugroho

A thesis submitted in partial fulfillment of the requirements for the degree of Master of Business Administration

Examination Committee :

Nationality : Previous Degree :

Dr. Barbara Igel (Chairperson) Dr. Donyaprueth Krairit Dr. Sununta Siengthai

Indonesian Bachelor of Science in Chemistry University of Indonesia Jakarta, Indonesia

Scholarship Donor :

Asian Institute of Technology School of Management Thailand July 2005

ACKNOWLEDGMENT The greatest thanks goes to Allah swt, God Almighty, the Ultimate Source of Knowledge, for all His blessings, which allows the Author to successfully carry through his study period in Asian Institute of Technology until the end. The Author would like convey his deepest love and gratitude to his beloved family in Indonesia, for ongoing, continuous support all these years. Their sincere encouragement shall never be forgotten. Dr. Barbara Igel, the Author’s academic advisor and chairperson of examination committee, who has been very helpful with her valuable supports, ideas and insights, guiding the Author throughout the study. Dr. Donyaprueth Krairit and Dr. Sununta Siengthai, for their willingness tojoin examination committee and also their valuable comments. Dr. Peter Theisen, the Author conveys his appreciation for giving him opportunity to participate and learning in BPI project. It was truly a valuable experience. Schlumberger people: Ms. Thippayawadee Sumawong, Mr. Panusak Wongpimonporn, Ms. Kantarika Songsakul, Mr. Vikram Khullar, who have contributed to this study by valuable comments and organizational support. The Author’s friends, words are not enough to describe this thankfulness for their sincere friendship during his study in Thailand and France, it was very inspiring and comforting. The Author wishes this friendship continues and flourishes. And finally, the Author would like to thank Asian Institute of Technology for this valuable opportunity of studying in this institution and also Government of France, for sponsorship of study in CERAM Sophia Antipolis. The Author ensures them, that he will use these attained knowledge for the benefit of community.

And all knowledge is vain save when there is work And all work is empty save when there is love And when you work with love you bind your self to yourself, and to one another, and to God

Bangkok, July 2005

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ABSTRACT Business Process Improvement (BPI) has been acknowledged to generate significant economic benefit for organization and also alleviate business performance in fulfilling customer’s needs. Therefore many organizations have realized that they need to improve their processes in order to improve their customer’s satisfaction. However, a study revealed that only as much as 30% of such BPI effort ends successfully. This fact compelled studies to discover the best breed of BPI methodology. Integration of Communities of Practice (CoP) in BPI project is something worth to investigate, since CoP are the seeds of learning organization, thus have potential to complement BPI methodology. This study will be based on a case study of BPI project in an organization, looking at how CoP works in a BPI project as part of the overall BPI methodology, how functional silos can be broken down to allow knowledge flow and what are potential impacts of CoP towards BPI performance.

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TABLE OF CONTENT ACKNOWLEDGMENT.................................................................................................................................. ii ABSTRACT ..................................................................................................................................................... iii TABLE OF CONTENT .................................................................................................................................. iv LIST OF FIGURES......................................................................................................................................... vi LIST OF TABLES.......................................................................................................................................... vii 1.

INTRODUCTION................................................................................................................................... 1 1.1. 1.2. 1.3. 1.4.

2.

BACKGROUND AND RATIONALE ....................................................................................................... 1 PROBLEM STATEMENT AND OBJECTIVE ........................................................................................... 1 FRAMEWORK AND METHODOLOGY .................................................................................................. 2 STRUCTURE OF THE THESIS .............................................................................................................. 2

LITERATURE REVIEW....................................................................................................................... 4 2.1. BUSINESS PROCESS IMPROVEMENT (BPI) ........................................................................................ 4 2.1.1. Business Process Definition.......................................................................................................... 4 2.1.2. Business Process vs. Functional Silos........................................................................................... 5 2.1.3. Business Process Improvement ..................................................................................................... 6 2.1.4. Critical Success Factors in BPI Projects...................................................................................... 8 2.2 COMMUNITY OF PRACTICE (COP)........................................................................................................... 10 2.2.1 Definition and Scope................................................................................................................... 10 2.2.2 Conceptual View of Communities of Practice............................................................................. 11 Community Input .................................................................................................................................... 11 Community Processes ............................................................................................................................. 12 Supporting Factors .................................................................................................................................. 13 Community Output.................................................................................................................................. 13

3.

METHODOLOGY ............................................................................................................................... 16 3.1. RESEARCH DESIGN ......................................................................................................................... 16 3.1.1. Research Question 1: How can the silos with narrow functional expertise are broken up through CoP to ensure the necessary communication and business knowledge transfer in BPI project? ....................................................................................................................................... 16 3.1.2. Research Question 2: Is there any the relationship between CoP performance with BPI project performance?.................................................................................................................. 17 3.2. DATA COLLECTION ........................................................................................................................ 18 3.2.1. Population and Sample ............................................................................................................... 18 3.2.2. Sampling Method ........................................................................................................................ 19 3.3. STATISTICAL METHOD OF ANALYSIS ............................................................................................. 20 3.4 VALIDITY AND RELIABILITY ................................................................................................................... 21 3.4.1 Validity........................................................................................................................................ 21 3.4.1 Reliability.................................................................................................................................... 21

4.

RESULT AND DISCUSSION.............................................................................................................. 22 4.1. ORGANIZATIONAL BACKGROUND .................................................................................................. 22 4.2. THE BUSINESS PROCESS IMPROVEMENT (BPI) PROJECT ................................................................ 24 4.2.1. Project Background .................................................................................................................... 24 4.2.2. BPI MEA1 Project Management................................................................................................. 25 4.2.3. BPI Methodology ........................................................................................................................ 27

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4.2.3.1. 4.2.3.2. 4.2.3.3.

Solving Process and System Issues ........................................................................................ 27 Improving Existing Processes ................................................................................................ 28 Setting Up a Learning Organization....................................................................................... 29

4.3. COMMUNITIES OF PRACTICE IN MEA1 BPI PROJECT ..................................................................... 30 4.3.1. Breaking up the functional silos.................................................................................................. 31 4.3.2. Correlation between CoP and BPI Project Performance ........................................................... 33 4.3.2.1. 4.3.2.2. 4.3.2.3.

5.

CONCLUSION AND RECOMMENDATIONS ................................................................................ 40 5.1. 5.2. 5.3.

6.

Community Performance ....................................................................................................... 34 BPI Performance .................................................................................................................... 35 Correlation Analysis............................................................................................................... 36

CONCLUSION .................................................................................................................................. 40 RECOMMENDATION FOR BPI PROJECT AND COP ORGANIZATION .................................................. 41 RECOMMENDATION FOR FURTHER STUDIES ................................................................................... 42

APPENDICES ....................................................................................................................................... 43 APPENDIX 1A: ORGANIZATION STRUCTURE OF SCHLUMBERGER LIMITED ................................................... 44 APPENDIX 1B: SELECTED FINANCIAL DATA IN FIVE YEAR SUMMARY ......................................................... 45 APPENDIX 2: MEA1 BUSINESS PROCESS IMPROVEMENT PROJECT GANTT CHART ....................................... 47 APPENDIX 3: EXAMPLE OF ISSUE LOG USED IN MEA1 BPI PROJECT ............................................................ 48 APPENDIX 4: PARETO METHOD .................................................................................................................... 49 APPENDIX 5A: QUESTIONNAIRE TYPE A....................................................................................................... 51 APPENDIX 5B: QUESTIONNAIRE TYPE B ....................................................................................................... 53 APPENDIX 5C: RESPONSE SCORING .............................................................................................................. 56 APPENDIX 6: INTERVIEW TRANSCRIPTS ........................................................................................................ 58 APPENDIX 7A: RESPONDENT’S PROFILE ....................................................................................................... 67 APPENDIX 7A: RESPONSES AND SCORE ........................................................................................................ 68 APPENDIX 8A: STATISTICAL ANALYSIS – DESCRIPTIVE STATISTICS ............................................................. 72 APPENDIX 8B: STATISTICAL ANALYSIS – PEARSON PRODUCT-MOMENT CORRELATION .............................. 75

7.

REFERENCES...................................................................................................................................... 77

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LIST OF FIGURES FIGURE 2-1 SELLING PROCESS FLOWS ACROSS SEVERAL DEPARTMENTS ..................................... 5 FIGURE 2-2 HIGH LEVEL DIAGRAM OF SUPER BPI METHODOLOGY (LEE & CHUAH, 2001) ........ 8 FIGURE 2-3 CONCEPTUAL VIEW OF COMMUNITIES OF PRACTICE (ZBORALSKI ET AL., 2003)...... 11 FIGURE 2-4 POTENTIAL BENEFITS OF COMMUNITIES OF PRACTICE (ZBORALSKI ET AL., 2003) ... 15 FIGURE 3-1 RESEARCH DESIGN HYPOTHESIZING CORRELATION BETWEEN COP PERFORMANCE AND BPI PROJECT PERFORMANCE ........................................................................................ 18

FIGURE 3-2 COMPARISON OF SAMPLE METHODS FOR TWO RESEARCH QUESTIONS....................... 20 FIGURE 4-1 MATRIX ORGANIZATION STRUCTURE OF SCHLUMBERGER OILFIELD SERVICES' MIDDLE EAST AND ASIA (MEA) REGION ............................................................................. 23 FIGURE 4-2 IDEALISTIC VIEW OF LAWSON’S ROLE AMONG THE EXISTING LEGACY SYSTEMS ALONG THE SCHLUMBERGER’S VALUE CHAIN ...................................................................... 24

FIGURE 4-3 ORGANIZATION STRUCTURE OF MEA1 BPI PROJECT ................................................ 26 FIGURE 4-4 ORGANIZATION STRUCTURE OF GEOMARKET LEVEL MEA1 BPI PROJECT .............. 26 FIGURE 4-5 FIVE-WHY ANALYSIS INSPIRED BY TOYOTA (LIKER, 2004) ...................................... 28 FIGURE 4-6 PROCESS IMPROVEMENT METHODOLOGY IN MEA1 BPI PROJECT ............................ 29 FIGURE 4-7 TWO TYPES OF COMMUNITIES RELATING TO OPPORTUNITY-TO-CASH (O2C) PROCESS IN MEA1 BPI PROJECT ......................................................................................................... 30

FIGURE 4-8 RESPONDENT (SAMPLE) COMPOSITION BASED ON SELECTED VARIABLES ................. 34 FIGURE 4-9 LINE FIT PLOT OF COMMUNITY PERFORMANCE VARIABLE (C) AND PROCESS ORIENTATION (P)................................................................................................................... 37

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LIST OF TABLES TABLE 4-1 DESCRIPTIVE STATISTICS OF COMMUNITY PERFORMANCE VARIABLES ..................... 35 TABLE 4-2 DESCRIPTIVE STATISTICS OF BPI PERFORMANCE VARIABLES ................................... 35 TABLE 4-3 SUMMARY OF SCORES FROM PAIR OF VARIABLES, COMMUNITY PERFORMANCE (C) AND PROCESS ORIENTATION (P)........................................................................................... 36

TABLE 4-4 SUMMARY OF SCORES FROM PAIR OF VARIABLES, COMMUNITY PERFORMANCE (C) 38

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1. INTRODUCTION 1.1. Background and Rationale Business Process Improvement (BPI) is a systematic approach to change the way organization or corporation to do its business. BPI has been acknowledged to generate significant economic benefit for organization and also alleviate business performance in fulfilling customer’s needs. One case study BPI project in Caterpillar’s MEC (Mossville Engine Center) in 1992 was able to save USD 10 to 20 million (Paper, 1998). Alongside the potential also lie risks: only 30% of such improvement effort gains successful result (Rohleder & Silver, 1997). Therefore, many studies have been done to find the best BPI methodology, even develop ‘best breed’ of BPI methodology, by analyzing and benchmarking existing approaches (Povey, 1998). As cited in McAdam and McIntyre (1997), Leesem (1992) argued that existing approaches to BPI have been developed from a mechanistic, Taylorist view of the organization and have taken little true account of organizational learning and its associated people issues. Furthermore, many researchers have acknowledged the involvement ‘the people’, the employees who do the daily business activities, is very crucial in determining the success of a BPI project (Greenberg, 1996; Paper, 1998; Povey, 1998). Therefore an integrated approach in BPI project, which means incorporation of organizational learning principle and continuous improvement into BPI methodology, would therefore increase the success probability. Critical studies in BPI methodology point out that principles such as experimentation with new approaches, learning from experiences, past history, best practices and knowledge sharing are best realized by integrating them in BPI mechanisms and methodologies, achieving the desired continuous process improvement even after BPI project has been disbanded (McAdam and McIntyre, 1997). Learning from experiences, past history, best practices and knowledge sharing are main characteristics of Community of Practice (CoP) which according to Wenger (2004) is the cornerstone of Knowledge Management. For these reasons, CoP can be considered in the integrated BPI methodology.

1.2. Problem Statement and Objective In every CoP, there are key issues which often arise and may cause organizational complications (Wenger, 2004). Two main issues are CoP existence organizational silos and the impact of CoP towards business performance. In relation to integrated BPI approach, these key issues will be transformed into the following research questions: 1

•

How can functional silos with narrow functional expertise be broken up through CoP to ensure communication and business knowledge transfer necessary in a BPI project?

•

Is there any the relationship between CoP and improved performance of BPI project?

This research will try to answer the above questions through a case study of BPI project in Schlumberger Middle East Asia (MEA) which used CoP-integrated approach. This research will investigate integrated BPI methodology which intensively involves Community of Practice as one of tool among others to achieve continuous business improvement for better business performance. This research will also address key issues for the influence of CoP in a BPI project to allow the organization to devise appropriate actions to manage those issues for the success of BPI project.

1.3. Framework and Methodology This research will try to answer the aforementioned questions by referring to existing literature and investigative efforts. The means in which this research is conducted is summarized as follows: •

Literature Study, overall research concepts and framework are based on study of existing literatures related to community of practice, knowledge management and business process improvement. As an example, all factors to be measured in CoP performance measurement will be based on a study by Zboralski et al. (2003) and Kuwaiti & Kay (2000).

•

Observation, mainly for the purpose of gaining facts about the BPI project in the case study itself, as the author was involved in the project during its initiation (conceptualization) and first phase of its execution.

•

Interview, especially for business process managers and process leaders (champions) in the organization to reveal the facts about BPI project and CoP performance.

•

Questionnaire, mainly serves the purpose of gathering data from employees involved in CoP of BPI project, in order to gain tangible result to measure CoP performance.

1.4. Structure of the Thesis The result of this research will be presented in seven chapters as follows: 2

Chapter 1

:

Introduction, comprises the general background and rationale for this thesis, also would include general framework and methodology

Chapter 2

:

Literature Review, explains concepts of this research and previous studies in the field of BPI and CoP

Chapter 3

:

Methodology, elaborates data gathering and analysis methodology, any limitations and also includes presentation format of results

Chapter 4

:

Results and Discussion, presents results of data analysis and discusses the results relating them to research questions

Chapter 5

:

Conclusion and Recommendations, answers posed research questions and summarizes research results, and finally gives recommendations for further study and the organization studied

Chapter 6

:

References, lists all references which has been used for this research

Chapter 7

:

Appendices, presents enclosure of relevant documents, questionnaire sheet, and additional information.

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2. LITERATURE REVIEW

2.1. Business Process Improvement (BPI) 2.1.1. Business Process Definition Business process is "a set of logically related tasks performed to achieve a defined business outcome" (Davenport and Short, 1990, cited in Maholtra, 1998). A process is a structured, measured set of activities designed to produce a specified output for a particular customer or market. It implies a strong emphasis on how work is done within an organization. Cousins and Stewart (2002) also define business process as a set logically related business activities that combine to deliver something of value (e.g. products, goods, services or information) to a customer. Business processes can be identified individually, as discrete steps in a business cycle, or collectively as the set of activities that create the value chain of an organization and associate that value chain with the requirements of the customer. Therefore a business process is most likely cross-functional, crossing organization boundaries (e.g. departments and divisions). Summarizing from those definitions, a business process has three important characteristics. A Business process: • • •

has specific customers, internal or external has specific objective, generally to generate value for customers crosses organizational boundaries

Business processes can be grouped into three main component processes that work together to support its logical activities (Gelinas et al., 2004): •

•

•

Management Processes, which is a human-made system consisting of people, authority, organization, policies, and procedures whose objective is to plan and control the operations of organization. The three most important activities are planning, controlling and decision making. Operation Processes, which is a human-made system consisting of people, equipment, policies and procedures whose objective is to accomplish the work of organization. Activities included in this process are manufacturing, distribution, human resources, and their sub-processes. Information Processes, which is a portion of overall Information System related to particular business process. Information process acts as glue for all process in order to work together.

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2.1.2. Business Process vs. Functional Silos Typically organizations are structured into division and department based on functionality of each division and department. Each division or department performs its own specific function and determines its own competency, this includes hiring people who are expert in doing that specific function. Therefore, this organization structure tends to create ‘Silo Thinking’, each department stands alone with less or no interaction with other department within the same organization (Harmon, 2003). Business processes, on the other hand, cut across these functional silos. Where different activities in a process require different skills, the process is likely to involve a number of people and departments (Cousins & Stewart, 2002). An example is the selling process to customer, it will involve several departments (as seen in Figure 1-1), namely Sales, Distribution, and Finance department and also involve people in those departments.

Figure 2-1 Selling Process Flows Across Several Departments

Even though the process flows internally through several departments, from customer point of view, only a single process has taken place. Throughout this process, each department performs its own function: Sales Department finds customer and order, Distribution Department delivers finished product to customer and finally Finance Department collects revenue once customer receives the product. All together these activities make up one process of selling to customer.

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In the functional view, the control and responsibility changes according to specificity of each function/department, therefore there are considerable risk of task duplication, delay and different perception of quality which can also mean the risk of loosing quality control. The risk is even more amplified by rigidity of hierarchical organization structure, which can be barrier to effective communication (Cousins & Stewart, 2002). All of these indications are the result of ‘Silo Thinking’. On the other hand, a process view will require organization to shift its view from ‘who does what?’ to ‘what needs to be done?’ (Cousins & Stewart, 2002). As process flows through the functional silos, the emphasis now is making sure that the process flows effectively and efficiently, without any significant obstacle. It means all functional silos will be required to coordinate and communicate intensely to ensure the process reaches its objectives. By coordinating and communicating, the risk of task duplication, delay and loss of quality control can be minimized along the process. 2.1.3. Business Process Improvement Business Process Improvement (BPI) is simply a method of improving the way a discrete set of business activities is organized and managed (Cook, 1996, as cited in Lee & Chuah, 2001). It is a structured approach to analyze and continually improve fundamental activities of a company’s operation by simplifying and streamlining business processes. BPI will lead to the efficient and effective use of resources such as facilities, people, equipment, time and capital (Zairi, 1997, also cited in Lee & Chuah). Effective processes means the activities within organization are producing the desired results from product or service in comparison to the customer expectations; whereas efficient processes means minimizing the resources used in those business activities. Lee and Chuah (2001) further explain, under the big umbrella of BPI, three aspects of process improvement strategies and activities commonly being adopted by today’s organizations are continuous process improvement (CPI), business process reengineering (BPR), and business process benchmarking (BPB). Povey (1998) also clarifies at BPI is a broad term that covers a continuum from incremental continuous improvement (CI) at one end to the radical re-engineering of the business and its processes, characterized as business process re-engineering (BPR), at the other. Caudle (1995), cited in Lee and Chuah, explains that process improvement can include continuous business process improvement that incrementally improves the operation efficiency, or total reengineering from a clean sheet to achieve maximum effectiveness during a short time frame. Therefore BPI has double spearheads, short term objective to perform quick wins and achieve effectiveness by radically changing the existing process, and long term objective to incrementally improve efficiency by implementation of continuous improvement mechanism.

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Nowadays there are varieties of methodologies that fall under the headline of BPI (Povey, 1998). Macdonald (1995), as cited in Povey, identifies that these methodologies are using three distinctive approaches to change: •

Process improvement. The continuous improvement approach, with a tendency for the improvements to be individually small, confined within functional boundaries, and focused on improving the existing system.

•

Process redesign. This concentrates on major business processes with crossfunctional boundaries, and is what most companies mean when they talk of BPR. It goes beyond improving existing processes by asking the question, “should we be doing this at all?” It is a natural evolution of TQM and uses many of the techniques of organization and methods.

•

Business process re-engineering. This approach is aimed at the fundamental rethink and radical redesign of business processes to achieve dramatic improvements in performance. It is based on the premise that continuous improvement will not deliver the major breakthroughs that companies need to remain competitive in the global marketplace.

In his study, Povey (1998) lists examples of proposed BPI methodologies (both from relevant literature and industry survey) and performs comparison analysis. Lee and Chuah (2001) have devised a BPI methodology which combines the aforementioned three aspects of process improvement strategies and activities. The SUPER BPI methodology (SUPER is an acronym for: (1) select the process; (2) understand the process; (3) proceed with the process measurement; (4) execute the process improvement; and (5) review the improved process). Figure 2-2 displays basic structure of this BPI methodology.

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Figure 2-2 High Level Diagram of SUPER BPI Methodology (Lee & Chuah, 2001) 2.1.4. Critical Success Factors in BPI Projects The fact reveals that 70% of business process re-engineering project are less than successful (Hammer & Champy, 1993, as cited in Rohleder & Silver, 1997). A survey by Tetzeli (1992), also cited by Povey, shows that of 500 US companies indicated that only one-third of them felt that TQM was having a significant impact on competitiveness. Another survey of 350 US executives indicates that only 16 per cent of them are fully satisfied with the results of business process re-engineering projects. With so many process improvement efforts ending in failure, one may wonder why companies ever make the effort. Of course, the reason is that when process improvements do succeed, they can have significant economic benefit. As an example, the Electric Boat Division of General Dynamics Corp. improved its contracting process leading to a 50% reduction in the number of process steps. However, even more importantly, the improvements saved the company over US$3 million annually (Gilbert, 1993, as cited in Rohleder & Silver, 1997). The complexity and variety of processes in the enterprises today, make it even more difficult to derive a generic BPI methodology. The consequence, as it can be observed, is that each company uses different process improvement approach. Some processes may only need incremental improvement in critical areas while others may require a sudden change or total revamp through process reengineering, or some may even need a combination of both (Caudle, 1995, ac cited in Lee & Chuah, 2001). However from comparative studies, researchers are able to identify generic success factors in BPI projects.

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According to Vaidyanathan, there are three primary reasons attributed to failing BPR efforts: •

Lack of an adequate business case resulting in unclear, unreasonable, or unjustifiable expectations for what is wanted or expected to result from a BPR effort. Absence of robust and reliable technology and methodologies for performing BPR so that there is a failing in executing BPR efforts. Incomplete or inadequate implementation. Reorienting a traditional organization from a functional to a process view focus requires a major cultural change in the organization. It also requires major change to the information systems that support the organization. The organization does not know what to expect and is often surprised, angered, or threatened by the change proposed. If the project does not correctly manage the expectations of the organization it will not be allowed to finish what was started.

• •

Whereas Povey (1998), focusing on BPI methodologies, concludes that although existing methodologies (from literature and in practice) have many strengths, however there are common weaknesses: • • •

They overlook the fact that processes are operated by people and are therefore “human activity systems”. While they address the identification of improvements to the process, they do not address the change or project management aspects of implementation. They do not utilize the power of benchmarking at the most appropriate point in the improvement methodology.

Paper (1998) summarizes that to ensure the success of BPI projects, three pillars must be equally strengthened: • • •

Systematic BPI methodology. ‘Methodology’ includes a systematic (step-by-step) guide to solving business problems. The BPI literature typically depicts a five step methodology such as envision, definition, diagnosis, design, and implementation. Environment conducive to change. ‘Environment’ includes the management and executive structures, employee reward structure, and team structure. Empowerment mechanisms for the people who do the actual business activities. ‘People’ includes direct involvement in critical decisions related to the project and freedom to approach problems in a creative manner. Worker empowerment is a key element of BPI. Team members need the authority to make critical process decisions where the work is done.

Other than all factors mentioned above, Greenberg (1996) highlights the role of external party in BPR projects. Involvement of external party, such as consultant, can be critical in breaking down organizational barriers and providing a fresh and objective organizational assessment. External party can also facilitate team building which is critical to sustaining the reengineering process.

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However, external party can also be a failure point, if they have only a little or no track record in reengineering or industry specific experience. Therefore it is important for organization to involve their employees at all levels in the reengineering process, who are familiar in day-to-day business processes, while using external party to support general conceptualization and decision making process.

2.2 Community of Practice (CoP) 2.2.1

Definition and Scope

The concept of Communities of Practice (CoP) was not invented in Institute of Research on Learning (IRL), a Palo Alto based spin-off institution of Xerox, although that is where the term started gaining its popularity. Founded in 1987, the Institute pursues a crossdisciplinary approach to learning research, involving cognitive scientists, organizational anthropologists, and traditional educators. Its primary finding was the fact that learning process is a social phenomenon and people organize their learning activities around social community which they are belong (Funderstanding, 2001). Therefore, schools are only powerful learning environments for students whose social communities coincide with school. Communities of practice are groups of people who share a passion for something that they know how to do, and who interact regularly in order to learn how to do it better (Wenger, 2004). Sharp (1997) views CoP as an informal network that emerges from a desire to work more effectively or to understand work more deeply among members of a particular specialty or work group. At the simplest level, CoPs are small groups of people who have worked together over a period of time and through extensive communication have developed a common sense of purpose and a desire to share work-related knowledge and experience. Brook Manville, director of knowledge management at McKinsey & Co., (as cited in Stewart, 1996) defines a community of practice as a group of people who are informally bound to one another by exposure to a common class of problem. The important keywords here are informal network, knowledge and experience, common interest and problem. Hence, CoP can be defined as an informal network on the basis of common interest and problem with the purpose to share, retain and leverage knowledge and experience within or among organizations. CoP is also can be distinguished from the organization-assigned team or task force. The main differences lie in CoP’s informality and voluntary nature of its membership. Teams have a charter and report to a higher authority even if they have no box on an organization chart, they still have an agenda, a deadline, accountability, a membership list. Whereas CoP is voluntary and longer lived, and has no specific deliverable such as report (Stewart, 1996).

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2.2.2

Conceptual View of Communities of Practice

According to existing literature on group performance, one of which Guzzo and Shea (1992) cited in Zboralski et al. (2003), group performance is conventionally measured by input-process-output model. In their research, Zboralski et al. have identified community input (such as member’s motivation and previous knowledge), community processes (community activities, the communication intensity, the member activity level, the community identity, and the communication quality), and community output (community performance: organization and individual benefits). Zboralski et al. have also included supporting factors (such as topic relevance, knowledge supply, knowledge culture, knowledge type and management support). Community input and its processes are considered as community characteristics, whereas its output is considered as community performance. The following figure describes the conceptual view of CoP.

Figure 2-3 Conceptual View of Communities of Practice (Zboralski et al., 2003) Community Input Two major input factors have been considered: motivation and previous knowledge. The activities within the community depend to a large extent on the individual member motivation to participate in the community. This motivation can stem from various sources. For instance the expected benefit of acquiring new knowledge can be one

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motivational factor. Members who have little knowledge in a specific area will be motivated to use CoP to leverage their knowledge. The level of previous knowledge of CoP members would also determine the competence of CoP activities. Therefore previous knowledge of member is considered important and thus it is an input to CoP processes beside member’s motivation. Community Processes Community Processes are the active and transforming section of this conceptual model, in which the community inputs are transformed into output or community performance. These processes can be characterized by different activities, the communication intensity, the member activity level, the community identity, and the communication quality. Community activities can be subdivided into five activities according to the components of knowledge management by Probst et al. (1999) as cited in Zboralski et al. (2003): knowledge development, knowledge distribution, knowledge application, knowledge preservation, and knowledge evaluation. While the first four activities represent core processes of each community, the latter is a rather additional activity and does not necessarily exist in every community. All community processes are based on communication, which makes it even more important factor in determining community performance. Several modes of communication can be distinguished: synchronous or asynchronous, virtual or face-toface. As result, there are several communication instruments to facilitate all kinds of communication. As stated by several authors in Zboralski et al., the use of these different instruments has significant influence on the communication intensity which in turn will impact on the community result. For example, the ease of using email instead of video conference to facilitate a virtual communication will obviously result more intensity in CoP using mailing list as means of communication. Hoegl and Gemuenden (2001), cited in Zboralski et al., have identified the communication quality as a critical factor for team success. This factor signified by degree of openness and accuracy in information exchange. Furthermore, looking at the individual community member, Zboralski et al. also considered level of member’s activity (how active member is) as an important factor in this framework. The importance of trust, mutual support, identification with the group, the internal collaboration, etc. is emphasized by several authors (Costa et al., 2001; Hoegl and Gemuenden, 2001; Scott, 1997), also cited in Zboralski et al. Therefore, community identity that reflects mutual trust between the members, their identification with the community as well as group cohesion is considered as an important factor influencing community success.

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Supporting Factors Former researches, as cited in Zboralski et al., have identified organizational context as essential supporting factor contributing to group success. In this CoP framework, Zboralski et al. have pointed out management support, knowledge culture, topic relevance, knowledge supply, and knowledge type as organizational context. Management support is an important supporting element as the community work depends on resources provided by the management. Without management support, undoubtedly community processes will be halted and difficult to achieve expected result. The existing knowledge culture which influences members’ general attitude towards knowledge sharing is a factor that enables and motivates members “to reach beyond the knowledge they carry in their heads as they go about solving technical problems” (Mohrman et al., 2003, as cited by Zboralski et al.). Knowledge culture in an organization gives indication of the extent of knowledge sharing among the members organization in their daily activities. Sharing culture allows community activities to flourish and community members to gain the maximum benefits from the respective community. In any organization there are knowledge and technology areas defined which are of strategic importance for the organization’s future and its competitiveness. The relevance of topics in CoP to these strategic areas will determine level of member’s motivation to participate in the community. The relevance of CoP’s topics will also influence perceived impacts of community processes to organizational benefits. Relevant topics would be seen as useful for organization’s competitiveness. Additionally, knowledge supply is seen as a critical contextual factor. If the knowledge within organization is easy to acquired, reliable and up-to-date, people might not see the benefit of joining CoP. On the contrary, if knowledge supply is difficult, people would be encouraged to attend CoP to benefit the knowledge leveraging outcome. Finally, the knowledge type, explicit versus tacit, is also considered in this framework. Type of knowledge in an organization will determine communication intensity needed and appropriate instruments, since implicit knowledge requires more intense interactions on a face-to-face basis compared to the explicit type (Leonard and Sensiper, 1998, as cited in Zboralski et al.). Community Output Communities of Practice are the cornerstones of knowledge management, since its members are practitioners who use knowledge in their activities and this people are considered in the best position to manage knowledge (Wenger, 2004). The knowledge management itself is now more and more considered having strategic importance, having impacts on overall organization performance and competitiveness. Therefore, main community output is organizational performance.

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On the one hand, communities are also designed to help individual members of the organization to perform better in their assigned tasks by leveraging their knowledge and provide better access to shared knowledge. Therefore another output of CoP is individual benefits. Organizational benefits from CoP has been widely discussed in various studies, all cited and summarized in Zboralski et al. (2003). The following are the summary of organizational benefits mentioned: •

•

• • • • •

Organizational Learning. CoPs as a forum for shared learning (Brown and Duguid, 1991; Lesser and Storck, 2001; Swan et al., 2002) and a way to increase the organizational learning capabilities (Brown and Duguid, 2001; Hedberg and Holmquist, 2001). Furthermore, due to organizational learning, a common knowledge base is created, new competences are developed and existing know-how is improved (Tsai and Goshal, 1998). Capturing and Sharing Tacit Knowledge. CoP is a way for the externalization of knowledge. Especially, close and intense communication to cultivate sharing mechanism of tacit knowledge which has been identified as a central for knowledge creation (Nonaka, 1994). Creativity. CoP raises the creative capacity of the organization as the generation of new ideas is supported (Cohen and Levinthal, 1990). The reason for this effect is that the community exhibits a climate which stimulates creativity. Learning Curve Effect. CoP is shortening learning curve in organization as organization learns about its own competences (Probst and Büchel, 1998). At the same time, preventing reinvention of wheels. Resource Savings. These are resulted not only from better solutions of problems and easier access to knowledge, but also from a shorter training period for new employees as well as the avoidance of double work. Customer Satisfaction. Optimized processes and the developed knowledge base will lead to higher customer satisfaction, as customer needs can be addressed in a more flexible manner. Cultural Change. CoPs change the existing culture of the organization in a favorable way. Change of culture is due to the development of collective sense-making and the emergence of networks among members. On the other hand, peoples’ attitudes towards the issue of knowledge transfer change as knowledge sharing is actively approved and rewarded.

Alongside organizational benefits, community members can also profit directly from their activities within the community. Although their performance assessment varies and depends on personal goals and individual motivation, the following general outputs can be summarized from Zboralski et al. citations: •

Due to the community the networking of its members is increased supporting access to new sources of knowledge and the development of social capital (Lesser and Storck, 2001; Nahapiet and Goshal, 1998).

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• • •

By communicating frequently the community members develop a common knowledge base (Schoen, 2001). Existing knowledge is re-used and modified, and by that transformed into new knowledge (Lesser and Prusak, 1999; Nonaka, 1994; Wenger, 1998b). An open communication, the exchange of interdisciplinary knowledge and development of mutual trust promote individual learning. By a familiar atmosphere members are encouraged to articulate new ideas, share knowledge and ‘think out of the box’ (Millen et al., 2002).

Therefore, community members gain new competences which in turn lead to the following individual benefits: • • • •

increased performance, higher reputation within the organization, professional development, higher work satisfaction.

These individual benefits will ultimately impact on the overall organization’s business performance, as shown in Figure 2-4.

Figure 2-4 Potential benefits of Communities of Practice (Zboralski et al., 2003)

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3. METHODOLOGY 3.1. Research Design The design of research outlines what type of information is to be gathered, which sources are suitable and how the gathering of data will be conducted. A good design of research makes sure that the gathered information matches to the purpose of the study. There are two types of research design, namely exploratory and conclusive research (Joppe, 2001). Exploratory research studies a problem or a scope of study that has not been clearly defined. On other cases, this type of research often used market research, to test new concept of product before market launching. Exploratory research allows the researcher to explore all possibilities and familiarize him/herself with a problem or concept, often by qualitative method and less frequently by quantitative method by generating hypothesis to be statistically tested. Another research design is conclusive research, in which the researcher is already familiar with the problem or concept and the result of this type of research is usually useful in decision making process (Joppe, 2001). This type of research often uses quantitative rather than qualitative methods in data analysis, the problem is specific, the data required must be detailed (Orr & Persson, 2003), it also uses hypothesis in its statistical analysis. This particular research is exploring possibilities of a novel circumstance: the use of CoP in a BPI project. There are numerous studies on CoP itself and on BPI, however hardly ever researchers discuss about the impact of CoP on a specific process improvement project like BPI, not as much as they do for the impact of CoP on the whole organization. Therefore exploratory research is an appropriate research design; nevertheless this research will also utilize quantitative deductive method in drawing conclusions. For the purpose of answering the two posed research questions, as mentioned, this research uses qualitative and quantitative methods. The qualitative part is mostly related to first research question, whereas second question is answered mostly by quantitative method. 3.1.1. Research Question 1: How can the silos with narrow functional expertise are broken up through CoP to ensure the necessary communication and business knowledge transfer in BPI project? This question is answered by observation method, as the author was deeply involved in this BPI Project during conceptualization and implementation stage, therefore has significant information regarding project strategies and execution. Further information can be obtained from in-depth interview with competent interviewee, such as business project manager and business process champions.

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3.1.2. Research Question 2: Is there any the relationship between CoP performance with BPI project performance? As mentioned in the literature review, Zboralski et al. (2003) identifies community processes to comprise community activities, the communication intensity, the member activity level, the community identity, and the communication quality. These variables have significant influence on the result of CoP (organizational and personal benefits) and they are defined as follows (Zboralski, 2003): •

community activities

:

all activities in the community in order to develop, distribute, apply, preserve, and evaluate knowledge

•

communication intensity

:

intensity of communication in community over a period of time using particular communication instrument

•

member activity level

:

the frequency of different communication activities within community performed by a community member

•

community identity

:

the attitude and perception of members toward community (degree of self identification to community, degree of trust, degree of support among members)

•

communication quality

:

perception of members toward the information accuracy, whether the information within the community is exchanged in an open and intensive way

These five variables are considered as independent variable in this context, since these variables are determining CoP performance. As for dependent variable, according to Kuwaiti & Kay (2000), BPI project performance can be evaluated from variables such as process orientation in the implementing organization, and worker’s empowerment. Therefore this research will see whether there is relationship between CoP performance (independent variables) with process orientation in organization and empowerment (dependent variables), formulated in the hypothesis, H01: there is no correlation between CoP performance and process orientation and H02: there is no correlation between CoP performance and empowerment. This design is depicted in the following figure.

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Figure 3-1 Research design hypothesizing correlation between CoP performance and BPI Project performance

3.2. Data Collection Data collected for this research is a combination of secondary and primary data. The secondary data will mainly consist of literature study, such as books, journals, articles, and lecture notes, either in hardcopy or in electronic version. The purpose of this study is to gain sufficient knowledge in this particular area of research by understanding concepts, theories, previous and recent studies. Based on this knowledge, the author derives research methodology to answer the research questions posed. Primary data for this research comprises information attained from in-depth interview, observation and distribution of questionnaire. This data will further be analyzed to generate conclusions. In-depth interview and observation will mainly serve qualitative analysis method, whereas data gathered from questionnaire will be used in statistical analysis, testing the hypothesis. 3.2.1. Population and Sample Population of this research is the member of CoP in Schlumberger Middle East Asia 1 Region (MEA1) which comprises of six sub regions/geomarkets (Thailand-MyanmarVietnam (TMV), Indonesia, Brunei-Malaysia-Philippines (BMP), India, China and Bangladesh), in both research questions. For the first research question, the sample will be Business Process Manager (BPM) in Bangkok Office and few of the process champions.

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Sample in the second research question is CoP participants in the MEA1 region which mean the population itself, since the population is not large and the questionnaire will be distributed through web interface sent to every member of CoP. 3.2.2. Sampling Method Sampling method, based on the randomness of sampling procedure, is distinguished into two types: probability sampling and non-probability sampling (Dimanche, 2004). In probability sampling method, sample is chosen randomly from the entire population, where every element has an equal opportunity to be included in the sample (Aczel & Sounderpandian, 2002). The advantage of this sampling method is the known and predictable probabilities of sample estimates, therefore sampling error can be determined and this helps to measure the accuracy of analysis. On the other hand, non-probability sampling method does not choose sample randomly out of the population of interest, rather it is either purposive, by quota or for the sake of convenience (Dimanche, 2004). In this method, the selection of sample is arbitrary or subjective, since the researcher relies on his/her experience and judgment. As a result, there are no statistical techniques that allow for the measurement of sampling error, and therefore it is not appropriate to project the sample characteristics to the population (Joppe, 2001). Despite all these shortcomings, almost all qualitative research rely on nonprobability sampling procedure. As this research contains qualitative and quantitative parts, it is appropriate to use both sampling methods. Research question one, which will find out how the functional silos are broken up in the CoP of the BPI project, will require a convenience sampling procedure (non-probability sampling) based on the accessibility and availability of sample. In this case, the samples are Business Process Manager (BPM) and process champions in Bangkok Office. The means of data collection is in-depth interview. The quantitative part of this research, the research question two, uses simple random sampling (probability sampling method). The questionnaire is sent to all members of CoP in six sub regions within MEA1 region through a link in the email pointing to http://communitysurvey.netfirms.com which is used as questionnaire web interface, and everyone gets the same probability to be included as sample. The result is forwarded to the author’s email address for further analysis. This sampling method allows further measurement of sampling error in the statistical analysis part. The diagram two sampling methods which are used in this research, is depicted clearly in the following Figure 3-2.

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Figure 3-2 Comparison of sample methods for two research questions

3.3. Statistical Method of Analysis Statistical method is used to analyze quantitative data from distributed questionnaire. In this case, the objective is to confirm whether there is correlation between community performance (determined by five variables in the community processes) and BPI performance (represented by two variables, process orientation and empowerment). Therefore the final analysis uses estimate of population correlation coefficient represented by Pearson product-moment correlation coefficient (Aczel & Sounderpandian, 2002). The questionnaire mostly consists of close-ended questions, to allow easy and objective scoring. The score itself is using Likert Scale, ranging 1-5 point (1 being ‘almost never true/happens’ and 5 being ‘almost always true’), this applies for all variables investigated, except for questions asking for frequency (1 being ‘several times a week’ to 5 being ‘less then once a month or never’). First step of analysis would be to establish the overall CoP performance based on measurement of five variables (community activities, the communication intensity, the member activity level, the community identity, and the communication quality), in which each has been weighted (the weight is determined by the respondent and generalized in further process). Each question, in the form of statement, is scored accordingly (high score for high performance and low score consequently for low performance). The average of weighted-score signifies the CoP performance. Similarly for each variable of BPI performance, process orientation and empowerment, however, in this case each variable is treated individually (no weightings applied). Questions are formulated as statements and scored high for high performance, low for low performance.

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The final score of each variable (community performance, process orientation and empowerment) for each respondent is then paired and analyzed (community performance and process orientation; community performance and empowerment). The result of Pearson product moment correlation analysis from two pairs of these variables is then used to draw conclusions about the impact of CoP towards BPI project performance.

3.4

Validity and Reliability

3.4.1

Validity

Validity determines whether the research truly measures that which it was intended to measure or how truthful the research results are (Joppe, 2001). In other words, validity measures how well the research instruments are able to answer research questions. As there are qualitative and quantitative aspects in this research, therefore there are more than one way to evaluate the result. A qualitative study would rely mostly on the interpretation of data rather than looking at numbers as in the quantitative study. How well the interpretation of qualitative data and the empirical criteria in answering research questions will determine the validity of this research. In this research, validity in the qualitative study in enhanced by involvement of competent persons in the in-depth interviews, they are process leaders and project managers of the BPI project. Validity of the quantitative study in this research is enhanced by selection of respondents who are really members of communities and supported by validity of source of questions which originated from previous studies (Zboralski et al., 2003; Kuwaiti & Kay, 2000). 3.4.1

Reliability

The extent to which results are consistent over time and an accurate representation of the total population under study is referred to as reliability. In other words, if the results of a study can be reproduced under a similar methodology, then the research instrument is considered to be reliable (Joppe, 2001). To enhance reliability of this research, for each set of questionnaire, before actual data collection, interviewees were given chance to review the interview guidelines before the actual in-depth interview, this gives interviewees more time to understand the questions and prepare the answer, avoiding misinterpretation of the questions. This goes also the same for questionnaire; a pilot test was performed involving some process leaders. In addition audio files, interview transcripts and questionnaire responses are also kept for reference in further analysis.

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4. RESULT AND DISCUSSION 4.1. Organizational Background Schlumberger Limited is the leading oilfield services company supplying technology, project management and information solutions that optimize performance for customers working in the international oil and gas industry, which in 2004 generated USD 11.5 billion (selected financial data is enclosed in Appendix 1b). The head offices are located in New York, Paris and Den Haag, employing over 45,000 people in more than 100 countries around the globe. The company comprises two primary business segments, namely Schlumberger Oilfield Services and WesternGeco. WesternGeco segment, which jointly owned by Baker Hughes, provides services related to surface seismic analysis for reservoir (a subsurface body of rock having sufficient porosity and permeability to store and transmit fluids, in this case hydrocarbons). It supplies technology and expertise in data acquisition and analysis of seismic characteristic of reservoir (porosity, pore-fluid content, permeability, pressure, and temperature) which is critical in determining the volume of extractable hydrocarbon and predicting fluid flow in the reservoir. Oilfield Services (OFS) is the largest source of revenue in Schlumberger, contributing 89% of total operating revenue in 2004. Oilfield Services segment supplies a wide range of technology services and solutions to the international oil and gas industry. It supports the industry with services from exploration up to abandonment phase, such as artificial lift, integrated project management, cementing, production management, coiled tubing, reservoir evaluation, completion, seismic imaging, consulting, software, drilling, and well testing. This research is focusing in the oilfield services unit, particularly its Middle East and Asia (MEA) operation. Schlumberger Information Solutions (SIS) under this segment provides a unique service: business consultancy, information management services, and IT infrastructure for oil and gas industries. This segment specializes in IT related solutions for the industry, therefore in the high level organization structure SIS has been separated from its parent segment, Oilfield Services. High level organization structure of Schlumberger Limited is mainly based on two main business segments, OFS and WesternGeco, SIS and with addition of functional groups such as controller (finance), personnel, marketing, legal, quality health safety and environment (QHSE), and information technology (IT). These functional groups are supporting two main business segment and SIS’ operations, and headed by vice president (VP) or executive vice president (EVP). Complete overview of high level organization structure of Schlumberger Limited can be found in Appendix ……, the MEA area of oilfield services segment is highlighted, since it is the area of interest and scope of this research. A closer look into OFS’ organization structure (Appendix 1a), Schlumberger Oilfield Services has adopted matrix structure. Headed by an Executive Vice President (EVP), 22

this segment has four major operational regions, namely ECA (Europe, CIS and Africa), NSA (North and South America), MEA (Middle East and Asia) and Russia. Besides those regions, OFS is also divided by product/service segments, namely drilling and measurement, wireline, well service, well completion and productivity, and data consulting and service. Combination between regional and product-defined sub-segments creates posts in a matrix organization structure; Figure 4.1 shows OFS’ MEA matrix organization structure. As also seen from Figure 4-1, Middle East and Asia (MEA) region, which is the focus of this case study, is chaired by a President and consisting of 11 GeoMarkets. GeoMarket is country level management unit, depending on the size of market and value of business, GeoMarket can consist of one or more than one country. MEA consists of the following GeoMarkets: APG (Australia, New Zealand and Papua New Guinea), BMP (Brunei, Malaysia, and The Philippines), CHG (China, Japan, Korea and Taiwan), ING (Indonesia), INM (India), TMV (Thailand, Myanmar, and Vietnam), ARM (Saudi Arabia, Kuwait, Bahrain, and Pakistan), EEG (East Africa and East Mediterranean), GFM (United Arab Emirates, Qatar, Yemen, and Oman), IRG (Iran) and LIG (Libya). Each GeoMarket is managed by GeoMarket Manager.

Figure 4-1 Matrix organization structure of Schlumberger Oilfield Services' Middle East and Asia (MEA) region

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4.2. The Business Process Improvement (BPI) Project 4.2.1. Project Background Schlumberger’s Management in late 2003 has decided to implement an Enterprise Resource Planning (ERP) system, Lawson Business Solutions, throughout company’s locations. The objectives of this ERP implementation are: 1. 2. 3. 4.

standardization of system and reporting for all locations, automation and integration of processes along Schlumberger’s value chain, ability to track business performance on regular basis based on reliable data, ability to perform financial accountings and reports which comply with SarbanesOxley Act (officially known as Public Company Accounting Reform and Investor Protection Act of 2002) which is enforced by U.S. Government to listed companies in New York Stock Exchange.

Lawson Business Solutions ERP system itself is developed by Lawson Software and web-based software, using internet interface. Lawson is end-to-end solution, providing automation in reporting, analysis, budgeting and planning, covering processes throughout value chain. However, there were some complications in this implementation project: • • • • •

high number of locations and its wide distribution over 100 countries short timeframe to include comprehensive trainings to all potential users, MEA as region was expected to ‘go live’ with the system by September 2004 existing system bugs due to quick customization to fulfill business needs at short period of time existing numerous legacy systems which are used throughout the value chain Figure 4-2) different local processes applied according to local requirement

Figure 4-2 Idealistic view of Lawson’s role among the existing legacy systems along the Schlumberger’s value chain 24

Obviously Lawson did not and never planned to replace those legacy systems, however Lawson was planned to create synergies among those systems, thus creating automation and integration along Schlumberger’s value chain. This idealistic view, nevertheless, was not easy to be realized, due to the mentioned complications, several problems have risen after go live: • • • •

users were not familiar to the new system and process, causing many issues and mistakes which at the end fixed by passing corrective transactions at accounting end (journal vouchers), decreasing the reliability of data new processes and roles were not defined, for instance how to setup and who is responsible for that process users were not aware of the impact of their work to others, despite the existing of integrated systems now many system issues require quick actions from system support, while there is no coordinated effort to escalate system issues, users individually raised issue to support (post a ticket)

Therefore Schlumberger’s Management team initiated a post-implementation project, Business Process Improvement (BPI) project. This project at the end aims to achieve the following conditions: • • • • • • •

users are trained and knowledgeable in the new process and systems, and aware that they are part of a business process all processes and roles defined a permanent organization is established for continuous learning and process improvement a service level agreement is agreed between Management and system support, to increase response time of issues control mechanism over process and system is established system bugs are addressed appropriately and resolved, allowing legacy systems and Lawson to integrate seamlessly roadmap for further improvement is established

Lawson implementation project was done separately by region, and then so was the BPI project that follows. MEA region, during Lawson implementation, was divided into two sub-regions, namely MEA1 (APG, BMP, CHG, ING, INM, TMV) and MEA2 (ARM, EEG, GFM, IRG, LIG). MEA1 went live with Lawson on March 2003 and the BPI project began on May 2003. The focus of this research is specifically the MEA1 BPI project. 4.2.2. BPI MEA1 Project Management MEA1 BPI Project covered six GeoMarkets, encompassing countries in South Asia, East Asia, South East Asia and Pacific, namely Australia, New Zealand, Papua New Guinea, Brunei Darussalam, Malaysia, The Philippines, China, Japan, Korea, Taiwan, Indonesia, 25

India, Thailand, Myanmar and Vietnam. However, this project was not managed by country, instead on the GeoMarket level. MEA1 BPI Project was managed by a project manager who reports directly to MEA Financial Controller in Dubai. BPI Project Manager also acts as MEA Business Process Manager, a new role in Schlumberger, to whom Business Process Manager (BPM) in every GeoMarket was reporting. Therefore the core project team are MEA Business Process Manager (Project Manager) and six BPMs representing six GeoMarkets. The following chart depicts project organization structure.

Figure 4-3 Organization structure of MEA1 BPI Project BPI Project Manager is responsible for overall project achievements, project management, providing BPI methodologies. Whereas steering role of the project is performed by MEA Financial Controller, who also acts as link to worldwide Schlumberger’s BPI efforts. On the GeoMarket level, Business Process Manager (BPM), a new full time position, reports to GeoMarket Manager. BPM manages changes and issues on process through process champions and provides transparency to Management about status of BPI project. Figure 4-4 below shows GeoMarket structure of BPI project.

Figure 4-4 Organization structure of GeoMarket level MEA1 BPI Project

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Process champions are selected from people in the functional organization who has sufficient knowledge on the local work process and system in respective area. Therefore these roles are part time roles. The time line of this project stretched from August 2004 to December 2004 (a complete project Gantt chart is available in Appendix 2). 4.2.3. BPI Methodology There were three main activities in MEA1 BPI Project to achieve its objectives: • • •

Solving process and system issues Improving existing processes Setting up a learning organization

The following section will explain, in detail, methodologies used in those three main activities. 4.2.3.1. Solving Process and System Issues This activity was intended to serve a short term purpose, to resolve existing issues and problems either with process or system experienced by users. This activity was coordinated by BPM in each GeoMarket and driven by local organization. However, not all issues were treated; using Pareto method (80-20 rules) the issues were prioritized and resolved accordingly. An explanation of Pareto method can be found in Appendix 4. The summary of methodology used in this activity is listed as the following steps: 1. user reports issue to BPM, then BPM registers issues in an issue log (an excel spreadsheet, an example is available in Appendix 3), issue log would contain detailed information, concerning department, identification as process or system issues, and impact evaluation (sometimes in monetary value or in score) 2. BPM sort issues based on functions and review impact evaluation, prioritizes issue based on Pareto method (Appendix 4) 3. BPM and respective process champions hold meeting regularly to discuss the issue log, following the priorities, using ‘five-why analysis’, by asking ‘why’ five times, to identify the root cause (see Figure 4-4 for ‘five-why analysis’), these meetings are usually a local community meeting 4. having identified root causes, the team devise proposed solutions, responsible party and accountable party, all are updated into the issue log 5. issue log is circulated to users and BPM tracks and follows up issue resolutions

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Figure 4-5 Five-Why Analysis inspired by Toyota (Liker, 2004) 4.2.3.2. Improving Existing Processes Process improvement was considered to achieve mid to long term objective, which was to create streamline processes, shortening the value chain time span and at the end a higher customer satisfaction. An academic approach was applied in this activity (Rohleder & Silver, 1997), with some modifications. The process improvement methodology comprises of several steps: 1. Selection of Core Processes, based on process’ strategic importance to the business and customer/organization strategic preference 2. Process Understanding which involves process mapping and identification of primary objective for each process 3. Facts Finding which includes investigation of the actual process flow, often obtained by interviewing users

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4. Gap Identification, in which the ideal process map is compared with the actual existing process to identify exceptions and deviations, and finally the root cause of such gap 5. Solution and Check Point Development, in this step the solutions are formulated for each gap according to the identified root cause, along with solutions, check points are established along the process in the form of KPIs (Key Performance Indicator) 6. Solution Implementation which will close gaps along the process. In this step, solutions are communicated to all concerning parties in the organization 7. Process Monitoring by process champions using KPIs. Measurement of KPIs is done regularly and any discrepancy should be addressed The following figure summarizes the aforementioned process improvement steps.

Figure 4-6 Process improvement methodology in MEA1 BPI Project 4.2.3.3. Setting Up a Learning Organization A learning organization is expected to carry on continuous process improvement activity, thus a long term objective for the organization. BPI project which was time constrained, would hand over responsibilities of process improvement to this organization which expected to establish permanent and habitual process improvement mechanisms through out Schlumberger. Communities of Practice (CoP) have been viewed since the beginning of the project as a seeds of learning organization. The methodology and impact of CoP to this BPI project and organization performance will be discussed in the next part as result of this research.

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4.3. Communities of Practice in MEA1 BPI Project Communities of Practice (CoP) in MEA1 BPI Project consist of two levels of communities: local and regional level. Local communities exist in GeoMarket level, whereas regional communities are covering MEA region. Both communities consist of process champions and have setup regular meetings and communications, however there is significant difference in choice of domain. Local CoP’s domain in each GeoMarket was based on business process and currently there are four main business processes identified: opportunity-to-cash (O2C), purchaseto-pay (P2P), finance and asset/inventory management (AM/IM). Regional CoP’s domain are based on functional silos, such as sales and marketing, procurement and supply chain, accounts payable (AP), accounts receivable (AR) and general ledger (GL). These two levels of communities maintain relevance between each other, issues found on the local level would be brought to the regional level by respective members, vice versa. Figure 4-6 depicts model of CoP employed by MEA1 BPI Project, here the opportunityto-cash is taken as example.

Figure 4-7 Two types of communities relating to Opportunity-to-Cash (O2C) Process in MEA1 BPI Project

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There are two research questions posed in relation to CoP in MEA1 BPI Project of Schlumberger: (1) How can the silos with narrow functional expertise are broken up through CoP to ensure the necessary communication and business knowledge transfer in BPI project? ;and (2) Is there any the relationship between CoP performance with BPI project performance? To answer both research questions, according to devised methodology, the author has conducted in-depth interviews to main actors behind BPI Project and Communities (four in-depth interviews, complete interview transcript can be viewed in Appendix 6), and also distributed questionnaires to community members (15 questionnaires sent). Some useful information was also extracted from author’s project notes and references during his internship period in the organization. The answers are elaborated in the following sections. 4.3.1. Breaking up the functional silos Much of discussion in knowledge management area has been directed to answer issue of ‘cross-functional’ CoP, whether it actually works (Sharp, 1997). Local communities in MEA1 BPI Project in Schlumberger is undoubtedly a cross-functional CoP, since within a community, people from different functions were involved. Therefore it is important to break up this silo thinking to allow desired information and knowledge sharing among members. The result of data collection and analysis for this research, lists some factors that may allow members of cross-functional CoP, such local CoP in this case, to share knowledge and expertise. The factors are listed below. 1. Common interest and/or problem In this case, all functional silos in Schlumberger now have the same interest of having a new system that integrates the whole organization. Although virtually each functional silo has their own system: SWPS (Schlumberger Web Procurement System) by Procurement, Siebel and OFS Invoicer by Sales and Marketing; Lawson implementation has made the function ‘talk’ to each other (Figure 4-2). ERP system has made automation of process flows, quality of work in the system from one functional silo can easily affect others, therefore forcing functional silos to communicate to each other. As Mr. Theisen (former BPI Project Manager) said from the interview: “This project is all about implementing new ERP system which requires integration, even internationally, if people don’t work cross-regional, cross-functional this will simply not work”. 2. Community’s domain or area of interest Local CoP in this MEA1 BPI case were defined process-wise, members are gathered based on their involvement in one specific business process. For instance, Opportunity-to-Cash CoP (O2C) would gather all actors involved in conversion of a business opportunity to cash. This includes sales and marketing people,

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procurement/supply chain people and accounts receivable (AR) accountants. Purchase-to-Pay (P2P) CoP would include purchasing people, supply chain people and accounts payable (AP) accountants. The right choice of CoP’s domain will allow members to focus in common interest (as explained in first point). They will pursue the same goal, which is clearing obstacles in their process flow. Ms. Sumawong (former BPM for TMV GeoMarket) stressed that ‘process awareness’ is important to allow smoothness of process flows, people need to be aware that their work affects others, therefore it is important to show process view in CoP. With the process-wise choice for CoP domain, the members are expected to know who they are working with, realizing that they are just a part among other parts in specific process. In regional level, CoP were based on functional silos, this will allow more in-depth discussion and more technical knowledge sharing. Regional CoP were also considered as information channel from Lawson Implementation Project, where global changes in Lawson are often communicated. 3. Previous knowledge and expertise of members CoP with competent members from respective function, sufficient knowledge and expertise of existing process and system, will initiate good discussion on the issues. Without sufficient knowledge of its members, the CoP will have shallow discussion, unable to identify root cause of an issue, thus resulting inappropriate solution. Members will be unmotivated knowing they cannot rely on other members to solve their problems. Consequently, they tend to find solution by themselves or inside their department, even though this solution is not better but they perceive it to be easier, promoting more silo thinking. As Mr. Theisen put it, “It is very critical to find the right people”. 4. The existence of personal networks CoP, both local and regional, will allow people to get to know each other, even to the personal level. They will know their counterparts in other locations (as in the case of regional communities) and their colleagues who work together in the same process (as in the case of local communities). The personal network will increase informal communication among members of CoP and this means less perceived boundaries among them as in the case of functional silos. 5. Support from Management Management involvement in CoP is very important, availability of this support means that individual and functional performance are related with CoP performance. This fact will make members of CoP work together cross-functionally achieving CoP objectives. 6. Appropriate Tools Tools used in CoP must be accessible to all members, despite of their function. Supply chain people who might spend significant time on the field locations have

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constraint to attend regular meetings. The fact is different with finance people who usually stay in the office. Therefore appropriate tools need to be utilized. Mr. Wongpimonporn (Procurement and Supply Chain Process Champion) showed the usefulness of bulletin board and mailing list in CoP communication besides regular meetings. This way, members can communicate more intensely. Worth to notice also in MEA1 BPI Project’s CoP, the use of issue logs. Issue log is basically list of issues contributed by members of specific CoP and this list is managed by GeoMarket Business Process Manager. As mentioned previously, issue log is used as agenda in regular local CoP meetings and regional meetings if necessary. CoP in MEA1 BPI Project also uses the Internet extensively: information about members, schedule of regional meetings, minutes of local meetings and summary of conference calls for regional CoP are ready at the BPI Project web page, enabling members so get information at any time. 4.3.2. Correlation between CoP and BPI Project Performance As previously described in Chapter 3, Methodology, the author has distributed questionnaire to community members and process/community leaders in MEA1 BPI Project at Schlumberger. There are two types of questionnaires, questionnaire type A (Appendix 5a) was directed towards community/process leaders to assess overall performance of the respective community (sample number, n=4). Second type of questionnaire, type B (Appendix 5b), sent to community members, assessing community performance from member’s perspective. Out of 15 questionnaire distributed to community members, using web-based questionnaire and email, the response rate was 47% making sample number of 7 (n=7). The author realizes the low response was probably caused by the timing of questionnaire and lack of support from organization. However, since the nature of this study is an exploratory one, the author assumes that small number of sample is permissible for model testing. The follow up or further study applying the same model should use bigger number of samples and more variety of sources. The result of those responses were scored using Likert scale, ranging 1-5 point (1 being ‘almost never true/happens’ and 5 being ‘almost always true’), this applies for all variables investigated, except for questions asking for frequency (1 being ‘several times a week’ to 5 being ‘less then once a month or never’). Score of 1 implies for a particular item (question), the response has least positive effect towards community performance. On the contrary, score of 5 implies most positive effect towards community performance. Appendix 5c. displays a full table, defining score for all possible responses of each item (question).

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All data are treated and analyzed using Microsoft Excel 2003’s add in feature of Data Analysis ToolPak. The analysis includes descriptive statistics, regression and correlation analysis. Composition of samples for community members are shown in the following Figure 4.7 (complete tables are in Appendix 7a).

Respondent Composition by Gender

Respondent Composition by CoP AM/IM 14%

Female 57%

Male 43%

Finance 29%

Respondent Composition by Function Marketing 29% Business Process 14%

O2C 28%

P2P 29%

Respondent Composition by Working Year

Supply Chain 14%

1-3 yrs 14% >6 yrs 14%

Finance 43%

4-6 yrs 72%

Figure 4-8 Respondent (sample) composition based on selected variables . 4.3.2.1. Community Performance Community performance was measured using five variables referred from a study of Zboralski et al. (2003), namely community activities, the communication intensity, the member activity level, the community identity, and the communication quality. Two variables (community activities and the communication intensity), which define measurement of overall community performance, were addressed to community/process leaders, whereas, variables such as member activity level, the community identity, and the communication quality, were addressed to community members. Total number of items (questions) on these variables is 60 items, community activities: 21 items, the communication intensity: 13 items, the member activity level: 9 items, the community identity: 12 items, and the communication quality: 5 items. The following

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table is a summary of descriptive statistics analysis of each variable, whereas Appendix 8a lists complete table of this summary. Table 4-1 Descriptive Statistics of Community Performance Variables Number of Sample, n

Mean

Standard Deviation

Standard Error

Members Activity

7

3.89

0.53

0.20

Community Identity

7

3.95

0.38

0.14

Communication Quality

7

3.97

0.37

0.14

Community Activity

4

3.79

0.49

0.28

Communication Intensity

4

3.18

0.46

0.27

Variables

All sample mean variables scored in the range of 3-4, with relatively low standard deviation. This implies that most respondents perceive that community performance is good. A moderate score, however, is found on communication intensity variable, indicating moderate intensity of communication among community members. 4.3.2.2. BPI Performance According to Kuwaiti & Kay (2000), BPI project performance can be evaluated from variables such as process orientation in the implementing organization, and worker’s empowerment. Assessment of both variables are done by community members, for empowerment variable, there were 14 questions posed, while for process orientation variable, 20 questions were asked to all respondents (n=7). Same as previous analysis on community performance, a descriptive statistics analysis were performed. Complete result of all items is displayed in Appendix 8a, however the summary is shown below. Table 4-2 Descriptive Statistics of BPI Performance Variables Number of Sample, n

Mean

Standard Deviation

Standard Error

Employee’s empowerment

7

3.90

0.34

0.13

Process orientation

7

4.06

0.20

0.07

Variables

The result of employee empowerment assessment, from mean of 3.90, shows high degree of empowerment in the organization, employees are given significant trust and responsibilities in their work. Relatively low standard deviation also shows low variability among responses.

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It can be concluded also, that within organization, generally there is high degree of process orientation, shown by mean score of 4.06. It seems that ‘process view’ has been quite prevalent in the BPI organization. 4.3.2.3. Correlation Analysis Answering research question number two, whether community performance has any kind of correlation to BPI performance as organization. Therefore, according to analytical model, which was previously presented in Chapter 3, community performance is treated as independent variable, whereas BPI performance will be treated as dependent variable. Correlation will be assessed separately between community performance (as total average score of five variables by respondent) and employee empowerment (average score by respondent) and between community performance and process orientation. Correlation between two pairs of variables will be assessed using Pearson productmoment correlation coefficient, ρ, testing the following hypothesis: H01: there is no correlation between CoP performance and process orientation, H02: there is no correlation between CoP performance and empowerment Correlation between community performance and process orientation Table 4-3 below pairs the score of community performance with its responding process orientation’s score. This table is only a summary, the complete score can be found on Appendix 8b. Table 4-3 Table 4-3 Summary of Scores from Pair of Variables, Community Performance (C) and Process Orientation (P) Community Performance

Process Orientation

C

P

1

19.48

4.33

2

19.36

4.25

3

19.32

3.83

4

16.62

3.25

5

18.30

4.08

6

18.52

3.75

7

19.90

4.17

Respondent

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Hypothesis test is

H 0: ρ = 0 H1 : ρ ≠ 0

Using Analysis ToolPak, an add-in feature, in Microsoft Excel to analyze Pearson product-moment correlation coefficient, resulted as follows: Regression Statistics 0.852576514 Correlation coefficient, ρ 0.726886712 R Square 0.672264055 Adjusted R Square 0.214870079 Standard Error 7 Observations

Furthermore, using 95% confidence level (α=0.05): Standard t-Stat P-value Error -1.4943461 1.495306 -0.99936 0.3635 0.28993796 0.07948 3.647934 0.01478

Coefficients Intercept Slope

Pearson product-moment correlation coefficient, ρ, is not equal to zero. Additionally, according to policy in achieving significance level, where P-value has to be less than α to reject H0, in this case the author can reject H0. P-value shows that it is lower than α (Pvalue