Reengineering The Corporation
Reengineering The Corporation
Reengineering The Corporation
Focus Take-Aways
Leadership & Mgt. • Reengineering was not merely a corporate fad of the 1990s. It remains an
Strategy important, necessary business activity.
Sales & Marketing
• Companies that undertake reengineering must be willing to discard old ways of
Corporate Finance
working and replace them with new approaches.
Human Resources
Technology & Production • Reengineering insists that processes follow a natural order and an economic logic.
Small Business • Reengineering does away with Adam Smith's division of labor, replacing
Economics & Politics segmentation with integration.
Industries & Regions
• Reengineering empowers workers, but it does hurt some people.
Career Development
Personal Finance • Companies cannot retreat in the face of resistance, but must push reengineering to
Concepts & Trends its conclusion in order to reap its benefits.
• Reengineering requires total commitment from top management – lower echelons
do not have the power to break through the organizational boundaries.
• Reengineering addresses processes, but management must not ignore values.
• Reengineering’s success stories include IBM, Kodak, Ford and Duke Power.
• Reengineering must be a continuing and recurring corporate undertaking.
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Relevance
Recommendation
Authors and reengineering consultants Michael Hammer and James Champy begin their
book rather defensively by insisting that reengineering is not merely a forgotten fad of the
1990s. And they may be right, particularly given their insistence that companies must be
totally, absolutely willing to discard the old and replace it with the new. The authors make
dramatic claims for the potential of reengineering, and highlight interesting victories
– such as Kodak, a company rarely cited as an example of success. The book presents
reengineering as a simple, straightforward way to view business processes, figure out
how to make them more rational and economical, and then implement necessary changes.
The authors made a splash by labeling this approach as reengineering in the 1990s. The
term became a euphemism for firing people in droves, then fell into discredit. This update
may be intended to rescue the concept from its bad image, but it doesn’t quite succeed.
In the new millennium, companies deal with complex, costly processes by outsourcing
them, yet the word “outsourcing” does not yet appear in this book’s index. Such time lags
aside, getAbstract.com finds this business landmark well worth reading. After all, it’s the
management Bible of the ’90s. Many of its hoary old verities still have the ring of truth.
Abstract
“To reengineer
a company is to Far from a Fad: Reengineering for the Twenty-First Century
take a journey Conventional wisdom regards reengineering as an irrelevant fashion that peaked in
from the familiar
the early ’90s. But, far from being a mere fad, reengineering is an enduring tactic.
into the unknown.
The journey Reengineering is still an important component in the success of such companies as IBM,
has to begin American Express, American Standard, Ford, Chrysler, Texas Instruments and Duke
somewhere and Power. Without reengineering, the U.S. economy would be characterized by high prices,
with someone.”
low quality and stodgy, noncompetitive companies. Only reengineering has made it
possible for U.S. firms to maintain healthy profit margins despite falling prices.
Why then is reengineering often criticized? The negativity may be a backlash against
its remarkable success, which generated a kind of bandwagon. Reengineering became a
“‘Reengineering,’ buzzword without much meaning. Thus, when people began to criticize reengineering,
properly, is the
fundamental
they often meant some inadequate, poorly conceived copycat that actually was not
rethinking and reengineering at all.
radical redesign
of business Reengineering’s first wave eliminated the barriers that prevented one part of a corporation
processes to from communicating or working with another part. Now, reengineering dissolves the barriers
achieve dramatic between corporations. Clearly, reengineering is not passé. IBM went through an extensive
improvements in
critical, contem-
reengineering in the 1990s, and has begun to reengineer again in order to “Web-enable.”
porary measures
of performance, The Continuing Crises
such as cost, Ironically, American companies need reengineering because their old way of doing
quality, service
and speed.”
business succeeded. American corporations profited by implementing the ideas of
Reengineering the Corporation © Copyright 2005 getAbstract 2 of 5
Adam Smith, the preeminent economist who first outlined the principle of the division
“The reality that
of labor. Smith observed that by dividing the parts of a manufacturing process into
organizations several steps and giving each worker responsibility for a particular step, a pin maker
have to confront, could make far more pins than if each worker made a complete pin. Most American
however, is that corporations are organized based on this principle. However, this structure has a price.
the old ways of
doing business By dividing processes into steps and assigning a step to each worker (or each department),
– the division corporations encouraged people to focus on discrete parts of the production process, not
of labor around on the whole process and its end result. One great, fatal consequence of this approach
which companies
have been
was to increase the distance between management and the customer. That has to change
organized since due to three important trends:
Adam Smith first
articulated the 1. The customers are in control – From the end of World War II through the early 1980s,
principle – simply companies operated in a relatively easy demand environment. The market absorbed
don’t work whatever products companies produced. That has changed. Now, production capacity
anymore.”
exceeds demand, and customers push for quality and economy.
2. Intense competition – In the old days, competition was straightforward. A company
could succeed with an adequate product at a good price. Now competition is more
intense and multifaceted. Take the finance industry, where new competition has
come not only from offshore financial institutions but also from manufacturing and
service companies.
3. Constant change – Change is becoming the only consistent factor in business life.
Business challenges include changing currency rates, changing customer preferences,
“Reengineering is
not restructuring
the emergence of start-ups and the redefinition of businesses and industries.
or downsizing.”
Formerly, corporate strategy seemed to be the root of business problems and the path
to success. Companies could strategize their way out of problems. However, the real
difference between winning and losing isn’t strategy, it is better business processes.
Bluntly, winning companies work better than losing companies. Today’s winning
companies have overcome the problems created by Adam Smith’s division of labor.