Getting past the obstacles to successful reengineering

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

Seeing and Accepting the Returns

Investment in reengineering must provide visible and acceptable returns to providers of capital. An organization has to guard against an overzealous attempt to build capabilities without concern for returns. Sometimes the desire to provide the utmost customer value by creating a process better than any competitor is so seductive that companies can lose sight of cost. Therefore, an attempt to build a superior process has to be tempered by the returns envisioned from that process.

As a key executive of Deere and Company points out, "Deere is now customer responsive but not customer driven." He emphasized that "doing everything the customer wants can drive you out of business. Any feature or enhancement must be something customers care about and are willing to pay for. This is because every time a part or process step is introduced, the complexity and potential for errors increases" (Davis 1993).

Being "economical" is also an important factor in customer value. There is no point in providing a service at a cost the customer cannot afford or the competition can underprice. Accordingly, the cost effectiveness of reengineered processes, with a view to increasing return on capital, is a critical consideration.

Framework for Targeting Processes

Successful reengineering should focus on processes that have an impact on providing customer value and allow the company to serve customer needs profitably better than its competitors. A matrix based on these two criteria (shown in Figure 1) can be used as a tool for identifying the key processes to reengineer. Processes that have both a high impact on customer value and a high importance in developing competitive capabilities should receive the "critical" priority for reengineering. Processes with low customer value and low importance in developing competitive capabilities are a waste and merit no reengineering attention, despite the common rationalization that "Its a safe place to start."

Processes that provide customer value but not lead to a competitive advantage are at best "complementary" to the critical processes. Reengineering complementary processes may provide competitive parity and may be necessary in sot cases for continued viability, but it will not allow the organization to outdo its rivals. Changing these processes, then, should complement the "critical" processes and assume a lower priority

Agway, the giant farm supply cooperative in the Northeast, had suffered two years of losses. Executives realized that these losses stemmed from two factors. First, retail store personnel were ill equipped to meet the specialized needs of the commercial farmers, and retail customers were being siphoned off by discount retailers like WalMart. Second, there was considerable redundancy in the ordering and billing system because many customers ordered directly at the stores but received their products from Agway mills and ware houses. In response, Agway reengineered its selling process by reclassifying its different customers as retail and commercial. Processes were reworked based on these different customer categories and needs. The reengineered process, though it did not give Agway a considerable advantage over such competitors as Wal-Mart, did allow them to stay in the game.