Expert Voice: James Champy on Re-Engineering

The work people do needs to be redesigned—reengineered is what we call it—in terms of processes rather than tasks or departments. That was the message Michael Hammer and I delivered nine years ago in our book Reengineering the Corporation. While the idea of reengineering touched a nerve and set off a wave of reengineering around the world, the impact was internal: By and large, the reforms ended at the company gate. That’s no longer enough. The information technology revolution and the shifts in power among the major global economic players of the past five years demand that the advances of reengineering be extended to include all the stakeholders in the corporation: its managers, employees, customers, suppliers, partners, shareholders—and perhaps even its competitors.

I call this idea “X-engineering,” and it can be defined as the art of using technology-enabled processes to connect businesses with their customers and other businesses to achieve dramatic improvements in efficiency, creating value for everyone involved.

“Okay, fine,” you say, “but how does it affect me?” In terms of X-engineering, I think the CIO’s role is, once again, to get line managers to understand the power and potential of technology. Sure, examples of companies using technology to cut costs are legion by now. But many managers still don’t understand how IT can be used to promote efficiency at their own companies—let alone outside the company’s walls. And so there are still yawning inefficiencies in the processes that connect companies, suppliers and partners, inefficiencies that can be eliminated by using technology to X-engineer how business is done.

Now, more than ever, it’s up to you to get others within your company to understand how technology—and particularly the Internet—can really drive companies to a whole new level of efficiency. That’s the first step for the CIO—to get others within the company to understand the potential of technology. And the easiest way to do that is through examples. If you are in the healthcare industry and you can point out that 35 percent of your spending goes to administrative costs, most of which can be eliminated through X-engineering—doing everything from creating single, unified patient records to holding auctions for hospital supplies—you’ll get people’s attention. If you can say that healthcare company Owens & Minor Inc. was able to lower its prices and still boost margins by 20 percent through X-engineering, people will listen.

Step two is to have your company begin to act, to actually start to redesign all the processes that govern the way your company does business. In X-engineering, you examine those processes from beginning to end—so you are looking both inside and outside your company—and decide what can be simplified or eliminated. That’s what happens at Solectron Corp., a manufacturer of circuit boards, computers and routers for the likes of Cisco Systems Inc., Dell Computer Corp. and Nortel Networks Corp. Solectron is one of the best examples of X-engineering out there. Before anyone thinks of manufacturing anything, officials from Solectron meet with their partners—engineer-to-engineer, production supervisor-to-product supervisor, and so forth. They go over every step in the process, looking for what can be streamlined or done away with based on the goals of the business, not some old-fashioned assessment of how well people do specific tasks. Not only does this speed up the production process, it speeds up time to market. And that’s no small thing in Solectron’s business: Estimates are that the market prices for the goods Solectron makes shrink by 1 percent a week. A circuit board that sits in a warehouse or in the hold of a ship for a month can be underpriced by 4 percent by a newer equivalent. Even worse, it may be well on the way to the fire sale of obsolescence. In Solectron’s case, time is truly of the essence.

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