Business process re-engineering gets a second wind

In the early 1980s, technology silos, those free-standing islands of innovation in divisions such as marketing, finance and human resources, were the pride of individual functional units. But as the decade came to a close, the lack of integration among the silos was costing dearly in dollars, duplication of effort and time-to-market.

“IT organizations were getting pressured to build systems that didn’t support just individual functional silos, but multiple organizations [within the company]. We came to realize that was about rethinking processes,” says Michael Hammer, president of Hammer & Co. in Cambridge, Mass. Hummer coined the term business process re-engineering (BPR) in 1987.

Increasingly sophisticated customers were demanding lower cost, higher quality and faster cycle time, and traditional processes couldn’t meet those demands, he recalls.

Then the ’90s began with a recessionary bang. “Companies were really struggling with improving business performance,” recalls James A. Champy, chairman of consulting at Perot Systems Corp. in Cambridge, Mass., “Competition, especially global competition, was intensifying. Companies were seeing the need to change [strategies].”

In 1993, with the publication of their best-selling book, Reengineering the Corporation (HarperCollins), Champy and Hammer changed IT forever. “We posited that companies had become too bureaucratic in the way they operated and too dependent on specialization and fragmentation: Break up work, assign it to specialists or department, then put it all together again,” Champy recalls. “And it wasn’t working. Companies had gotten too big.”

“BPR was saying you’ve got to stop doing these silos, and you’ve got to run the [business] process across different functions,” says Charlie Feld, president of The Feld Group, who, as CIO at Frito-Lay Inc., did some of the most successful IT re-engineering of the decade.

By the mid-’90s, Computerworld was reporting that U.S. companies were spending about $22 billion on BPR, and companies including Eastman Kodak Co., Ford Motor Co. and Taco Bell were reporting great results. Consolidated Edison Inc. in New York redesigned procurement processes and reduced administrative costs by 80%. Harley-Davidson Inc. cut manufacturing time from 72 days to two days, and Frito-Lay’s mobile marketing application became a Harvard Business School case study.

But BPR wasn’t always successful. In 1995, Hammer himself reported that nearly 80% of all re-engineering was falling short of its stated goals, but looking back, he blames that more on hype than on any flaw in the BPR concept. “A lot of companies fell in love with the term, didn’t exactly know what it meant, did some damn thing or another, and when they were unhappy with the result, they blamed it on re-engineering,” he says. “Lots of people were using the term without knowing what it meant.”

Champy adds that some managers mislabeled downsizing as BPR. “The manager would reduce parts of the company by half and leave it to the people remaining to do the same amount of work,” he says. “They never changed the nature of the work, and they created a great cynicism about new ideas that still exists.”

Says Ralph Szygenda, CIO at General Motors Corp., “If you don’t implement it right — and there are a lot of reasons you might not (the business is not involved, the culture resists) — then the assumption is that it’s bad, but that’s just based on whether you [were] successful or not.”

Eventually, the hype went away, and with it, most references to BPR. But Champy and Hammer maintain that it never disappeared.

Szygenda, whose BPR history goes back to his days as CIO at Texas Instruments Inc., agrees. “It’s never gone out of favor; it’s just been named different things,” he says. “Trying to improve your business processes is kind of apple pie and motherhood,” he adds.

“Companies that were into it because it seemed to be fashionable flitted like butterflies onto something else,” Hammer says. “The people who understood kept at it and continued to prosper.”

Hammer says some companies got into BPR indirectly in the late ’90s through enterprise resource planning implementations. “They realized that they had to do re-engineering and found religion halfway through,” he says.

Meanwhile, new technologies have given BPR another boost, says Paul Harmon, senior consultant at Cutter Consortium in Arlington, Mass. “Companies are going to revise their business processes to take advantage of new technologies” such as the Internet, he says.

Hammer says success in BPR depends on two things: managing it as process re-engineering and not a software implementation, and investing “more than you think is necessary” on training and change management — the human element.

Hammer and Champy insist that BPR is here to stay. In fact, Champy has just written a new book on the subject, X-Engineering the Corporation (Warner Books, 2002). “BPR never really went away,” he says. “It went underground. Companies never stopped doing this work. Dell and Cisco have taken it to an extreme — superb BPR heavily enabled by the Internet.”

“We have been re-engineering new processes that we didn’t think about 10 years ago,” Hammer adds. Early BPR was mostly focused on order fulfillment, procurement, manufacturing and customer service, he says. In the mid- to late-’90s it moved on to product development, and now processes like sales, marketing and strategic planning are being re-engineered, he says. “So it’s a new frontier in terms of processes. We’re starting to look at it through a new lens,” says Hammer.

That view includes inter-enterprise processes that link companies together. “Companies need to think about processes not just within their walls but in relation to customers and suppliers,” Champy explains. “We can do that because of the ubiquity of the Internet. The next frontier for BPR lies in those cross-organizational processes.”

Melymuka is a freelance writer in Duxbury, Mass. Contact her at kmelymuka@earthlink.net.