Now Champy, chairman of the consulting practices at Perot Systems Inc., has published a new book that argues for taking re-engineering to the next level. Rather than just simplify and integrate cross-functional processes within the enterprise, Champy argues in "X-Engineering the Corporation: Reinventing Your Business in the Digital Age" that companies must use the Internet to refashion business processes that flow beyond the corporate boundary, touching customers, suppliers and other companies.
Recently eWEEK Executive Managing Editor Jeff Moad had a chance to discuss with Champy some of the ideas in the new book.
eWEEK: What is X-Engineering?
Champy: The short definition is that it is about deeply collaborative work. The longer definition is that its about the redesign of information technology-enabled processes across company boundaries: between companies and other companies and companies and their customers.
eWEEK: Most enterprises we talk to today are focused first on reducing costs. Does this make them more or less receptive to X-Engineering?
Champy: It should make them more receptive to X-Engineering. On the other hand, Im not sure that many companies today really know where costs lie or how to get costs out effectively and reduce the systemic redundancy and inefficiencies in their work. Between 35 cents and 40 cents of every dollar spent on healthcare is on administrative process. That industry is struggling with the increased cost of pharmaceuticals, and that is a huge issue. But the 35 to 40 cents [now spent] on the paperwork may actually be a bigger issue. But they dont know how to tackle those kinds of problems and where real costs lie. …
Still, I dont find companies mobilizing around [doing] what they need to do the way they should. Its a strange time. I think companies are frozen a bit. Its almost a rejection of new ideas and an uneasiness with what the real payoff from technology is going to be.
eWEEK: Technology—the Internet specifically—seems to be a much more integral part of X-Engineering than the original concept of re-engineering. Why?
Champy: Thats true. When we did the original concept of re-engineering, we very purposefully did not want it to be seen as a technology-driven phenomenon because we felt that work had to be redesigned independent of the technology. We were also concerned that if re-engineering were seen as being owned by the technologists in the company, it would not get the attention that was required from line managers to really get it done. …
On the other hand, X-Engineering clearly argues that it is, in fact, information technology today that enables processes to get redesigned across companies. I wouldnt have argued this 10 years ago. But its the presence of the Internet that allows this to happen.
eWEEK: In your book you say that, in order to take the step to X-Engineering, companies need to have harmonized their internal processes. Are most companies there today?
Champy: It varies widely, but Id say … on average, companies have done 10 percent to 20 percent of the real process change internally that they will have to do in the next five to 10 years. There are some companies—the Wal-Marts of the world, the Dells of the world, the Solectrons of the world, the Ciscos—that have driven this very far. Those are the companies that have completely changed their cost infrastructures and are way ahead of where their industries are as a whole. But most companies have done a small part of what needs to be done.
eWEEK: So your book is a long-term road map as opposed to something you would expect the average company to launch into tomorrow?
Champy: What Im describing in this book is probably a five-to-10-year phenomenon. When we did the re-engineering work, we expected that companies would be able to change the way processes operated within a years time. And some of them did. But this is a longer-term phenomenon. On the other hand, I dont think companies can wait to begin. If youre in retailing and youre facing a Wal-Mart, youve got to get costs out. Youve got to figure out how to do it. …
But it is a long-term change. … One of the things companies failed to see and understand during the so-called dot-com era was that what they were offering customers—and what they were asking their suppliers to do—required an adoption period that was measured in years, not months. But somehow there was this assumption that you could advertise your way into changing behavior. You cant do that. This is an adoption time issue. So this also argues for companies getting started sooner rather than later. By the way, it [also argues for companies to] husband [their] cash. Really watch what its going to take in terms of time and dollars for this transformation to take place, and dont spend too fast.
eWEEK: e-marketplaces would seem to be the ultimate expression of X-Engineering, yet so many of these have struggled. How do you explain that?
Champy: A couple of things. First, recognize that the e-marketplaces countered the natural laws of competition because they really did ask industry competitors to collaborate and, if nothing else, to share processes. … Companies were actually willing to do that when those e-marketplaces—which many players in the industries would own a piece of—had a very high value. … But once the value of these e-marketplaces declined, the natural laws of competition overtook these companies. And people started to fight and argue, and wouldnt put any more money on the table.
In the long term, we are going to see a second generation of these marketplaces with more viable business models. … What we learned in the last generation was that these models couldnt work by simply taking a percentage of the transaction. That it was more likely a subscriber model that would work. But the problem was that people ran out of money before we could really try the new models and complete them. Nobody wanted to put more money in. But we will see a second generation.