Who Has the Next Big Idea?

While much of Hammer's latest book is flecked with common-sense notions about the customer being important and effective communication being essential, it does contain several ideas that will surprise and provoke. Here are some of those ideas.

The real new economy is the customer economy. "Customers are no longer supplicants for scarce goods," Hammer writes in The Agenda. "Roles have changed, and sellers have become supplicants for scarce buyers." One example: Today, the auto industry can produce nearly 20 million more vehicles a year than the world market demands. Another example: The worldwide overcapacity in steel is larger than the U.S. steel industry.

This flip -- from scarce goods to scarce customers -- is the essence of what will make the next decade of business different from previous ones. The Industrial Age was a battle between labor and capital, Hammer explains. What labor got, capital lost -- and vice versa. "Now it's really labor and capital versus the customer, which is a whole different notion," he says. Customers want more for less -- and they want it now. Satisfying these new-economy power brokers depends on (you got it!) reengineering. Companies that reengineer to face the customer, to serve the customer, and to make life easier for the customer will flourish.

Those that don't will perish.

Most conventional business measures are worthless. (And the others are dangerous.) One Hammer idea seems sure to drive CFOs straight to the therapist's couch: "Financial measures -- profitability, return on investment, discounted cash flow, or any of the technically complex measures used by financial engineers -- tell you little, if anything, of what you need to know about your business." Even something as basic as a profit-and-loss statement? Phooey! says Hammer. "It's just an autopsy. The fundamental language of business is about work, not about money. Now, don't get me wrong, you need certain outcomes. You need a strong balance sheet and a good P&L. But those are just outcomes. The fundamental language of business is about things like customer satisfaction, speed, and error rates."

Measures that count include: How long does it take to turn around an application for insurance? What percentage of the time does a company deliver a product on the date the customer asks for? How many times a year does a firm turn its inventory? Those are operating measures, metrics that matter not to the accounting department but to the all-powerful customer.

Business heroes -- the sort of people this magazine loves to celebrate -- are actually signs of terrible dysfunction. When an employee goes the extra mile to solve a problem or serve the customer, most of us tend to applaud. Hammer tends to shake his head in fierce disappointment. Celebrating such heroes is a "poisonous attitude," he says.

What's wrong with heroism? "It's not repeatable. It's not reliable. It's not dependable!" he thunders. "It's episodic. If you put people in a lousy process, you're asking them to fight the process. After a while, it wears them down."

In Hammer's theology, the cardinal virtues are discipline, structure, and repeatability. Individual heroics are just an early warning signal: The company is broken and doesn't know it.

The rise of the Internet is less important than the invention of air-conditioning. Hammer was an Internet skeptic before Internet skepticism was cool. "I do not buy the notion that the Web changes everything," he says. "The Web's impact on the individual is going to be modest. I don't think it's going to have the transformative effect on society that, say, the automobile did."

So why is the Internet capturing so much attention? "What the Internet does is turbocharge phenomena that were already happening. Before the Internet, if I bought a car, I would read Consumer Reports. Now I'll go to the Web. Can I get more data? Yes. Can I get it a little faster? Sure. But it's more an extension of existing phenomena than something new."

Nonetheless, he says, the Web is a "howitzer" for consumers: "It's very important for further pushing the power of customers, including corporate customers." Then Hammer introduces his most provocative and controversial new idea: "In the long run," he explains, "the revolutionary impact of the Internet will be in dissolving boundaries between companies."

The company as we know it will soon disappear. "The Last Big Thing was demolishing the walls within enterprises," writes Hammer. "The Next Big Thing that will dominate business discourse for the coming decade is the destruction of walls between enterprises."