Who Has the Next Big Idea?

Hammer calls this "virtual integration," the descendant of vertical integration -- and the logical next chapter in the reengineering saga. Imagine, he says, that he and I are competing yogurt makers and that, instead of sending our yogurt to stores on separate trucks, we decide to share a truck. It makes sense, he says. "We're not competing on the cost of trucking. We're competing on the flavor of the yogurt, on its freshness, and on our advertising. If you and I share trucks, that's to the consumer's advantage. It lowers your costs; it lowers my costs. We can keep some of that savings and pass some of it on."

Just as reengineering helped reduce overhead, inventory, and cycle times by combining certain processes across departments of a single company, Hammer's idea is to reduce overhead, inventory, and cycle times by combining certain processes across enterprises. First, businesses began reengineering internally. Soon, they will begin reengineering externally.

Return to the two yogurt companies. Suppose Hammer and I combine other processes as well -- say, financial management. After all, we're not competing on who has a better accounting system. After a while, it might become hard to tell where my yogurt company ends and Hammer's begins.

"This is a great-grandchild of the idea of core competence," Hammer says. "Maybe all you are is your core competence." And that -- get ready for a major meme -- changes the very idea of what we think of as a company. "It's a CEO and a core competence or two embodied in a couple of processes," Hammer says. "That's a company."

Redemptive Process: The Faith Endures

Business ideas, Hammer says, follow the same trajectory as Hollywood stars. Stage one: Who is X? Stage two: Get me X! Stage three: Get me a young X! Stage four: Who is X? Reengineering, and perhaps Hammer himself, is teetering between stages two and three.

Hammer's last big idea has been widely accepted: "I find fewer and fewer skeptics when I interact with companies, because some of the skeptics have left and some of the other skeptics have been converted." Yet Hammer's last big idea also has been widely corrupted. "That happens to almost every important business idea. It gets hyped, people get excited about it, and people say, 'Give me 20 pounds of it,' without knowing what it is."

The same perils lie in wait for Hammer's newest batch of notions and proposals. Will some companies devise new measurements -- and get them horribly wrong? Will stomping out business heroism stifle individual excellence? What will be the unintended consequences of blurring the boundary between my yogurt company and yours?

But what remains embedded in his latest ideas is process, which Hammer calls "the Clark Kent of business ideas: seemingly mild and unassuming, but actually powerful and amazing." Hammer believes that good processes can be liberating -- indeed, good processes might be the only way to unshackle the innovation and creativity in everyone.

Alas, he also believes that most processes within most companies stink -- that companies are loose where they should be tight and tight where they should be loose: "The great majority of companies, large and small, are organized and managed in ways that directly conflict with the principles of this agenda." And fixing that -- forcing fundamental changes in large, historically successful, self-preserving organizations -- won't be easy. Hammer -- a mathematician, an engineer, a man with a left brain the size of Wisconsin -- recognizes that further reengineering ultimately depends on qualities that emanate from the right side of the brain: devotion, trust, empathy, and all of their touchy-feely cousins.

And that calls for a new style of leadership. "The old leader was a guy who sat on the 59th floor and made financial decisions," Hammer says. The new leader must be a charismatic persuader, someone to whom others can relate, a person who can set sights higher than the next quarter's earnings report. Such leaders, he says, aren't cold and distant. They have a sense of "empathic identification."

"In a world where so many are deprived," Hammer says, repeating a line he's used before, "inefficiency is a sin." When you ask people to make changes -- large, frightening changes -- you need to enlist not just their minds but also their hearts. And possibly their souls. "You're not going to get passion in your organization by talking about shareholder value. You have to give people a sense of transcendent purpose," he says. In short, you have to make them believe.

Discipline, structure, repeatability. Say it loud, and say it proud. Reengineering, like religion, begins with first principles. But it endures through faith.

Daniel H. Pink (dan@freeagentnation.com), a Fast Company contributing editor, is the author of Free Agent Nation: How America's New Independent Workers Are Transforming the Way We Live (Warner Books, 2001). Contact Michael Hammer by email (michael_hammer@hammerandco.com).