Embarking on Reengineering Embarking on Reengineering It is

Embarking on Reengineering

Embarking on Reengineering It is tremendous challenge persuading people within an organization to embrace - or at least not to fight - the prospect of major change. Getting people to accept the idea that their jobs will undergo radical change is not a war won in a single battle. It is an educational and communications campaign that runs from reengineering start to finish. It is a selling job that begins with the realization that reengineering is required and doesn't wind down until well after the redesigned processes have been put into place. 2

Embarking on Reengineering Experience shows that companies that been most successful in selling change to their employees are those that have developed the clearest messages about the need for reengineering. Senior managers in these companies have done the best job of formulating, and articulating two key messages that they must communicate to the people who work in their organizations. The first: Here is where we are as a company and this is why we can't stay here. The second: This is what we as a company need to become. 3

Embarking on Reengineering The first message must make a compelling argument for change. It must convey a forceful message that reengineering is essential to the company's survival. This is a crucial requirement because employees who aren't convinced of the need for change will be disinclined to tolerate it and may even obstruct it. The process of developing this argument has the additional benefit of forcing management to look honestly at the company and its performance in the context of a broad competitive environment. case for action 4

Embarking on Reengineering The second message, what the company needs to become, gives employees a palpable goal for which to shoot. Articulating it forces management to think clearly about the purpose of their change program and about the extent of the change that needs to be effected through reengineering; vision statement 5

Case for Action The case for action says why the company must reengineer. It has to be concise, comprehensible, and compelling. It has to be a dramatically persuasive argument, supported by evidence, that spells out the cost of doing anything short of reengineering. If a company stands to lose its competitive advantage in a particular line of business, the case for action should say so. If the company is seeing a steady erosion of its profit margins, the case for action should show that. If a company faces outright failure, the case for action should argue that. 6

Case for Action The document must present a strong case, but it cannot exaggerate. The case for action must be so persuasive that no one in the organization will think that there is any alternative to reengineering. The case for action should be brief – 5 to 10 pages. Examples 7

Case for Action – Pharmaceutical Company We are disappointed by the length of time we require to develop and register new drugs in Kenya and in major international markets. Our leading competitors achieve significantly shorter development cycles because they've established larger-scale highly flexible, globally integrated R&D organizations that operate with a uniform set of work practices and information systems. 8

Case for Action – Pharmaceutical Company The competitive trend goes against our family of smaller independent R&D organizations, which are housed in several decentralized operating companies around the world. 9

Case for Action – Pharmaceutical Company We have strong competitive and economic incentives to move as quickly as possible toward a globally integrated model of operation: Each week we save in the development and registration process extends the commercial life of our patent protection and represents, at minimum an additional $1 million in annual pre-tax profit - for each drug in our portfolio. Five major elements that appear in most effective cases for action 10

Case for Action - Elements The business context summarizes and describes what is happening, what is changing, and what is newly important in the environment in which the company operates. Our leading competitors, this company's case for action says, are establishing much shorter development cycles. 11

Case for Action - Elements The business problem is the source of the organizations concern. Our company takes too long to develop and register new drugs. The case for action also spells out marketplace demands - how the contextual conditions have led to new performance g requirements that the company can't meet. The competitive trend goes against our approach to research and development. 12

Case for Action - Elements The diagnostics section of the case for action makes it clear why the company is unable to meet the new performance requirements and why the usual fix-up, patch-up techniques of incremental ^ improvement won't do. The pharmaceutical company is losing its competitive edge to companies with globally integrated R&D organizations. 13

Case for Action - Elements Finally, to eliminate any doubt about the need for reengineering, the case for action ends with a section that warns of the consequences of not reengineering; the costs of inaction. We stand to lose $ 1 million in annual profits, per drug, for every week's delay in development and registration. 14

Case for Action – Consumer Product Company Markets are changing so quickly in our retail channels that, in order to generate profitable growth for our distributors, we must be able to respond quickly with exactly the right programs. Each of our channels has unique needs for innovative products, services, promotion, merchandising systems, and training to enable them to compete and succeed in their markets. We must develop the flexible processes within our company that thrive on these channel-specific opportunities 15

Case for Action – Consumer Product Company Consumer needs and desires are constantly changing, based on new retail formats, media stimulation, new products/substitute products, changing lifestyles, and market segmentation. We cannot develop a product concept or retail solution that appeals to everyone; products that are highly successful with one market segment will be rejected by another. 16

Case for Action – Consumer Product Company Today, the time that elapses between our assessing a marketplace need and our delivery of a new program at retail is at least two years and can stretch out as long as three. Furthermore, the process is largely sequential. Each of the steps interpreting retail and research data; developing plans; obtaining commitments; and getting agreement on product, merchandising, promotion, advertising, systems, training, and field-launch plans - crosses many division lines and requires endless meetings and approvals. 17

Case for Action – Consumer Product Company In a dynamic market, a three-year planning cycle is unacceptable. Even if a product or program seems innovative in the early planning stages, it no longer is when it reaches the consumer twenty-four or thirty-six months later. Feedback on retail performance comes too late to affect replacement products and leaves poor performers in the market too long. 18

Case for Action – Consumer Product Company Frequently, the scope of our planning and decisionmaking process is too narrow and does not encompass multiple channels or specific retailers. These are often left out or added late in the process, when our options are limited. Many times, when programs arrive at retail, the order is late, products and merchandising are missing and the retailer or field personnel lack enough training to effectively install or sell it. 19

Case for Action – Consumer Product Company The current process is incapable of meeting our growing need for speed and precision. It produces, instead, a stressed and overworked staff, lastminute scrambles, increasing exception processing, and creaky systems. Our current process costs the company millions of dollars in overtime and excess expenses, missed deliveries, and less-thanacceptable retailer performance and confidence. 20

Case for Action – Consumer Product Company We often place our focus on maximizing our own cost-effectiveness rather than on marketplace needs and performance. We have applied technology to improving what we do with little result. We have measured success by our own internal performance, rather than by our retailers' yardsticks. 21

Case for Action – Consumer Product Company Just working harder and more efficiently within our existing process won't get us to our goal of dramatically improving retail performance. We are still very profitable today, but if we don't take comprehensive remedial actions soon, our continued success is at risk. Without major change, we will eventually fail. 22

The Message “Let's change“ - the case for action “To what? “ the vision. 23

Vision 24

Vision The Vision Statement is the way a company's management communicates a sense of the kind of organization the company needs to become. It describes how the company is going to operate and outlines the kind of results it must achieve. It is both a qualitative and a quantitative statement, which a company can use again and again before and during reengineering, as a reminder of reengineering objectives, as a yardstick for measuring progress, and as a prod to keep the reengineering action going 25

Vision The vision is what a company believes it wants to achieve when it is done, and a well-drawn vision will sustain a company's resolve through the stress of the reengineering process The vision also provides a continuing focus. It reminds people constantly of what it is the company is trying to change. Otherwise, people easily become sidetracked and diverted. In any company at any time, countless procedures and organizational details exist that could be changed 26

Vision The vision reminds the organization which processes will actually need to be worked The vision provides a yardstick for measuring the progress of reengineering. Does the company look like its vision yet? If it is getting closer, reengineering is making progress. 27

Vision statements need not be long, but they have to be powerful. Too many corporate visions tend to the vacuous and simplistic and provide no clue as to what the company must do to achieve them. § "We want to be number one in our industry" or § "we want to be the premier manufacturer of widgets" or § "we will be the preferred supplier for our customers" are nice wishes, but they are not useful visions Although they are well intended, such statements are devoid of any real meaning. They don't suggest concretely how the company wants to operate, they have no real utility, and they wear off very quickly 28

Vision A powerful vision contains three elements: It focuses on operations It includes measurable objectives and metrics If it is really powerful, it changes the basis for competition in the industry Examples 29

Vision: Pharmaceutical Company We are a worldwide leader in drug development We have shortened drug development and registration by an average of six months We are an acknowledged leader in the quality of registration submissions We have maximized the profit potential of our development portfolio 30

Vision: Consumer Product Operating close to the marketplace injects a new life into the entire product development process. We develop plans, make decisions, produce products, and launch programs with a sense of immediacy. Our employees are rewarded by seeing products in stores that they worked on weeks or months but not years ago. 31

Vision: Consumer Product Our market focus is sharpened because our fully integrated programs are never more than a year away from market. The needs of our marketplace drive us, and we evaluate our success by our performance at retail—retail sales, retail profitability, retail service, and retail execution. 32

Embarking on Reengineering Preparing and disseminating the case for action and the vision is the first step in reengineering. It is the leader's personal responsibility to articulate and communicate these key messages. It is only an individual with the leader's seniority and clout who can fashion and communicate these critical arguments 33

Embarking on Reengineering The senior management team represent the first audience for these messages. These messages are not easy for them to hear, since they say that the organization these people head is in need of major change. Only a very senior executive has the credibility and the clout to make such an assertion. An outside agent - a consultant - can be of help in this step, since an agent has no biases or vested interests and can be seen as an objective third party. Telling senior managers that their company is broken is difficult, since they have, in fact, played a substantial role in creating the current company, so diplomacy as well as credibility are important in communicating the case for action and the vision to them 34

Embarking on Reengineering After senior management hears these messages, the rest of the organization must get the word, too. The case for action and the vision are the opening salvos in an ongoing communication barrage to enlist the entire organization in the reengineering crusade 35