's heart. "The rules of management do not change, but the way companies go about doing their businesses will and should change significantly from time to time," he declares. Champy's 1993 book Reengineering the Corporation sold more than 3 million copies, while Reengineering Management was considered one of the top business books of 1995.
The chairman of Perot Systems' consulting practice, he was in India recently for the launch of his sixth book, Outsmart!. Champy engaged Govindkrishna Seshan in a freewheeling conversation that covered everything from food (his favourite: pizza) and the US presidential election to technology and the role it can play in organisational growth. Excerpts:
How can technology change the way companies do business?
Companies today need to change both, the way they operate and what they deliver. Technology is now offering companies a never-before opportunity, which companies must learn to adapt and leverage.
For Outsmart!, I looked at companies that have witnessed high growth in the past few years. I studied nine companies that have been witnessing rapid double- and triple-digit growth year-on-year.
On analysing them, I realised these companies are behaving in a fundamentally different manner from most other companies and thereby benefiting from it. It is my belief that other companies must also look to emulate these examples.
What are these companies doing differently?
There are two things that technology offers today. Today, it is very easy to launch a product and go to market with it. For instance, there is a company called partsearch.com. This company has catalogued 8 million parts for various consumer electronic products and digital appliances and has been immensely successful in selling these parts, which were otherwise difficult to find.
Also, since it uses the Internet, the company can sell its products globally. This is the reach that technology offers.
Another big benefit that technology offers companies is that they can test market their products quickly. You can put a product or service for offer and quickly find out whether it's appealing.
Earlier, this would not have been possible: once you built the product you needed to find distributors and retailers, put the product on display in stores and then find out whether or not it was a good bet. Today, the process is far simpler. The Net has ensured this.
But these are startups. What can established large-scale businesses do?
Established businesses first need to realise that they are not competing with just other established businesses. Today, a 20-year-old can start a business and begin competing with them. Indian companies, especially the large Indian service sector companies, need to enter new businesses. These companies, like Infosys, have a business model that depends heavily on people.
Raising a company that is people dependent year on year by 20-30-40 per cent is a challenge that will be very difficult to sustain. After a point, the very economies of scale that they benefit from will work against them. Hence, they need to find other businesses where such high growth is sustainable.
The biggest mistake large companies make is that they are reluctant to take risk. Most of the companies are publicly held and hence they are averse to taking risk. But if you want to make innovation a part of your culture "" and you have to have such a culture to be able to grow today "" then you have to take intuitive and bold decisions. You need to look at creating process changes. Consider Minute Clinic, a US-based health care firm that has transformed the US health care business.
In the US, health care is largely taken care of by doctors who work on their terms and are expensive. On a weekend, even if a child complains of something as minor as pain in the ear, the parents have no option but to rush to the emergency ward of the nearby hospital, which would cost their insurance company a minimum of $200.
Now, Minute Clinic is a large retail chain that has senior nurses from hospitals who diagnose and treat minor ailments 24x7 around the year. At these clinics, the charges are lower and patients are seen in about 15 minutes. Thanks to the new delivery method the clinics are loved by patients and insurance firms.
How do large organisations begin such changes?
Change always begins at the top. For such changes to happen the leaders in these organisations must drive innovation and change within their company. Most large companies find a profitable business model and thrive by sticking to it or perfecting it.
However, once in every five or 10 years, companies need to look at either making a dramatic change to their product or their delivery system. And here it is not just about diversifying your business: it is about undertaking a fundamental re-engineering process.
How do you understand a company needs to re-engineer itself?
One of the surest signs is that you are losing business. But that is the final indicator and comes too late in the day. Among the early signs is a shortage of funds to invest in new ideas. If a company is growing at a decent rate and still finds itself short of budgets for new businesses, then there is definitely something wrong in the way it is doing its business.
Another sign is when volumes of a company are increasing, but profit margins are shrinking. Even comparing delivery cycles with those of others is a good measure of finding out if re-engineering is required.
If your cycle time is way longer than those of your competitors, that's a sure sign you need to change the way you do business. Look at the US automobile industry and you will find all these signs there. Their products are of poor quality and losing sales, their processes are not efficient and their delivery cycles are longer.
How can a company that shows any of these symptoms take a path of recovery?
You need to get your focus right. You need to identify ways that will change your business dramatically and go about implementing them. See it as a process change, and not a war of change. Look at IBM. Its transformation from a hardware company to a service company is stunning: it sold its entire laptop business to Lenovo, a very bold move aimed at bringing a dramatic change in the way it did business.
Now, many companies cannot take such risks because they are publicly held and shareholders are too demanding. Since they are answerable to the shareholders they take far less risk. I think companies should be privately held as that allows you far more freedom.
