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5 Corporate Reinvention in the Information Age In the last decade it has become axiomatic that no corporation, no matter how large or how successful, is immune from upheaval or failure. In 1969, the number of Fortune 500 companies reporting losses was 11, in 1985 it was 70, and in 1994 it was 149 (Shapiro et al., 1994~. In a similar vein, the fortunes of two-thirds of the companies applauded in In Search of Excellence (Peters and Waterman, 1982) have changed (The Economist, 19941. Many of these changes of corporate fortune have been in large part attributable to the failure of those organizations to assimilate new technologies effectively. This chapter examines how information technology can transform a business in terms of how the business is done, its fundamental business processes, and how the business seeks to differentiate itself from its competitors. Based on lessons learned from such transformations in the commercial world, the committee then explores the implications for the Army. INTRODUCTION The initial focus of this chapter is on large-scale corporate reinvention aided by information technology. This focus provides an appropriate backdrop to the committee's belief that the Army will need to undergo large-scale reinvention to remain competitive with armies that can design themselves with the newest information technology or are less burdened by legacy systems and embedded industrial age processes. To set the stage for what follows, the characteristics of reinvention, both as they apply in the corporate world and as they could apply to the Army, are described below. An overview is then provided for the remainder of the chapter. Reinvention The characteristics of a reinvention process are (a) a radical level of change in how the enterprise operates; (b) starting anew; (c) a time frame of several years; (d) broad, cross-functional scope; and (e) cultural and or- ganizational change (Davenport, 19931. Reinvention can 68 be contrasted with continuous process improvement, in which an existing process is gradually refined (e.g., stepped improvements in the 10 percent range). Unlike continuous process improvement, reinvention aims for several-fold improvements in organizational effective- ness as measured by productivity, customer complaint rates, rework, or combinations of these. Reinvention is achieved by using radical business- process reengineering. In the corporate world, most radical reengineering projects were undertaken only when competitors were at the gates. Reinvention of the Army is seen by the committee as also involving competitiveness, only here the competi- tors are the U.S. Army vis-a-vis the armies of likely opponents in warfare. However, unlike the corporate world, the Army cannot assume a reactive position; it must undertake planning and execution of a reinvention strategy before being confronted by superior hostile forces. The Gulf War experience may have some hum- bling aspects that could be used internally to motivate reinvention. At the same time, the evolving threats of the post-Cold War era with their requirement of short notice, rapid response to a variety of contingencies, suggest that the Army must reinvent itself with a range of lethal foes in mind. The Army's basic mission the reason for being is to win the nation's wars. That will remain its "raison d'etre," its "core business," but the Army's rein- vention will surely change how it goes about accomplish- ing its mission. Chapter Overview The chapter makes three main points regarding com- . . mercla. . experience: 1. The large infusion of information technology in commercial businesses has greatly increased ca- pabilities even though it has not as yet produced the anticipated gains in productivity. 2. To be successful, technological introduction must be accompanied by a change in the way work is done.

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CORPORA 7E REINVENTION IN THE INFORMS TIONA GE The chances of success for large-scale reengineer- ing have so far proven to be small- roughly 25 percent. This dark side of reinvention exposes several critical factors (e.g., the culture and organ- izational structure must change to accommodate technological change). The chapter also presents three case studies to illus- trate important lessons learned from the corporate world. Finally, in light of the available data and accumulated wisdom in corporate America, the chapter addresses what can realistically be expected by the Army and in what time frame. THE PRODUCTIVITY PARADOX Despite computer power doubling every 18 months, whether this powerful technology has actually enhanced productivity has been hotly debated. It has been cogently argued that computers have had a negligible effect on productivity (see, e.g., Roach, 1991, 1992, and Strass- mann, 19901. To quote Lester Thurow of the Massachu- setts Institute of Technology (Thurow, 19911: Specific cases in which the new technologies have permitted huge increases in output or decreases in costs can be cited, but when it comes to the bottom line there is no clear evidence that these new technologies have raised productivity (the ultimate determinant of our standard of life or profitability). In fact, precisely the opposite is true. There is evidence, in the United States at least, that the investment in the new technologies has coincided with lowered overall productivity and profitability. A recent book provides a digest of all the available cross-industry and cross-country productivity data (Lan- dauer, 19951. Data show that computerization has had large positive effects on manufacturing by introducing computerized process control. Data also show that com- puterization has led to substantial gains in telecommuni- cations industry productivity that have been sustained over a long period of time. However, for many industries, the effects have been negligible. While it has been difficult to document that investment in information technology has improved important busi- ness outcomes (Strassmann, 1990), there have been 69 . improving coordination and synchronization of work by better planning, monitoring, tracking, and analysis; supporting products and services that depend on powerful information processing; and allowing people to do information work more efficiently. Most of the successes are in the first category (e.g., reducing paper and data entry). Improved coordination and synchronization have occurred in the airline industry with route and schedule optimization and in overnight freight (see the case of Federal Express described below). Information retrieval systems such as Dialog are exam- ples of the third category, and computer-aided-design tools are an example of the fourth. For some industries, such as the airline, financial, and telecommunications industries, investment in information technology and its applications has been viewed as an ongoing part of the cost of doing business for a decade or more (i.e., a necessary investment to improve or retain competitiveness). In these industries, much of the invest- ment to date has been in the communications and data-handling infrastructure. Well-known examples include airline reservation sys- tems, the banking automatic-teller-machine network and all wired financial trans- actions,~ scanning sys- tems for inventory in the retail industry, and the billing systems in the telephone network. Each of these mega-ap- plications has changed the way business proc- esses are done and would have been im- possible without infor- mation technology. What characterizes many of these success- ful uses of technology are large transaction vol- umes with data that change frequently. In all of these cases the soft- examples ot positive business effects. For example, there are several ways that computers can be used to increase Banks process tens of billions of transactions a year. The rnterbank productivity (Landauer, 1995~: Payments System handles approximately $2 trillion worth of transfers per day. The automatic teller machine network consists of more than 75,000 automatic teller machines in the United States alone and handles more than 6 billion transactions annually. reducing redundant work by electronic storage and transport of information;

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70 COM~IERCIAl MULII~1EDJA TECHNOLOGIES FOR ~-FI~TC~YA~YBA ~7F! as ware systems, not the hardware, have been the major investment. Thus, the business case supporting the application of information technologies in industry, particularly service industries, has been mixed. While for many industries data supporting a return on investment in the form of cost savings or customer satisfaction from the substantial investments made in these technologies are disappoint- ing, there are some major industries that have shown positive retunes and have, in some cases, been substan- tially changed by information technologies. Successes to date have focused on data communications, data capture, and transaction processing technologies. Although the elect on productivity to date may have been minimal in many industries, successful applications of information technology have made more and better inflation available, thus permitting improved planning and application of resources with the result of greater customer satisfaction. The implications for the Army can be significant if the Anny employs information technology for similar purposes. Providing more and better informa- tion to those who need it when they need it and elimi- nating repetitive, redundant tasks should lead to better planning and the better application of combat power at the right time and place. The result may well be that a smaller, early-deploying force will have the capability to handle the contingency crisis it has been deployed to handle and to do so quickly with minimal losses. SUCCESSFUL REINVENTIONS: CASE STUDIES The current emphasis on reinvention and on business- process reengineering, as exemplified in Reengineenng the Corporation (Hammer and Champy, 1993), is attrib- utable in large measure to the demonstrated success enjoyed by businesses that have changed processes to make best use of technology. To illustrate some lessons reamed from successful reinvention, the committee con- sidered three corporations that have reinvented them- selves aided by information technology. Each offers somewhat different insights and applicability to the Army. Citicorp Citicorp was a classic successful, large, insular com- pany, which found itself in a time of rapid change when the ability to ream, adapt, and move quickly was key to survival. Banking had become highly competitive with constant pressures to reduce costs and to innovate. Citi- corp realized that it could not afford to do everything intemally, that many things had to be outsourced, and : .. ::~:-:-~ ~ .-: -I :~- ~ ~~ ... :~:.~, it, -:. ~ :~: .~ ~ I. .~ ~.,~. ::. .~ ~ - ~ . -; -.~ : :. ~ ~ i' ' .:' ' '..' i ', :itiQ - . fig asp: - '' ~ it' < ': . ~ 'a: ~: ~ ~ ~~ ~~ ~ - ~ ~~ ~~,~ - ~ I, . ~ ~: ~ ~~ . - i.. - ~~ ~~ .. ~ ~ ; ~ . .. .. ;~ : . ~~ :: i: ~ ~ M~,emeDt~:a~.~A~ou - ~ :~: : -: .. ~,~ it. ~ . -, ,,..,: i..' '.~',.~' '. , ~ . I' . : '2~ ~;~ s - -I ;~- i- ~ :~.:.::~i ::.:::: ~ -it Em, :~ I- ~~ ~ .,,.:- ~' ~:~ ~ . : . ~ ::.: ~ ~::~ . I: :- I: ~~.:~ ~~ :-.: : it. .,: :.:~ ~ . ~-~.~ ., - ,. < Hi : ~~ .: `.~ -I ~ ~ I: ~ught:;ti}e~ wO*~io.nV fen~s3E~r :~ comte - : - ~ . ..~: . i. . . ~ - . ~w : En:: Li : . ~ - . ~ : I. - . . ~ ., : ~ : .: . ~ ~ ~ ~ . . Ti ~ . . ~ .~ - ~ . . ..~ ~ . - I. , i. . ~ ; . .- . ~ ~ . ~ . ; - ~~ano~o-~uy levee ~emp~ayee wit ~ : .~. Ail: ~ ~ ^~ ~:-:, ~~ ~ .- . ,.i ,, ,,,,.,, .,, ,. , ~ .. ,. ,,, ,,. I,: ~.~, ,. ,,.~ ,^~. ~ :; ~~dll~.::~.=C - ::... ~e~ Aims .,. ,.:, i;: . ~.:- ^:~. I: :- - :- ::.- ::: :., - ~ A. - I, ' A:< I .. it, - , .,. I If. In, .ou~g.m~e~cil b~mess:bmmom ~.~a-~ . i; ~ i ~~ ~ ..~i, ,, ~ , :,~.i ~~ is ~~ . it ~ ~i Ti-~- ~,~i ~ ; : i- -. caps-apt is:: ~~ it:; i'''-: :~ i' ~ : 2 ~ -:~ i-- : ':: A. ' ~ ~ ~~ ' ~ ' ~ ~ ~ 2 ' ~ ' ~ ' ' ~ i ~ ' ' , ~~ ~ ~~ ~~\'~ _< i: . -I. .:.~.:Qu~urce nonc~3~ess~ns,: .''~'','', ,~2tj"''~ ,2'~''' ',,.'..' :'.:~'.~ ,~'.A'' 'A it'-.`' > }ear b~s~ A"'' ., -'.'. 'it .,~ ~ ~ ~ I: :', ~ ~ Hi' its, i N< ~ ~ :' ~ ;j ~ ~~ i ~ ~~ ~ :~ . girl ;' i: I; ~ ~ii~ ~ ~ .:iN~ it: ~ ~~ ~~ ~ :. `: ..--~}y.t~geted areas::~r~re ~e.~A~:~i:.~er- ~ : ~mg~ ~ : . . <, -: . Only. deep; tec},nolog~s- to^^mem pique by. ~ -. .: - - - ~ :~ is i- :'4 By- Hi .~ it, ~~ ,,,i~, ~ ,~ ~ ,, ~:,~, i, ~ ,, . . .i it. ~ ~ . ~~ .. .- - ... i i; ~i,~ ~ ~ ~ .'.; ?:' swore =~05~., - ..? - If; ,:~ :~::.~ ~ A: ~s-~ ~e.~my~an - ;o~` ~e.:n"m's~. ^:~.:~.~ ~ ,- ~ ~~ 'it' i' '' ' ' i''~..~'' i' '' . ~ 'I'' I'd' . 'I "'''"a ~ i i ' " ' 'a' i':,' ''"it' ' ''''" " ' ' i '' '~"''~'' ';" ' i'"'' ' i At '' ''I' ':.: :~:: ':~::~ ' :~ ~~1 ;tC~:'t0 ~:~e^rpr~ TV- ::> ... - ....'' .~ SUC~. 'em: .' '' .' '... '. ~ 2, ' ,:: :. , :.,~:: .. ~ .:. ' :, ; ~ . i , ? .. ;'~ ::: .: :~ i: : i: ' . ~ ~ :- . :: .t . ~ : i ' .', . : . .< :~ . ~ ~ i ~ ' that other ventures had to be the products of alliances. While Citicorp employs a large number of technical people, it is not a technology company, per se, except in one areaanalytics. Analytics includes the science of credit, market, and risk analysis; customer modeling; data mining; and portfolio management. These are the COIpO- ration's crown jewels the science that allows it to look for new opportunities in the market and evaluate their risks (Schutzer, 1995~. Citicorp has been actively restructuring its business since the mid-1980s by redesigning its work flow and systems to exploit information technology. Moving to a single integrated and interoperable corporate network has produced enormous cost savings through efficiency gains, amounting to approximately $100 million annu- ally. Also, computing technology, including tools and databases, was moved to the desktop. Virtually every employee was given a workstation and access to corpo- rate-wide information, which established linkages be- ~veen the work groups and the enterpnse. Technology was used to streamline work processes, pushing decision making lower in the organization and reducing duplica- tion of effort. In addition, using computational tools allowed employees to get work done faster.

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CORPORA 7Z REINVENTION IN THE INFORMS HONE GE Citicorp systematically measured the effects of its business-process reengineering in its Real Estate Group. As cited in Tapscott and Caston (1993), two years after the business-process reengineering, the amount of time to process loans had been reduced by about 50 percent, profit center earnings had more than doubled, executive time spent on "administrivia" had been reduced from 70 percent to 25 percent, and the number of customers per account executive had gone up by 170 percent. Federal Express Federal Express is frequently cited as the premier example of an integrated, enterprise-wide organization, delivering 1.5 million packages a day with a goal of 100 percent timely and correct delivery. The Federal Express network has 420 airplanes, 30,000 trucks, and almost 100,000 people working in synchrony. Innovative use of information technology is the cornerstone of Federal Express business (NRC, 19881. By using real-time tracking and tracing systems net- worked together, Federal Express "knows" where every 71 package is instantaneously. Barcodes on each of the 1.5 million packages are scanned an average of nine times. Federal Express constantly runs software to determine if shipments have gone astray and to try to correct the problem before the customer is affected. The chief infor- mation officer at Federal Express has stated, "We believe that information is just as important as the shipment. It provides a tremendous amount of product differentiation and value added to our product" (Tapscott and Caston, 1993) The Federal Express system, COSMOS, was first im- plemented in 1977 and gained the functionality described above by approximately 1988 (NRC, 1988~. During that time Federal Express field-tested numerous custom-built scanners, working with one vendor for 3 1/2 years to develop a scanner that met all the business needs. With the in-house expertise of dealing with a hardware vendor in place, the next hardware scanner project was accom- plished in 1 year. The current system COSMOS, II~ had its share of redirects and restarts, testing many different versions of the scanner as well as different networks and software, but it is considered to be a veIy well-managed project. The evolution of the Federal Express system is an excellent example of successful spiral development. Ford In the early 1980s, Ford was losing market share to the Europeans and.Tapanese in the automotive business. In 1980, Ford lost $1.5 billion. It was clear that Ford's basic survival was at stake, and the corporation under- took to dramatically change the corporate culture and business. That turnaround is usually attributed largely to Total Quality Management rather than to technological innovation as in the Federal Express story. However, the problems Ford faced are pervasive in any old, large, vertically integrated business, including the military. Ford's biggest problem was that it was not producing nearly as good a car as its competitors the same car assembled in the United States was inferior to the one assembled in Japan. Ford initiated a no-holds-barred employee involvement program. Decisions on how to improve production were pushed down to the rank-and- file workers. Management levels were eliminated, and all managers were trained in participatory management. By constantly monitoring the product and the process and keeping people involved as team members, Ford was able to regain market share (Petersen and Hillkirk, 19911. Initially, Ford changed the business by making incre- mental changescontinuous quality improvements. Af- ter a few years, the marginal effects of this more gradual process became negligible. Improvements at the next

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72 -I- :: -hi- ~ ~ . ~.Ford: fig - ~A~nobil:e~ i; . ::- ~ .. . '. ~~ ~ ~ ': :~-~.:ppe~:as.P~ ~ A~d~rh~h ~ i: -,- .. - ;::::: ::~::M4jorP~s:''.ed~ - ~ - ~ .. .. . ~ . I. I. < . - - . ~ ~ - . ... :- . : : ~ ~ : - . :. ~ ~lbe~.Fc~d'~Motor; Gig snare :a;~:si~nt :~:~m' ::-: ::~e ~~:::Much of its :success can be.:~ibuted to :continu~s~ -, . . - ~.~ :~y~:~mprovements.~ and pa~a~ management reck- :: : :: ~~ : ~ ..n~es~. ~~ ~ Foods: - desks of I: His ~ accounts; ~ =yabk ~ : -; ~ ~~a~a~lly~re.ducing;:~e~.number of peopie:~invol~d~;- .. . . . . . . : :~quer+;ciedas~a~:reengineenng~success::story.: ::~::: ~~ All: :::-:-: :: .: ~ : I-.: ::: ~ : ~ - ~ . - ~ - ~ ~:~ ~~ -~-~ .-FJaden belt hian~::.~chy~for ef~icy.:~ If: I: :~::~ :~ :: - -a . . . . - . . ~ ~ . . . ~~:~:~ ~ :~e~b~:to.~-~ove~l a.kev business coon. if: ::: . . . . . . . ~-~ - ~~ ~-~:te~i~edie::co~:and:~ hid ~~w~-an---eye::~ ~ : : ~ ~ - :, . : . .: ~ ~ ~ : ~ .- :. . I: ~ ~ . :. ~ . . . - ~ .:.- ~ I::: farm:::;:: opines- for so: .-.s~lming-~.a*d4~ ~~ ~~ .. . . ~ . - . . . . . ... . ~ ~ ~ . . I::: ::~: :~:: .~ i: ~~:~ it. :: ::: I:.: ~~ :-: :~::~:: -I:: -:::~..~::~:~ If:.. I: : ~ - ~ i:: I. I. ~-:-:~:: .~ ~ ~ -I I. ,,~ . :::: ::~:~::: :::::~::::~:: :: :~:::::~ ::::~::: :: ::: : :: I:: ~ ::: :: ::: ::: :::::: :::~::: i:: .:::: I: ::: :~:: :~: :~::: ::: ::: ::: : ^: :: :--~- ~~ it. . ~a~ .~:~ ~ her ~ . - nil :: to .: :~lale -. boId - :-~ - ~:; ~ ~ ~ I- ~ I: ~ : ~ ~ :: a: ~ : ::: ~ . - .: -: : ~ ~~ ~ .. v. ~ ~ . . ~ . . . . ~ . . . . . ~ - ~ .: <. :~:~1: ~g~D~pr~eSS. r.eqngin~ oppo, E Yes.-: :.:: : I- :', ~~-~ ~~ :~ :.: stage required radical redesign of the basic business processes, as illustrated by the overhaul of the procure- ment process described below (Hammer and Champy, 1993~. Ford's accounts payable department employed over 500 people in the early 19SOs. By straightforward com- puter automation of their functions, Ford believed that a 20 percent personnel reduction could be achieved. On a visit to Mazda, however, Ford executives found five people doing the accounts payable function. This discov- e~ prompted Ford to look beyond redesigning what the accounts payable department did to redesigning the entire procurement process. To quote Hammer and Champy, "Define a reengineering effort in terms of an organizational unit, and the effort is doomed." In redesigning the process, the traditional three-part invoice was eliminated. In its place was a much more streamlined process: (1) Buyers enter a purchase order electronically, which simultaneously goes to the vendor and an internal database. (2) When the goods arrive at the receiving department, receiving takes possession of an order that is in the database and, upon accepting it, causes a check to be issued and sent to the vendor. (3) Orders not in the internal database are shipped back to the vendor simple, efficient, and cheap. Now, routine payments are a part of the process of receiving goods, COMMERCIAL MULTIMEDIA SCHOOL OGRE FOR ~-FIR~ C~Y~YBA~I~S and an accounts payable group consisting of only a few people exists to handle exceptions. THE DARK SIDE OF REINVENTION There is a significant danger when writing about corporate reinvention (also referred to in the literature as reengineering) to highlight the success cases and down- play the failures. But in fact there have been far more abortive efforts than successes, with an estimated success rate of only 25 percent (Landauer, 199~. The literature quickly becomes redundant; the same examples are used time and time again. An impression can be created that reinvention is easy: obliterate and start over; a bit of creative thinking will solve most business problems. Instead, a successful reengineering project requires many rare ingredients, a master chef, and some highly skilled soul-chefs. The next wave of popular-press books may proclaim reengineering as practiced thus far to be the black plague of corporate America. Corporate America has bought the reengineering dream wholesale and downsized the work force, banking on success. However, when reengineer- ing projects are not successful, the results are: the requi- site expertise to run the business is gone; the quality of the product or service is undermined; and the business begins a downward spiral. The Army cannot afford similar results. With this frequent failure in the forefront, the commit- tee analyzed those factors that are critical to consider when deciding whether or not to reengineer. These factors are: . Radical reengineering requires careful scrutiny of existing processes to identify those that must change and to evaluate critically the probability of success. Most successful efforts start from a small core and build outward. Highly skilled managers and staff are needed to implement most ambitious plans. Finally, the culture and organization must change to accommodate technological change. Each of these factors is discussed below. Not Every Business Process Is a Candidate for Reengineering Decisions on whether or not to reengineer a process or a system should be based on honest answers to some hard questions: Does a significant cost reduction in this

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CORPORA ~ RE:INVENTIONIIV THE INFORMS TIOIVA GE process need to be achieved for the business's viability? Does this process constitute a competitive niche or market differentiator? For example, not all legacy systems have to be replaced. In fact, analyses of some legacy systems might reveal that the cost of replacement is more than the expected gain. Not all business processes are of equal importance. For most businesses, those processes that are directly perceivable by the customer are the first to scrutinize as reengineering candidates. Federal Ex- press was missing critical deliveries (its core business) and hence decided to redo its tracking system. Banks have concentrated on customer services, such as making automated teller machines available and easy to use (the core business). Banks have outsourced back-room func- tions that are not their core business (e.g., Banc One hired an outside company for data processing and Citi- corp formed an alliance with another company). The cutting-edge technology should be applied in areas where it is a market differentiator. Start Small and Build from Success It is tempting to move to a utopian mode when undertaking reengineering (i.e., every process would be better off being dismantled). However, to undertake multiple projects simultaneously that are interdependent in function and sequence is to court disaster. Most reengineering depends on software being built, and it is well known that large software projects are typically in crisis mode. Undertaking multiple reengineering projects invites all the unsolved problems of software engineering in the large; coordination and information-sharing diffi- culties increase with the square of the number of people and software interfaces that need to be maintained. Small is beautiful in software and so too in reengineering. Most reengineering projects that succeed follow iterative soft- ware engineering methods. They start with a core func- tionality, refine it, and build outward in quick design and implementation intervals. The benefits of iterative design cannot be overestimated, and it becomes more important as the complexity of what is to be implemented increases. Landauer (1995) documents the benefits derived from iterative methods with actual project data. One such iterative method, a thorough round of evaluation and redesign known as User Centered Design, resulted in improvements per design cycle of as much as 720 percent. As a rule of thumb, each design cycle is likely to improve performance, as measured for a particular application, by about 50 percent. Inexperienced Staff and Managers Need Not Apply Many reengineering projects fail because they are staffed with people having inappropriate skills. In the experience of the committee, one needs extremely tal- ented software engineers who can design and implement quickly and effectively. The best programmers are 20 times more productive than average ones (Egan, 1988 and Pressman, 19949. However, these experts need to be supported by people who understand the systems they are replacing and who understand the business needs. A team composed solely of software experts will fail, as will a team composed only of people who wrote and maintained the systems that are being replaced. There needs to be a working partnership with roles and respon- sibilities strongly defined and enforced. In point of fact, there are too few software engineers who have com- pleted successful reengineering projects; there are even fewer managers who are current with the technology, understand the business needs, and have actually expe- rienced reengineering successes. In terms of the rare ingredients, the most important one is having the critical skill sets in terms of the people doing the reengineering: subject matter experts familiar with the domain; software engineers with domain expertise and a reengineering success, if possible; and technically skilled managers who are current with the technology to be used and have managed a previous reengineering project. Cultural Changes anti Support for the Change Davenport (1993) points out that information technol- ogy can only enable; to be successful it must be accom- panied by organizational change. To benefit from new technology, the nature of the work to be done must change as well. Dependencies similar to the interrelation between process innovation and technological innovation exist with cultural change; social and technical change must go hand-in-hand. Many a reinvention attempt has failed because the existing corporate culture was not ready for the change or because no one understood just how much the culture would have to be changed to accommodate reinvention. Davenport (1993) discusses cultural enablers of radical corporate innovation: (a) empowered employ- ees, (b) active participation of employees in decision making, (c) open communication channels, and (d) flatter hierarchical structure. So, as the list implies, a receptive culture is one in which communication across functions and between levels is welcomed and is active, dynamic, and participatory. Unfortunately, most corporate cultures are characterized more by their rigidity and inability to change, and this makes radical innovation nearly impos- sible. Davenport (1993) has observed that the most difficult task many corporations face in radical redesign is getting the senior executives to act as a team. In many organizations, senior executives control fiefdoms with

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74 CO~IMERCIAI~ MULTIMEDIA TECHNOtOGI~ FOR -FIRST CE~YA~YBA BRIMS little desire or need to communicate, let alone cooperate across functional lines. However, the result of a success- ful reinvention is massive organizational rearrangement, frequently combining once-separate functional entities as well as overall streamlining. So, when turf retention is an issue, executives may consciously or subconsciously undermine a reinvention effort. To reinvent basic processes using information tech- nology, the nature of the jobs performed must change. This change is very threatening to those employees currently doing the old jobs, and those employees may be a source of sabotage. Very often the new plan calls for new employees, since the embedded base of employ- ees does not have the right skill set. Thus, the new agenda is in direct conflict with what the employees perceive to be their best interests, and so a battle of organizational survival versus employee survival can ensue. Somewhat related to the above issue is the question Who is going to implement or build the new design? Hammer and Champy (1993) as well as Davenport (1993) stress that bottom-up reengineering does not work. How- ever, there have been instances in which a top-level design and initial implementation has been done but then was severely compromised because the wrong imple- mentation team was selected. In a particular case, the reengineered design called for looking at products the business sold in a fundamentally different way from the way the business currently operated. However, the im- plementers were so involved in the old way of thinking that at every turn in implementation the design was compromised, thereby systematically reintroducing con- cepts that had been killed in the radical redesign. Further, these design compromises were made unwittingly; the familiar way simply made more sense to these people. Change requires champions, and not just a single champion. Given the rate of job changes in the average business and the duration of most reinventions (2-3 years), it is likely that a single champion will have come and gone in that time. Also, social acceptance of new ideas requires multiple committed spokespersons and corporate "movers and shakers." IMPLICATIONS FOR THE ARMY This section contains the committee's views on how to apply some of the above lessons learned in the commercial sector to the Army. It has been written from the perspective of information technology and is not meant to suggest an overarching roadmap for reform of the Army as an institution. The following sections focus on (a) what has been learned in commercial experiences with reengineering that is relevant to digitizing the battlefield and (b) an overview of the effects reengineering is likely to have on the Army. Digitizing the Battlefield The problem of displaying the relevant command and control information in a way that is highly usable to each soldier and commander on the battlefield needs to be solved using iterative methods. The questions What is information in this context? and How easy is it to make the correct interpretation? are interface and usability issues that can only be resolved by putting the technology in the hands of the users and iteratively refining the design. This is an opportunity for multimedia to impact battlefield events favorably, if used effectively, but it is an invitation for disaster if done poorly. In terms of overall cost, a rule of thumb is that the system software costs at least three times as much as the hardware. Given the inherent complexity in the Army applications, it is all the more important to use iterative software design and development methods rather than counting on one giant leap forward. In addition, the success rate for large software systems and reengineering projects (one in four succeeds) is low, implying that the Army cannot afford to use less than the best practices and methods in systems development. Effects of Reinvention on the Army It is obvious that information technology resides at the heart of the vision for the Army of the future. What is less obvious is how information technology will transform warfare and how the Army must transform itself to best benefit from technology. This chapter has stressed that it is wrong to believe that just the technology changes. To effectively use technology means that the work, the organization, its doctrine, and the culture all must change. Moreover, because the Army's vision of the future relies on the massive infusion of technology for acquiring, processing, and communicating information technology that will change the organization and how it functionsone cannot comprehend as yet what the future Army will be like organizationally or how its battles will be fought. Processes and work flow in unit staffs will change. Simply automating current procedures will not leverage the full potential of information technology. If staffs are not reduced, automation may have a negative impact as large staffs find more time and automated capabilities to demand more information from subordinate organiza-

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CORPORA 7F REINVENTIONIIV THEINFORMATIONA GE lions. The Army will have to analyze the role of staffs in the information age and the functions they perform. That they can be smaller is certain, but they are also likely to be restructured. The committee's review of corporate success stories also indicates that it will be possible to eliminate one or more levels of command. As commanders, supported by smaller staffs, are able to command and control more subordinate units effectively, organizational structures can evolve into flatter, more integrated, and less vertical entities. The Army will have to review the purpose served by each level of command and the value added to the overall success of the enterprise. Corporate experience indicates that failure to eliminate intervening levels is a mistake. Often, levels between the decision maker and the executor of a function become redundant and an impediment to efficient operations. Operations can take place faster and be synchronized over a wide area with the application of advanced information technologies. The implications for Army doctrine and tactics are likely to be extensive. Units will be able to move rapidly, operate with greater certainty, and make more rapid decisions. Exactly how the tactics will be affected may not yet be evident, but corporate experience again makes it clear that those who fail to assess the fundamental ways an enterprise conducts its business and to adjust to new ways will not leverage the advantages of information technologies and are likely to lose their competitive advantage. Extrapolating from the success stories in the corporate world leads to the recommendation that iteration and experimentation be built into the process from the be- ginning. It is beyond the limits of human intellect to come up with the grand master plan that will effectively transform the current Army into the future, information- based Army. Success is made with plans of limited scope that are intended to be built, tested, redesigned, and expanded. At the core of effective use of information technology are iterative design methods, which were best exemplified by the Federal Express story. Despite 20 years of crisis and large-scale failures in the software industry, there is just beginning to be an understanding that requirements are always incomplete, that the first implementations are always flawed, and that reducing development time in software must translate into short- ening the time through successive cycles of design, implementation, and evaluation. Fortunately, the Army has a leg up on many of its industrial counterparts in experimentation, as it has a rich tradition of using modeling and simulation to aid decision making. These same technologies can be used to reduce the risks of reengineering. For example, the Air Force plans to use simulation, modeling, and work flow com- puter tools to enable decision makers to better predict the impacts of incremental-to-radical changes in business processes (USAF, 19951. Given the risks and uncertainty inherent in reengineer- ing, it is very important to identify processes that are key to success and to benchmark them formally against external corporations or institutions. To do this effectively requires a critical examination of the internal operations together with an assessment of the outside competition or industry leaders in a particular area of interest. After unearthing best practices, the organization must figure out how to assimilate these into its operation. Formal benchmarking is a disciplined process of uncovering and measuring effects of adopting best practices. Done correctly, digitizing the battlefield is a complex systems integration job, which will need much experi- mentation and refinement. Thus, the role of the Battle Labs will become even more critical and will probably expand in coming years as a means of quickly evaluating new technology and introducing it into the evolving systems. In addition, realistic field testing of the complete system at frequent intervals, through exercises such as the Louisiana Maneuvers and warfighting experiments, will be essential to not only see that the technology works but to understand how the work must change to use the technology. Much of the active interplay between tech- nology and work must be seen and experienced in order to know how to modify each component. These are difficult things to visualize. Another important aspect of active experimentation is to find out just how usable and useful the information technology is. The lesson over the past few decades is that it has been tremendously difficult to invent software that improved end-user productivity. In a battle situation in which stress, fatigue, and attention overload operate, it is more important, yet more difficult, to build usable systems. Unfortunately, there are few principles to guide correct design. The state-of-the-art is to do usability evaluations in multiple phases of development and in each product or system release. The recommendation to use open systems and com- ponents, which plug and play, has been made several times in this report. There are large gains to be made in such areas as development time evolving to new systems and levels of expertise needed to accomplish specific tasks. Again, the use of open systems and components are examples of how iterative reengineering can be accomplished. Perhaps the biggest unknown is how the Army will look and feel as an organization in the t~venty-first century. In the successfully reengineered businesses, there were fewer people running the business and more integrated organizations (e.g., fewer vertically integrated functional entities). More of the workers became gener- alists, but in many cases the jobs demanded more

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76 COMMERCIAL MULTIMEDIA TECHNOLOGIES FOR TWEN7-y-FIRsT cE~7~URyARMyBA=LEFIFrr)s education and training than previously. The Army may find that a new kind of warfare demands more techno- logically sophisticated enlisted and officer personnel and that the current skill inventories are underrepresented in disciplines that support computer applications and com- munications technology. If the cultural enablers of reinvention are the same as in corporate America, the committee speculates that the cultural transformations that need to occur will be the Army's biggest hurdle. Warfare is not management by consensus. Hierarchies exist for the efficient flow and control of information. People need to expedite orders. Much of the organizational rigidity of the Army is there for good reasons in times of conflict and confusion, what to do and to whom to listen need to be reflexive. How to overlay this on a culture that needs to have more open involvement, discussion, and evaluation of new ways of working will require that people understand that they have contradictory roles depending on the context. The committee does not expect the Army to abandon completely its chain of command orientation, but it does expect that the Army will need to accommodate a more empowered soldier and subordinate leader if information technology is to give the Army a competitive edge. Cultural change also is likely to be resisted by senior executives, officers, and employees who, like their civil- ian counterparts, feel threatened by loss of turf or posi- tion. As has been noted many times in this report, to achieve the full potential that information technology offers, there must be fundamental changes in how the Army is organized and operates. Organizational changes, functional changes, and changes in work processes ultimately will affect the Army's basic branches, its senior commands, and its staff relationships. The natural incli- nation of those affected will be to resist changes that diminish the role, importance, or size of these entities. If the Army's efforts to reinvent itself for twenty-first century warfareenbodied in Force XXI are to be successful, the senior leadership of the Army must overcome the resistance that is almost certain to arise. Corporate expe- rience makes it clear that this requires their personal and continuous involvement, including the "CEO," working collectively as a team. SUMMARY While overall there has been an apparent productivity paradox associated with the introduction of information technology, there have been successes as well. For example, information technology has made possible the coordination and synchronization of complex events, such as airline reservation systems. Successful corporate change seldom results from tech- nology alone; the business processes and the structure of the organization usually change as well. Three successful corporate reinvention cases consid- ered relevant to the Army were discussed. These cases involved the use of information technology at Citicorp, Federal Express, and Ford. Key lessons learned included the need to outsource noncore business functions, use spiral development, and flatten management hierarchy for efficiency. Corresponding Army correlates were: use commercial off-the-shelf (COTS) technology, except in carefully targeted areas; experiment (e.g., via simulation); and reexamine the Army's command and control hierar- chy, with an eye toward opportunities for substantial streamlining and changes in functions. Only about one in four reengineering projects suc- ceeds. Among the many ways they fail are: (a) reengi- neering processes or business functions that are better left alone, (b) not starting small and building from success, (c) not having the critical skill sets available, and (d) not being able to change the culture to accommodate reengineering. Implications for the Army, based on lessons learned, were then discussed more generally, beyond the Army correlates to the lessons learned in the case studies. These included possible changes in organization, doctrine, and tactics as well as the need to actively experiment and iteratively design and develop. No one has the blueprint for warfare in the twenty-first century it must evolve. Not only is the technological end state unknowable at this time, but the cultural changes that will ensue are equally difficult to predict and will result from the interplay of the work, the technology, and the social structure. REFERENCES Davenport, T. H. 1993. 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