iMac showing a graph on its screen

Step-by-Step Guide to Business Process Reengineering: Principles, Best Practices and Successful Examples

Business process reengineering (BPR), also known as business process transformation, focuses on the analysis and redesign of core business practices.

It’s used by businesses to identify and eliminate inefficiencies in the workflow, resulting in improvements in productivity and quality.

Benefits of Business Process Reengineering

Increases Competitive Advantage

BPR helps an organisation to focus on its core competencies. These competencies are hard to mimic, which provides businesses with a competitive advantage.

Reduce Costs

Organisations can radically improve the effectiveness and efficiency of its operations with BPR. The redesigned processes can help boost productivity and reduce time wastage, which ultimately lowers operational costs.

Maintains Flexibility

BPR allows organisations to maintain flexibility. In today’s world, the most successful companies are known to be able to adapt quickly to changing trends. Therefore, the ability to stay agile is imperative.

Principles of Business Process Reengineering

laptop with business charts and graphs

Michael Hammer – the founder of the BPR concept, wrote the book “Reengineering the Corporation: A Manifesto for Business Revolution”. In his book, he suggests 7 principles that businesses should abide to when undergoing BPR.

1. Organise Around Outcomes, Not Tasks

The first principle states that new processes should focus on the outcomes of the BPR programme and the easiest way to achieve it.

2. Have Those Who Use the Output of The Process Perform the Process

This principle suggests that the work should be carried out by the person using the output. For example, employees can make purchases without having to go through the procurement department.

3. Integrate Information Processing Work into the Real Work that Produces the Information

This means that the handling of data must be done by the same person who’s collecting it. This reduces errors by limiting the number of external contact points in a process.

4. Treat Geographically Dispersed Resources as Though They were Centralised

Technology such as shared databases and cloud computing should be used to optimise the organisation’s resources.

5. Link Parallel Activities Instead of Integrating Their Results

According to Hammer, parallel activities must be coordinated. This removes inefficiencies and reduces operational costs.

6. Put the Decision Point Where the Work is Performed and Build Control into the Process

Hammer states that employees must have the rights to make decisions and should be given control over their work.

7. Capture information once – at the source

This principle recommends that information should be collected once at where it’s been created. This helps the organisation to avoid incorrect data entries and expensive re-entries.

Steps in Business Process Reengineering

Step 1: Set the Vision and Define Objectives

The vision and objectives of the BPR programme should be clearly defined and communicated to the employees. This prepares them for what’s to come and sets the tone of the project.

Step 2: Establish a Competent Team

A group of business people having a meeting

A team of cross-functional experts needs to be assembled to help establish new processes. It should consist of employees who can reengineer outdated processes.

According to Toggl, the best BPR teams consists of

  • senior managers,
  • operation managers and
  • reengineering experts.

Step 3: Study the Existing Processes

Current processes will be thoroughly analysed to identify inefficiencies and bottle necks.

Benchmarking can be helpful in this step. It’s the act of comparing the company’s performance and processes against similar organisations in the same industry.

This can help your organisation better determine the processes that need to be overhauled.

Step 4: Redesign the Processes

The redesigned processes should be in line with the vision and objectives established in Step 1. Additionally, it should also lead to increased efficiency and mitigate problems caused by the previous processes.

Step 5: Implement the Reengineered Processes

Once the processes have been redesigned, a test should be carried out to identify any potential issues.

This allows the organisation to make any necessary adjustments before implementing the process on a larger scale.

Business Process Reengineering Best Practices

BPR is not a failproof method. Some factors that will help ensure the success of the BPR programme include:

  • Making customer needs a priority
  • Gathering support from upper management
  • Establishing clearly defined goals and responsibilities of the participants
  • Using proven BPR methodologies that have shown real-world results

Examples of Business Process Reengineering Case Studies

Ford Motors

Person holding onto the steering wheel of a ford motor vehnicle

Problem: Ford’s accounts payable division was not as efficient as it should be.

The company found that the department was overstaffed and approximately 5 times larger than it should have been.

 

Solution: Deploy a BPR strategy to change the accounts payable process.

Ford reorganised and downsized the department and came up with new processes. This helped the company become more productive.

Google

Google Logo

Problem: The company’s hiring process was ineffective.

Google had found that their hiring process had little correlation with how a candidate ultimately performed in his job. This led to bad hires that left negative, long-lasting effects on the company.

 

Solution: Adopt a structured, process-driven approach to hiring and interviewing candidates.

Google reengineered its hiring process and developed a structured approach to interviewing candidates.

Consequently, the company spent fewer resources and capital when hiring new staff and can better weed out toxic employees.

Airbnb

Apartment with a person holding onto a phone with the airbnb logo on its screen

Problem: The employees involved in Airbnb’s product development process – designers, engineers, and researchers – were working in silos.

This was counterproductive and caused them to struggle with meeting their deadlines. Furthermore, it also resulted in mediocre product ideas.

 

Solution: Create a digital environment where employees can work closely together.

The company came up with a system that updated files in real-time, allowing the designers, engineers, and researches to work seamlessly together. This enabled them to deliver great product ideas punctually.

 

Business process transformation brings about a multitude of benefits such as lower operational costs and increased competitive advantage.

However, it requires a great deal of careful planning and expertise to implement it successfully.

Need help with redesigning your business processes? Contact our team at Astreem today!

 

Implementing Business Process Reengineering in Your Company

A BPR programme requires the right expertise and knowledge to succeed. If you’re keen on redesigning your existing business processes, contact us to find out how we can assist you.

plants growing out of coins to symbolise raising funds for a business

Fundraising for Small and Medium-sized Enterprises (SMEs)

Having sufficient capital to grow your business is a very important aspect of your business journey. Knowing when to raise capital and get access to sufficient quantum can be one of the most critical aspects of building a successful business.

Business owners will likely need to seek investment dollars at different points in the life cycle of their business, and from a variety of sources, in order to raise the necessary capital to sustain and grow their business.

Regardless of whether you need additional funding immediately or later, it’s always beneficial to have an understanding of the various avenues of fund raising, the fund raising process, and the importance of building a business that can maximize its valuation.

Various Avenues of Fundraising

Crowdfunding as a Funding Option

Stack of coins

Crowdfunding is one of the newer ways of funding a startup that has been gaining lot of popularity lately. It’s like taking a loan, pre-order, contribution or investments from more than one person at the same time.

This is something you can consider in the very early stages of your business. The best thing about crowd funding is that it can also generate interest and allows you to test market acceptance whilst providing some  financing.

However, this is not a long term solution for businesses that already have some traction and need to grow in a more sustainable way.

Find Angel Investors for Your Startup

Angel investors are individuals with surplus cash and a keen interest to invest in upcoming startups. They also work in groups of networks to collectively screen the proposals before investing. 

They can also offer mentoring or advice alongside capital. Typically, angel investors invest in early stages of a start up.

Get Funding from Business Incubators and Accelerators

Early stage businesses can consider incubator and accelerator programs as a funding option. Incubators are like a parent, it nurtures the business and provides shelter, tools, training and network to a business.

Accelerators are more or less the same thing. However, an incubator helps/assists/nurtures a business to walk while an accelerator helps a business to run/take a giant leap.

Get Venture Capital For Your Business

Venture capitals, are professionally managed funds who invest in companies that typically invest larger quantum but also have higher expectations on growth.

They are institutional investors who often seek to recover their investments within 3-5 years. They usually invest in a business against equity and exit when there is an IPO or an acquisition. 

VCs provide expertise, mentorship and acts as a litmus test of where the organisation is going, evaluating the business from a sustainability and scalability point of view.

They typically look for larger opportunities that are a little bit more stable and companies with a strong team of people and good traction.

You also have to be flexible with your business and sometimes give up a little bit more control, so if you’re not interested in too much mentorship or compromise, this might not be your best option.

A venture capital investment is usually more appropriate for businesses that are beyond the startup phase and already generating strong revenue. 

Raise Funds Through Fully Regulated Private Exchange 

These regulated private exchanges enable businesses to trade their private shares publicly. This could be a great avenue for companies who require funding but do not want to lose the management control of their businesses.

Exchanges like Capbridge’s 1X can enable the trading of private shares, achieve costs effective and faster exits to allow founders, early investors and key employees an avenue to sell their private shares without going through a costly and time consuming IPO.

Raise Money Through Bank Loans

Banks can usually provide two kinds of financing for businesses. One is working capital loan, and other is funding. Qualifying companies can secure a working capital loan from the bank to fund its operations.

Funding from the bank would involve the usual process of sharing the business plan and the valuation details, along with the project report, based on which the loan is dispersed for.

Government Programs that Offer Startup Capital

Most governments encourage their SMEs to digitize or innovate and do offer help in the way of grants to encourage the proliferation of start ups. 

Companies that are based in Singapore can get access to different government-funded grants like the Enterprise Development Grant (EDG) from Enterprise Singapore or Startup SG by SPRING SEEDS CAPITAL and SGInnovate. 

The Fundraising Process

Group of business people discussing their plan

A thorough understanding of the process of raising capital is essential to achieving the best possible funding outcome for the entrepreneur’s business.

Step 1: Develop Your Business Plan

Before you go out there and start speaking with investors about raising funds, first determine how much capital you require to fund the business’s ongoing operations and growth objectives.

Develop a business plan that details the capital requirements (for example, hiring new employees, expanding office space, purchasing or developing new technology) to achieve the growth initiative and how this capital will help the company achieve its overall strategic goals and long-term business plan.

Step 2: Determine the Amount of Capital Needed

Raising the right amount of capital is a careful balance. If too little capital is raised in a fundraising round, additional funds sooner than they expected, diverting attention and resources away from running the day-to-day business.

Conversely, if too much capital up front, you may find it more difficult to fulfil the targets set. 

Step 3: Choose Your Funding Model

Depending on which part phase of growth your business is in, you can choose the type of funding option that best suits you.

If your company is young, you may prefer to go the friends and family, crowdfunding route. However, if your company is more mature, you may prefer to raise larger amounts. In these instances, you could consider raising funds through venture capital firms consisting of  institutional investors.

These venture firms will likely seek equity ownership in the company and some degree of control over business decisions (for example, a seat on the company’s board of directors). You could also choose to raise capital from non-institutional investors.

These investments may be structured as convertible debt, which is a hybrid of debt and equity. This can make fundraising simpler, since many of the terms of the investment do not have to be decided until the next formal fundraising round.

Today, more flexible options provided by private exchange for tradeable private equities that allow companies to offer publicly tradable stocks whilst still remaining private companies exists.

Step 4: Conduct Pre- and Post-money Valuation

Valuation is one of the most important negotiating factor when raising capital. Prior to  the beginning of the fundraising process, the entrepreneur should determine an estimated valuation for his or her company based on a detailed and defensible set of assumptions.

Private equity and venture capital fundraising typically involve negotiating a “pre-money” and “post-money” valuation of the business in order to determine what percentage of the company investors will receive in exchange for the capital they are willing to provide.

Pre-money valuation is the value of the company before the new capital investment is included. Post-money valuation is the pre-money valuation of the company plus the value of the new capital invested.

Step 5: Pitch to Investors

Man giving a business presentation to a group of people

This process is usually a very concise and sharp pitch deck designed to allow the investor to quickly make a decision on whether to find out more about the investment opportunity.

If there’s an interest in your business, the investor will typically start investing more time to uncover the details of the opportunity. 

In general, the investor will present the entrepreneur with a term sheet, which is a short document that covers the basic parameters of the deal including the amount to be invested, the pre-money valuation, the amount of equity the investor will receive and other big picture deal terms. The details will be ironed out by the legal team after the term sheet is agreed upon.

At this stage, the entrepreneur has the opportunity to negotiate and to compare competing offers. Once the term sheet is signed, the negotiation over major deal terms begin.

Building a Business That Can Maximize Valuation

Focus on the Bottom Line, Not the Top Line

When you’re about to sell your company to a buyer, the buyer will determine a company’s worth based on its earnings.

The main thing that will be taken note of is the cash flow through which the value of the company is evaluated. This is used to maximize the business valuation, which is what everyone is looking for.

Earnings gained from the services or products that do not bring any cash flow or profits in the company will eventually hurt the overall value of your business.

Strong Management Team

People having a business discussion with their laptops open

Companies that have a capable and highly experienced management team without the supervision of the founder are normally viewed as more attractive for the strategic acquirers and the private equity firms.

Develop and Protect the Intellectual Property (IP) That Exists in Your Company

Even if a company has a high revenue flow, it’s important to understand the quality of the revenue and if it is sustainable.

A company that’s in a business like every other business will find it hard to extend its value.

A company that owns intellectual property that can be exploited through franchising or licensing will become more valuable.

A company that owns a platform that can perpetuate future sales or one that is unique in its offerings will be able to command a higher valuation than a company that is dependent on volume of transactions.

Get Your House in Order

If you’re planning to raise funds for your business, it’s important you start planning for the event, so that there is time to maximize the business valuation. This could mean getting the management team in place, realigning margins, curating your proprietary IP and building your net profitability. 

Diversify Your Revenues

When speaking to investors, they will typically check if the revenues are expanding and sustaining at a much greater level over the long run.

And this makes it important to bring diversity in the revenue, which means that you need to have many ways by which your company would earn money.

This could mean developing new avenues of revenues through royalties through franchising and licensing, selling new products and services or even acquiring new capabilities to expand into new but related areas.

Get the Right Advise

Preparing your business for fundraising is a full time effort. Preparing yourself for the journey is important and is best done with a team who can help you prepare your journey.

In the end it is not merely about putting your business in front of an investor but more about how much value, both tangible and intangible, you can bring to the table for an investor.

Working with a team with experience in fundraising, branding, IP creation and business strategy development can save business owners a lot of time and disappointment as they embark on this exciting journey!

What is Process Improvement in Businesses?

Also known as Continuous Improvement Process (CIP), Business Process Improvement (BPI) is a constant process of identifying, analysing and improving existing processes within your business.

BPI is used with the purpose of meeting the organisation’s growing or changing goals by

  • minimising errors,
  • reducing waste,
  • improving productivity and
  • streamlining efficiency.

Why Process Improvement is Important

Boosts Productivity and Streamlines Workflow

Process improvement can help to identify obstacles and repetitive tasks which can be automated.

Furthermore, integrating work processes across all functions will make performance measurement much easier with less risk of human errors.

Reduces Operating Costs and Wastage

By improving work processes, you’ll be better equipped with accurate and reliable data. In return, knowing the exact costs and time involved to complete a body of work will help to reduce any unnecessary costs and wastage.

Process Improvement Method: PDCA

One of the most straightforward process improvement techniques is the PDCA framework. It effectively identifies possible improvements for implementation.

PDCA is a repeatable cycle that comprises 4 main steps.

Step 1: Plan

The first step begins with you identifying the problem and changes you’re planning to make. This can be done by using process mapping and problem-solving tools.

Process mapping tools

  • Determines which part of the process works or doesn’t work well

Examples of such tools include audit development and Standard Operating Procedure (SOP) documentation.

Problem-solving tools

  • Points out the root cause of the problem you’ve identified to come up with a solution

An example of a tool would be the cause-and-effect analysis.
It’s also a good idea to bring in external help and experts to provide insights as their experience can save you additional time and resources.

Step 2: Do

Next, you can start testing the improved process on a small scale. If your organisation is medium to large-sized, you should test the solution on a sub-division first.

Step 3: Check

While analysing the effectiveness of your implementation, it’s important to note that a short-term positive result may not be sustainable.

For example, an increase in output may result in a compromise in other areas (e.g. increase in defect rates).

Therefore, do continue to monitor the effectiveness of the new implementation(s) by comparing results against the previous process before moving on to the next step.

Step 4: Act

You can start enforcing this new implementation company-wide when it has been proven to show favourable results.

PDCA is designed to be a repeatable process. Hence, you can duplicate the same framework to rectify any other issues that your business is facing.

 

Business Process Improvement VS Business Process Transformation

Business Process Improvement is an ongoing process that aims to improve efficiency through continuous refinement of existing processes. It’s used to remove existing problems and obstacles in the workflow to reduce waste.

On the other hand, Business Process Transformation seeks to redesign the entire process from scratch by focusing on the desired result.

Although introducing radical changes in the operation strategy requires careful planning and experience, it gives your business a more significant competitive advantage.

Looking to transform your business process? Consult our team at Astreem today!

Process Improvement Tools

1. Audit Development

An audit system provides a clear overview of all financial records and documentation.

Benefits:

  • Clear reporting

Provides stakeholders with a much clearer understanding of the health of the company

  • Maintains and improves profitability

Steers your company to improve business processes to maximise profitability

2. SOP Documentation

SOP documentation provides employees with step-by-step guidelines for work processes.

It can be in the form of checklists, flowcharts, videos or images among other mediums.

Benefits:

  • More accurate employee performance measurement
  • Reduced training costs
  • Ensures consistency in workflow processes

3. Cause and Effect Analysis

A cause-and-effect analysis provides a structure for assessing each problem by exploring all of its possible causes.

This can be done in 3 simple steps:

  1. Identify a problem you want to solve.
  2. Explore all possible causes of this problem.
  3. Evaluate and come up with possible solutions for each of the causes.

Benefits:

  • Identifies areas of improvement relatively quickly through the visual representation of each effect and their causes

4. 5 Whys Analysis

The 5 Whys analysis is a theoretical variation of the cause-and-effect analysis, used to resolve simple to moderately difficult problems.

It’s a deductive process that involves a discussion with your team and asking a series of 5 whys after a problem is identified.

Here’s an example:

Q: Why did sales drop this quarter? A: The team didn’t close as many leads in recent months.
Q: Why? A: Recent leads are of lower quality.
Q: Why? A: The marketing team has recently switched to a new lead generation partner.
Q: Why? A: The finance department deemed the previous partner unsuitable.
Q: Why? A: The previous partner increased their rates substantially.

After completing the analysis, you’ll be presented with better insights and multiple ways to rectify the problem.

In this scenario, your team can analyse if the increase in rates of the previous partner is justified or if it’s better to engage other partners.

Benefits:

  • Identifies the root cause of the problem efficiently
  • Doesn’t require statistical analysis

Use Efficient Process Management Tools

On top of using process improvement tools, businesses can also complement their strategy by incorporating process management tools to improve their operations.

Statistics shown on a tablet

Some examples are:

  • Daily checklists and processes can be developed to enhance team collaboration and productivity
  • Processes can be automated to reduce manual work and human error

These process management tools help to streamline workflow and operations.

Furthermore, embedding automation triggers next step functions either via email, alerts or integrations to help managers stay on top of what’s important.

Identify Opportunities to Improve Your Business Process Today

Today, business improvement can range from improving linear processes to complete company-wide business transformation.

The extent to which digitisation is adopted depends largely on

  • the opportunities for improvement,
  • the expectations of profit improvement and
  • the readiness of the team to embrace the adoption of technology.

With some professional assistance, both in terms of business and mindset transformation, you’ll be able to get through the transformation process effectively and efficiently to scale your business with the help of an expert.

In countries like Singapore where digitisation is a priority, the government offers financial assistance for approved projects (up to 70% of consultancy fees) to encourage businesses to go digital.

Top view of office table with people working on their laptops

All businesses have different requirements and pain points. Consider engaging a business growth consultancy  or a business transformation expert as they can help you identify critical problems and solutions to help improve your business profitability quickly.

 

Franchise as a Growth Strategy

On the 5th of September, FLA, [email protected] and Astreem Consulting Conducted an overwhelming event at the Lifelong Learning Centre.

As each passionate speaker addressed the SMEs and provided invaluable information on how to grow their business, the audience was equally interested and engaged.

“Business Process Transformation and Franchising as a growth strategy must go hand in hand if brands want to grow fast and succeed. The traditional methods of managing franchisees may be once successful, but with the right technology, business performance can be improved and franchising as a brand will be even more successful. Who doesn’t want higher profits?” quizzed Hsien, which drew laughter from the audience.

What Hsien Naidu was trying to bring across to the SMEs was that, with right technological tools, SMEs are able to fully achieve what larger enterprises have achieved. The lack of resources should not hinder growth. One of the tools that Hsien had introduce was TreeAMS, a performance management system that is geared towards ensuring the success of franchises through performance monitoring at real time. Something that many franchises are unable to gain visibility due to geographic issues which cause many a good brand’s demise. She stressed further that SMEs should leverage technology to facilitate growth.

She also introduce what Business Process Transformation was which drew much interest from the audience as many continuously asked questions. This shows that many companies are interested in digitizing and streamlining their business process and understand the importance of what business process transformation/optimization can really do for their growing organisation.

Preparing for an AI Future

With constant industry automation and innovation transforming the new future, the playing field is constantly reshaping into an open world unrestricted by geographical lines.

This year at SMEICC event, Astreem Consulting’s very own Hsien Naidu, was invited as one of the panel speakers as a domain expert under Track 1.1 – “MAKE-UP OF A FORWARD-LOOKING ENTERPRISE – PREPARING FOR AN AI FUTURE”.

Along with other panel speakers, Ms Sophia Chin, Lead Consultant from Personna, Mr Daniel Walker from Zegal, Ms Roslina Chai, Managing Director from Catalyse Consulting.

SMEICC Panel of Experts on Digitization and AI

Expert Panel speaking: Hsien Naidu, CEO from Astreem Consulting. Ms Sophia Chin, Lead Consultant from Personna, Mr Daniel Walker from Zegal, Ms Roslina Chai, Managing Director from Catalyse Consulting.

A well received presentation, Hsien shared about digitization and what it meant for corporations and clients in the future. How technology is quickly taking over jobs and changing the demands and motivation of the new generation. However, the future is not all doom and gloom as she shared how Astreem Consulting has been gearing up to ensure our SMEs clients are ready for digitization.

Aside from laying out what challenges lied ahead, she shared insights on how companies can adapt and future-proof their businesses and using technology to their advantage.

Astreem Consulting and our clients are ready for the AI future. Question is: are you?

Speak with us today to understand how to digitize your business and transform your business with us.

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Is it time for a Business Process Transformation?

Are your teams getting frustrated by simple processes such as locating documents? Or does your team spend precious resources and time to perform data entry? Wondering how you can improve your business operations and increases those profits?

Overhead costs are fast rising, which means that your business needs to constantly audit operations and streamline your business processes to automate workflow in this fast paced economy. Sharpen your competitive edge to stay relevant. You cannot afford to allow manual data entry and outdated processes or inefficient operations distract you.

Take our simple assessment below and receive a FREE simple consultant on your results and possible solutions.

Business Process Transformation Assessment

Taking your Franchise to Indonesia

Indonesia is one of the countries that franchise owners often enquire about when thinking about brand expansion. The close proximity of Jakarta to Singapore and the number of Indonesians that come through Singapore gives Singapore brands a happy unfair advantage in Indonesia. Singapore brands are well received and offer a great balance of International appeal and local familiarity to the Indonesian market. Brands like Fish & Co, Imperial Treasure, Shilin, Seoul Yummy, Eton house, Seriously Addictive Maths, and most recently the much loved Joe & Dough have enjoyed success in Indonesia. We thought it might be useful to share some Indonesia centric information for business owners considering Indonesia as a possible destination for their brand growth.
To begin, entering Indonesia by appointing Master Franchises is a good way to enter this very promising new market. It allows the franchisor to focus on readying the brand for international market whilst leveraging local knowledge for real estate, human resource and navigating local legal requirements. This reduces the risk for both Franchisor and franchisee whilst each focus on what they do best. When implemented well, the brand can increase tremendous growth due to the large market potential of Indonesia. Given that the bottom line can be very attractive when a brand is well executed, Some franchisors owners also use the franchise model to enter into Joint Venture agreements to co build the brands in the country. This format increases the upfront risks, but when well executed, both parties can enjoy the rewards of a profitable partnership.

In this article we will cover the following:
1. Franchise Landscape of Indonesia
2. Considerations when entering the Indonesia Market
3. Legal Framework for Franchising
4. The Franchise Registration Certificate
5. Criteria that triggers Franchise Registration requirements
6. What is the Best Market Entry Strategy into Indonesia?

Franchise Landscape of Indonesia
Indonesia has a relatively young population of 288 million represents both a sizeable workforce and pool of consumers. This is complemented by the country’s steady economic growth of 5.1% in 2017, and 5.1-5.5% expected for 2019. 58% of the population is now living in Jakarta making it the most populated region.
The Franchise (Both local and international Brands) sector has been buoyed by the increased spending power of its growing middle class. In the more populous cities, major International and very creative local franchise brands have been growing exponentially. Brand owners should not disregard the creativity of local Indonesian brands like Jco, Upnormal Coffee Roasters, Kitchenette, Union Tanamera, Pizza&Birra, Social House, DJournal certainly offer lifestyle concepts that can rival international brands. In order to compete with the local brands, franchisors need to be aware that in Indonesia, although the market is still developing, and likely to be exponentially bigger than home country, they need to put in conscious effort to localise their brands, be conscious of the lifestyle factor and be well priced to reflect the value.
According to Ministry of Trade, there are 1,000 legal franchise in Indonesia; 540 of it are Indonesian companies and 460 foreign franchise companies. The franchise industry led by Food and Beverages companies for 62.4% and Education companies for 18.1%. The rest of it is contain of retail (14.9%) and service (4.6%). Allegedly there are 1,400 other non-franchise businesses that cover Indonesia franchise sector. In 2016, International Trade Administration projects that there will be 8% increase in local franchise, and 14% in foreign franchise each year F&B Industry in franchising is the biggest compares to the other sectors, in 2017 it has 624 franchise brands which 317 of it International brands and 307 domestic brands.
Not surprisingly, of the International franchise brands in Indonesia, almost 40% of the brands are from the US followed by a strong presence of Made in Singapore Brands. F&B remains the MOST sought after franchise category.
This finding is in line with Ministry of Industry report indicating the continued growth of F&B industry at an estimated 9% in 2019. As a whole, the F&B sector now contributes up to 34.33% of the countries non Oil& Gas GDP. The Indonesian government encourages the growth of this sector as most of the owners of F&B businesses are Micro and small Businesses, a driving force behind the increase of earning power equality.
International brands that have performed well in Indonesia are KFC, Mc Donalds, Wingstop, Bread Talk, Canele, Killiney, Lawson, Mothercare, Snap fitness, Charles & Keith, On the whole, rentals and manpower work very favorably for brands that come from countries with very high real estate prices and man power scarcity. As a result, franchises thrive in these markets because the net profit margins are very comfortable, even after paying the franchise royalties.

Considerations when entering the Indonesia Market
In order to capture the market, brands entering Indonesia need to recognize that a fair amount of localization is required in order for the franchisee to enjoy a successful market entry. If a brand insists on franchisees implementing the brand exactly as its home country, it exposes the brand to a high amount of uncertainty as to brand acceptability. Brands like Joe & Dough entered Indonesia successfully invested a fair amount of time and research to understand local consumer habits, lifestyle, competitor offerings to develop a final market specific strategy.
Legal Framework for Franchising
In order to protect the Indonesian franchisees from Unscrupulous and Fraudulent Franchisors, Indonesia has a franchise regulatory regime aimed at controlling the activities of franchises. Franchisors are required to register for a franchise Registration Certificate also known locally as the Surat Tanda Pendaftaran Waralaba-STPW.
The Franchise Registration Certificate
The franchisor and the franchisee each must file for, and obtain, an STPW. Each STPW is valid for five years and may be renewed each time for five years. In addition, an annual report must be filed with the Ministry of Trade.
The franchisor must apply for, and obtain, its STPW before the franchise agreement may be signed. The following are required for the STPW submission by the franchisor:
• The disclosure document in the Indonesian language (and a legalized disclosure document if prepared in another language) the minimum content of which is explained above
• A copy of the passport of the franchisor’s representative
• Legal documents of the franchised business, i.e., technical business permits or the license issued in the franchisor’s home country
• Statement Letter/Reference Letter issued by the Trade Attaché of Indonesian Consulate in the franchisor’s home country
• The franchisor’s Indonesian trademark registration certificates
• The local content statement
• A list of manpower to be employed for the operation of a typical outlet
A copy of the draft franchise agreement in the Indonesian language (translated by a sworn Indonesian translator)

For foreign franchisors, there are pre-contract disclosure requirements that need to be legalized. The documents are:
• The franchisor proof of identity and the legal documents of the franchise business
• Franchisor’s business history
• Franchisor’s organizational structure
• Audited balance sheets for the last two years (for medium and macro businesses)
• The number of franchise business
• A list of franchisees
• The rights and obligations of the franchisor and franchisee

The franchisee must apply for its STPW following execution of the franchise agreement and must also file an annual report. Its STPW submission must include:
• The franchisor’s Disclosure Document in the Indonesian language
• Copies of the signed agreements in the Indonesian language
• The local content statement
• A list of manpower to be employed at the typical outlet
• The franchisor’s Indonesian trademark registration certificates
• The franchisor’s STPW
• The franchisee’s Deed of Incorporation/Articles of Association with its approval from the competent government authority

Criteria that triggers Franchise Registration requirements
Business are required to be registered as a franchise if it triggers the following criteria:
• Having specific business characteristic or Unique selling proposition;
• Franchisor must have approximately three to five years’ experience in business.
• Have written SOP and a description of the proposed goods and service provided
• Minimum 10-year term for a master franchise
• A Replicable system (easily applied and taught)
• Giving continuous support
• Registered or Have Applied their Intellectual Property Rights (IPR) to Directorate General.
• Ongoing Support.
• Have a system that is easy to learn and apply

What is the Best Market Entry Strategy into Indonesia?

Depending on the area of business your franchise exists in, you need to make sure you enter the market with the right mindset. There is no magic formula for success but we have found that companies that followed a broad foundational market entry strategy usually find more success than others. Some of the areas these successful franchisors invested time in are:
1. Conduct Due Diligence on the market, including research on the existing competitive landscape, pricing of the competition’s product of service, Cost of products or service and identify targeted audience
2. Spend time to find a like-minded franchisee or JV partner who will willingly handle the local operations and allow you to build on the brand.
3. Get the brand positioning and brand communication right. Here franchisors should ensure the franchisee invests in both effective off-line and Digital marketing so that the Go-To Market Strategy is well executed.
4. Invest in technology to ensure that you as a franchisor gets access to real time information.
5. Ensure training and on-going audits are conducted to ensure sustainability.
About Astreem Consulting
Astreem Consulting was founded in 2005 for the purpose of building Franchises across Asia. Over the last 14 years, Astreem has been steadily building the Franchise brands across the region from Singapore, Malaysia, Indonesia, Thailand, Philippines and Australia.
Through in depth franchise development plans to well executed market entry strategies, and localised Market research, Astreem is confident in bringing effective and result oriented solutions for brand growth.

For more information on taking your business to Indonesia, contact [email protected] or +65 6732 0803.

Implementing Change Management to ensure successful Business Process Transformation

Change management is a systematic approach to dealing with the transition or transformation of an organization’s goals, processes or technologies, often through the process of Business Process Transformation. More recently, this Change management is not something that is reserved for the large enterprises but something that almost all companies large and small need to engage in to stay relevant and competitive as the world dashes into a future environment of AI driven technology transformation.

What is the purpose of Change Management?

The purpose of change management is to implement strategies for effecting change, controlling change and helping people to adapt to change. Often, this change management is implemented as a part of business process transformation, This is something that all businesses need to gravitate towards and adopt new tools that help them manage improve their business processes and remain competitive. There are many a times when most business will think that “Yes digitising and redesigning my workflow is something I will do soon… once I have reached a certain revenue, once I have launched this new product or when I have more time or when we hire a new CTO.” As they say, Time and Tide wait for no man. Everyday we put aside equipping our business for the future is another day we exposed ourselves to being vulnerable to a lack of transparency & just in time information, unnecessary repetitive tasks, human errors, and additional manpower costs. In a world where every one is blind, the one eyed man shows the way. However, when more and more people start to see the benefits of implementing technology, this new standard of leveraging technology for improved business operations becomes the new norm. Today, most companies adopt some kind of technology.with the goal to optimise their business performance.  The issue lies in the fact that most of this technology is implemented in piecemeal formats, usually without an organisational mandate on how each of these technology impacts the other. In order to implement the effective adoption of new technology and processes, businesses need to adopt an organization wide Change Management exercise in order to successfully navigate the journey towards industry 4.0.

The types of Change Management

In general, there are two major kinds of organizational change; change imposed by circumstances and change that is planned and adopted to encourage growth or improvement. This applies to both small and large-scale enterprise organizations. Change management systems are designed to help businesses plan for change instead of react to it.

In a world where so much technology is available, navigating the company can still be difficult. This is due to the incongruent, non aggregating and siloed models that most technology applications are built upon. So whilst many businesses imagine they are adopting change and embracing the digital age, they are actually adopting new tools that do not work in harmony one with another, which in itself, creates a new issue. This is the time where a holistic plan that comes in the form of Business Performance Management is activated and where implementing Change Management processes can help.

There are concrete reasons for accelerated growth in the business process transformation and change management industry. Products, technology, or ideas that used to take years to design, develop, test, and deploy are now being squeezed down to months or even weeks. The evolving consumer expectations for better, faster, and cheaper products also drive the need to reorganize the work culture to meet demand. Business owners are expected to respond faster and more effectively to market demands. Without a fundamental change in how data is collected, how it is analysed, decisions made and actions taken, business owners would consistently be forced to take actions that are late and mostly no longer impactful in the scope of things. In a world of almost immediate satisfaction, actions taken months after the fact only sound like excuses and bad management.

How do we implement change management?

There is an overabundance of frameworks and models available to guide and educate on change management practices, it can be difficult to find a perfect fit for your business. Regardless of the models available, business need to take charge of what business model transformation and change management approach suits them most.

6 Essential Steps for Implementing Effective Change Management Process

As your company constantly experiences change caused by new technology implementation, business process updates, compliance initiatives, reorganization, or customer service improvements, change is constant and necessary for growth and profitability. Inline with implementing business performance management actions, businesses should ensure that change management at the human resource level takes into consideration the following:

1. Identify the Goals

Since Change management usually happens simultaneously with overall organisational change, the goals of why the the company has embarked on a Business Transformation Process must be made clear. Change mostly occur to  improve a process, a product, or an outcome. Know what needs to change and why it needs to change helps the team understand why the actions taken are necessary and what their roles are in the process.

2. Present a Solid Business Case to Stakeholder

As with the case of Business Process transformation, Change management is the natural next step to ensure there is organisational buy in from all levels of the company. Every level of stakeholders different expectations and experiences and it is important to convey the urgency and importance of a successful business process transformation, changing the way things are done. The process of onboarding the different parts of the business varies but with a structured change Management plan, all departments can be onboarded one at a time.

3. Develop a Plan for the Change

This is the “roadmap” that identifies the beginning, the route to be taken, and the destination. This is where the resources needed, the objective of the business transformation and costs of implementation needs to be planned. As in all business performance management planning, areas of change, how processes will alter, what are the KPIs, measurable targets, incentives, aggregation of results and analysis.

4. Resources and tools needed

Here, it helps to have a technology platform that allows the businesses to align all its plans. If all the tools needed can be presented on one platform, that would add another layer of simplicity in the change management process. It will not only reduce the time needed to collate data from different sources, it will also allow easier cross platform data interpretation and also save on subscription and implementation costs. The clarity of clear reporting allows for better communication, allow managers to take proper actions and measuring successes and milestones.

5. Monitor and Manage Resistance, Dependencies, and Budgeting Risks

Resistance is a very normal part of change management, but it can threaten the success of a project. Most resistance occurs due to a fear of the unknown. Formal Training sessions  and communication channels to deliver the necessity of the Business Process transformation process  can help to reduce resistance to the project. Where there exists inherent resistance, in can create a fair amount of risk associated with change – the risk of impacting dependencies, return on investment risks, and risks associated with allocating budget to something new. As such, ensuring there is significant BUY-IN from all levels of the organisation is critical to the success of the implementation of Change management in Business Process Management Transformation.  Anticipating and preparing for resistance by arming leadership with tools to manage it will aid in a smooth change lifecycle.

6. Review, Revise and Continuously Improve

As much as change is difficult and even painful, it is also an ongoing process. Even change management strategies are commonly adjusted throughout a project. Like communication, this should be woven through all steps to identify and remove roadblocks. And, like the need for resources and data, this process is only as good as the commitment to measurement and analysis.

Why Using A Business Process Management Expert Can Help With Change Management

Astreem Consulting is a business growth consultancy and has been responsible for the growth of many SMEs regionally. Inherent in the delivery of their processes is the deep understanding of what the key success drivers of businesses are. They leverage their expertise in translating best practices into specific key Business Performance Management areas of SMEs. Manual and Analog process can be translated into automated processes that reduce human errors and repetitive actions. Process flows can be designed so only the high value activities are actioned by manpower, transparency and real time reporting becomes possible.

The expertise provided by experts that help businesses become more efficient and productive can cut done the time needed to execute such a project, offers a different perspective other than the internal view of how change can be implemented, provide additional resources and also provide the trainers needed for the actual Change management implementation.

Contact us at [email protected] for more information. We believe in democratising the availability of ERP and Performance Management Systems for ALL SMEs. Let us know how we can help. We would love to work with you on that!

 

 

What is process improvement

Business Process Improvement (BPI) is a singular initiative or project to improve the alignment and performance of a particular process with the organizational strategy and customer expectations. BPI includes the selection, analysis, design, and implementation of the (improved) process.

The Importance of Efficient Processes

The various kinds of processes have one thing in common: they’re all designed to streamline the way that you and your team work. When everyone follows a well-tested set of steps, there are fewer errors and delays, there is less duplicated effort, and staff and customer satisfaction is higher.

Processes that don’t work can lead to numerous problems. For example:

  1. Customers may complain about poor product quality or bad service.
  2. Customers complain about long wait time
  3. Colleagues get frustrated.
  4. Work may be duplicated, or not done.
  5. Costs increase.
  6. Resources are wasted.
  7. Bottlenecks can develop, causing deadlines to be missed

 As businesses accelerate growth, there’s always a desire to manage quality, reduce costs and efficiency through process improvement.

Traditional Business Process Improvement Disciplines

Business Improvement stems from various disciplines that have been developed over time. Methodologies like Lean and Six Sigma are various disciplines that can stand alone but over time, there has been additional modifications to include sectors beyond manufacturing.

While Business process improvement is often associated with Lean and Six Sigma, Astreem also leverages value stream mapping, as our underlying business process improvement methodology.

Foundation of Process improvement Methodologies:

LEAN manufacturing, was a process that originated by Toyota Production System, today known as the TPS. It was implemented to streamline the company’s production chain and dramatically reduce operating and overhead costs. Lean thinking frames TPS around five key principles – Value, the value stream, flow, pull and perfection

The key idea is to base process improvement on the customer perspective; taking the time to understand what they value from the product and then using LEAN process improvement to eliminate unnecessary waste, errors and other things that drive up costs. By focusing on value, the entire process is organized to drive more of what the customer is willing to pay for.

Six Sigma is a process improvement example that focuses on achieving the maximum level of obtainable quality within an organization. At the Six Sigma level, that is a rating of near 100% perfection (or 99.9966%).

The Six Sigma approach looks closely at the root cause of problems, defects, and variations that reduce the effectiveness of processes. At its heart, there’s a philosophy of constant improvement that is in place to consistently and progressively improve results until that max level of perfection is achieved

However, today’s concept of Process Improvement, is a series of continuous actions that positively impact the bottom line and require further investments in time and resources to make operations more effective.

Astreem’s View on Process Improvement

Astreem Consulting takes a practical view of continuous improvement, leveraging the Plan-Do-Study-Adjust method to solve performance issues, capitalize on market opportunities, plan new products and improve the delivery of existing ones.

As an expanded view from Lean and Six sigma, Astreem uses Value Stream Mapping to offer more holistic views of how work flows through entire systems and provides effective means to establish strategic direction for making improvements. Value stream mapping allows for various perspectives ranging from the macro perspective to finer layers of granularity.  Stream Mapping also allows for a deeper understanding about the work systems that deliver value and support the delivery of value to customers. Finally, value stream maps reflect workflow from a customer experience perspective verses the internal focus of typical process level maps. This allows different departments to move from a silo mentality to a more holistic and cross functional view point, making customers the key stakeholder  the process.

Contact our Business Process Transformation experts if you are seeking to increase your efficiency, reduce redundancy and increase profitability.

Your Franchise Development Strategy

Developing your Franchise Strategy

Every business is unique and develops its own business plan. Similarly in Franchise development, Each business needs to develop its own unique franchise strategy. Whilst many businesses have grown to become international giants through franchising, the road to successful franchising can be complex.

Franchising is about more than just the legal agreement that binds the franchisee and franchisor. There is a whole host of business management areas that a franchisor needs to invest time and resources in to build a franchise development strategy to ensure successful replication and local adaptation of the brand over time.

I am often asked about how much a business should charge for a franchise fee and royalties. This is a question that cannot immediately garner a responsible answer. If one chooses to look at the closest market competition and decide on pricing, the answer is already out there. However, I believe that the success of a franchise is more than just the economics of the franchise. Those who already franchise will testify that franchising is certainly more than these magic numbers. Ultimately, it is the quality of the franchise management, the relationship between Franchisor and franchisee and the strength of the brand that influences the franchise success most.

While there are usually legal documents that frame the agreement between the franchisor and franchisee, it is really the business decisions that make up the agreement that ultimately determine how the franchisor and franchisee work together.

So what does it take to develop a strong Franchise Strategy?

The franchise strategy used in structuring the franchise offering is the foundation for every successful franchise system, and proper strategy development can ensure that your goals are attainable. This means we need to consider if the franchise strategy is to be developed as single units in home territory, in different territories in the same country or is it to handle international growth. The challenge is knowing what is right for your organisation, so that you can create a franchise offering that is easily replicated and marketable to the franchisees you want to target.

Underlying any successful franchise system is the determination of the economics of the franchise and the franchisor franchisee relationship, with a focus on creating a business model that is both marketable and sustainable.

We focus on understanding the key drivers that make your business successful, identify performance targets, systems to monitor progress. Other important areas to understand are the elements of support provided by you, the franchisor to help strengthen the performance of your franchisees, like set up support, training support, supply chain management, audit implementation, marketing support and many other aspects. Looking at your business from a holistic view, we build credible financial simulations and then make our financial recommendations regarding initial and continual fees based on extensive economic modelling.

Once the financial models are developed, we then go about pulling all the features that make your franchise different and more attractive than other similar franchises that are out there. Offering a franchise program to potential franchisees is no different from selling your products to end consumers. It is important to have a quality franchise offering that is well positioned and clearly differentiated from the other franchises out there.

Alongside a strong franchise development strategy is the need for strong Standard Operations Protocols to ensure increased replicability. Our award winning clients like The Manhattan Fish Market stated that it was their Standard Operating Protocols (SOP’s) that have helped them to accelerate and grow their business. Today, these SOPs have become integrated into a business operating system that leverages cloud technology to offer easily accessible, updatable processes and provide reports and business intelligence for the franchisor to take action.

Your Franchise Partner

Astreem’s success as a franchise development advisor is that we focus on the business’s state of franchise readiness, identify the key success drivers, strengthen the fundamentals, build sound Franchise growth strategies that are scalable. We focus on designing our clients’ franchise systems for long term success. We balance the economics of the business and the ongoing franchise relationship with the goal of ensuring sustainable growthfor the franchise system. Technology today makes it much easier for franchisors to manage their franchisees. Franchise management technology helps franchisors to monitoring performance, communicate to franchisees, streamline business processes, provide information to take pre-emptive actions when necessary as well as to ensure compliance within the franchise system.