Companies that have successfully implemented reengineering projects, particularly those in the financial service industry, have often found that while change is constant, sustainable competitive advantage without sustained effort is a myth.
Customer demands are continually evolving. Competitors turn out to be just as smart as you are - or if not, they will hire your best people to replicate your advantage. Legislators, regulators, and accountants periodically change the rules or tweak interest rates, keeping you on your toes at all times.
In the few years since the concept was launched and the term coined, "business process reengineering" has achieved pop-star status in the business world with all the adulation and resentment that such status implies.
It has been hailed as a revolutionary breakthrough and damned as "old wine in new bottles." It has been lauded as a panacea by those who have used it successfully and reviled as an overpriced placebo by the skeptical.
Proponents say that BPR is to the 90s what "strategy" was to the 70s and "quality" was to the 80s. Disbelievers counter that BPR is another elusive slogan more buzzword than solution.
But positioned correctly, business process reengineering can be the critical first step in creating a performance-improvement culture, one that can provide an organization with the flexibility and energy to anticipate change and sustain competitive advantage.
Why do you do it?
In no industry have the promises been as alluring as in the financial services industry. And in no other industry is the skepticism its great. Both the allure and the skepticism are understandable. The allure is based on the unquestionable fact that almost all segments of the financial services industry are in need of a major overhaul because:
* There are too many providers chasing the same customers.
* The regulatory environment that once protected inefficient organizations and industry segments is breaking down.
* The corporate cultures of financial services organizations are not attuned to the industry's new competitive realities.
* Customers are getting smarter and smarter.
Unfortunately, too many of the financial services providers that have undertaken process reengineering projects over the past several years have been dissatisfied with the results.
Although it is true that many projects did not achieve the anticipated dramatic improvements, the problem was not always with the concept, but with why it was used and how it was implemented.
Business process reengineering is intended to create competitive advantage. But too often, the approach is applied to create cost advantage - a very valuable competitive advantage in commodity businesses.
While creating cost advantage in financial services organizations is very important, most financial services firms say that they would prefer to compete on service. Cost reduction is usually more valuable to the shareholder than it is to the customerassuming it is converted into increases in market share or profits.
At Coopers & Lybrand Consulting, we have helped our clients use reengineering to produce dramatic cost reduction benefits. And, more often than not, these projects do evolve into true reengineering engagements. But, quite frankly, if all that is wanted is financial improvement, easier and less disruptive approaches should be considered.
I make this point because survey after survey has shown that what the financial services customer really wants is:
* Time-place convenience.
* Quick transaction turnaround.
* Quality execution.
* Responsive problem solving.
But BPR is very much for real and can help a company deliver what the customer really wants. At Coopers & Lybrand Consulting, our financial services practice was quick to recognize and utilize its potential to improve our client's performance.
Our our experience shows that the value of business process reengineering can be made to extend beyond the near-term quantitative performance improvement. Indeed, BPR can be a critical first step in creating an organizational culture that sustains superior organizational performance by:
* Forcing the clarification and communication of critical business strategies and strengthening their linkage to both customer needs and individual employee responsibilities.
* Opening the core business processes by providing the economic rationale for applying new technologies that might otherwise take years to justify.
* Providing the opportunity to seamlessly integrate risk management and compliance controls into the process.
* Exposing management to what competitors and best practice organizations can accomplish.
* Confronting the organization with the need to eliminate or modify nonvalue-added policies and practices.
Taken all together, a wellstructured BPR project serves as a wake-up call. It demands a complete understanding of a company's customers, markets, and competition - and then stimulates positive and properly directed changes.
How do you do it?
To understand how process reengineering can work, it is necessary to understand what it is. We believe that BPR is as much a mind set as it is a skill set. It is a way to create a paradigm for empowering organizations to deliver what the customer wants. The core three-step methodology embodies the key elements of disciplined management:
* Discovery, through which an organization compares its current process results to the requirements of its strategy, customer demands, and the capabilities of its competitors. This results in the identification of the performance gaps to be addressed.
* Redesign, which creates the specifications for changing the organization's technology platform, processes, practices, policies, and structures, that will be required to close those gaps.
* Realize, which is the process through which the redesign is planned, organized, and rapidly implemented.
Most of the basic tools and techniques applied in financial services BPR projects have been used in the industry since the mid-1970s and in manufacturing since the late 1800s. What differentiates process reengineering is how these tools are applied.
Other process-improvement approaches focus on one or another element of a process such as cost, quality, or customer service. BPR focuses on identifying and addressing all elements that are consistent with a company's strategy and important to its customers.
At my firm, we use a unique business process investment analysis model which helps us understand and identify which processes can be leveraged in order to deliver a client's strategic objectives. The model permits us to focus on processes that begin and end at the customer and that, therefore, ought to be driven by an understanding of exactly what the customer wants, or at least, by what the customer won't stand for.
The model looks for what we call the "identity and priority" processes - those that define what a company stands for and that directly and materially affect an organization's performance every day. We focus our attention on the performanceoriented processes because they are the ones that make a real difference.
Over the past few years, we have discovered several preconditions for successful process reengineering projects. Having these preconditions in place won't necessarily ensure success, but not having them in place increases the probability of failure:
* Managing change is what BPR is all about. Start thinking about implementation on day one and doing something about it on day two.
* Company objectives and strategies must be clearly articulated, communicated, and understood (at least by the key organizational managers). Most importantly, they must be linked to the BPR effort.
* Business process reengineering is a full-time job. There must be a staff of full-time company personnel dedicated to the project, and they should be managed by a full-time company manager.
One of the most valuable byproducts of a BPR project is a cadre of trained company personnel who can replicate the program time and again. Indeed, it has been our experience that part-time leadership of a BPR project results in project slippage and wasted resources.
* If an outside resource (consultant, trainer, adviser) is used, it should be one who not only understands the process reengineering tools and techniques, but has a full working knowledge of the company's industry, business, and processes. There is not enough time in a BPR job to educate the consultant about the business.
* The performance improvement requirement must be large enough to make a real difference and to create a competitive advantage. This is what we call the BreakPoint at Coopers & Lybrand Consulting.
It is the creation of a BreakPoint performance gap that energizes the organization, stimulates creativity, and provides the incentive for immediate action.
* The responsibility for producing performance improvement must reside primarily with the company's project team. An outside consultant can help and support, but should not lead. The effort must be a company initiative, not a consultant's. It is too easy to dismiss a consultant's recommendation as being unimplementable. A line manager whose career is on the line will figure out a way to implement change.
* In a process reengineering job, there cannot be any sacred cows. Obstacles to change, whether they be people, policies, or practices, must be made vulnerable, preferably in the early stages of the project.
* The organization's technology departments must be active and early participants in the redesign process. Their participation is critical if the redesign is to take maximum advantage of current and emerging technologies. More important, having them involved early motivates them to be pan of the solution.
* Finally, BPR projects cause anxiety, disruption, and pain to the people involved in the processes that are being reengineered. It is better to face this straight on by anticipating and planning for transfers, retrainmg, and firings.
The company's human resource people must be encouraged to be a constructive and supportive part of this process.
Several years ago a client said to me, "Our attitude here is that if it's not broke, don't fix it." If that is your attitude, reengineering is probably not the right solution for your business. I was taught that the job of a manager is to make his organization better every day.
Reengineering can be very effective when an organization is in dire straits because any obstacles to change are easy to eliminate. But reengineering is also valuable when an organization is stable and performing well when it is most complacent and potentially vulnerable.
Finally, reengineering is, at its core, a strategic initiative designed to position a company for the emerging future. It is the mechanism for aligning the core business processes of an organization with its core business strategies.
At its best, it is the foundation of a management culture that has as its principal value serving the customer and improving the processes every day.
It may not be an easy management culture in which to work - but it is one that can produce sustained competitive advantage and a way to succeed in an increasingly difficult competitive environment.