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Strategy and Transformation

[Part One] Reengineering for the 21st Century Business – Don’t Automate, Obliterate

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The computing power that employees wield today is unprecedented. With a desktop at work, a laptop at home and a smartphone in hand, all connected to the internet, the availability of processing power and information is astounding.
“The computing power in your cell phone today is a million times cheaper and a thousand times more powerful and about a hundred times smaller [than the one computer at MIT in 1965]. So what used to fit in a building, now fits in your pocket.”
– Ray Kurzweil

Simply put, the millions of information workers in the global economy have access to more resources and power than ever before. While computing power has increased exponentially, productivity has increased only incrementally. How can we reconcile this fact?
Seeking to answer that question Michael Hammer, former MIT professor and president of the IT consulting firm Hammer and Company, published an article in the Harvard Business Review in July 1990 entitled “Reengineering Work: Don’t Automate, Obliterate” in which he details what he sees as the major roadblock in productivity.
The usual methods for boosting performance—process rationalization and automation—haven’t yielded the dramatic improvements companies need. In particular, heavy investments in information technology have delivered disappointing results—largely because companies tend to use technology to mechanize old ways of doing business. They leave the existing processes intact and use computers simply to speed them up.
In three words, the answer to improving productivity beyond small increments is business process reengineering. The bottleneck in an information worker’s productivity is no longer resources or power, but rather the process itself. Hammer notes that “many of our job designs … came of age in a different competitive environment and before the advent of the computer.” Rather than automating existing methods of doing work, companies should look to analyze and understand the processes they currently use and ask one important word: “why?”

In “Reengineering Work”, Hammer details how Ford was able to reduce their accounts payable department headcount by 75% by analyzing the tasks fulfilled by those individuals. They chose not to simply automate certain tasks, but rather to re-think the process entirely. Through reengineering, they reduced the accounts payable workflow from matching 14 items to matching three items before a check was issued. Similarly, Mutual Benefit Life reduced the turnaround on an insurance application from 5-25 days to 2-5 days.
While process reengineering is often used to cut costs, its utility extends far beyond simply reducing expenses. As Hammer states in his article, many business processes and organizational structures were developed when unskilled labor was abundant and analytical professionals were rare. That picture of the workforce is no longer true; in the case of Mutual Benefit Life, the many clerks executing redundant tasks were given more responsibility, walls between departments were torn down and the organization was flattened to focus on the empowered employee. The application process that previously involved 19 people and 30 touch points now was entirely under the review of a job title that had never existed before – case manager. Rather than utilizing specialists with repetitive tasks, employees were empowered to not only expand their knowledge and expertise but also to take complete ownership, cradle to grave, of an application. Process reengineering is as much about cutting costs as it is about educating, empowering and enabling the human capital that firms already employ.
The entire article is a really fascinating read and is available for purchase at the link below from the Harvard Business Review.
[Note: this is the first post in a three part series on the topic of process reengineering. Look forward to an interview with an industry professional and an introductory post on the human side of process reengineering, organization change management.]
Reengineering Work: Don’t Automate, Obliterate – Harvard Business Review
Did You Know? – YouTube
Supercomputers vs. Mobile Phones – CyTalk

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