Re-engineering in a Downturn

At the time of writing, the UK and other Western countries have been in a mix of recession/no growth/low growth since the financial implosion of 2008. How does this affect firms’ ability to make major innovation such as re-engineering? How can such change be successfully made during an economic downturn? Recessions are nothing new (for the over 30s anyway) and in the past, progressive businesses have transformed themselves during a recession. Nintendo, famous for its (then) radical Wii gaming machine, only moved away from its core business of making playing cards in the late 1960s when its market collapsed. IBM re-engineered itself from a computer hardware business into the world’s leading IT services business from near financial implosion in the early 1990s. HP started up in the famous garage in Palo Alto at the end of the Great Depression in the USA in the 1930s. In fact adversity can be a powerful force for business improvement if harnessed effectively by management.

An economic downturn can be an excellent time for re-engineering.

Case Study 15 Re-engineering Real Estate Purchase

Introduction

In 2011–2012, Codexx worked with a major UK firm’s Corporate Real Estate department, with the key objective being to improve their margins through efficiency-driven cost reduction. Activity in the UK commercial real estate sector had contracted significantly since the 2008 downturn and in consequence Real Estate departments in law firms were having to compete for a smaller pool of work – which had driven prices down.

The initial focus of the project was on the property purchase due diligence service, with a scope from heads of terms to post completion. A team of partners, associates and support staff was established to work with Codexx on the re-engineering project. The firm’s primary focus was on cost reduction, but Codexx experience was that value improvement should also be a key objective in a re-engineering project – as this is an important differentiator. At the very least the client experience should be improved. So as part of this project the partners met with a number of key clients to review the value they received from the firm compared to rivals and also to explore their service experience.

This enabled the identification of improvements required in the firm’s value profile for key elements of the purchase service as well as focus areas in the service ‘moments of truth’. Client feedback from these meetings was very positive.

In parallel, mapping and analysis work on the current ‘AS-IS’ service identified wastes and many areas for improvement; this helped to further engage the team in the project. Multiple improvement projects were established covering both new products and cost reduction, involving the development of SOPs for repetitive tasks and the increased use of IT and non-legal administrators. The net result was identified cost reduction in excess of 25 per cent and service improvements. A Partner was selected to run each project and they formed a small team of other partners and associates. Each project’s objectives and project plan was defined. An overall monthly review structure, involving the programme steering team (comprising the partners leading the projects together with the Head of Innovation and Head of IT) was established and Codexx helped run the first two sessions. Then the steering team picked up responsibility for the programme management.

Unfortunately the programme then temporarily stalled as the partners involved were consumed in the normal daily business and, in the absence of a dedicated Programme Manager, the monthly reviews were not held and project progress slowed significantly over a six month period before regular programme reviews were restarted. At the time of writing this project is in the implementation phase and has now delivered the key projects for the use of non-legal administrators, the use of a standard purchasing procedure and improvements in reporting (Source: Codexx).

Commentary

Project slippage during the implementation phase is an all-too-common occurrence in re-engineering projects with professional service firms. Once the tight working required during the AS-IS mapping and review and TO-BE design phases are completed and the individual projects are commenced, external consulting support usually diminishes significantly if it is not completed. Firms often underestimate the work required for effective implementation and underestimate internal time and external support required. Basic but effectively applied project management disciplines are required during this phase to realise the benefits of the innovation project – in a timely way. This is a key challenge for professional service innovation and is discussed fully in Part IV – Managing Key Challenges.