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SEN 649: Business
Process Reengineering
Lec 01: Introduction
Faculty: Dr. M. Rokonuzzaman
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LOOK AT THE PICTURE FOR 2 MINUTES
Form Groups of three. Discuss and note down your comments on thecartoon.
We have recently discovered a concept that illustrates many of the ways mostorganizations really operate
Performance Management Company, 1993 Not forReproduction
SQUAREWHEELS
2
Courtesy: DR.Scot J Simmerman
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What isprocess?
Process or processing typically describes the action of taking something through an
established and usually routine set of procedures or steps to convert it from one form to
another, such as processing paperwork to grant a mortgage loan, processing milk into
cheese, or converting computer data from one form to another. A process involves steps
and decisions in the way work is accomplished, and may involve a sequence of events.
The process that one follows is as important as the results that are produced by the
process. Without understanding the underlying process, it is difficult to know how a certain
set of results were achieved, or why they were good or bad. So, if results are viewed as the
"destination", then process can be viewed as the "vehicle" that gets you there (and ideally,
you should be able to use the same "vehicle" for many trips...with a few modifications based
on the desired destination!)
http://en.wikipedia.org/wiki/Action_theory_(philosophy)http://en.wikipedia.org/wiki/Convention_(norm)http://en.wikipedia.org/wiki/Set_(mathematics)http://en.wikipedia.org/wiki/Procedurehttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Milkhttp://en.wikipedia.org/wiki/Cheesehttp://en.wikipedia.org/wiki/Data_(computing)http://en.wikipedia.org/wiki/Decision_theoryhttp://en.wikipedia.org/wiki/Work_(project_management)http://en.wikipedia.org/wiki/Sequence_of_eventshttp://en.wikipedia.org/wiki/Resulthttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Errorhttp://en.wikipedia.org/wiki/Desirehttp://en.wikipedia.org/wiki/Desirehttp://en.wikipedia.org/wiki/Errorhttp://en.wikipedia.org/wiki/Understandinghttp://en.wikipedia.org/wiki/Resulthttp://en.wikipedia.org/wiki/Sequence_of_eventshttp://en.wikipedia.org/wiki/Work_(project_management)http://en.wikipedia.org/wiki/Decision_theoryhttp://en.wikipedia.org/wiki/Data_(computing)http://en.wikipedia.org/wiki/Cheesehttp://en.wikipedia.org/wiki/Milkhttp://en.wikipedia.org/wiki/Mortgage_loanhttp://en.wikipedia.org/wiki/Contracthttp://en.wikipedia.org/wiki/Procedurehttp://en.wikipedia.org/wiki/Set_(mathematics)http://en.wikipedia.org/wiki/Convention_(norm)http://en.wikipedia.org/wiki/Action_theory_(philosophy) -
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What is business process?
A business process or business method is a
collection of related, structured activities or tasks
that produce a specific service or product (serve aparticular goal) for a particular customer or
customers. It often can be visualized with a
flowchart as a sequence of activities.
http://en.wikipedia.org/wiki/Task_(project_management)http://en.wikipedia.org/wiki/Flowcharthttp://en.wikipedia.org/wiki/Flowcharthttp://en.wikipedia.org/wiki/Task_(project_management) -
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LETSBEGINWITHANEXERCISE
Articulate the work process with clear boundary having clearly definedinputs, outputs and interfaces with other processes.
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There are three types of business processes:
Management processes, the processes that govern the operation of a system.
Typical management processes include "Corporate Governance" and "Strategic
Management".
Operational processes, processes that constitute the core business and create the
primary value stream. Typical operational processes are Purchasing,
Manufacturing, Advertising and Marketing, and Sales.
Supporting processes, which support the core processes. Examples include
Accounting, Recruitment, Call center, Technical support.
A business process begins with a mission objective and ends with
achievement of the business objective.
http://en.wikipedia.org/wiki/Management_processhttp://en.wikipedia.org/wiki/Corporate_Governancehttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/w/index.php?title=Operational_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Core_businesshttp://en.wikipedia.org/wiki/Purchasinghttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/w/index.php?title=Supporting_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Call_centerhttp://en.wikipedia.org/wiki/Technical_supporthttp://en.wikipedia.org/wiki/Technical_supporthttp://en.wikipedia.org/wiki/Call_centerhttp://en.wikipedia.org/wiki/Recruitmenthttp://en.wikipedia.org/wiki/Accountinghttp://en.wikipedia.org/w/index.php?title=Supporting_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Saleshttp://en.wikipedia.org/wiki/Marketinghttp://en.wikipedia.org/wiki/Advertisinghttp://en.wikipedia.org/wiki/Manufacturinghttp://en.wikipedia.org/wiki/Purchasinghttp://en.wikipedia.org/wiki/Core_businesshttp://en.wikipedia.org/w/index.php?title=Operational_process&action=edit&redlink=1http://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Strategic_Managementhttp://en.wikipedia.org/wiki/Corporate_Governancehttp://en.wikipedia.org/wiki/Management_process -
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A business process can be decomposed into several sub-processes[1], which have
their own attributes, but also contribute to achieving the goal of the super-process.
The analysis of business processes typically includes the mapping of processes and
sub-processes down to activity level.
Business Processes are designed to add value for the customer and should not
include unnecessary activities. The outcome of a well designed business process is
increased effectiveness (value for the customer) and increased efficiency (less costs
for the company).
Business Processes can be modeled through a large number of methods and
techniques. For instance, the Business Process Modeling Notation is a Business
Process Modeling technique that can be used for drawing business processes in aworkflow.
http://en.wikipedia.org/wiki/Business_Process_Modeling_Notationhttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Workflowhttp://en.wikipedia.org/wiki/Workflowhttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modelinghttp://en.wikipedia.org/wiki/Business_Process_Modeling_Notation -
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ORIGIN?
Adam Smith
One of the first people to describe processes was Adam Smith in his famous (1776) example of a pin factory.
Inspired by an article in Diderot'sEncyclopdie, Smith described the production of a pin in the following way:
One man draws out the wire, another straights it, a third cuts it, a fourth points it, a fifth grinds it at the top for
receiving the head: to make the head requires two or three distinct operations: to put it on is a particular
business, to whiten the pins is another ... and the important business of making a pin is, in this manner,
divided into about eighteen distinct operations, which in some manufactories are all performed by distinct
hands, though in others the same man will sometime perform two or three of them.
Smith also first recognized how the output could be increased through the use of labor division. Previously, in
a society where production was dominated by handcrafted goods, one man would perform all the activitiesrequired during the production process, while Smith described how the work was divided into a set of simple
tasks, which would be performed by specialized workers. The result of labor division in Smiths example
resulted in productivity increasing by 24,000 percent (sic), i.e. that the same number of workers made 240
times as many pins as they had been producing before the introduction of labor division.
http://en.wikipedia.org/wiki/Adam_Smithhttp://en.wikipedia.org/wiki/Pin_(device)http://en.wikipedia.org/wiki/Diderothttp://en.wikipedia.org/wiki/Encyclop%C3%A9diehttp://en.wikipedia.org/wiki/Division_of_labourhttp://en.wikipedia.org/wiki/Artisanhttp://en.wikipedia.org/wiki/Artisanhttp://en.wikipedia.org/wiki/Division_of_labourhttp://en.wikipedia.org/wiki/Encyclop%C3%A9diehttp://en.wikipedia.org/wiki/Diderothttp://en.wikipedia.org/wiki/Pin_(device)http://en.wikipedia.org/wiki/Adam_Smith -
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IMPORTANCEOFTHE PROCESS CHAIN
Business processes comprise a set of sequential sub-processes or tasks, with alternative paths
depending on certain conditions as applicable, performed to achieve a given objective or produce given
outputs. Each process has one or more needed inputs. The inputs and outputs may be received from, or
sent to other business processes, other organizational units, or internal or external stakeholders.
Business processes are designed to be operated by one or more business functional units, andemphasize the importance of the process chain rather than the individual units.
In general, the various tasks of a business process can be performed in one of two ways 1) manually
and 2) by means of business data processing systems such as ERP systems. Typically, some process
tasks will be manual, while some will be computer-based, and these tasks may be sequenced in many
ways. In other words, the data and information that are being handled through the process may passthrough manual or computer tasks in any given order.
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THE FOUR MAJOR PROCESS IMPROVEMENTAREAS
The point to note here is that, irrespective of the class of the task -
whether manual or computer assisted - it is important that each task -
and hence the process as a whole is designed and periodically
reviewed, improved, or substituted by another task, with a view to
continuous improvement in four major areas:
Effectiveness
Efficiency
Internal control
Compliance to various statutes and policies
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EFFECTIVENESS
The overall effectiveness of a process is the extent to which the outputs
expected from the process are being obtained at all, and is therefore a
first measure of the basic adequacy of the process and its capability to
fulfill the logical and reasonable expectations of process uses and
operators.
For example, consider the material procurement process. One of its
important tasks is the sub-process for supplier follow-up to ensure timely
deliveries of materials. Such a task is considerably less effective if it doesnot provide accurate and timely purchase order status reports for use of
the purchase department staff responsible for follow-up
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EFFICIENCY
Supposing it has been observed that the average time taken to
prepare and send out a purchase order after receipt of a properly
prepared intent from the end-user is unacceptably high, leading
to delayed customer deliveries and consequent customer
complaints.
The process of converting the end-users intent to a purchase
order is effective because a purchase order is being somehow
generated, but its efficiency is very low since it takes an
inordinate amount of time and costs considerably more in terms
of the cost to the company of the salaries of staff members
involved.
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INTERNAL CONTROL
In a scenario where quantities of major raw materials are regularly ordered and consumed, rates are fixed
with selected, reliable, approved vendors for an extended period commonly a year. Moreover, let us say
that the rate contract does not contain a price escalation clause. This safeguards the organisation from
unanticipated price escalation during the period. The rate contract data are stored in the ERP systems
database. Whenever materials are to be ordered (with or without a delivery schedule), purchase orders
are generated mentioning the rate finalised in the rate contract. An internal control exists to keep the
purchase rate constant throughout the year.
Suppose, however, it is found that the rate on a purchase order based on a current rate contract is
changed to a different value, and the purchase order then sent out to the supplier. This is a serious lapse
in internal control, since a change to a higher rate exposes the company to a higher financial liability.
Moreover, the editability of the rate in such a purchase order completely nullifies the internal controls
provided by having a rate contract in the first place and including a no-escalation clause in it. There would
be a further breach of internal control if it were found that such a PO amendment is actually authorised
before sending the purchase order to the supplier.
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COMPLIANCETOVARIOUSSTATUTESANDPOLICIES
There are certain situations where payments made to consultants or
service contractors must be statutorily made after deducting tax at
source (T.D.S.), and such T.D.S. amounts must be deposited in
government treasury accounts with banks on or before a specified date
in the month following the month in which the payments are made.
In such cases, if a business process does not provide for deduction of
T.D.S. and/or fails to ensure deposition into government accounts by the
specified date, then this is a statutory compliance issue that makes the
concerned executives liable to civil / criminal legal action.
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BPR?
Business Process Re-engineering (BPR) is basically the fundamental re-thinking
and radical re-design, made to an organization's existing resources. It is more than
just business improvising.
Business process re-engineering (BPR) began as a private sector technique to
help organizations fundamentally rethink how they do their work in order to
dramatically improve customer service, cut operational costs, and become world-
class competitors. A key stimulus for re-engineering has been the continuing
development and deployment of sophisticated information systems and networks.
Leading organizations are becoming bolder in using this technology to support
innovative business processes, rather than refining current ways of doing work. [1]
http://en.wikipedia.org/wiki/Organizationhttp://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/w/index.php?title=Operational_cost&action=edit&redlink=1http://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Computer_networkhttp://en.wikipedia.org/wiki/Information_systemhttp://en.wikipedia.org/wiki/Competitorhttp://en.wikipedia.org/w/index.php?title=Operational_cost&action=edit&redlink=1http://en.wikipedia.org/wiki/Customer_servicehttp://en.wikipedia.org/wiki/Organization -
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Within the framework of this basic assessment of mission and goals, re-
engineering focuses on the organization's business processesthe
steps and procedures that govern how resources are used to create
products and services that meet the needs of particular customers ormarkets. As a structured ordering of work steps across time and place, a
business process can be decomposed into specific activities, measured,
modeled, and improved. It can also be completely redesigned or
eliminated altogether. Re-engineering identifies, analyzes, and re-
designs an organization's core business processes with the aim of
achieving dramatic improvements in critical performance measures,
such as cost, quality, service, and speed.[1]
http://en.wikipedia.org/wiki/Conceptual_frameworkhttp://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Markethttp://en.wikipedia.org/wiki/Customerhttp://en.wikipedia.org/wiki/Service_(economics)http://en.wikipedia.org/wiki/Product_(business)http://en.wikipedia.org/wiki/Conceptual_framework -
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Re-engineering recognizes that an organization's business processes are usually
fragmented into subprocesses and tasks that are carried out by several
specialized functional areas within the organization. Often, no one is responsible
for the overall performance of the entire process. Re-engineering maintains that
optimizing the performance of subprocesses can result in some benefits, but
cannot yield dramatic improvements if the process itself is fundamentally
inefficient and outmoded. For that reason, re-engineering focuses on re-
designing the process as a whole in order to achieve the greatest possible
benefits to the organization and their customers. This drive for realizing dramatic
improvements by fundamentally re-thinking how the organization's work should
be done distinguishes re-engineering from process improvement efforts that
focus on functional or incremental improvement.[1]
http://en.wikipedia.org/wiki/Business_processhttp://en.wikipedia.org/wiki/Business_process -
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BASIC THEME:
Whereare
we
now?
How will we
integrate
technological &
organisational
change?
Wheredo we
want
to go?
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HOWDOES IT FITINTO BPR?
In 1990, Michael Hammer, a former professor of computer science at
the Massachusetts Institute of Technology (MIT), published an article
in the Harvard Business Review, in which he claimed that the major
challenge for managers is to obliterate non-value adding work, rather
than using technology for automating it.[2] This statement implicitly
accused managers of having focused on the wrong issues, namely
that technology in general, and more specifically information
technology, has been used primarily for automating existing
processes rather than using it as an enabler for making non-value
adding work obsolete.
http://en.wikipedia.org/wiki/Michael_Hammerhttp://en.wikipedia.org/wiki/Massachusetts_Institute_of_Technologyhttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Harvard_Business_Reviewhttp://en.wikipedia.org/wiki/Massachusetts_Institute_of_Technologyhttp://en.wikipedia.org/wiki/Michael_Hammer -
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Hammer's claim was simple: Most of the work being done
does not add any value for customers, and this work should be
removed, not accelerated through automation. Instead,
companies should reconsider their processes in order to
maximize customer value, while minimizing the consumption
of resources required for delivering their product or service. A
similar idea was advocated by Thomas H. Davenport and J.Short in 1990,[3] at that time a member of the Ernst & Young
research center, in a paper published in the Sloan
Management Review
http://en.wikipedia.org/wiki/Thomas_H._Davenporthttp://en.wikipedia.org/wiki/Ernst_&_Younghttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Sloan_Management_Reviewhttp://en.wikipedia.org/wiki/Ernst_&_Younghttp://en.wikipedia.org/wiki/Thomas_H._Davenport -
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STRUCTUREOF WORK PROCESS
Software/IT is a tool to improve workprocesses and/or engineering artifacts.
Basic structure of work processes
Man/Woman Machine/Tool
Software Database
Hardware Computing Non-Computing
Communication network
Policy
Procedure
Standard
ProcessPerformanc
e
Goal
Purpose tobe met
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BASIC PERFORMANCE INDICATORS?
1. Efficiency (degree of utilization of inputs)2. Effectiveness (conformance to purpose)3. Wastage4. Pilferage5. Accuracy
6. Time7. Cost8. Ease of use9. Predictability10. Availability
11. Reliability12. Security13. Safety etc
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Our strategy is to
reassign roles ofsystem elementsfor significantly
improving systemperformance.
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WHATDOESPERFORMANCE
IMPROVEMENTMEAN?
1. Improve value of delivery
2. Reduce cost of delivery
3. Shorten time of delivery4. Increase predictability of delivery
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How can software or ICT help?
Model/redefinebusinessprocess
Define, measure,and compare
KPIs
Target for improved
values of KPIs
Analyze existingroles of system
elements at each
activity, sub-process and
Redefine roles of systemelements at each step withfocus of giving more roles
to software.
Perform
cost/benefitanalysis andoptimize roleallocations to
system elements.Implementredefinedprocess
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BASIC ELEMENTSOF WORK PROCESS?PROCESS ELEMENTS:
1. Production purpose(s)
1.1. Performance goals
1.2. Key performance indicators or parameters (KPIs) and high level breakdown of it into measurable data.
1.3 Currentperformance level (i.e., base line)
2. Policies to follow to achieve performance goals in meeting purpose(s)
3. Practices and the Procedure of their execution, along with terminal and intermediary inputs/outputs
4. Terminal as well as intermediary inputs and outputs and their standards
5. Knowledge and skill required to perform activities in compliance with policies in meeting performance goals
6. Tools, machines along with software applications to perform activities in producing outputs
7. Environment and resources for doing the job
8. Breakdown of KPIs into measurable data developing measurement framework; defining and taking
Measurement for monitoring progress of producing outputs and assessing performance levels
9. Control for ensuring planned outputs and targeted performance goals
10. Improvement for meeting enhanced performance goals and additional purposes
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EXAMPLESOF USAGESOF IT IN BPR? Information technology (IT) has historically played an important role in the reengineering concept[9]. It is considered by some
as a major enabler for new forms of working and collaborating within an organization and across organizational borders[citationneeded].
Early BPR literature [10] identified several so called disruptive technologiesthat were supposed to challenge traditional wisdomabout how work should be performed.
Shared databases, making information available at many places
Expert systems, allowing generalists to perform specialist tasks
Telecommunication networks, allowing organizations to be centralized and decentralized at the same time
Decision-support tools, allowing decision-making to be a part of everybody's job
Wireless data communication and portable computers, allowing field personnel to work office independent
Interactive videodisk, to get in immediate contact with potential buyers
Automatic identification and tracking, allowing things to tell where they are, instead of requiring to be found
High performance computing, allowing on-the-fly planning and revisioning
In the mid 1990s, especially workflow management systems were considered as a significant contributor to improved processefficiency. Also ERP (Enterprise Resource Planning) vendors, such as SAP, JD Edwards, Oracle, PeopleSoft, positioned theirsolutions as vehicles for business process redesign and improvement.
http://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wireless_data_communicationhttp://en.wikipedia.org/wiki/Portable_computerhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/SAP_AGhttp://en.wikipedia.org/wiki/Enterprise_Resource_Planninghttp://en.wikipedia.org/wiki/Portable_computerhttp://en.wikipedia.org/wiki/Wireless_data_communicationhttp://en.wikipedia.org/wiki/Wikipedia:Citation_neededhttp://en.wikipedia.org/wiki/Wikipedia:Citation_needed -
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Basic Steps of BPR?
1. Business process modeling
2. Define key performance indicators (KPIs)
3. Measure and benchmark KPIs
4. Assess current roles of system elements
5. Assess contribution of System elements roles to existing values of KPIs
6. Target improved values of KPIs by redefining roles to system elements
7. Redefine business process, policy, procedures and standards
8. Manage the development and deployment of improved roles of system elements
9. Change management
10. Risk and Business continuity management
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More
Time
Performance
Less
hype
technological
potential
actualperformance
reality gap
Innovate to Close the Gap:
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Productivity duringchanges of BPR Exercise
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Begin with the end in mind.-- Stephen R. Covey from The Seven Habits of Highly Effective People.
and, measure your progress
accordingly
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Do not forget
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Everyone thinks of changing
the world, but no one thinksof changing himself.
- Leo Tolstoy