Reengineering the corporation
Blueprint for revolution
Description
Reengineering involves discarding traditional assumptions and practices of business operations to establish a new, process-focused organization that significantly enhances performance.
This approach demands a novel perspective, starting from scratch, with current knowledge of customer preferences to build an organization aimed at maximizing customer satisfaction. It transforms the existing organization into its optimal version.
Reengineering presents an opportunity to create new operational rules, enabling businesses to gain and sustain a competitive edge, rather than adhering to externally imposed rules.
Table of contents
01Understanding reengineering basics
Reengineering is essentially the comprehensive reevaluation and radical transformation of business processes to achieve significant enhancements in critical performance metrics such as cost efficiency, quality, service, and speed.
This concept entails initiating from scratch, as if on a blank canvas, to reconstruct the business in a superior manner. To thrive in the contemporary global marketplace, companies must possess organizational frameworks and business methodologies that are characterized by their rapidity, consistent delivery of high quality, adaptability, and cost-effectiveness.
The traditional business models are often incapable of meeting these demands due to the historical evolution of business management practices. This evolution can be segmented into four pivotal stages, beginning in 1776 with Adam Smith's publication of The Wealth of Nations, where he advocated for labor specialization to enhance productivity by dividing large tasks into smaller, repetitive ones.
This was followed in the 1820s by the railroad companies' introduction of bureaucracies to prevent collisions on single-track lines, which laid the groundwork for the command-and-control systems still prevalent today. The early 1900s saw Henry Ford's implementation of the assembly line, complemented by Alfred Sloan's creation of decentralized management teams at GM for efficient operation of vast enterprises.
The period between 1945 and 1960 marked the adoption of hierarchical organizational structures to align production capacity with the demand for mass-produced consumer goods, adding functional middle managers for oversight and management.
02Traits of reengineered firms
Reengineering initiatives are transformative processes that reshape the very fabric of a business organization, leading to a streamlined and more efficient operational model. These initiatives result in a business environment where complexity is reduced in favor of simplicity, ensuring that business processes are straightforward and devoid of unnecessary complications.
In this reimagined business landscape, job roles expand beyond their traditional confines, becoming multi-faceted and encompassing a wider array of responsibilities. Employees are no longer confined to monotonous, single-task roles but instead engage in a variety of tasks that contribute to the broader objectives of the organization. This shift not only enhances the scope of their work but also fosters a sense of ownership and connection with the final product or service.
Empowerment becomes a cornerstone of the organizational culture, replacing the old paradigm of control. Employees are encouraged to take initiative and exercise autonomy, becoming proactive contributors who are driven by the desire to achieve and excel. This empowerment is further exemplified when supervisors interact with employees, not as overseers, but as resources to aid in the pursuit of customer satisfaction.
The focus within the organization pivots from individual accomplishments to the collective success of teams. These teams, which may vary in structure and size based on the needs of the process they oversee, assume full responsibility for their respective processes, thereby eradicating the siloed approach imposed by traditional departmental divisions.
03Case studies on reengineering
Successful corporate reengineering initiatives, both in large and small companies, have historically shared several key characteristics. These include a shift in focus towards process optimization over organizational structure, the pursuit of significant performance improvements, the courage to depart from established traditions and norms, and the innovative application of new information technologies.
It is imperative for each company to tailor its reengineering efforts to its unique circumstances, as there are no universal, fail-safe methodologies or step-by-step guides that guarantee success in reengineering.
In the case of IBM Credit Corporation, which provides financing for IBM's products, the process of handling a finance application was initially a lengthy one, taking anywhere from six days to two weeks. This was due to the application being passed between various departments. Upon realizing that the actual work involved only took about 90 minutes and the remaining time was spent idly on desks, IBM Credit decided to overhaul the entire process.
They introduced a 'deal structurer,' a generalist role that replaced the four specialists and managed the application from inception to completion using a new computer system equipped with templates and tools. This system allowed for the occasional consultation with specialists for complex cases. The reengineering resulted in a reduction of the turnaround time from an average of seven days to just four hours, and without increasing staff, productivity increased a hundredfold, enabling the handling of 100 times more credit applications than before.
04Success factors in reengineering
In the pursuit of reengineering success, it is imperative to commence with the customer as the focal point and navigate the process in reverse order. The raison d'être of business processes is to engender customer satisfaction; devoid of this objective, their existence lacks legitimacy. Thus, the essence of reengineering is the strategic redirection of a company's resources to fulfill customer needs effectively.
To ignite the internal drive for reengineering, it is crucial to establish lofty objectives that stretch the organization's capabilities. Such ambitious goals serve as a catalyst, inspiring individuals to forsake familiar routines in favor of innovative, reengineered processes, fueled by a compelling vision of the company's future.
Reengineering is characterized by its intensity and radical nature, necessitating swift and decisive action. A gradual or tentative approach will not suffice, as it allows entrenched resistance to stifle the transformation. The process must be executed with alacrity, leveraging a critical window of opportunity, typically spanning 12 months, to ensure a successful reengineering endeavor.
Embracing change is synonymous with embracing risk, a fundamental component of progress. Those who are inherently risk-averse may find reengineering disconcerting. However, it is often the case that the gravest risk lies in maintaining the status quo. By demonstrating that clinging to conventional methods could lead to obsolescence and unemployment, individuals within an organization can be galvanized to embrace new approaches with newfound zeal.
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