Getting past the obstacles to successful reengineering

Business Horizons, May-June, 1995 by W.E. Holland, Sanjiv Kumar

Although a multitude of companies are actively pursuing reengineering, mounting evidence shows that many of the efforts are not meeting original expectations. Recent surveys, in fact, suggest that 60 to 80 percent of reengineering programs have been unsuccessful. Why does reengineering so often fail to pan out? What can be done to make it a success?

One comprehensive survey has revealed two frequent causes for the failure of reengineering programs:

* Targeting wrong or meaningless processes;

* Lack of balanced and sustained executive support.

This article attempts to provide some insight on these causes of failure and what companies can do to avoid them.

TARGETING WRONG OR MEANINGLESS PROCESSES

Too often organizations focus on trivial operations or processes when they reengineer. The task seems so daunting that some firms end up streamlining functions and departments rather than focusing on meaningful processes. Some companies launch too large a reengineering effort. Instead of prioritizing their tasks and resources, they attack every process with equal gusto and fritter away their energies on all processes even though some are less valuable than others.

The crucial challenge for reengineering, therefore, is to target only key processes that add value to the business. How can a company identify these key processes? By focusing on two questions and one caution:

* What customer needs does or should the company satisfy?

* What resources does the company need to muster to serve customer needs better than its competitors?

* Can the company "see and accept" the returns from reengineering these key processes?

It is the combination of an external focus on satisfying customer needs and an internal focus on the development of unique resources that should drive reengineering efforts. The eventual measure of their success will be their impact on the company's return.

Customer Needs

Companies have to discover what their customers value. This, says Ed Heard (1993), is defined in terms of the ratio of "what the customer gets" in exchange for "what the customer pays." Customer expectations are based on the three contact points between the customer and the organization:

* interaction with the company in the ordering process;

* the use of the actual product or service;

* the delivery and post-delivery process.

Based on their expectations, customers judge each of these points of contact on whether they are (1) correct and appropriate, (2) timely, and (3) economical. Customer satisfaction with the three points of contact defines for the company what the customers value and which processes might need to be reengineered.

Deere and Company, the leading farm equipment manufacturer, focused its reengineering initiative on processes that satisfied customer needs. Up to then, new- product introductions had been haphazardly planned, resulting in many product features and process steps that had no value for the customer. After reengineering the new product development process, cross-functional teams took the product from the initial analysis and definition of customer needs through product development to customer acceptance. Only after analyzing and defining customer needs did the company actually begin any design work.

Customers participated on the cross-functional teams along with members from marketing, design, engineering, manufacturing, purchasing, accounting, and sales and service. In fact, customer input was actively sought and incorporated throughout the new product development process. Only features or enhancements that customers cared about and were willing to pay for were incorporated in the product. Features that added little value in the eyes of customers were eliminated.

The reengineering effort has resulted in many dramatic tangible benefits. As a result of customer involvement, Deere is now able to detect and fix problems early and avoid customer dissatisfaction and costly changes later. The company has not only reduced the number of parts and operations for many of its products but is also able to provide customers with more options by using interchangeable parts. Additionally, set-up time and manufacturing overhead have been reduced, the costs of material handling and direct labor have been slashed, floor space is used more effectively, and responsiveness in terms of servicing customer needs has improved.

Our field experience suggests that many companies are not eager to tackle the reengineering of the three contact points. The underlying reason for this reluctance seems to be either "It's too hard" or "It's too risky. "Difficulty and risk aside, however, if reengineering is to be valuable for the company, processes that "count with the customer" remain the most productive targets. Some companies have realized major payoffs from reengineering efforts aimed directly at the "hard" job.

An aerospace company that produced wings for both American and European airliners and corporate jets faced the reality of its poor reputation for customer service and communication. After confronting the facts, the CEO appointed two new players to his management team with the primary objective of "rethinking" customer processes--from initial development and engineering of the customer's order to post-delivery follow-up, service, and customer evaluation. After "scouting" the situation, the two new executives formed company-wide teams to examine, evaluate, and redesign those processes most connected with customer satisfaction. The teams reworked key customer processes and implemented the new designs on an urgent basis.