The restructuring wave that swept across the business world in the early nineties has abated. The business process re-engineering (BPR) movement was a conspicuous part of this wave. It may have served a purpose as a survival response by businesses to the economic recession that was occurring at the time, but it has also had its day. There is now the emergence of a complementary approach.

BPR's particular strength was its focus on identifying core processes in a business and examining ways in which these processes could be honed in order to achieve corporate goals more effectively. The idea was that a process could be made cheaper and more responsive to customer needs by stripping away peripheral activities and bureaucratic layers.

BPR was not about entering new markets or introducing new products. It was about rearranging existing processes with the help of new technology. The rise of BPR coincided with the widespread adoption of new IT systems based on PCs, networks and the Internet. They permitted more decentralisation by improving communications, which allowed firms to strip out layers of middle management and cut more costs as the recession took hold.

The advocates of BPR said that it required the following four basic actions:

• Assess fundamental organisational objectives
• Identify core processes
• Clarify objectives and identify associated goals
• Achieve reform through reorganisation and the incorporation of new IT.

That may have been an eminently reasonable basis for organisational restructuring at the time but the approach incorporated critical weaknesses. There are two main conceptual difficulties with BPR. First, it has an inherently high level of disregard for the impact it may have in social and behavioural terms. BPR's cost savings were usually achieved through staff reductions, so the movement became associated with waves of job cuts that were often implemented by consultancy firms brought in for the purpose. Organisations that survived re-engineering were often drastically slimmed-down versions of their former selves. They often found that their remaining employees were overworked, demoralised and burned out. The advocates of BPR have often argued that the problem here was that the re-engineering had been done insensitively or that the organisations concerned weren't good candidates for re-engineering.

The second flaw of BPR was its tendency to lack "contextual analysis". The practice of re-engineering took on a rather mechanistic, macho quality over the years, with the idea that a given set of practices could be applied in any situation with no regard for an organisation's particular circumstances. This failed to recognise the full value that employees and their accumulated knowledge brought to a business.

In practice, BPR often produced a quick fix to perceived problems, but at a long-term cost that may not have been immediately apparent. It caused specific practical problems including the following:

• A decline in morale. Many service functions in an organisation - eg, marketing - rely heavily on trust, motivation and enthusiasm. A re-engineering exercise may well erode these and lead to a deterioration in performance. This may be a critical loss in some types of business.
• A loss of communication and co-ordination. Re-engineering typically involves stripping out layers of middle management in order to produce a flatter and, hopefully, cheaper organisational structure. But middle management often plays a subtle role in ensuring that different parts of an organisation know what each other are doing.
• A loss of quality and control. Farming out both business processes and elements of production can achieve immediate cost savings, but with adverse consequences for flexibility and quality. Outsourcing your firm's customer service function to a call centre company overseas results in loss of control over what happens, while the contracting involved makes it difficult to change any arrangements.
• "Dumbsizing". There are cases where organisations have reduced their headcount only to have to hire back the same employees whom they ave released.

Revitalisation
It is now widely accepted that BPR is in essence a backward-looking approach. It takes what has happened in the past and seeks to improve on it, but with limited regard for what's going to happen in the future. The concept of revitalisation, on the other hand, is in essence forward-looking. It requires a business to evolve its operation by developing its products and markets using a portfolio of options.

The classic approach to the consideration of these options is the Ansoff matrix, first presented in 1957. An adapted version is shown in the table. The central concern of revitalisation is not cost engineering. Market penetration is normally a relatively low-investment, low-risk strategy. It involves taking existing products or services and trying to increase your business's market share by meeting customers' evolving needs. At the other extreme, diversification (through either organic growth or acquisition) is likely to be a high-investment, high-risk strategy.

BPR and revitalisation are not best considered as alternatives. Rather, they complement one another. The first seeks to perform existing activities better and the second seeks to evolve the activities being performed. They are different dimensions of business strategy and cannot be considered in isolation. Hammer's then influential but now infamous 1990 Harvard Business Review article, "Re-engineering work: don't automate, obliterate", should be viewed in that context.

ANSOFF MATRIX ADAPTED FOR REVITALISATION

	Present products	New products
Present markets	Market penetration	Product launch
New market	Market development	Diversification

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Bob Scarlett is an accountant and consultant. This article is contributed by CIMA (The Chartered Institute of Management Accountants) and it first appeared in Financial Management, CIMA's monthly magazine for its members.