Is It Time To Junk The Way You Use Computers?John W. Verity and Gary Mcwilliams
Anyone who has bought a home knows what a pain it is to fill out all the forms needed to get a mortgage. But imagine what banks go through, processing all those forms from hundreds of customers a day, trying to weed out the bad risks but moving fast enough not to lose the good ones. "Traditionally, the mortgage business has been a one-to-one cottage industry" relying heavily on personal relationships within the bank, says J. Albert Smith, president of Banc One Mortgage, an Indianapolis-based subsidiary of giant Banc One Corp.
But in 1989, after two years of heady growth, the paper flow had become so crushing for Banc One that it figured something new was needed--radically new. Smith and his senior managers began rethinking the mortgage business from the ground up. As a result, Banc One is switching from a desk-to-desk assembly-line approach to a series of work cells similar to those used in building cars. Teams of about 17 people using computers convene electronically to work on all aspects of an application at once. They get the job done weeks faster than before. And team members are cross-trained, Smith says, so salespeople in the field--now equipped with laptops--no longer have to depend on an assigned loan processor.
FIRST, THE PROCESS. In the computer business, what Banc One did is called re-engineering. And it's the latest industry buzzword. The idea is so simple it seems obvious: Instead of using computers and information systems to automate the way a business has always run, you first re-engineer the process, then apply computing power to the new system. The resulting productivity gains are the best customers have seen from their computer investments in years. Re-engineering is "reducing costs by 80%, improving time to market by 80%, or doubling sales," says James F. Moore, president of GeoPartners Research Inc., a re-engineering consulting company. "Those metrics are what drives you to look at things in new ways."
Computer makers hope those measures will spur new sales. According to analysts, one reason for weak demand in the computer industry, beyond recession, is that customers have automated virtually all the easy tasks they can find: payroll, financial accounting, and the like. IBM, Digital Equipment, Unisys, and Wang Laboratories all are seizing on re-engineering as a new marketing approach. So are systems integrators such as Electronic Data Systems and Andersen Consulting. Andersen, for instance, is advising Banc One Mortgage and other banks on how to re-engineer their businesses. G2 Research, a Mountain View (Calif.) market researcher, figures that re-engineering services were a $5.4 billion business last year and will hit $14.6 billion in 1995.
Re-engineering first surfaced in the 1980s in manufacturing circles. There, such concepts as concurrent engineering and just-in-time inventory-stocking and product deliveries demanded profound changes. These processes, all but impossible without sophisticated computer systems, upended traditional ways of doing things. Rather than isolate tasks into discrete departments, as they had since the Industrial Revolution, manufacturers began tearing down walls between engineering, manufacturing, sales, and support operations. That improved feedback from the marketplace and enabled more activities to take place in parallel, not sequential, order. Products got to market faster and with fewer defects.
Now, entire businesses are being re-engineered. That inevitably means new computers and software. "When you change how you work, it changes the way information is moved around," says GeoPartners' Moore. "It follows that you need to change your systems."
Hallmark Cards Inc. is using re-engineering to get new greeting cards, wrapping papers, and gift items to market sooner to meet customers' fast-changing tastes. The process now takes up to two years, but the goal is to get the job done in less than 12 months. Hallmark is setting up small teams of workers from its art, design, and sales departments to move products from concept to market. It also is bringing suppliers such as lithographers onto projects at earlier stages. And, to improve marketplace feedback, Hallmark is equipping its 1,700 retailers with computer-based cash registers, at no charge to the stores.
FILE PROSPECTING. "What has been automated over the past 20 to 30 years reflects how business was done over the past 20 to 30 years," says Donald Fletcher, division vice-president of business process redesign at Hallmark. "The computer systems we had were right for their time, not right for the future."
Re-engineering is now finding a strong following in service industries. Banks, for instance, are striving to be more competitive, particularly when it comes to selling customers extra services such as loans and insurance. They can't be concerned only with cutting costs, says William E. Storts, managing partner of Andersen Consulting's retail financial services practice. And that, he says, means "organizing the work flow around the customer, not the product."
Storts says that banks are now using their computers to capture data that can help them identify likely prospects for new business. Systems that pull together data from different bank computers make it possible for customer-service representatives at a branch to get a complete picture of a customer's accounts and suggest new products.
Wang Laboratories Inc., which is struggling to stay afloat in the computer business by reselling IBM hardware, is pinning its hopes on re-engineering service businesses. Wang's specialty is electronic-image systems, which eliminate paper and speed the delivery of documents around an office. At Hartford Insurance Group, a Wang system has completely changed how the claims-processing department works. "Don't lay new technology on old cow paths," says Ronald J. Arenson, Wang's senior manager of image marketing. "Re-engineered work flow is the market."
IBM has hired one of the top re-engineering gurus, Michael Hammer, to boost its efforts in the new market. Hammer and his troops are training IBM salespeople in the re-engineering concept, both as a service and as a way to sell hardware. Hammer wrote a seminal Harvard Business Review article last year, titled "Reengineering Work: Don't Automate, Obliterate." Part of IBM's pitch is to show customers how re-engineering is helping Big Blue overcome its own business problems. Re-engineering is helping IBM's drive for what it is calling "market-driven quality." Beginning next June, the company's joint venture with Coopers & Lybrand, called Meritus Consulting Services, will begin selling re-engineering services.
Still, re-engineering may not deliver the boost computer makers seek. Companies should not confuse the addition of new computers with engineering technology, warns William A. Wheeler III, partner in charge of worldwide manufacturing strategies at Coopers & Lybrand. Technology "shouldn't be the driver," he says.
In some cases, re-engineering requires no new computer systems at all. Inland Steel Industries Inc. is in the midst of a major re-engineering project. But Bill Howard, vice-president for information technology, says he doesn't know if that will lead to more computers. "The focus has to change from buying hardware to fixing the processes," Howard says. "Once you get those right, then the existing technology may be adequate." That may send the computer industry searching for yet another buzzword.
HOW THE APPROACH TO COMPUTING EVOLVED AUTOMATION
1950s Using the new `electronic brains' to mechanize routine office and factory procedures
MANAGEMENT INFORMATION SYSTEMS
1960s-1970s Collecting and organizing data for centralized analysis and control of the business
1980s Connecting various brands and sizes of computers, often installed in different divisions or subsidiaries, to better share information
1990s Rethinking business processes with the aim of cutting time-to-market for new products and services and really improving productivity