The Importance of Revisiting the Basics of Business Redesign

Reestablishing BPM and Six Sigma – the ideas that started it all

Do you remember W. Edwards Deming?  Do you remember Michael Hammer?

BPM has been around for the past 20 years and it has evolved considerably.  The same is true for the basic concepts of statistical analysis based continuous improvement.  But has this evolution been good?  Maybe it is time to review some of the basic foundation tenets that made these concepts so widely popular.

If you haven’t read W. Edward Deming’s book, “Out of the Crisis”, you really should. While it came out in 1982, it is still relevant.  It is heavy on statistics but if you skip those parts, you have the foundation for many of the modern BPM concepts.  If you can slog through the math, you will find what I believe is the foundation of Six Sigma.  If you are mathematically inclined, read the statistical parts – but there is still a lot in the book even if you skip the math.  However, together the business improvement and performance measurement sides form statistical continuous improvement. 

To me the heart of the book and the concepts it espouses are the Deming 14 principles.  These are:

1. Create consistency of purpose toward improvement of products and services with the aim to become competitive, stay in business, and provide jobs.
2. Adopt the new philosophy – Western management must learn their responsibilities and take on leadership for change.
3. Cease dependence on inspection to achieve quality – build quality into the product in the first place.
4. End the practice of awarding business on the basis of price tag.  Instead, minimize total cost, building long term relationships of loyalty and trust.
5. Improve constantly and forever the system of production and service to improve quality and productivity, and thus constantly decrease costs.
6. Institute training on the job.
7. Institute leadership – the aim of supervision should be to help people do a better job.
8. Drive out fear, so that everyone may work effectively for the company.
9. Break down barriers between departments – people must work as teams to foresee problems.
10. Eliminate slogans, exhortations, and targets for the workforce asking for zero defects and new levels of productivity – they only create adversarial relationships and lower quality and productivity.
11. Eliminate quotas; eliminate management by objective – substitute leadership.
12. Remove barriers that eliminate pride.
13. Institute a vigorous program of education and self-improvement.
14. Put everybody in the company to work to accomplish this transformation – it is everyone’s job.

Note:  This list is from Deming’s book Out of the Crisis, ©1982, published by the Massachusetts Institute of Technology Center for Advanced Engineering Study.  The entries in the list are shortened from the original version in Deming’s book.

For those who really don’t know about Deming, the story goes that he could not find many in the US who would listen to him or his ideas on improvement.  So he somehow wound up in Japan as it was rebuilding after WW II.  They listened to him. The result is that Japanese products went from being recognized as inexpensive, poor quality, use and throw away electronics in the 1950’s to the industrial, progressive, giant noted for high quality that it is today.  And yes, Deming was very influential in this transition.

I read this book some time ago and I now use it as a reference – especially the discussions on the list above.  I try to keep these things in mind as I look at redesigning business operations.  They are applied a little differently for business transformation than they are for manufacturing improvement, but the principles are the same.

It is also really interesting that in the mid-1990s when Michael Hammer started the business reengineering craze with his articles and his book (Reengineering the Corporation), Deming’s principles were the mainstream in business improvement.  But they are largely focused on making the things you do better, assuming that you are doing the right things to start with.  Hammer challenged that belief.  He instead wanted companies to start over and redesign their operations from scratch.

Of course while there is value in periodically questioning everything that is done in a business operation (as Hammer suggested), these reviews cannot be allowed to introduce constant operating disruption.  While constant improvement is needed, disruptive improvement should be closely controlled. Also, from experience, asking a business to starting over with a radical new business design is not very practical.  But Hammer’s principles did bring the need to look at the fundamentals of the business to the attention of all levels of company management.

However, those of us who have been involved in Business Transformation since the 1990s tried hard to apply these principles and blend them into something that worked.  My books, “Reengineering Your Business” and “Just Don’t Do It” came out in the 1990s to help people understand what we were learning by actually redesigning large parts of companies.  These were the first “how to” books on business reengineering. 

This was a time of experimentation that was rewarded with serious cost reduction and quality improvement.  This proved to others that these “Business Reengineering” concepts could deliver enough benefit to be noticeable and to make a difference in the ability of the company to compete.  But, just as we have experienced over the past 5 to 10 years with BPM, there were Business Reengineering failures.  That is, however, to be expected of any truly revolutionary ideas – some people will get it and apply them in ways that work and some people won’t.  But if we are smart we learn from both.

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With the collapse of the economy around 2008, the shift from many of these principles to a total focus on cost reduction became the norm in business transformation.  While this was necessary for many companies, it was unfortunate because numerous companies moved away from many of Deming’s and Hammer’s principles.  However, I am starting to see companies leveraging BPMS enabled BPM to again focus on revenue generation and an ability to compete.  Some more progressive companies have even started to leverage BPMS enabled BPM to change their approach to applications support and build flexible business and IT support structures.  Of course while these changes are happening, cost does need to be controlled and everyone needs to be concerned with profitability.

I now believe that every few years, as practitioners in the business transformation industry, we need to take time to take a look at these original foundation principles and ideas.  We have drifted far away from many of them and some may never really be considered again.  And maybe that is good in some cases, but I think that going back to your roots every so often is valuable – if you allow yourself the time to think about them and what they may mean in the context of what you are doing. 

Another shift has been to a mode of relatively short term thinking.  Hammer and his co-author James Champy focused on a radical redesign of the company starting from the ground up.  This of course requires a long term perspective.  It was founded on the fact that periodically management needs to consider the possibility that the business has evolved to an ineffective and inefficient state.  It also recognizes that constant small improvements eventually combine to create operational ineffectiveness and inefficiency.  This creates a cycle of transformational change, then continuing improvement, and then once again transformational change. 

In their book “Reengineering the Corporation”, Michael Hammer and James Champy, proposed seven actions that should be taken in redesigning a company – reengineering it.  They believed that these actions would deliver significant improvement and increase profitability.  These principles are:

1. Organize around outcomes, not tasks.
2. Identify all the processes in an organization and prioritize them in order of redesign urgency.
3. Integrate information processing work into the real work that produces the information.
4. Treat geographically dispersed resources as though they were centralized.
5. Link parallel activities in the workflow instead of just integrating their results.
6. Put the decision point where the work is performed, and build control into the process.
7. Capture information once and at the source. 

Note:  Reengineering the Corporation, 1993, ©Harper Collins Publishers.

This focus on business process laid the foundation for today’s BPM approach and launched the business reengineering movement – the forerunner to today’s BPM business redesign.  However, like Deming’s 14 points, Hammer’s seven principles have evolved and in some cases have been forgotten.  But they are important and should really be part of any approach to business redesign.

Use in projects

Like all principles, both Deming’s and Hammer’s principles are conceptual.  They are ideas – guidelines.  They are not executable nor are they a set of tasks or actions to take in any project.  But they are important concepts to consider.  Their real value is in how they are applied and how their application is controlled.

I find that by mixing the Deming and Hammer principles and then adjusting them to the realities of the company culture and the project objectives, my teams can have a different perspective in looking at how future state business activity could change.  From these project experiences I believe applying these principles can help increase the value that business transformation can bring to the company and its culture. 

However, there is a danger that must be considered when applying statistical analysis driven change.  That danger is to focus on driving redesign strictly by performance numbers.  I can, and have, built new operation designs that were optimal according to the performance measurements. 

But I found that I needed to back off from that level of performance and factor in the very real needs of people.  No one is a machine and the rates of production people can hit for short times (during tests) cannot be maintained – requiring a sliding scale of activity throughout the day.  I also found that in any estimate for performance we need to build in time for human nature – the way people really work.  Again, we can force changes in behavior and we can bully people to work hard, but we will have a disgruntled staff that will naturally slow work down or we will have high turnover—most likely both.  Neither is good and both can result from a new design that has squeezed out all non-value added time.

I have found that while we need to consider both Deming’s and Hammer’s principles we also need to apply them with caution – just as we really need to do when applying any principles.  Success is related to people and enabling them to work better, faster, and with greater accuracy.  From experience in turning around failing and failed BPM projects, I can tell my readers that unless you mix the numerical performance management side with concern for the workers, the solution will not be well accepted and will eventually be made to fail.

Back to the Future

Although I believe that we need to go beyond simple cost reduction, I know that there are still many companies that have true opportunities to reduce work and error, and thus cost.  I also believe that this must be balanced with longer term goals and the ability of the company to increase sales, revenue, market share, and an ability to change quickly enough to remain competitive.

The purpose of this column is to reintroduce the concepts that Deming used to help Japanese industry become what it is today and Hammer’s ideas about the need to look at fundamental changes and not just improve the current.  Both are addressed here because both are needed in most improvement projects and both are definitely needed in all transformation projects.  The concepts and ideas that underlie the approaches that these men have suggested are really timeless and should not be forgotten.  However, many of these concepts have been put aside in our current economy-driven quest to reduce cost.  That was arguably necessary.  But it also changed the focus in business reengineering and operational transformation as espoused by Michael Hammer in the mid 1990’s.

So today we are faced with a decision as to what Business Transformation will evolve into.  The BPMS technology that supports transformation today is itself evolving quickly with BPMS vendors releasing products that allow us to do things inexpensively and quickly.  We can now go far beyond anything we ever really initially expected and the capability of these tools keeps expanding.

When these tools are used properly, they have the ability to change the face of the ever present business/IT divide, and in many companies the gap is now growing narrower.  So we have the power to help support even our most complex new business designs. 

But we still face two problems.  The first is that many business managers are again beginning to rely on IT to figure out how their business operation will be supported.  They are taking a back seat role and once again complaining that support is not adequate.  That needs to stop, but it will probably not be seriously addressed as long as the business managers and staff are as shorthanded as they are due to cutbacks.  These unfortunate companies are caught is a negative cycle – they don’t have the time for business people to engage in changing the operation and the results they get from IT are not good enough to free up time so they can engage in the future.  This is a major issue in BPM project outcome dissatisfaction.

To avoid this very real situation, BPM promotes and BPMS enables an extended version of collaboration.  This collaboration goes far beyond the traditional IT view – even considering the developer/business user interaction of an Agile IT application development approach.  In BPM, collaboration is extended to include not only those who will be using the new solution, but also to those who will be impacted by it.  This carries its own set of organization and orchestration problems, but it is effective in making certain that the right solution is built and deployed.

Customizing Deming and Hammer’s Principles

I urge any BPM project manager to include a company interpretation of the Deming and Hammer principles in their list of discovery and redesign consideration guides.  I have found that they make a difference when added to more standard design philosophies and approaches such as - simplify all work, eliminate redundancy, re-evaluate all decision processes, improve control over work that passes into and out of the processes or workflows within scope, move to shared services for common activities, automate where you can, etc.

In practice, like most of generalized concepts, Deming’s and Hammer’s principles will likely need to be adjusted in real use.  As concepts, their meanings are interpretive.  For example, I doubt that many senior managers would agree with the part about companies existing to provide jobs in Deming’s first principle.  However, if the goal is to grow the business, increasing sales and revenue, then additional people may well be needed and training and integration of new staff will need to be considered in the new design.

Because the way these and other current state analysis and future state design concepts are applied will have a significant effect on the BPM project solution, it is important that the entire project team have a common understanding of them and how they might be applied within the company.

I also find that in many projects these principles really need to be applied differently for two separate but related sets of goals – short term and long term.  The issue is that the way the business changes will differ depending on which set of goals the project is focused on. 

Where these short and long range goals need to be combined, it is necessary to create a series of design steps.  Here a short term solution is created and then additional steps are designed to evolve the short term solution through interim steps to deliver a solution that meets long term goals – the final outcome design.  If this is the case, there will be a huge impact on the project plan, estimates, and funding.  There will also be an impact on how the project is approached and how design principles will be applied in the evolving design from a short term change to a long term solution.  That may require different interpretations of the principles at different points in the project.

It is clear that the principles that are considered and their interpretations are important in determining the quality of the new business operating design and the implementation of the solution that will be built from the design.  It is also clear that the concepts in both Deming’s and Hammer’s principles make a good addition to the analysis and design concepts that most BPM teams have to work with.  I have found that although they may need to be adjusted to the realities of the company’s culture, the project goals, and the capabilities of the BPM teams, these principles, when added to those you may have in place, make a real difference in the way the new design is approached and the solution that is designed.

As always, I thank you for reading my column and hope that it gave you food for thought.  Please call me at 603-290-4858 or email at daniel.morris@wendan-consulting.com if you have questions or comments.  Also, please watch for my new book, “The Business Transformation Field Guide” which will be out in early April.