Monday, December 29, 2003

Business Service Reengineering

Business process reengineering was very popular in the 1990s, following the works of Michael Hammer and other gurus.

While successful in some quarters, it was a complete waste of time in others - in particular, the financial services industry.

This was largely because of an inappropriate concept of the business process, and the source of value in services. A bank does not make money converting blank application forms into mortgages, it makes money borrowing from one customer and lending to another at a higher rate. An insurance companies does not make money selling policies, collecting premiums and processing claims; it makes (or more often loses) its money trading and redistributing risk.

In the 1990s, the reengineering effort typically focused on improving the clerical workflow. While this sometimes generated some operational efficiencies, it rarely added any value to the fundamental service proposition on which the business was based.

In contrast, a service-oriented view of business allows us to embark on structural and process improvements that are directly connected to the sources of business value.

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