Looking for a way to reenergize your business in these tough times? When the market shrinks, competition heats up.
The only way to grow your business or perhaps survive this crunch is to run rings around your competition. Accomplishing that goal means operating at lower cost, translating that cost advantage into lower prices and providing world-class levels of quality, service and customer experience. Simply executing your current processes better will most likely not be enough.
In such a situation, the late Michael Hammer would advise turning to operational innovation -- a philosophy based on coming up with entirely new ways of getting critical work done. Let's look deeper into Hammer's advice and his approach to building competitive advantage.
Operational innovation, Hammer said, goes far beyond another phrase often used in business, operational excellence. The latter term refers to achieving high performance through existing operating methods, such as ensuring that work is done accurately, at budget and on time. Achieving such excellence, however, requires only smart execution, not restructuring the fundamental way required work is accomplished.
Most efforts at excellence aim to speed up an existing process. Yet according to Hammer, this solution is inadequate. It is akin to "paving the cow paths" rather than building a new mode of transportation. He advised those in search of best performance to obliterate the old methods, to break the existing rules and to set up new ways to accomplish work. Hammer called his approach reengineering.
Connection to strategy
An example of operational innovation is Wal-Mart's implementation of cross docking -- the transfer of goods immediately upon receipt from the supplier to trucks bound for their stores. This innovation, of course, meant lower inventories and hence lower costs.
Perhaps more famous is the Toyota Production System. TPS is the prime start-to-finish process for making cars that enabled the Japanese company to displace Ford and GM.
This joining at the hip of process reengineering to a company's strategy makes Hammer's approach to improvement unique. He believed that companies cannot achieve high-level corporate goals by simply cutting fat or automating existing processes.
The degree of change Hammer envisioned cuts across functional boundaries existing in most organizations. In his mind, major value-creating innovations do not occur in a single department but rather require end-to-end process developments that affect large parts of a company.
He understood that the old rules of specialization of labor and economies of scale are the enemies of efficiency in today's marketplace. Hammer joined other change gurus in calling for a champion or process owner to shepherd a reengineering effort to success. That senior executive must hold the responsibility and authority to make change happen across a company's existing functions and departments.
Selecting a starting point
At the outset you must rely on your strategic planning effort to highlight the process to tackle first. Hammer suggested building an enterprise process model to describe the few key, end-to-end processes in your business. Develop Products, Acquire New Business, Manufacture Products and Deliver Products are examples of these basic processes.
These broad activities cut across the typical functions like sales, manufacturing, accounts payables and customer service and are truly responsible for creating value for customers. Put simply, Hammer advises you to view your company as a collection of critical processes rather than the typical set of functional silos.
Redesigning the process
According to Hammer, process redesign demands a full-time team to complete the necessary analysis and design in a timely manner. Members of the team must represent all of the functions in the process being reengineered. Among the principles Hammer offered to guide this effort are:
1. Organize around outcomes rather than tasks. This rule advises to have one person perform all the tasks necessary for completion. An example is a customer service representative who handles all of the needs for specific customers, such as order entry, acknowledgement, credit management, invoicing and after-sales assistance.
2. Have the user of a process output perform the process. For example, through sound information technology you should enable a process operator to initiate the replenishment of material inventory.
3. Make decisions where work is completed. Following this principle flattens organizations by eliminating people who check, record and monitor. In the new process these tasks belong to front-line workers, who become self-managed and controlled. Such empowerment is a proven enabler of higher performance.
Reimagining a process
Inventing a new way of doing things is tough work. Hammer suggested these ideas to stimulate your imagination:
Look outside your industry. Being a follower is not the route to operational innovation. Globally, very few companies achieve operational innovation. Even fewer get there in the same industry. To break through, you must be the first on your block to deploy a new method of working.
Defy a constraining assumption. Innovation typically means changing the rules of the game. Thus you must strike down long-held assumptions about the way things must be done.
Learn from emergencies. Companies often operate more effectively in a crisis. The emergency mode of working in chaos can be an excellent starting model for process change.
Analyze the key process dimensions. A process design specifies what results are expected, who performs the work, where the work is completed, whether and when the work is accomplished and what information is required by the process.
Engaging the front line
Late in his career Hammer recognized the human dimension of reengineering. He knew the rubber meets the road at the front lines, where the biggest impact will be felt. As with all change initiatives, exposing the affected through involvement in the design process and training is a must.
Part of this recognition is that real process reengineering requires critical human resources. Without capable leaders, expertise in process redesign, skill at complex project management and a culture of teamwork, failure is certain. You cannot build a new, stronger organization on a weak, short-handed foundation.
Bottom Line: Hammer reminds us that many of a company's processes have simply evolved. Through neglect, managers have "institutionalized the ad hoc and enshrined the temporary." To survive the tough times now upon us, you better follow his advice obliterate the old processes and engineer new, improved ones.
Have something to say? Share your thoughts with us in the comments below.