The rebirth of re-engineering
- 10 September, 2012 10:14
It might go by the same name, but today's slimmed-down business process re-engineering bears little resemblance to its clunky predecessor.
Twenty-five years after management guru Michael Hammer popularized the concept of business process re-engineering, companies large and small are at it again -- only this time around with a few significant twists. Chief among them is the re-engineering of the IT organization itself.
Unlike the mega-projects of the 1990s that spanned multiple years and revolved around big, honking ERP systems that cost millions and produced disappointing results, today's process re-engineering initiatives feature multiple, quick-hit projects, many born out of pocket innovation labs within IT.
The methodologies are also different. Forget color-coded Gantt charts and waterfall development techniques. Today, it's all about lean manufacturing, Six Sigma and agile development.
In a nutshell, today's re-engineering is not a one-time event. Rather, it's an ongoing endeavor that involves continually refining and enhancing the hundreds of end-to-end steps involved in developing new products, acquiring and retaining customers, and making money. What it's not about is the software that automates these steps.
"You might re-engineer once, and it takes you from a 1 to a 5 in some area. But the world is changing fast, so what was a 5 quickly becomes a 3," says Daphne Jones, CIO at Hospira, a $4 billion pharmaceutical company in Lake Forest, Ill. "You have to figure out every day how to re-engineer back to a 5. It's a continuous journey."
That's why the savviest CIOs are re-engineering IT itself around those steps with an eye toward creating new streams of revenue and business value as markets advance at hyperspeed.
For example, at Boston-based John Hancock Financial Services, IT team members are organized around business processes, such as order-to-cash or procure-to-pay, rather than around various technology stacks or software applications.
"If you have people organized around the processes being delivered rather than in [technology] silos, that means those people are attentive to how the processes operate and how they need to evolve and change over time," says CIO Allan Hackney. "Re-engineering is constantly changing the status quo."
Customers everywhere are demanding greater mobile access to services, tapping into social networks and showing no signs of a weakening appetite for multiple consumer gadgets. "If you haven't figured out that you have to expose your business rules and processes in new and different ways, I don't know how you'll survive," Hackney adds.
Jones has similarly organized Hospira's IT team around business processes, or what the company calls "value streams."
"I used to have SAP people and non-SAP people, and when someone called from the business, they wouldn't know who to talk to," she says.
Re-engineering: Hindsight is 20/20
Michelle Sheedy, a process architect at pharmaceutical company Hospira, has seen it all.
As a former integration manager at Arthur Andersen, Sheedy worked on big SAP projects and other ERP implementations, making sure all of the technology pieces fit together.
"Whether it was SAP or Oracle or another ERP system, if you bought the technology, you agreed to abide by its rules. That was the 'to-be' state. You had decisions to make at a granular level, but those systems were pretty inflexible," she recalls.
Today, as a process architect -- a relatively new and rare title in IT circles -- Sheedy's job is to take an enterprise view of process changes and make sure that a change made in one process or system doesn't adversely impact another. Sheedy, who reports into IT, calls it the "whack-a-mole effect."
"The role of the process architect is to keep an eye on the big picture," she says. She likens the process models and changes she tracks to a library of standard operating procedures that business owners can consult before making changes to their own processes.
For example, Hospira is in the midst of re-engineering its customer complaint process, which is touched by eight different organizations within the company in some way.
"What we're trying to do is make sure the entire life cycle is correctly depicted so that we get an accurate performance measure and that changes made work together and not against each other," Sheedy says. The ultimate goal is to have all of the groups' respective improvement initiatives "move the entire needle, not just their needle," she says.
"As I look back at re-engineering, especially around ERP systems, there would be lengthy projects where you'd set out a 'to-be' state that you could work toward for two years and then find out that's not what you enabled or that it wasn't accurate," Sheedy says. "Today, business is moving too fast for IT to work off of a blueprint that may be a year out of date. That's why re-engineering is much smaller, quicker efforts."
Now, in contrast, Hospira still has an SAP team, which deals strictly with technical issues and ERP technology. But it also has appointed relationship managers who sit on cross-functional teams organized around 12 different value streams. Now, Jones says, "when someone from the business calls, they know exactly who in IT to talk to."
Currently, the pharmaceutical manufacturer has seven of its biggest and most important projects operating in this manner, Jones says. The ultimate goal, under an enterprise initiative known as GATE, which stands for "globally aligned and transformative enterprise," is to have the entire company humming the same process-focused tune.
Moshe Schechter, director of device manufacturing operations at Hospira, is the "value stream owner" for the company's procure-to-stock process. The process includes all of the steps involved in acquiring raw materials, making medical devices such as tubing and infusion equipment, and finally, stocking the products in the warehouse.
Schechter's team also includes a relationship manager who is his key contact back to IT. "I know exactly where to go as a business leader," he says.
"As the value stream owner, I'm from the business side and I'm responsible for revamping the process," Schechter emphasizes. In previous re-engineering efforts elsewhere, "IT had business analysts who were re-engineering the processes so they could launch technology. There was no buy-in from the organization being re-engineered," he says, adding that "one of the biggest lessons learned is that re-engineering has to be a part of everyone's goals."
Jones puts it this way: "People, processes and technology go together for a reason. It's the people who change the process, and it's the process that is accelerated or automated because of the technology."
Pick Up the Pace
Speed and rate of change are perhaps two of the most significant factors in today's re-engineering efforts, says Scott Hicar, CIO at DigitalGlobe, which operates three Earth-imaging satellites and processes massive volumes of data used for everything from assessing disaster damage to providing location-based mobile services.
"If you think back to traditional re-engineering, there was the 'as is' and 'to be' implementation plan. There was a lot of thinking up front about the end state," says Hicar. "In today's world, growth happens so fast and technology is so pervasive and evolving at such an incredible rate that anybody who thinks they can step back and guess the end state five years from now is probably going to have a very high error rate."
By way of example, Hicar notes that one of DigitalGlobe's first big customers wanted its images for car navigation. DigitalGlobe provided images on which roads and highways could be electronically traced, and the software was ultimately built into the customer's car navigation workflow.
Innovative business processes: The new crown jewels
Business processes are so critical to Lincoln Trust that top management views them as strategic assets.
"Process is just as much an asset as people," says CIO Helen Cousins. "Before, it was looked at as just a way to get work done."
In fact, Cousins says, a recently re-engineered self-service process for IRA customers was a big factor in Pensco Trust's acquisition of Lincoln's self-directed IRA business. "No one else who does self-directed IRAs enables clients to go on a website and do their own distributions," says Cousins. "It's one of the big things that helped us sell that part of the company."
Re-engineering the distribution process was accomplished using lean practices and agile development methods -- an approach that delivered benefits to the business every six to eight weeks, Cousins says.
"We first delivered a wizard to do the online application, then integrated that with the workflow system and then integrated that with back-end trust management systems," she explains.
"We wanted to make sure that whatever process we tackled, we did it in a way that was incrementally beneficial," she says. "It's just common sense. You deliver a little at a time."
But DigitalGlobe's next big customer wanted images that could be segmented for presentation on its own website. Hicar's team responded by building a so-called "tiling engine" that enabled it to chop up the images into smaller images that the customer could present online as customized maps.
"We processed 45 billion tiles for that customer," he says. At the same time, DigitalGlobe IT re-engineered itself and the content of its cloud-based image repository in a way that could serve other customers down the road.
"We're constantly re-engineering to create value for our customers," Hicar says.
Fail Fast, Move Forward
To do that successfully, speed and agility are absolute musts, CIOs say.
That's the main reason so many projects are short in duration, and it's behind the emphasis on "failing fast and moving forward." The idea is to try new and innovative ways of creating business value and, if they don't work, to move on -- quickly.
Agile and iterative development methods are the best way to do this, CIOs say.
"You have to apply lean practices and agile methods," says Helen Cousins, CIO at Lincoln Trust in Denver. "The faster you know you're going the wrong way, the quicker you can fix it."
Cousins, who was involved in major, ERP-intensive re-engineering projects at various companies during the 1990s and 2000s, considers the need for speed to be one of the greatest lessons CIOs learned from earlier re-engineering efforts.
Big ERP projects usually turned out poorly because they cost a lot and took a long time to deliver any real efficiency, she says. "The CIO's role now is more about how to drive revenue to the bottom line as opposed to constantly cutting costs," Cousins notes, adding that "you have to deliver incremental benefits to the business every six to eight weeks."
At Capital One Financial, the company's online and mobile channels are the primary drivers of this need for speed, says CIO Rob Alexander.
"We see rising expectations from business customers all the way through to end customers for what we do in IT," he says. "They want to interact how they choose, and they want products and services when they want them."
What's more, Alexander says, "customers' expectations aren't being driven just by their experiences with competing banks. They're being shaped by Amazon and Google and the best companies out there at delivering online experience."
What's notable is that the process re-engineering effort at Capital One is being led by IT "and will then have a ripple effect out to the lines of business," according to Alexander.
Last year, Capital One launched a major transformation effort in IT, committing to deliver all software through agile development methods. Alexander says it helped that when Capital One acquired ING Direct last year, it also acquired "a 100% agile IT shop, so we got a critical mass of tremendous agile talent."
Re-engineering: 6 tips for getting it right
1. The most successful re-engineering efforts are externally focused and place more of an emphasis on increasing business value than on cutting costs or creating internal efficiencies.
2. Lean, agile and iterative software development methods are essential to creating flexible processes. Determining an end state and working toward it is unrealistic.
3. Long-term mega-projects have a good chance of failure. Projects should deliver business value every six to eight weeks.
4. Organize IT around business processes, not around the technologies or software applications that enable them.
5. Technology automates processes. It shouldn't determine them.
6. Business interests are highly flexible. Technology must be flexible, too.
The other key area Alexander is focused on involves consolidating the bank's 30-plus data production and operation sites into two data centers running a standard set of technologies.
"Before, we had custom handcrafted technology stacks for each application," Alexander says. Standard technologies will enable IT to quickly deliver new services to Capital One's all-important base of ever-demanding mobile and online customers.
"This is really a big deal for us," Alexander says. "It's changing how we do work and also our combination of resources and skills. It will put us in a much better competitive position in the market."
Capital One isn't alone in its need for a new and different mix of skills in its re-engineered IT organization. Virtually all IT executives involved in re-engineering or transformation efforts list talent acquisition as a major challenge and priority.
"The most important thing that has changed is that we need a richer mix of associates," says Alexander. Specifically, Capital One is seeking out professionals with business and process knowledge and agile software development skills.
Kim Johnson, CIO at Graham Group, a midsize construction management company based in Calgary, Alberta, says the role of business analyst is taking on greater importance at his company and others. It's critical that business analysts have technical knowledge combined with "a very good understanding of the problem domain," Johnson says.
Traditionally, Graham Group, like many other companies, embedded business analysts in the IT organization. They would venture forth to the business, collect and interpret requirements and bring them back to IT.
Now, Johnson says, "when we talk about business analysts, we're talking about embedding a portion of the IT function into the business. As the problems have become more complicated and the company has grown and there is increased specialization, we're shifting the business analyst role into the business."
The upshot: "Today, I weigh business skills heavier than technology skills" in recruiting, Johnson says. High on his list of desired skills are the ability to drive collaboration, the ability to understand business requirements and translate them into a technical format and the ability to facilitate and integrate multiple perspectives.
Graham Group is also organizing most of its IT and business employees around various business processes. Additionally, there is a purely technical organization that is home to highly specialized technical workers.
"The days of the general software developer are long gone," Johnson says. Instead, Graham Group recruits candidates or hires service providers according to very specific platforms, the type of project and the type of software development.
The bottom line, according to Hicar, is that customers -- not technology -- determine how and where IT at the company will create business value in the future.
"Our vision is that business value will be determined by how people are using our imagery to create their own business value," he says. "We don't know yet what the most important value is going to be and which will emerge in the market, so we're building for flexibility.
"The reality now is that we know the world won't be what we thought it would be," Hicar adds. "We can't outguess technology evolutions."
In other words, we can expect the future will hold more re-engineering efforts implemented in a decidedly new manner.
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