JIM CHAMPY DISCUSSES X-ENGINEERING A CORPORATION

How is X-engineering different from Reengineering?

When Michael Hammer and I conceived REENGINEERING THE CORPORATION, we recognized the economy was going through enormous changes and businesses urgently needed ways to respond. Our message was that work would have to be redesigned or reengineered in terms of processes rather than tasks or departments. The impact of reengineering was internal. In other words, the reforms ended at the company gate.

For the past five years, the technology revolution and the global economic realignment demanded that businesses prepare for the next stage of transformation. Reengineering must now be extended to include all stakeholders, not just a company's shareholders.

I wrote X-ENGINEERING THE CORPORATION to help managers confront the new challenges of connectedness and dependency. Where reengineering showed managers how to organize work around processes inside a company, X-engineering argues that the company must now extend processes outside, integrating them with other companies.

What does the X mean?
X stands for crossing boundaries between organizations. X also marks the spot where intuition joins technique and solutions emerge. X-engineering is the art and science of using technology-enabled processes to connect businesses with each other, as well as their customers, to achieve dramatic improvements in efficiency.

Explain boundary crossing.
X-engineering requires managers to ask who should participate in the creation and delivery of a business proposition—customers, suppliers, partners and competitors—and how far they should go in integrating their processes.

Solectron Inc., a leader in electronics manufacturing, has done seamless work across organizational boundaries. The company originally made its own products, but by introducing well-honed processes that respond dynamically to the needs and expectations of customers, it now manufactures products for such brand names such as Dell and Nortel.

Does the Internet play a role in making these boundary-crossing connections?
The Internet is the central nervous system of X-engineering. The Internet allows organizations to become creators of change, not just tools of change. Because we can now gather, analyze and share information with speed and sophistication, organizational intelligence is raised dramatically. Every day, process-savvy companies use the Internet to exceed performance levels unimagined 10 years ago.

FedEx found major savings by encouraging its customers to track packages via its Web site. The company spends $2.14 to track a package if a customer calls its phone center, but only 6 cents if a customer uses the Web. FedEx receives more than 600,000 such queries a day.

Paradoxically, the nature of competition today leads companies to cooperate. Billions of dollars could be saved if companies shared processes—with customers and suppliers—that are now essentially redundant.

Are you advocating that businesses share information with competitors?
Connectivity is the hallmark of X-engineering. The future belongs to companies that recognize the primacy of relationships in the networked marketplace. X-engineering is about harmonizing relationships so companies can tap the full sum of the intelligence and experience of all the people in its network of customers, suppliers and partners.

SciQuest recently established a new division, E-Services, with the goal of sharing some of its proprietary process with others. E-Services has the potential to manage the catalogs and Web sites of SciQuest’s suppliers just as it does its own—charging a fee for the services.

How is X-engineering different from e-commerce?
Most companies think of e-commerce as a technical addition to their existing business. With
X-engineering, technology is the backbone of their business. X-engineering is not about automating old processes; it’s about creating new ones that leverage information technology.

Process is one of the three P’s of X-engineering. What are the other two?
A company’s processes, which are all the things it does to create and sell goods or services, includes all the methods involved in business dealings with external players such as customers, suppliers, distributors, partners and shareholders. The second P is the business proposition, which is a company’s best effort to meet a customer’s essential need through products and services. Whatever the proposition may be, it will stand or fall on its ability to create new value for the customer. The third is the extent of participation with others in creating shared processes.

How does X-engineering create more value for a company?
Creating compelling and distinctive business propositions for customers is a continuous process. The X-engineered organization leverages its processes for maximum push and allows its customer maximum pull. At the intersection of those forces sits the business proposition. X-engineering improves price, speed, quality and variety—the components of a valuable business proposition.

How do managers decide what should be X-engineered?
There are six principles to keep in mind when looking for opportunities to X-engineer. 1) Follow the money: not just internal costs, but also those of customers and suppliers as well. 2) Look for opportunities: to reduce capital expenditures for all participants. 3) Go broad: excess costs aren’t generally attributed to a single activity or process. Look across processes to those of customers and suppliers. 4) Know what customers are going through: ask about their realities and challenges rather than their immediate needs. 5) Chart breakdowns: talk to customers directly and openly about problems as they occur, which will provide insight to expectations. 6) Fish upstream: the cost of a product, service or process is substantially determined in its design phase. Try to participate with customers and suppliers in this phase.

You mention a fourth and final P as well.
X-engineering is a place, but not a final destination. It’s a place where innovation is nurtured by a constant flow of information and is supported by an invisible technology infrastructure. It’s a place where information technology improves the human potential and where work has been redesigned to make it less of a burden and more of a joy.

Is re-engineering over?
The age of reengineering is just beginning. We have at least twenty-five years of major process change to go. X-engineering is the next phase.