An Optimization Model for Valuating Process Flexibility

Although flexible processes are deemed critical for many companies and constitute a key concern of business process management, there is a lack of approaches for valuating process flexibility from an economic perspective and for determining an appropriate level of process flexibility. Today, companies do not know how flexible their processes should be. While generally advocating balanced investments, scholars provide concrete recommendations for very specific settings only. What is missing is a more general guidance and a deeper investigation of the positive economic effects of flexible processes, which are hard-to-measure and beset with risks. Against this backdrop, we propose an optimization model that enables determining the optimal level of process flexibility in line with the principles of value-based business process management. We also report on the insights gained from applying the optimization model to the production processes of an international company from the semi-conductor industry

Analyzing the Trade-Off between Traditional and Agile Software Development - A Cost/Risk Perspective

Digitalization heralds a new era of enterprise IT. It challenges CIOs to find a balance between renovating legacy IT and seizing the opportunities of digital technologies to keep up with competitors and start-ups. This requires organizations to operate two software development modes simultaneously: the traditional and the agile mode. Despite substantial research on both modes, little is known about whether to implement distinct software development projects traditionally or agile. As a first step to addressing this gap, we propose a quantitative decision model that compares the cost and risk profiles of both modes associated with the implementation of a distinct project. The decision model integrates qualitative and quantitative characteristics of the project in focus and of the traditional and the agile mode. As for evaluation, we implemented the decision model as a software prototype and validated its behavior using sample projects as well as a sensitivity analysis

The Business Value of Process Flexibility - An OptimizationModel and Its Application in the Service Sector

Promising to cope with increasing demand variety and uncertainty, flexibility in general and process flexibility in particular are becoming ever more desired corporate capabilities. During the last years, the business process management and the production/operations management communities have proposed numerous approaches that investigate how to valuate and determine an appropriate level of process flexibility. Most of these approaches are very restrictive regarding their application domain, neglect characteristics of the involved processes and outputs other than demand and capacity, and do not conduct a thorough economic analysis of process flexibility. Against this backdrop, the authors propose an optimization model that determines an appropriate level of process flexibility in line with the principles of valuebased business process management. The model includes demand uncertainty, variability, criticality, and similarity as process characteristics. The paper also reports on the insights gained from applying the optimization model to the coverage switching processes of an insurance broker pool compan

A Simulation-Based Approach to Understanding the Wisdom of Crowds Phenomenon in Aggregating Expert Judgment

Research has shown that aggregation of independent expert judgments significantly improves the quality of forecasts as compared to individual expert forecasts. This “wisdom of crowds” (WOC) has sparked substantial interest. However, previous studies on strengths and weaknesses of aggregation algorithms have been restricted by limited empirical data and analytical complexity. Based on a comprehensive analysis of existing knowledge on WOC and aggregation algorithms, this paper describes the design and implementation of a static stochastic simulation model to emulate WOC scenarios with a wide range of parameters. The model has been thoroughly evaluated: the assumptions are validated against propositions derived from literature, and the model has a computational representation. The applicability of the model is demonstrated by investigating aggregation algorithm behavior on a detailed level, by assessing aggregation algorithm performance, and by exploring previously undiscovered suppositions on WOC. The simulation model helps expand the understanding of WOC, where previous research was restricted. Additionally, it gives directions for developing aggregation algorithms and contributes to a general understanding of the WOC phenomenon

Good Decisions and High Business Value – Descriptive and Normative Contributions to IS Decision-Making

Digitalization has significantly increased the competitive pressure on organizations. Companies must be able to continuously react on technological innovations as well as to recognize new opportunities of efficiency and competitive advantages. Thus, the ultimate success of surviving the disruptive power of digitalization requires series of correct decisions on IS and fast reactivity towards changes (Meyer et al. 2014; Edwards 1962). A prerequisite of correct IS decision-making is the critical evaluation of both, opportunities and threats with respect to the business value created (Mata et al. 1995, p. 487). For fulfilling this prerequisite, decision-makers have to deal with an enormous decision complexity (Henfridsson and Bygstad 2013). The main objective of this doctoral thesis is to help practical decision-makers to identify situations to provide a suitable tool-kit for assisting in these complex decision situations of IS

Good Decisions and High Business Value – Descriptive and Normative Contributions to IS Decision-Making

Digitalization has significantly increased the competitive pressure on organizations. Companies must be able to continuously react on technological innovations as well as to recognize new opportunities of efficiency and competitive advantages. Thus, the ultimate success of surviving the disruptive power of digitalization requires series of correct decisions on IS and fast reactivity towards changes (Meyer et al. 2014; Edwards 1962). A prerequisite of correct IS decision-making is the critical evaluation of both, opportunities and threats with respect to the business value created (Mata et al. 1995, p. 487). For fulfilling this prerequisite, decision-makers have to deal with an enormous decision complexity (Henfridsson and Bygstad 2013). The main objective of this doctoral thesis is to help practical decision-makers to identify situations to provide a suitable tool-kit for assisting in these complex decision situations of IS

The Business Value of IT in Light of Prospect Theory - A New Explanation for IT Paradoxes

A key problem with IT decision-making is that the real value contributions of IT projects are unknown ex-ante to their executions. Thus, an organization has to rely on the expectations and perceptions of its decision makers. Moreover, these perceptions are prone to biases and display only a transfigured or irrational image of reality. This paper examines how these biases are related to the business value of IT (BVIT) and how IT decision-making can be rationalized. To this aim, a model is set up based on prospect theory, which is a frequently cited theory from behavioral economics used to descriptively analyze human value perception under risk. Applying the results found via prospect theory to IT decisions, the “perceived” BVIT is quantified and analyzed. Based on the model, the paper shows that the irrationalities rooted in human value perception provide explanations for two central paradoxes of IT. First, it reveals that they cause a disparity between the anticipated value-adding effects of IT and the actual measured outcomes, reflecting a famous observation within BVIT research known as the “productivity paradox of IT.” Second, recent studies show that IT increases the operational efficiency and competitiveness of organizations. However, only the operational effects are perceived in practice. In the paper, this one-sided perception is referred to as the “perception paradox of IT”. It is ultimately concluded that a rethinking of the position of IT within modern organizations and the establishment of suitable corporate governance mechanisms can resolve these issues, avoid irrationalities, and positively influence the performance impacts of IT

Customer Experience Versus Process Efficiency: Towards an Analytical Framework About Ambidextrous BPM

Digitalization forces organizations to rethink classic operating models and develop completely new ways about how to run business. This revolution also spills over to the management and design of business processes. New market transparency and the increasing interconnectedness of customers define customer satisfaction and operational efficiency as two equal strategic objectives. Ambidextrous business process management (BPM) demands the symbiosis of exploitative BPM to ensure organizational efficiency and explorative BPM to create process designs that truly excite customers. A key challenge is to properly balance the different capabilities. Therefore, we propose an analytical framework providing an in-depth understanding about effects and interdependencies of this challenge. As justificatory knowledge, we drew from literature on value-based BPM and customer confirmation/disconfirmation paradigm to unite the different perspectives. Based on our framework, we match process and customer types to generic design principles and provide concrete guidance on the establishment of ambidextrous BPM