Using Scenario Analysis to Manage the Strategic Risks of Reengineering

  • Eric K. Clemons
  • July 15, 1995

Major business reengineering efforts represent an organization’s commitment of millions of dollars for redesigning internal organizational processes, changing fundamental product delivery and customer service procedures, and often reexamining and repositioning corporate strategy. These efforts are inevitably accompanied by millions of dollars for replacing the information infrastructure and developing new application code to support the new processes, procedures, and strategies.

Just as inevitably, after completing a reengineering project, the organization lacks both resources and will to undertake a second reengineering effort to resolve the first project’s major deficiencies; thus reengineering generally constitutes a lasting legacy, and whatever is decided about the organization’s future design and built into the information systems will constrain the corporation for years.

Reengineering projects are inherently risky and uncertain. While the individual risk components associated with the projects are the same as those of any other large systems undertaking, the specific risk profile of reengineering projects is fundamentally different. In particular, the risks either of building the wrong systems or of terminating prematurely and thus completing no systems are both greater.

Successful business reengineering must begin by examining an organization’s future and its operating environment; based on this, reengineering must determine which of the organization’s fundamental assumptions about the future to reexamine and which strengths based on these assumptions must change. Techniques like scenario planning can greatly reduce risk and help executives properly focus their reengineering efforts.

Business Reengineering Defined »

Business Reengineering Defined

While almost everyone is convinced that reengineering is critical, not everyone knows what it is. Part of the confusion stems from the use of “business reengineering” to describe three different concepts. As commonly used, reengineering can refer to any of three degrees of fundamental business change:

  • Reengineering can mean business process redesign, or BPR, the least radical degree of change. It entails redesigning processes to make them more efficient or improve service quality. However, BPR does not require a fundamental change in the purpose of the process, or in the larger processes in which it is embedded.

For example, when Rosenbluth Travel, a small Philadelphia firm, sought to eliminate even the possibility of certain classes of travel agent error, it developed a scripting language, PRECISION, to support reservation agents.