Harvard Business School 9-396-054

November 13, 1995

Reengineering a Business Process

Like every business activity, reengineering itself can be viewed as a process, with a
sequence of activities, inputs and outputs, customers, and stakeholders. Though there are
variations in how reengineering is performed in organizations, most projects have many components
in common, particularly in the design phase. In implementation, the political, leadership, and
cultural characteristics of organizations lead to widespread variation from firm to firm.
Implementation is more difficult, both to accomplish and to generalize about in terms of method
and technique.

Most reengineering initiatives consist of six steps: selecting the processes for reengineering,
identifying change enablers, developing a business vision and process objectives, understanding and
measuring existing processes, designing and prototyping the new processes, and implementing the
new process (Figure 1).

Although the sequence of the steps in Figure 1 may vary, aspects of the ordering are
important. Selecting processes for reengineering, for example, should be done early so as to focus
effort and resources. It is also important to have a clear vision of the process before embarking upon
detailed design and prototyping. Other aspects of the process may be somewhat iterative. For
example, as the process design is shaped, it is usually necessary to make changes in the information
technology enablers used to support the process.

This approach also presumes the existence of an organizational infrastructure for

reengineering. As with any project-oriented business initiative, a project team must be selected and
trained. The team infrastructure required for reengineering, though similar in some respects to that
required for organization-wide continuous improvement,1 differs most significantly in the need to be
familiar not only with particular processes, but also with the enablers of change discussed below.
There may also be a need for a team of executive sponsors in addition to the design and
implementation teams for the processes.

1H. James Harrington, Business Process Improvement: The Breakthrough Strategy for Total Quality, Productivity,
and Competitiveness (New York: McGraw-Hill, 1991).

Professor Thomas H. Davenport at the University of Texas at Austin prepared this note as the basis for class
discussion.

Copyright © 1995 by the President and Fellows of Harvard College. To order copies or request permission to
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 396-054 Reengineering a Business Process

Figure 1 xxx A High-Level Approach to Reengineering

Selecting the Processes for Reengineering

Identify Change Enabler

Developing a Business Vision

and Process Objectives

Understanding and Improving Existing Processes

Designing the New Processes and Organization

Implementing the New Process-Based Organization

The choice of participants for a new process design team should be governed by both design
and implementation considerations. A balance must be struck between team members who can
deliver the most creative and innovative process solutions and those who can help to ensure
implementation. It is particularly important that key process stakeholders feel their interests are
represented during the latter phase. Stakeholders who should participate on the team during the
design phase include heads of key functions intersected by the process, key general managers with
operational responsibility for the process, suppliers of important change resources (e.g., IT, human
resource, and financial functions), and process customers and suppliers, both internal and external.

Some firms divide the work of reengineering into two or three teams, for example, one team
for current-state work, one for future-state work, and a third for change management. Others do
reengineering with only one team. If there are multiple teams, it is critical that they communicate
regularly and thoroughly.

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 Reengineering a Business Process 396-054

Selecting the Processes for Reengineering

Reengineering should begin with a survey of the process landscape aimed at identifying
candidates for radical change. Some typical core processes for organizations are illustrated in
Figure 2. Both the overall listing of the processes within a firm and the focus on those requiring
immediate reengineering initiatives are crucial to the success of change efforts. The identification
procedure establishes the boundaries of the processes that are to be addressed, enabling a firm to
focus on those most in need of radical change. Companies often underestimate the difficulty of this
step; they should bear in mind that they are creating an entirely new way to operate their business,
and then making difficult choices about what aspects of their businesses to change and in what
order.

Of course, some firms simply choose a process somewhat arbitrarily and begin to reengineer
it. They may be responding to complaints or requests from key customers or regulators. An
enthusiast for reengineering may want to get started on a process over which he or she has control.
These are not bad reasons to begin working on a process, but eventually an organization should list
and prioritize its processes on a more reasoned set of criteria.

The principal activities in the selection process are identified below. The first is to
identify the major processes in the organization. An informed selection can be made only when all
of the organization's processes are known. A survey also serves to determine process boundaries that
help to establish the scope of initiatives for individual processes.

Key Activities

1. Enumerate Major Processes

Considerable controversy revolves around the number of processes appropriate to a given

organization. The difficulty derives from the almost infinite divisibility of the processes. For
example, the activities involved in taking and fulfilling a customer order can be viewed as one
process or hundreds. The "appropriate" number of processes in an entire organization has been
pegged at from two to more than one hundred.

The level of process change desired is key to the number of processes identified. If the
objective is incremental improvement, it is sufficient to work with many narrowly-defined
processes; both the rewards and risk of failure will be relatively low. But when the objective is
radical process change, a process must be defined as broadly as possible. A key source of process
benefit is improving handoffs between functions, which can occur only when processes are broadly
defined. Moreover, if a process output is minor, radically changing the way it is produced is likely
to result in suboptimization or, at best, only minor gains.

Most of the companies that have identified their processes in the context of reengineering
have enumerated between 10 and 20. The appropriate number reflects a trade-off between
managing process interdependence and ensuring that process scope is manageable. The fewer and
broader the processes, the greater the possibility of innovation through reengineering, and the
greater the difficulties of understanding, measuring, and changing the process.

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 396-054 Reengineering a Business Process

Some firms may wish to maintain both broad and narrow processes. While addressing
broad processes in a reengineering context, they could also be working on narrow processes from the
perspective of improvement. To avoid confusion, some mapping of narrow to broad processes should
be developed. That is, a broad process, such as order management, should be broken down into its
constituent processes (or subprocesses, if that is a preferred terminology). The mapping need not be
perfect, but it should provide some guidance for all participants in process management initiatives.

2. Determine Process Boundaries

Whatever the number of processes identified, their identification should be understood to

be exploratory and iterative. As a process becomes the focus for a reengineering or improvement
effort, its boundaries and relative importance become much clearer. Most companies that have
worked on their processes for a number of years have revised their original lists.

Once the processes have been identified at a high level, the boundaries between them need
to be managed. Because process definition is more art than science, boundaries are arbitrary. A
number of questions may help to define boundaries, among them:

• When might the process owner begin and stop worrying about the process?

• When should process customers' involvement begin and end?

• Where do subprocesses begin and end?

• Is the process fully embedded within another process?

• Are performance benefits likely to result from combining the process with other
processes or subprocesses?

Inasmuch as the end of any process is the beginning of another, either within or external to
the organization, reengineering will often result in new interfaces to up-stream and down-stream
processes. Consequently, process management is best viewed as an iterative activity, in which
major change in one process gives rise to a need to re-reengineer, or at least modify, others.

3. Prioritize Processes for Reengineering

Having identified and bounded its major processes, a company must select individual
processes for reengineering. Experience suggests that the scope of the innovation effort should be
based on an organization's capabilities and resources. IBM, GTE, and a few other companies
attempted to reengineer all of their key processes at once, but most cannot successfully deal with
innovation on such a scale. Even given a clear need to redesign, most organizations would lack
sufficient resources—people, funds, and time—to do so. Beyond resources, most companies could not
endure the magnitude of organizational change that reengineering all processes simultaneously
would precipitate. An organization must understand the level of change and upheaval it can
endure, and use that knowledge to determine how many processes it can successfully change.

Moreover, simultaneous change in multiple processes can be difficult to coordinate. Because

redesigned processes must still interface with up- and down-stream processes, process owners or
managers must communicate frequently about directions and interface points. If changes in one

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 Reengineering a Business Process 396-054

process must be coordinated with changes in, say, 17 others, it will be very difficult to make much
headway.

Nevertheless, some firms find that they must work on groups of processes to solve particular
business problems. Xerox, for example, found that to affect the time it takes to bring products to
market it had to address not only its product design and engineering processes, but also processes
such as manufacturing, service, and logistics. Similarly, IBM discovered that to speed delivery of
custom-built products to customers, it had to address the production, logistics, and customer
fulfillment processes.

Most companies choose to address a small set of business processes in order to gain experience
with the reengineering process. Each successful initiative becomes a model for future efforts. Five
criteria might guide process selection: (1) the process's centrality to the execution of the firm's
business strategy; (2) the state of the process's health; (3) the process's culture and leadership; (4)
the current cost of the process; and (5) manageable project scope. Ideally, all five of these factors
should favor the selection of a particular process; in practice, results are often ambiguous, and
differential weighting of the factors must be applied.

The determination of high-priority processes is often fairly obvious. At Continental Bank,

because the firm had focused heavily on building broad relationships with corporate customers, the
relationship management process was an obvious place to start. At Bethlehem Steel, the process of
scheduling a customer order into the production schedule was chaotic and inefficient, often leading
to customer dissatisfaction and sales force frustration. Therefore, the customer service process,
which included production scheduling, was an easy selection. When Federal Mogul’s Chassis
Products Division analyzed its business, executives concluded that the failure to deliver new
product prototypes quickly was a major impediment to increased sales. Applying radical change to
this process was then not a difficult decision.

Identifying Enablers of Change

After a process has been selected for reengineering, a design team can begin to address how
the primary “structural materials” of business processes will enable a new way of working.
Information technology and people are the primary enablers of change; however, they are also the
primary constraints. The difficult task is to determine what opportunities for new IT and human
resource management approaches can be taken advantage of, and what existing constraints must be
accepted. In short, as in new product design, reengineering must adopt a “design for implementation”
philosophy.

For example, a company might decide to institute a case manager position—an empowered
individual at the customer interface aided by a powerful workstation—as part of a reengineering
initiative. But a study of the required employee skills set reveals that retraining would not be
possible; implementing a case-manager model would require replacing the current staff, which is
not an option under the company's policies. Similarly, proposed technology changes might entail
substantial overhaul of the installed base of applications, which might be financially
prohibitive. Finally, a company may be constrained by the need to continue to support existing
products or services, for example insurance policies issued under past processes. Such product
“legacies” may be difficult to support given a radically new process.

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Key Activities

1. Assess Information Technology Enablers of Reengineering

Information technology not only is important in implementing new processes, it also makes
possible entirely new process designs. Therefore, IT should be considered both before and after
process design (Figure 2). When we understand how companies in many industries have used
technology in innovative ways to improve their processes, we can better design new processes.
Emphasis should be on the question, “What could we do if we had.. (substitute specific
technologies) in our process?” Then, after a process design is envisioned, the focus should shift to IT
implementation issues—supporting the new process with information from applications and
databases.

Figure 2 xxx The Role of IT in Reengineering

IT as Enabler New Process Design IT as Implementer

Opportunities
Opportunities Modeling
Modeling Tools
Tools

Constraints Systems
Systems && Information
Information
Constraints Engineering
Engineering

For example, any firm intending to design a sales reporting and analysis process should be
fully aware of how firms such as Frito-Lay have used IT to transform their processes. 2 Any
insurance company considering a new underwriting process should be cognizant of the many efforts to
apply knowledge-based systems to an underwriting decision making processes. There is virtually no
major process in which IT has not been used by some firm somewhere to achieve radical
improvement.

It is possible, of course, to take enablement of reengineering too far. IT and other enablers
should never be employed for their own sake. To redesign a process solely to take advantage of
imaging technology, as one insurance company did, is an example of such excess. A process design
should be enabled, not driven by, a particular change lever.

2 Melissa Mead and Jane Linder, “Frito-Lay, Inc.: A Strategic Transition (A),” 9-187-012 (Boston: Harvard
Business School, 1987); and Nicole Wishart and Lynda Applegate, “Frito-Lay, Inc.: HHC Project Follow-Up,” 9-
190-191 (Boston: Harvard Business School, 1990).

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 Reengineering a Business Process 396-054

2. Assess Organizational and Human Resource Enablers of

Reengineering

To focus only on information and associated technologies as vehicles for process change is to
overlook other factors that are at least as powerful, namely, organization structure and human
resource policy. In fact, information and IT are rarely sufficient to bring about process changes, most
of which are enabled by a combination of IT and organization/human resource changes.

Attention to both social and technical factors as agents of change arises from a long
tradition, having been a focus of the “sociotechnical systems” approach, developed in the 1950s, to
understanding and managing change. The sociotechnical theorists did not have the advantage of a
process orientation, with its customer and measurement focus, and they typically made no
distinction between incremental and radical levels of change. Sociotechnical plans also had no
strong linkage to strategy and operational vision. Information technology did not even exist as a
useful organizational tool for much of the period of sociotechnical research. Still, the
sociotechnical approach can offer many useful lessons for reengineering.

Because they have been a part of the enterprise for a much longer period than IT,
organization structure and human resource policy are more familiar to managers as change tools
(although managers have hardly mastered their use). The great irony is that familiarity seems to
have bred neglect, in part because the evangelists of reengineering are much more likely to lead the
information services function than the human resources function. They undertake carefully
managed projects, employing tested methodologies and strict timetables, to build new systems to
enable processes that, because the human aspects of change are managed as afterthoughts, lead to
significant human resource problems. Too many systems fail to yield any real business benefit
because of human problems in implementation. If reengineering is to succeed, the human side cannot
be left to manage itself. Organizational and human resource issues are more central than
technology issues to the behavioral changes that must occur within a process.

Organizational enablers of reengineering fall into two categories: structure and culture. Of
the many kinds of structural changes that can facilitate new, process-oriented behaviors, one of the
most powerful involves structuring process performance by teams.

Since the beginning of work design in the Frederick Taylor era, the primary unit of work
performance has been the individual. Taylor and others believed that the more isolated the
worker, the more efficient the performance of the task. Yet most processes or subprocesses can be
performed by teams (or collections of teams). Although there is a long history of team experiments
and analysis, American firms have, until recently, been slow to adopt team approaches on a large
scale. Those that have begun to explore the use of autonomous teams as the primary unit of work
organization—General Electric, Xerox, Martin Marietta, Aetna Life and Casualty, and others—are
seeking specific benefits from doing so.

First, companies adopting teams are looking for cross-functional skills in single work units.
Cross-functional skills facilitate functional interfaces and parallel design activities. New product
development teams, for example, increasingly include representatives from all the functions
involved in the development process. A second benefit is improved quality of work life. Most
human beings seem to prefer jobs that include social interaction, and work teams provide
opportunities for small talk, development of friendships, and empathic reactions from other
employees. However, the social interactions of team members are not always positive.
Particularly when teams are cross-functional, members may lack a shared culture, leading to
conflict and misunderstanding. Therefore, companies must pay careful attention to cultural
compatibility issues in selection of team members. Teams of senior managers, or “teams at the top”

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 396-054 Reengineering a Business Process

as they have been called, may also be necessary to manage processes that cross functional
boundaries.3

Changes in organizational culture can facilitate new process designs. Most recent shifts in
organizational culture have been in the direction of greater empowerment and participation in
decision making and more open, nonhierarchical communications. The resulting participative
cultures, which have a structural side in flatter organizational hierarchies or broader spans of
control, have been widely documented to lead to both higher productivity and greater employee
satisfaction. In a reengineering context, these cultural changes are intended to empower process
participants to make decisions about process operations. Participative cultures may even lead to
self-design of smaller, restricted processes by employee teams.

Human resource enablers of reengineering involve the way individual workers are skilled,
motivated, compensated, evaluated, and so forth. New processes invariably involve new skills.
Because reengineering often leads to both greater worker empowerment and a broader set of work
tasks, the requisite new skills may involve both greater depth of job knowledge and greater
breadth of task expertise. A variety of programs, including specific process training, anticipatory
training, and on-the-job training, must be undertaken if the requisite skills are to be available when
needed. Even when firms have not yet fully designed their processes, they can begin to train
workers for skills that are likely to be necessary in a reengineered environment. Such skills as the
use of information technology, detailed knowledge of the entire business process in which one
works, and mastery of a wide variety of job tasks are all likely to be useful after reengineering.

Motivation levels of employees are another key determinant of process performance.

Motivation results from a combination of factors, some determined by individuals’ personalities.
Companies can set as an objective the hiring of workers with high motivation levels, but they can
also design motivation into their processes. The consensus model in studies of work organization
suggests that work motivation derives from skill variety, completion of an entire task, task
significance, autonomy, and feedback.4 Reengineering often involves establishing higher levels of
these factors in new processes.

A number of other human resource policies can be viewed as reengineering enablers when
combined with technological and other organizational changes. These policies include
compensation based on process performance, lateral career paths, work role rotation, and higher
levels of employment security.

3. Determine Which Constraints Will Be Accepted

Just as information technology and human/organizational enablers can provide exciting

opportunities for reengineering, they can also impose considerable constraints on process designs. It
is easy, though seldom realistic, to suggest that firms ignore existing systems and technology
infrastructures, organizational barriers, and existing skill levels in designing a new process.
Existing systems are often too expensive, complex, and embedded in an organization to simply
assume them away. Organizational and human issues may be too imposing to change quickly.
Instead of pretending to have a “clean sheet of paper,” firms should acknowledge the constraints

3“Teams at the top” are discussed by John Katzenback and Douglas K. Smith, The Wisdom of Teams (Boston:
Harvard Business School Press, 1993).
4 For further detail on this list of motivating characteristics, see J. Richard Hackman and Greg R. Oldham,
“Motivation Through the Design of Work: Test of a Theory,” Organizational Behavior and Human Performance
16 (1976): 250-279.

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 Reengineering a Business Process 396-054

existing systems and organizations impose on a new process, understand their implications, and
make the best of them.

IT constraints are perhaps the most pervasive. For example, in a natural gas transmission
company, the process constraint took the form of a recently acquired inventory management
application package. Although the company was redesigning its process for inventory
management, its chief information officer did not feel it could afford a clean-sheet approach to
inventory management. At a money-center bank that invested heavily in IT-enabled reengineering,
the information systems organization begins to investigate packages that might meet process
support needs well before the process design is complete. “We used to buy packages and modify
them to suit our idiosyncratic processes,” noted the director of IT planning. “Now we are just as
likely to modify our process to fit the package.”

Many firms, particularly in manufacturing industries, are beginning to employ integrated

packages that support a broad array of processes from a single database. The most successful of such
package vendors is currently SAP, a German firm that claims its package supports more than 800
processes. Because such an integrated package is difficult to modify substantially, its adoption is a
major constraint on process design.

A package or existing system that may be a given or a constraint in a new process design
should be evaluated in terms of which process elements are implicit within or assumed by the
system. The following are among the aspects of the system that should be analyzed.

• Who are the system's intended users?

• What are its inputs and outputs?

• What process tasks is the system designed to support?

• How difficult is it to add task functionality to the system?

• What interfaces to other systems are possible?

• What processes do other firms use with the system?

When a process extends across organizational boundaries into customer and supplier
organizations, it may create a further constraint on systems support. One cannot expect a customer to
change systems to better supply one’s firm with process information.

Considering the existing systems environment as a process constraint may seem to limit the
prospects for radical innovation. Indeed, if an organization chooses not to change many of its
systems, the possibilities for reengineering are restricted. But analyzing system constraints at least
makes these tradeoffs conscious. Rather than assuming a clean systems slate at the beginning of a
process and then later getting bogged down in existing systems, the analysis of constraints tailors
the process to a systems environment from the beginning.

Most organizational and human constraints are simply the reverse of the enablers
mentioned above. They may involve an organizational design element that does not fit the process
design, for example, a process design that assumes a great degree of front-line empowerment in a
control-oriented organizational structure and culture. Some organizational constraints are more
general, for example, organizational structures and cultures that support management along
individual functions rather than cross-functional processes. Human resource constraints typically

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 396-054 Reengineering a Business Process

involve a lack of required skills, human resource management systems that are highly functional
rather than process-oriented, or career paths and rewards that do not favor acquisition of broad
skills. Many “change management” methodologies focus on identifying and removing
organizational and human resource constraints.5

Developing a Process Vision

A vision for the future process is the core of the design phase of reengineering. It is, in
essence, a “strategic plan” for how work will be done. Key activities required to create visions for
reengineering are described below. A firm’s business strategy provides the overall context for a
reengineering effort, and it is assumed to be an input into the initiative. The primary output is a
process vision, consisting of specific objectives and attributes.

Key Activities

1. Assess Existing Business Strategy for Process Directions

A well-defined business strategy should precede a reengineering initiative. A defined

strategy is a primary determinant in both the selection of and development of process visions for
processes to be reengineered. A good strategy in reengineering terms should address nonfinancial
goals in addition to financial ones, should be measurable, should focus attention on specific
processes or aspects of the business, and should inspire efforts to change.

2. Consult with Process Customers to Determine Performance

Objectives

A key aspect of creating a process vision is to understand the customer’s perspective on the
process. The customer of a process can be either internal or external to the firm; in practice, most
firms are more concerned about the perspectives of external customers, and therefore place a high
priority on customer-facing processes. Asking customers what they require of our processes serves
multiple purposes. In the context of creating visions, the customer perspective furnishes both ideas
and objectives for process performance. Seeking customer input also demonstrates a desire for a close
relationship and informs customers that they may need to change their own behavior for the
process to be fully effective.

However, customers rarely provide breakthrough ideas for reengineering. Instead, their
objectives are to improve the existing process incrementally: “I would like to have more on-time
deliveries.” These sorts of inputs are important, however, because they specify the areas in which
improvement should take place. If the customer feedback process is somewhat iterative, taking
place throughout a reengineering initiative, customers can react to successively more concrete
process designs.

5See, for example, the materials of Organizational Development Resources, based in Atlanta, Ga.

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 Reengineering a Business Process 396-054

3. Benchmarking for Process Performance Targets and Examples of

Innovation

As practiced in the quality movement, benchmarking helps companies to formulate

objectives for continuous improvement programs. But it can also be an effective tool for determining
process objectives and identifying innovative process attributes. Insofar as it enables companies to
look outside for alternative ways of designing processes, benchmarking can help to break a
company’s inwardly focused mindset.

For reeengineering purposes, firms need both traditional competitive benchmarking as well
as “best practice” or “innovation” benchmarking. The latter type selects companies on the basis of
the performance of a particular process, without regard to the industry, and addresses specific
innovations and uses of change enablers as well as overall process performance. A manufacturing
company attempting to reengineer its customer service process, for example, might study USAA’s (a
large insurance company) empowered customer service representatives.

The sources of benchmarks are varied, ranging from company visits to telephone discussions
with consultants and executives at other firms, to industry publications and academic case studies.
Because third-party accounts of reengineering projects may gloss over important issues or stop short
of the final chapters of a story, a company is wise to contact benchmarked organizations directly at
some point in the benchmarking process.

Strategy, customer perspectives, and external benchmarks are necessary, but not sufficient,
to establish the context for reengineering. For a process to be transformed, the context must be made
explicit and operational through a set of visions that define the desired process functionality,
specificly change objectives for the redesign of the process, and identify qualitative attributes of
the process’s future state. These visions provide necessary direction for the design team.

4. Formulate Process Performance Objectives

Process objectives, a key component of the vision, include the overall process goal, specific
type of improvement desired, and numeric target for the innovation, and time frame in which the
objectives are to be accomplished. Both general process functionality and change goals should be
addressed by these objectives, creation of which begins with a “vision team” asking itself, and key
stakeholders, “What business objective is this process supposed to accomplish?” This analysis
should broadly address the functions and value the process is expected to bring customers. Process
objectives must be quantified as specific targets for change. Examples of the radical quantitative
process objectives for various industries might include:

• Reduce new drug development cycle time by 50% in three years.

• Double customer service satisfaction levels in two years.

• Reduce involuntary employee turnover to 10% by the end of next fiscal year.

• Reduce processing costs for customer orders by 60% over three years.

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 396-054 Reengineering a Business Process

5. Develop Specific Process Attributes

Process attributes, the descriptive, non-quantitative adjunct to process objectives, constitute

a vision of process operation in a future state. They address both high-level process characteristics
and specific enablers. Process attributes for an order-management process, for example, might
specify that the process will employ automated credit checking, automated proposal generation,
increased worker empowerment, and a financial structure resembling dealerships for customer-
facing teams. Other attributes might specify that the process be performed by one person or team,
and that credit, shipping, and scheduling functions will be performed by the customer-facing
individual. It is sometimes useful to categorize attributes as “technology,” “people,” “process
outputs,” and so forth.

Process objectives and process attributes are derived from multiple sources—among them,
analyses of corporate strategy and vision, high-level overviews of the roles of technology and
people (as both opportunities and constraints), customer interviews, benchmarking of the best
processes in other companies, and a firm’s performance objectives—during visioning sessions in the
early phases of a specific reengineering initiative.

Understanding and Improving Existing Processes

It is important to understand an existing process before designing a new one. Some

approaches to process redesign and reengineering do not include this step, and some companies have
omitted it in their reengineering initiatives—to their regret. One process team at a large
telecommunications firm, for example, estimates that not taking the time to understand an existing
process left it unable to establish the benefit of adopting the new process. The team found it
difficult to get funding for the initiative, resulting in an 18-month delay.

There are at least four reasons to document existing processes before proceeding with
reengineering. One, understanding existing processes facilitates communication among participants
in the reengineering initiative. Models and documentation of current processes enable those
involved in the reengineering activities to develop a common understanding regarding the existing
state. Process participants who do not view their current activities in process terms are not likely to
readily adopt a revolutionary new process. Two, in most complex organizations there is no way to
migrate to a new process without understanding the current one. Current process documentation is an
essential input to migration and implementation planning, useful for understanding the magnitude
of anticipated change and the tasks required to move from the current to a new process.

Three, recognizing problems in an existing process can help ensure that they are not
repeated in the new process. It is not unusual for process problems to go unrecognized until an entire
process is scrutinized. Finally, an understanding of the current process provides a measure of the
value of the proposed innovation. Given a process objective of reducing cycle time, for example,
baseline data collection would need to include measurement of elapsed time for the current process.

Of course, the way that current processes are performed will vary across the organization.
In reality, “the current process” will be an agglomeration and averaging of multiple practices, work
sequences, and performance levels. Even where processes have been defined, the number and nature
of process definitions may differ from one site to another within the same organization.

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 Reengineering a Business Process 396-054

Key Activities

1. Assess the Current Process Flow

It is often true that existing processes have never been described or even viewed as
processes. The current state of the process, including key activities and flows, should be documented
after consultation with those who perform it. The process may be captured either on paper or in
computer-based process modelling software. The scope of the existing process should be the same as
that envisioned for the new process.

2. Measure the Process in Relation to the New Process Objectives and

Attributes

Because it will be used as a baseline for comparisons with the new process, the existing
process should be assessed in terms of the same criteria employed for the new design—its specific
performance objectives and process attributes. This narrowing of the assessment task helps to reduce
the time and effort required for the current process analysis.

3. Identify Problems with or Shortcomings of the Process

Most companies do not study processes on a regular basis and therefore the opportunity to
examine a process as a whole often highlights long-standing problems, such as bottlenecks,
redundancies, and unnecessary activities, that have gone unrecognized. Identification of these
problems will facilitate avoidance of them in the new process design. Customers should be a key
source of current process problems.

4. Assess Current Information Technology and Organization

Current process analysis should also include assessments of the information technology and
organizational approaches employed in the process. Assessment of the existing IT architecture
should include existing applications, databases, technologies, and standards; the organizational
evaluation should address current job descriptions, skills inventory, and any recent organizational
changes (e.g., implementation of a new performance measurement system).

5. Identify Short-Term Improvements in the Process

Most companies feel that there is nothing incompatible with reengineering in identifying
and making short-term incremental improvements to existing processes. Improving existing
processes is a natural follow-on to documenting them. The analysis activity provides employees
with an opportunity to document problems they may have known about for years.

In fact, many companies engaged in reengineering initiatives, including IBM, Xerox, Reebok,
and Ford are coupling short-term improvement and breakthrough innovation. This may be the only
way to achieve short-term benefit. Inasmuch as reengineering typically takes several years to
implement fully, short-term improvements offer a way to begin to deliver results. Short-term
improvements can be implemented while the reengineering work proceeds. Some firms are viewing
process improvement in the near term as a vehicle for funding reengineering over the long term.

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 396-054 Reengineering a Business Process

Designing and Prototyping the New Processes and

Organization

With a vision in place, the design activity is largely a matter of having a group of
intelligent, creative people review the information collected in earlier phases of the initiative
and synthesize it into a new process. There are techniques for facilitating the review process, but
the success or failure of the effort will turn on the particular people gathered together. The outputs
of this phase of a reengineering project include detailed process and information flows, detailed
technology architectures and human resource plans, e.g. job descriptions, and prototypes of the
process and its key enablers.

Key Activities

1. Brainstorm Design Alternatives

Ideally the design team will generate several different process designs that meet the
objectives and attributes described in the process vision. Design innovation is best accomplished in
a series of workshops, and brainstorming is an effective means of surfacing creative process designs.
Brainstorming is any creative group facilitation technique or practice that encourages participation
from all group members, regardless of their roles and relationships within the organization.
Emphasis during brainstorming sessions should be on creativity and idea generation, and a non-
judgmental atmosphere is essential.

2. Assess Feasibility, Risks and Benefits of Design Alternatives and

Select the Preferred Process Design

Graphic representation of a process design can be extremely helpful in understanding

process flows. Computer-based tools for design, display, and simulation are useful, but firms have
also successfully employed large whiteboards and large pieces of colored paper and string affixed
to walls. Most computer-based tools use a rigorously defined set of symbols to represent different
process entities, but they are not essential. The primary purpose of the graphic display is
communication and recording, and any consistent set of easily understood symbols will suffice.

Brainstorming sessions usually surface a number of design alternatives, which must be

subjected to feasibility analysis to evaluate their relative benefits, costs, risks, and time frames.
The new design and current state must be compared in terms of structure, technology, and
organization to fully understand the implications of each alternative. The results of these
analyses provide the basis for selecting the optimum design.

3. Prototype the New Process Design

After a new process has been designed, developing a prototype is a way to simulate and test
the operation of a new process. It is an iterative process in which the "fit" between new process
structure, information technology, and organization is refined and re-refined. A prototype might be
considered the analog of a scientific experiment performed in a laboratory setting. It is a small

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 Reengineering a Business Process 396-054

scale, quasi-operational version of a new process that can be used to test various aspects of the
design. This type of prototype is known as an organizational prototype.6

There is no way to predict the organizational impact of a redesigned process and associated
information technology with complete accuracy. The goal of the prototyping is to gradually shape
the organizational environment or, alternatively, to revise the technology. Prototyping must be
viewed as a learning activity by process designers and users alike. Many iterations may be
necessary to achieve a proper fit; thus, the need to reiterate must not be viewed as failure.

4. Develop the Migration Strategy

Having designed and tested a prototype process, an organization faces the considerable
challenge of migrating from the current process environment to the radically new design. A full
“cutover” may be difficult or impossible. If the new process involves customers, revenues, or valued
employees, or if the process change will be highly visible internally or externally (and for what
important process are these conditions not true?), the firm may not want to risk a full, abrupt
transition. Alternatives to full cutover include phased introduction, creating a pilot, or creating an
entirely new business unit.

A pilot is a smaller scale, but fully operational, implementation of a new process in a

relatively small unit of the organization based on a particular geography, product, or set of
customers. Although pilots are often viewed as a means of testing a new process (or other type of
intervention), the goal should be to achieve success rather than merely objectively test. Thus, the
unit selected should be the one most capable of achieving successful change.

One migration approach is to begin with a pilot and follow with a phased introduction. A
firm might, for example, implement new systems capabilities and skills as they become available.
A phased approach may be the most economically feasible, in that companies can derive some
financial benefit from the process change earlier than might otherwise be possible, but it is not
necessarily less disruptive than a full cutover. In fact, the sense of constant change and instability
may be difficult for some employees to handle.

5. Implement New Organization Structures and Systems

If constraints within the existing environment are too great, it may be desirable to create an
entirely new organization for the new process. This organization can run parallel to the existing one
and be the locus of specific products, channels, or customers. The most prominent example of
reengineering in the banking industry involved establishing a new organization. Midland Bank in
the U.K. established an organization called First Direct to service retail customers without the
usual branches or other “bricks and mortar.” The new bank employs innovative customer service
processes that rely on the telephone and automated teller machines. It also makes extensive use of
information technologies to identify patterns of customer behavior that reflect credit risk. Because
its processes do not involve expensive real estate, First Direct can offer 24-hour service and higher
interest rates that compete with Midland’s more traditional banking organization as well as with
other U.K. banks.

6 Dorothy Leonard-Barton, “The Case for Integrative Innovation:

An Expert System at Digital,” Sloan
Management Review (Fall 1987): 7-19 and “Implementation as Mutual Adaptation of Technology and
Organization,” Research Policy (February 1988).

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 396-054 Reengineering a Business Process

Implementing the New Process-Based Organization

Firms and organizations today tend to be structured in a way that mitigates against the
success of their new process designs. Most organizational structures are based either on function or
product, with little or no process orientation. Functionally organized firms have difficulty meeting
customer needs seamlessly across different functions because no one “owns” the issue of how long it
takes or how much it costs to fulfill customer requests. Certain key processes—typically new
product development and order management—cross so many parts of the organization that the only
manager to whom all their activities are reported is the CEO.

A firm organized around product structure has a difficult time ascertaining total business
done with individual customers or “cross-selling” different products to the same customer. The
latter problem is particularly pressing in banks, which, being organized around product lines (for
example, many have a trust system for trust customers, a demand deposit accounting system for
checking account customers, a consumer loans system for consumer loan customers, and so forth).
Banks are therefore encountering severe problems establishing integrated customer databases.

Although the problem of rigid functional organizations is widely recognized, the proposed
solution—to abandon any form of structure other than business processes—may be worse than the
problem, or at least much less well defined. Thus far, there have been very few, if any, firms that
have adopted a fully “horizontal organization.” Strong functional skills are important to a process
orientation, as is concern for product management and the running of strategic business units. Several
firms are beginning to adopt a multi-dimensional matrix structure, adding process responsibility as
a key dimension. An organization that wishes to benefit from a process perspective must be
prepared to tolerate the well-known problems with matrix structures, including diffusion of
responsibility, unclear reporting relationships, and excessive time spent in coordination activities
and meetings.

The reengineering approach outlined above is only the first step toward full-scale
implementation of new processes. The complete innovation cycle is depicted in Figure 3. Innovation
and the creation of a new organizational structure must be followed by detailed systems design,
development of new performance-measurement systems and skills, and systems construction and
deployment. A fully implemented reengineering effort occurs over several years and, although
described above somewhat sequentially, should really be executed in a highly iterative fashion.
Rigid partitioning of the activities will not yield the maximum benefits of reengineering.

Figure 3 xxx The Reengineering Cycle

Process Detailed
Process System Deployment
Visioning
Design Construction

Companies involved in reengineering often believe the most difficult aspect of the effort is
over when the new process design has been developed. Realization of reengineering benefits is not,
however, a fait accompli. The benefits of reengineering, like the benefits of any other innovation,
must be managed over time. They can be achieved by careful monitoring of key behaviors, of process
operational performance, and of key financial indicators.

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