Business Re-engineering

10% this year you would consider a number of solutions that alone, or in concert with one another, could provide a 10% improvement. Then you would probably stop thinking. If you were asked to improve the same process by 85% this year, the nature of the solutions you examine would be dramatically different. You would recognize that simply doing what you are doing better and faster probably wouldn't be enough. You would explore more radical and creative alternatives, quite possibly reengineering the activity.

What manager directs the organization to make 85% improvements? Not many! Most managers are constrained by their own assessment of reasonability and lack of creative thinking. Go out and examine a process in your company. How much of the delay in processing your products is dictated by adding value to the product? How much time is spent processing and how much time is queue time? In most companies, major business activities involve 90-95% nonproductive activity. Opportunities for 85% improvement probably exist all around you. Thinking big is a prerequisite to big improvements because they don't happen when you target small improvements.

Although you've heard it before, this principle is a key focus of any business reengineering effort. For one thing, when evaluating a process only the customer's perception of value counts. Customers communicate this perception through a willingness to pay more for a product or service. Only if your customer is willing to pay more for a product variation has that variation added value to the product.

Measuring the value imparted by processes is a requirement for reengineering these processes. This means first listening to the customer's definition of value. I frequently work with suppliers to the retail industry. The message from those customers, to suppliers interested in listening, is that flexibility and quick response are valuable. Low price and on-time delivery are still important but the supplier capable of rapidly replenishing hot sellers in response to consumer demand and replenishing product quickly to allow minimal stocking levels has provided far more value. Few retailers perceive value in out-of-stock hot sellers or dead stock delivered on time for a low price.

Another valuable customer contribution to the reengineering process is their view of your business. They do not recognize the departmentalized, hierarchal view that typically prevails in existing systems and procedures. Rather, the customer sees processes capable of adding value; the order processing process, the production process, the shipping and logistics process, the invoicing and related financial processes. If we strive to reengineer processes as the customer views them we can avoid confusing artificially imposed requirements with those that support adding value.