Reengineering the Corporation: A Manifesto for Business Revolution The novel, “Reengineering the Corporation: A Manifesto for Business Revolution” is a very enlightening book, especially to a novice college undergrad like myself. The authors make the argument that traditional business organization is based on the specialization of tasks as laid out in Adam Smith's work, Wealth of Nations. Once initiated, the idea of division of labor did in fact increase productivity immensely.
Division of labor worked so well because it fragmented the work to be done into separately contained specializations/jobs that could be taught to even the most ordinary of employees. This increased the capacity of firms to produce goods, and in the earlier times the customer was faced with little to no product options and would accept anything that was offered. This scarcity and lack of competition allowed companies to continue manufacturing large amounts of goods without too much consideration into much innovation.
Over time, competition from other countries ended this complacency. American companies began to lose their prior dominance and some of its business to more agile and innovated companies that were sprouting up. Hammer and Champy point to the Japanese growing competitiveness as a major source of losing dominance in the production front, also if this book were to be updated to accommodate today’s environment it would surely cover the growing competitiveness of Chinese and Indian companies.
The authors cite that an enormous force has changed the world’s business climate and now customers have the upper hand instead of the businesses. Information comparison brought on by the computer age has made customers into comparative bargain finding shoppers. Customers now can tell suppliers what they want directly and even indirectly. Mature markets and replacement industries have made a new market environment that needs to be able to be more flexible. Trade barriers have been removed and foreign competition is devastating many American companies.
Authors Hammer and Champy prescribe a solution to this problem; it is a total "reengineering" of the processes of the company in question. They recommend that this will create a fast moving and innovation orientated new organization, which will be more adept at quickly changing to meet new customer needs. They talk about radical redesigning, which they say will offer dramatic quantum leaps in performance. They relate some specific case studies of American companies; Ford, Aetna, Hallmark and Wal-Mart. The ford example describes changes that can be made in the accounts payable department.
After reengineering their purchase order process, they eliminated all purchase orders, instead starting an online database, which allowed them to computerize the vendor payment procedure, and even had the computer issue the check immediately upon receipt of the shipment. At Kodak, they also reengineered and streamlined their product development process by using a CAD CAM Technology (Computer Aided Drafting). They changed from a parallel process to a concurrent process with the help of this technology and cut their product development time by fifty percent.
At another company they found that the absence of an assembly line was good and that less errors and delays occurred. They found that having a single caseworker, rather that a whole series made the process upwards of eighteen times faster. They tell the story of Wal-Mart working with PG; E, their Pampers supplier, in helping to advise, order and ship the diapers directly to Wal-Mart themselves. This greatly decreased errors on both ends, and turned out to be a winning strategy for both companies.
This went against the usual adversarial role that companies and their suppliers have traditionally had. The authors recommend putting in place a process team to do a task together. This team would do multi-dimensional work, all of the team members would have collective responsibility and the team would self-monitor. The work would be more challenging and difficult, but in turn be more rewarding. There must be some outsiders on the team to shake things up and relieve stale thinking, but the insiders with their valued knowledge would dominate the group.
People would be empowered and paid per deal, not for just showing up on the day to day. For excellent work, contributions, and stellar performance there should be a bonus. To make today’s customer happy, the employee must work for the customer and not be the "boss". Hammer and Champy value the idea of the coach instead of the manager. They stress that technology is not the solution, but a tool and that inductive thinking in which the solution seeks a problem is the non-linear way of innovation.
They suggest that a "generalist is better than a specialist, and when a specialist is needed, that person can be a consultant”. They also think that decision-making should be everyone's job; the traditional way of waiting for the boss to make key decisions is just too slow in the rapid information age will now live in. The use of shared databases is seen as an essential part of ‘reengineering’. Shared databases allow information to flow through the framework and it can be used simultaneously with few mistakes within an organization.
Wireless technology uses are now available and they have been cited to greatly increase customer satisfaction. An Avis rental car attendant with the companies handheld computer devise is mentioned as an example of improving customer satisfaction through increasing access and speed to information. Other well-known companies are also outlined such as Federal Express, Taco Bell, and Bell Atlantic. All of these companies received a substantial payoff after deciding to undergoing reengineering, Taco Bell actually increased it's sales from $500 million to $3 billion.
Hammer and Champy point out that in order for reengineering to be successful a strong leader that is very respected and from very top management of the company must be the visionary of the reengineering project. Change is always contentious and within the reengineering process and even within each team there will be conflicts along the way. For this reason it is recommend that a company choose only one process to reengineer at a time. They are advocating reengineering the processes, not the actual sales or the manufacturing. This book informed me about a lot of “reengineering” and tactical processes that are going into today’s corporations.
The business environment has obviously changed tremendously since Wealth of Nations was originally published. Although the ideas that were laid out in this book still hold true, as the world changes it is important for corporations to change with it. Today a company must be innovative, technologically savvy, and distinguishable from its competitors on price or product. From whatever side of the business spectrum you’re looking from adversity to change is never going to work, sometimes reengineering the corporation might be just what is in order, and if so “Reengineering the Corporation: A Manifesto for Business Revolution” is a must read!