The Fad That Forgot People

These insights required some field work with companies and some model-building by academics and consultants. The field work came through a multiclient research program that Index and Hammer operated called PRISM - Partnership for Research in Information Systems Management. I was the program director, and in 1988 we interviewed 100 companies on the ways information technology could improve cross-functional processes. Later, some of the companies that became stars of reengineering made presentations at the first public forum on reengineering - although none of the companies called what they did "reengineering."

Then the model-making kicked in. A piece I wrote with MIT's James Short on "business process redesign" appeared in the "Sloan Management Review" in the Summer 1990 issue under the title, "The New Industrial Engineering: Information Technology and Business Process Redesign." A few weeks later, Hammer published "Reengineering Work: Don't Automate, Obliterate" in the "Harvard Business Review." "Process Innovation," my reengineering book, came out in November 1992. In April 1993 Hammer and Champy published "Reengineering the Corporation."

Reengineering had its textbook and its bible.

The Reengineering Industrial Complex

How did a modest insight become the world's leading management fad? How did reengineering go from a decent idea in 1989 to a $51 billion industry in 1995? Chalk it up to the rise of the Reengineering Industrial Complex. Just as the concept of reengineering wove together three previously unrelated strands, its application brought together an iron triangle of powerful interest groups: top managers at big companies, big-time management consultants, and big-league information technology vendors.

Think back to the early 1990s. LBOs had come crashing down and business leaders were left casting about for a new direction. In retrospect, the pendulum swing seems obvious: from the go-go 1980s to the cost-cutting 1990s, from huge leveraged buyouts to massive internal workouts, from financial restructuring to business process reengineering.

As the reengineering tide rose, companies began to rewrite their histories. Ford had dramatically improved its accounts payable process; IBM Credit its financing quotation process; Mutual Benefit Life its new policy issue process. Not one was originally done under the banner of reengineering. All three were repackaged as reengineering success stories.

But from the beginning, this reengineering revisionism had its problems. Taco Bell used a change in its food preparation process to lower its prices and increase peak restaurant sales capacity. After reclassifying this project as a reengineering success, Taco Bell executives launched another project, this time relying on two (two!) outside consulting firms using the newly formulated reengineering tool kit. The project bombed. Nevertheless, inside companies, reengineering was gaining acceptance as much as a way for managers to get their projects approved and financed as for the real efficiencies it could deliver.

As fast as managers repackaged their projects, consulting firms repackaged their expertise. Continuous improvement, systems analysis, industrial engineering, cycle time reduction - they all became versions of reengineering. A feeding frenzy was under way. Major consulting firms could routinely bill clients at $1 million per month, and keep their strategists, operations experts, and system developers busy for years.

For their part, executives had to show financial benefits - especially at those consulting rates. The fastest way to show financial results was to reduce headcount. Reengineering became synonymous with cutbacks. At Apple Computer and Pacific Bell, for example, press releases in 1993 described major layoffs as a product of reengineering. It didn't matter that the actual linkage was doubtful. Headcount reduction gave reengineering a strategic rationale and a financial justification.

The third winner in the reengineering sweepstakes was the computing industry. Before the advent of reengineering, American business already bought $1 trillion of hardware, software, and communications products each decade. Reengineering justified all that spending - and promised to increase it. In addition, many of these vendors had gone through reengineering themselves; they could offer consulting services on top of their technology. A nifty double dip.

The stars were in alignment and reengineering exploded. Suddenly everything was reengineering and everyone could do it.

A modest idea had become a monster.