5: The Enabling Role of Information Technology
Technology often plays a role in reengineering processes, but adopting technology is not the same as reengineering. Specifically, companies that leverage technology merely to automate tasks but leave their existing processes intact are not reengineering - though they may claim to be doing so.
Reengineering often leverages technology because it provides capabilities that would have been impossible without it (or at the very least, inefficient and difficult). Near-instantaneous communication and simultaneous access to a central repository of information are some of the chief advantages, which can provide greater efficiency even if processes are not changed.
Some advantages could be gained by adopting technology while keeping existing processes. Consider the case study of IBM's credit department: if e-mail is used to move credit applications, it creates some efficiency by eliminating the tasks necessary to transport the paper applications.
However, the greater efficiency was gained by changing the process itself: if IBM kept its applications on paper, but reduced the number of people and departments that were necessary to process an application, it would still have gained most of the benefits.
Learning to Innovate
Businesspeople, and people in general, are trained to observe and analyze things that currently exist; they have no training, and are highly uncomfortable, regarding speculative thinking. That is to say, they are very good at analyzing an existing process and finding ways to make it more efficient without changing the process. Reengineering requires them to completely depart from the observable word of current reality and consider what might be possible if the current process were abandoned and other ways to accomplish a goal, using imagination to visualize something that doesn't presently exist.
(EN: It's a bit ironic, in that cultural comparisons have stressed that westerners, particularly Americans, are far more accomplished at creative thinking than other cultures. The notion that Americans invent things and the Japanese make them better, smaller, faster, cheaper, and sturdier is not a false stereotype - it bears out repeatedly. And yet, even Americans tend to be mired in reality and unable to see possibilities. This raises the question of where this capacity comes from and how it can be improved upon, but that's a digression.)
The fundamental error most companies make in regard to technology is that they view it through the lens of their existing processes - they seek to streamline what they are presently doing, rather than asking whether there might be a completely different way to achieve the same goals, or even to change the goals to achieve a better outcome.
Automation alone is not reengineering. It uses different tools to do the same job. Reengineering changes the job. Back to the case studies, the managers at Ford initially wanted to make their method for processing invoices more quickly and with fewer people - but what they found was a method for doing away with invoices entirely.
Even the inventors of technology failed to recognize the potential of their creations. Statements that today seem utterly gormless - the worldwide demand for computers is fewer than fifty, nobody needs more than 256K of memory, and the like - were actually quite reasonable from the perspective of automation. If information technology had been applied to the tasks that were currently being done, and new uses of technology were not discovered, they would likely have been right. They merely failed to imagine that computers would ever be used for personal communication, electronic commerce, entertainment, and the myriad of other tasks to which technology has been applied.
Innovation is also not related to solving known problems or satisfying no needs. The author tells the example of Xerox, which was looking to sell off its photocopier business at one point because its consideration was limited to present uses - making duplicate copies of legal documents, which was being done using carbon paper. No-one articulated the need for people to make small print-runs - but when he technology came available, copiers were used to copy documents for small meetings, create handouts for classes, publish club and organization newsletters, and a myriad of other tasks that were too small to hire a printing company but too large to copy manually.
In terms of technology, most people do not imagine possibilities - but when they are shown that something is possible, they recognize that it has value to them. A person may even recognize that they have a problem without a solution, but their vision is limited. A business professional who travels often to attend meetings might say he needs a faster way to reach the airport or a private plane - but he would never envision the potential for videoconferencing to make travelling unnecessary. (EN: this is all good and well from the perspective of the consumer, but the problem of using this approach in business is that if you wait for your competition to show you the way, you will already be a step behind.)
For this reason, traditional approaches to market research are not useful in identifying potential to innovate. People cannot identify needs they do not know they have, and tend to think in limited terms about the ways in which they might address the problems of which they are aware. The author takes the perspective that someone must invent a gadget, in the nature of a pure scientist experimenting with capabilities, before its usefulness will be recognized.
However, not all technology is adopted - and just because something is possible, and even if it is useful, doesn't mean it will be used. Videoconferencing is widely regarded as a technology failure: while it provides the ability for people to meet without travelling, it has not been widely adopted. The author supposes it is because there is some ineffable value in being there in person (EN: which doesn't really wash). However, in some companies it is being leveraged as a tool to facilitate globalization and round-the-clock development: status meetings can be held regularly as work is passed from one continent to the next. This did not decrease travel, but it made possible a task that would not otherwise have been feasible.
The author looks to Saturn as a case-study: when GM created Saturn, it did not carry over the practices of its existing plants. Instead, it gave Saturn the ability to start with a blank page to determine how an automobile plant should be run, and it came up with a number of innovative ways to operate including putting suppliers in charge of inventory, working collaboratively with vendors, and implementing a paperless purchasing and payment system. Because there were no existing processes, Saturn was able to design processes as it saw fit, eliminating a great deal of inefficiency at plants where decades-old ways of doing business were carried forward.
As such, technology can lead to innovation when companies approach it with the right perspective: to consider what is possible given the capabilities of technology, rather than considering how the technology can be adapted to work within their existing processes.
Breaking Rules
The author provides a random smattering of "rules" that were once accepted as limitations, which have been overcome by technology.
Information can appear in only one place at one time
Traditionally, information was coded on paper and kept in files - when one person has checked out a file, no-one else was able to use it. Making copies and distributing them was possible, but would create inconsistent versions of the file as different people updated it. Consequently, business processes were designed to accommodate this limitation - one person must complete a task before the next person could begin theirs, even if there was no other dependency between them.
Shared data enables information to appear simultaneously in as many places as it has needed, which means processes can be reengineered to allow multiple people to perform tasks simultaneously using the same data. The author uses insurance as an example: when an application is submitted, one clerk can be calculating the premium while another is checking the driving record and a third is checking the credit history - the application doesn't have to be passed from one desk to another because the sequence is not relevant.
Only experts can perform complex work
Traditional workflows involved specialists to handle tasks: in order to have a single process that could handle any job, every piece of work had to be treated the same way as the most complex piece of work the process might be required to handle.
Expert systems enable generalists to be trained to do an entire task, end-to-end, based on a more reasonable estimation of the complexity of the average job, and provided with access to informational resources they can leverage in the rare event that a complex case crosses their desk.
It's also noted that "expertise" is often merely information that has been memorized, dredged out of human memory on the rare instances when it is germane ... and as such a highly skilled specialist has a head full of knowledge that he very seldom needs to apply.
Computer systems are better than human experts in their ability to store more data and retrieve it more quickly. One example are customer relationships databases that remember every item a customer has ever ordered, and cross-references their purchases against other customers to identify cross-selling or up-selling opportunities. The most knowledgeable and skilled expert could not possible memorize that much information and make assessments as promptly and accurately as a computerized system.
Centralization and decentralization are mutually exclusive
Businesses traditionally had to choose between two approaches to organizing their business: there could be a centralized operation in which a headquarters office held all authority, or a decentralized operation in which each field office operated autonomously, and there was no way to blend the two.
Communications networks enable businesses to be more flexible in their process design, dividing work (and authority) between field units and a headquarters on a more granular level. This was entirely possible using mail, telephones, and overnight package delivery, but each of these methods involves either a time lag (waiting on documents to be delivered) or poor communications capabilities (a long order cannot be read over the telephone)
An example is branch banking: there is no longer a need to have a loan officer at every branch who spends a great deal of time idly waiting for an applicant to turn up. Instead, branches provide customer service, gathering information from applicants, while the back-office work is done by a centralized department that makes better use of fewer employees. In that way, a bank benefits from being able to form a close relationship with customers (decentralized service) while maintaining efficiency of operations (centralized processing).
Only managers can make a decision
In the traditional model, employees were authorized to perform tasks, not to make decisions about what needs to be done. The idea was that employees do not have access to enough information to make an informed decision, and only those at a management level had a broad enough perspective. The result was that decisions were made too slowly for a fast-paced market because they had to be escalated through the organizational hierarchy.
In the reengineered model, authority is delegated to the front lines. Information systems can provide information to the field to help the low-level employee make informed decisions. Expert systems and modeling tools can provide guidance and help employees recognize the consequences of deviating from standard procedures. Decisions can be made and problems can be resolved more quickly.
(EN: The author provides no example for this, and I have the distinct sense he's going on about general and academic theories of what should be possible without a specific instance in mind.)
Employees need offices
The traditional approach to doing business is based on physical artifacts - people need to be in the same building as the equipment, materials, files, etc. and even those who work in the field make sorties from a central office location.
Wireless data communication invalidates this rule, at least for workers whose product or service is intangible and does not strictly need to be provided at a specific place and time. People can work wherever they happen to be, provide that they have connectivity in that location.
Otis elevator, whose employees work on the customer site and carry with them portable terminals that can reference work orders and repair histories, and through which they can transmit information on the work they have performed. The same sort of technology is now used by car rental companies, which enable customers to return a rental car without having to step into the office.
(EN: It's been well over a decade now that "telecommuting" has been practical for many professions, but still has not been widely implemented - so this may be another example of a technical possibility that has failed to gain adoption except in limited situations.)
Personal selling is the most effective
The author refers to the quaint technology of "interactive videodisks" to provide video brochures about products, or kiosks that enable customers to obtain information. Customers are increasingly willing to interact with a "cold and impersonal" machine to get more information, and more accurate information, that a warm and friendly human salesman can provide.
Many companies are turning to the online channel to replace brick-and-mortar stores, and even traditional retailers are operating in the online channel, where sales take place without any human interaction at all.
The author notes that banks, real estate agents, brokerages, and other businesses that were once considered too complex for customers to self-service are all leveraging technology to improve, augment, or substitute for human agents.
People are needed to keep track of things
The use of technologies such as sensors and intelligent tags means that people are no longer needed to keep track of the location of physical objects. Considerable time and labor is saved because technology enables the things to tell people where they happen to be.
For example, any item in inventory can carry an RFID tag that can be detected by a network of sensors, allowing its location to be known at any moment. GPS devices on trucks mean that dispatchers can keep track of fleets and drivers don't need to phone in at each stop to report their whereabouts.
This level of detail allows for greater tracking and precision, and more flexibility: vehicles can be rerouted in transit, items can be tracked without having to perform physical inventory, etc.
Established plans seldom change
The time and difficulty of gathering information and bringing it to a central location for analysis and decision-making meant that businesses would have to make plans far in advance, and there were long periods between planning sessions in which operations were expected to be static and unchanging, following the last plan that was laid.
Today, the sheer capacity of affordable computing power means that companies can keep constant track and make changes in real time to make their operations more efficient. Data from external sources can also be leveraged in order to adjust plans to circumstances - for example, if the system that tracks freight in transit can be tied into data about traffic conditions, road construction, and weather, drivers can be sent notifications at any time to adjust their routes accordingly, rather than following a pre-set plan until an obstacle is encountered.
First-Mover Advantage
It should be clear from the examples provided that many of the limitations the governed the way businesses operated have been overcome by technology, and it's likely that rules will continue to be broken or invalidated. What's true this year may not be true next year.
Consequently, businesses constantly need to keep an eye on technology, considering whether the potential has arisen to reengineer an old process that was implemented because of a limitation that no longer applies. Given the pace of change, this isn't something that a firm can do once a decade, but has to be an ongoing effort, and one that is a significant priority: the ability to seize a technological advantage quickly and capitalize on it before competitors can be a significant advantage.
At the same time, the author offers this maxim: "If you can buy a technology, it's not new." That is to say that by the time a shrink-wrapped solution is being sold by a vendor, then they recognized it long enough ago to build and market their product - and perhaps even sold it to a number of your competitors - so you are behind the field.
Companies that have had great success with technology and have been ahead of their competition have generally developed their own solutions rather than waiting for the industry to provide a standard. Both American Express (digitizing receipts to speed processing) and Chrysler (satellite tracking of shipments) defined their needs and built custom solutions to get the capabilities the needed ahead of their competition.
The author suggests that companies that are aggressive in pursuing technology can maintain a three-year lead over competitors who wait for others to invent and prove out a solution - it takes time for competitors to notice it, to analyze it, and to imitate it. By the time their competition has a prototype, they are already onto the next generation.