Peter G.W. Keen - The Process Edge: Creating Value Where It Counts
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The Process Edge proves that business process improvement is not a fad. It addresses the recent backlash against process movements like reengineering by explaining why businesses can decline even as process reform is creating dramatic new efficiencies and savings. Companies that experience this paradox are investing in the wrong processes. The book presents an economic model for deciding which business processes are worth the investment and provides the tools for applying the model. It shows that process can be the key to competitive edge. Applying the principles of The Process Edge will help managers resolve the process paradox, by measuring the genuine cost and economic value of process improvements and investing only in those that will help their companies thrive.
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HARVARD BUSINESS SCHOOL PRESS BOSTON, MASSACHUSETTS
Page iv
Disclaimer: Some images in the original version of this book are not available for inclusion in the netLibrary eBook.
Copyright 1997 by the President and Fellows of Harvard College
All rights reserved
Printed in the United States of America
01 00 99 98 5 4
Library of Congress Cataloging-in-Publication Data
Keen, Peter G. W. The process edge : creating value where it counts / Peter G.W. Keen. p. cm. Includes index. ISBN 0-87584-588-6 (alk. paper) 1. Reengineering (Management) 2. Organizational effectiveness. I. Title. HD58.87.K44 1997 658.4'063dc21 96-48382 CIP
The paper used in this publication meets the requirements of the American National Standard for Permanence of Paper for Printed Library Materials Z39.49-1984.
Page v
For my circle of family-friendsthey're both of these for me.
And they all contribute to me in my writing through ideas, encouragement, comments, assistance, support and helping me find whatever it is I've mislaid in the last five minutes.
To Sherry, Sara, Chris, Merry, Peggy, Bill, Dale, Jennifer, Russell, and Tracy.
Page vii
Contents
Preface
ix
Acknowledgments
xv
1 The Process Paradox
1
2 The Salience/Worth Matrix
25
3 Out of the Process Swamp: Determining Salience
41
4 Process Worth and EVA
57
5 Process Value Builders: Abandon or Adjust
81
6 Process Value Builders: Enhance
95
7 Process Value Builders: Basic Change
115
8 Building an Enterprise Strategy: Leadership and Change
125
9 Building an Enterprise Strategy: Organizing for Change
143
10 The Process Investment Process
155
Notes
169
Index
177
About the Author
185
Page ix
Preface
What I most hope for this book is that its readers will say after reading it, "That's common sense." And that they then add, "Well, now it is." The Process Edge is built on proven, practical ideas and tools from many fields. That's what I hope makes its original contribution to management: my search for and synthesis of the best of thought and practice in corporate finance, business process transformation, information technology, economics, and business strategy. Because these fields are very separatewhen did you hear a finance expert talk knowledgeably about business process reengineering, for instance, or a total quality management expert speak of the real costs of information technology?experts in one field rarely recognize how an idea or a technique in other fields can give them new insight.
My career has been in spanning fields, so it's more natural for me to find great ideas in one area and translate them into another. I'm an English literature major who went into the computer field. My doctoral thesis was on the psychology of intuition. I then taught at MIT in organizational behavior and while there wrote my first book on computers. I taught management science at Stanford while writing mainly about organizational change. I returned to
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MIT to teach in the management information systems department. My next books were on telecommunications. Then I wrote a series of "every manager's guides" to information technology, business processes, business multimedia, electronic commerce, and the business Internet and intranets. Constantly searching across fields rather than staying within them was how I came across so many separate ideas that needed to be brought together to create something original and useful.
I believe that common sense in research increasingly comes from thinking in multidisciplinary terms, not those of academic departments, just as the new common sense of business processes as competitive opportunity and advantage comes from thinking outside the bounds of functional departments. I define a new common sense idea as one that is obvious fifteen minutes after you hear it but that you wouldn't have thought of fifteen minutes earlier. The common sense I offer in this book is that business processes are financial capital assets or liabilities, to be managed in financial terms. That's not at all part of the common sense today of what I call process movements-total quality management, time-based competition, the learning organization, and others. Nor are the skills and successes of the process movements part of the common sense of finance. The experts who talk about shareholder value don't see these movements as essential contributors to their field.
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