Our opening case study provides a perfect example of how successful quantum change unfolds through a series of highly leveraged "15% initiatives" that create new contexts in which radically new things can happen:

The new CEO recognizes that she's inherited an organization in desperate shape and does something nobody has done before: she survey's staff opinions on the situation. This would have been a disastrous step if they'd already been surveyed to death. But in a context where employees had all but been ignored, it was exactly the right thing to do. The survey was a high leverage 15% action, and so were the other key decisions and actions that launched the change on its uncertain way:

• The decision to establish a cross functional team broke familiar boundaries;
• The status of the people selected to the team communicated that the project was serious and not to be ignored;
• The projects selected to pilot manufacturing redesign were crucial in demonstrating that meaningful results could be achieved;
• The decision to confront the rumour "grapevine" was crucial in tackling forces that threatened to undermine the whole change effort.

At each stage of the change process the CEO and her change team were confronted with a fork in the road. One branch led to a new future: the other back to the past. They used their 15% to launch simple well-targeted initiatives that could keep the project on the right road. The quantum change eventually achieved was the result of this unfolding process.

We see the same process in the major reengineering and other success stories that are celebrated in the management literature. To illustrate, let's take the cases of IBM Credit, Ford, Taco Bell, Capital Holding, Bell Atlantic, and Hallmark Cards, which were the major cases featured by Michael Hammer and James Champy to establish the success of Reengineering as an approach to change, and the major transformation of the Brazilian company Semco, led by Ricardo Semler. Semler's approach with its emphasis on highly individualistic leadership is usually seen as being at the opposite extreme of the programmatic approach to change represented by reengineering, and the differences confound many people. But, as we will show, there are amazing commonalities when you tap the underlying principles on which their success is based. [6]

Case Studies: Quantum Change in Action

	IBM Credit
	Ford Motor Company
	Taco Bell
	Capital Holding Corporation
	Bell Atlantic
	Hallmark Cards, Inc.

IBM CREDIT

At IBM Credit the highly bureaucratized process for approving financing requests was so slow that it took five separate departments an average of six days to close a deal. Salespeople were incredibly frustrated because in the interim, many customers took their business elsewhere. Attempts to streamline the process all failed until one day two senior managers decided to walk a typical claim through the entire process for themselves. The experience was crucial since it revealed that the whole process took just ninety minutes to complete, and pointed to a simple solution. Instead of trying to streamline and reorganize relations between the five departments, it was decided to take the whole process of credit approval out of the hands of the specialists and make one generalist responsible for completing the task. Average completion time was reduced to four hours, and the productivity of the system as a whole was eventually increased one hundredfold through the introduction of new technology, using a small group of skilled specialists as a back up resource to support the generalist's work.

As Hammer and Champy have shown, this case provides a wonderful illustration of the breakthroughs to be achieved by rethinking and reshaping complete business processes with the customer in mind. But look at how the change happened. It wasn't the result of a formal program so much as of a 15% action on the part of two managers. By walking a typical claim through the whole process they found a way of breaking the bureaucratic stalemate, opening the way to a series of key improvements. Reengineering , like other programmatic approaches to change, is most successful when it's implemented through high leverage actions that create a new context for those involved in tackling key problems. The pattern is also evident in the following examples. Without this kind of leverage change initiatives are as likely to become empty, expensive rituals, as means of creating significant breakthroughs.

FORD MOTOR COMPANY

The dramatic breakthrough at Ford Motor Company's North American Accounts Payable Department came when a group of Ford managers visited Mazda in Japan and found that the work being performed by five hundred people at Ford was being done at Mazda by five. The executives realized that instead of just trying to improve the accounts payable system they should focus on rethinking the whole process of procurement, encompassing purchasing, receiving and accounts payable. This new focus reframed the whole business problem, allowing them to find a solution whereby the receiver, supported by an appropriate information system, could authorize payment for goods received when backed by relevant purchase orders. At a stroke the accounts receivable function was eliminated, reducing staff to 5% of the original number in the form a small team of people handling exceptional circumstances.

Here again we see the effects of high leverage actions creating a new context where new things can happen. The visit to Mazda transformed executive assumptions about what was possible. The focus on the importance of the receiver as the crucial point in the procurement process allowed them to lever a complete transformation with dramatic results.

Hammer and Champy and other proponents of reengineering do an excellent job in promoting the power of reengineering as a concept. But they tend to underplay the significance of finding the high leverage initiatives that spell the difference between failure and success. Too much emphasis is placed on selling reengineering as a solution, and too little on the strategies and tactics needed to make it work. Yet the lessons are there in their case studies. Take for example the major strategic transformations achieved at Taco Bell, Capital Holding, Bell Atlantic, and Hallmark Cards. They all lend support for the emergent "15% nature" of successful change.

TACO BELL

Under the leadership of John E. Martin Taco Bell has been transformed from a small regional $500 million company in the quick service restaurant business into a $3 billion company with its sights set on $20 billion in sales by the year 2000. Martin attributes this breakthrough to the insight that the only way that Taco could become a giant player was to focus on the value given to the customer in terms of the value of the actual food and paper in the customer's hand.

This led to a search for ways of reducing all costs except those of goods sold, and ended up transforming the whole business. As Martin puts it, "With that decision we were creating a true paradigm shift that launched our entire reengineering program... By thinking entirely out of the box... we unleashed a power within our company that has produced enormous success and ...has enabled us to think realistically about becoming the dominant force in the convenient food industry within the next ten years."

The focus on creating a better deal for the customer led to an attack on all overhead and marketing costs, a flattening of the hierarchy and redefinition of jobs to make the restaurant manager's role more important, new yardsticks and controls for measuring performance in terms of sales, profitability and customer satisfaction, and many innovations in relation to the use of new technology. One thing led to another as the changes rippled through the organization. For example, a decision to increase the focus on the customer by reducing the kitchen area of outlets from 70% to 30% , led to search for innovations that would allow more preparation of food outside the restaurant. This, in turn, led to the idea of "kitchenless restaurants" and the idea that the company should be taking the food to where people congregated rather than expecting the people to come to them, This in turn is leading to a reinvention of the basic business that is taking the company out of the traditional fast food restaurant niche into becoming a value leader for foods for all meal occasions.

The changes at Taco Bell have been driven by a quantum sense of vision linked to a highly leveraged set of insights and actions that have resulted in a fundamental reengineering of the company. The question we ask is whether the success has been driven by a reengineering program, so much as by a series of 15% initiatives that have produced a set of reengineered outcomes?

It may seem paradoxical to describe this change as being driven by the 15% principle. But that's exactly what happens. Thousands of companies are driven by a vision of making customer needs the central point of reference. Few succeed in the manner of John Martin and Taco Bell. The key, as Martin says, is to find ways of making the vision realistic and actionable. In his case the decision to drive change around cost reductions outside the direct costs of good sold, created a sense of purpose and direction that allowed all the detailed initiatives to unfold. They were not planned or programmed in advance. They emerged as resonant 15% opportunities along the way.

CAPITAL HOLDING CORPORATION

We see the same pattern in the transformation of Capital Holding in the restructuring of their direct marketing insurance business. In the late 1980's the company realized that the mass market for insurance was disappearing and that more customized approaches were necessary. Driven by the vision of creating a strong customer-focussed company, various initiatives were launched. As Pamela Godwin, the Senior Vice President who headed one of the project's cross-functional teams put it, despite the aim of reengineering the whole process it was quickly learned "that you can't plan an entire reengineering project in advance, because what you discover during the project changes your plan. Every change you design is a living rough draft not a perfected process...The problems you encounter themselves lead to better solutions, which is why it's essential to attack change in manageable chunks."

The process that unfolded under the leadership of Godwin and her colleagues is a model of what a 15% approach to change looks like in practice. In the context of a cultural audit designed to take the pulse of the existing organization, a model for integrating sales, service and marketing was developed, and the details allowed to unfold through pilot projects and prototypes that would allow experiments with new modes of operation without "betting the farm." For example, a section of regular customers were taken "off line" and served by a new customer management team supported by PCs and appropriate information systems. The prototype allowed team members to learn from the experience and reshape their relationships and roles. For example, it was discovered that marketing and service were really one and the same.

This kind of prototyping allowed systems to be redesigned in a way that built the infrastructure of the new company. The change was conducted in "manageable chunks," piloted, tested and refined in ways that allowed the organization to learn and evolve as it went along. The problems that arose themselves suggested solutions that could not have been imagined before. The aspirations and results belong to the category of quantum change. But they were linked by a lot of 15% activity on the part of Godwin and her colleagues.

[Ed. Note: the firm has since changed its name to Providian]

BELL ATLANTIC

At Bell Atlantic, a $12 billion communications company facing the challenge of moving from a monopoly position to one of open competition while meeting new technological challenges, reengineering was seen as a means of creating dramatic improvements in cost and service. Under the leadership of Regis Filtz, head of Carrier Access Service, first steps were taken. Filtz decided to meet first-hand with the three largest long distance carriers to understand what they wanted long and short term. He sees these meetings as crucial in getting to the heart of the situation, in a way that was impossible through more formal market surveys. From there the project moved to an analysis of current problems, revealing a slow, expensive delivery process involving 13 different organizational units and 27 different information systems.

To address the problems two cross-functional reengineering teams were established with a view to slashing costs and service time. One of these teams, known as the "core team," was given the seemingly impossible goal of achieving a new work design that could provide cost effective service with a zero cycle time. The other team was charged with testing and implementing the ideas with no holds barred. They were empowered to make any changes in procedures and work processes. As Filtz reports, the leadership and membership of these teams was crucial, and much care was taken to ensure that they had the character and skills to make them effective.

Using close communication between the two teams a rapid cycle of improvements were soon created. Within a month the core team had developed the prototype of a new system that was then piloted and improved in practice. From there it was spread into other operating subsidiaries.

The process delivery changes were then used to drive further changes in management systems and management practices based on cross functional modes of operation. In this way the pilot projects prototyped the new style organization, their obvious success - with service cycle time being reduced close to zero in many cases, and costs being reduced from $88 million to $6 million - sending a strong message about the need for change to the culture at large. The improvement process continued as the core team engaged in further experiments designed to create further changes in modes of operation by using multi-skilled individuals supported by new technology in place of the cross functional teams.

At Bell Atlantic we see the same process of quantum change as in the other case studies. It's driven by carefully targeted initiatives and experiments capable of prototyping new styles of organization in practice. Success breeds success as the organization uses carefully chosen initiatives to lever large effects. There's no attempt to change everything at once even though the aim is quantum gain. With hindsight there is a very clear course to the change. It's a reengineering project that's worked! But the precise path emerged as the project went along!

HALLMARK CARDS INC.

The transformation at Hallmark was another top-down initiative designed to create a new competitive edge in the face of fragmenting markets, expanding channels of retail distribution, and smaller average print runs, all leading to fundamental changes in the economics of Hallmark's business. The project was driven by a "quantum vision" of achieving radical transformation in the way the company did business, but again, unfolded in a step-like way.

The first step was to get the company's 40 senior executives "on board" through an off site meeting. From there the company proceeded to create a broader context for change by getting the chairman, Donald Hall, to articulate the company's "beliefs and guiding values" for communication to employees generally. A clear set of business priorities was also set, emphasizing the importance of getting new products to market in less than a year; producing products and promotional programs that consistently won over both buyers and retailers; and reducing costs with continued improvements in quality. As Robert Stark, President of the core business unit puts it, "It all boiled down to dramatically improving performance at the retail level" through Hallmark's specialty stores and other distribution outlets.

Against this background the company embarked on what Stark calls "The Journey." They sought , in his words, "to demonstrate the viability of some of (the) concepts and come out with significant wins. That required picking our pilot projects carefully. They had to be believable and reproducible in another area of the organization. The improvement had to be order-of-magnitude - something you couldn't get from continuous improvement, for example."

As in the other cases the whole change was driven by pilots and prototypes that brought the challenges down to a manageable size. For example, they grouped one hundred people into nine teams to address what Stark calls a series of "leverage points" - the critical parts of the business that needed to change. From over a hundred recommendations for design improvements, a dozen were selected for validation in a series of pilot projects. As a result of the experience critical improvements were made, for example, around the use of new technology. Specific understandings of how new technology could improve the business came through the experiments. As Stark reports, there was a faith in the idea that new technology could improve the business, but the details had to emerge and be refined through practice.

For example, an initiative designed to create instantaneous market information led to a number of stores being outfitted with computerized point-of-sale information systems. Decision support systems were then produced, allowing fine-grained real-time analysis of what was selling and what wasn't, using experiments with in-store layout, promotion and advertising to determine effectiveness on the basis of immediate feedback.

In another situation, pilot experiments in relation to the product-development cycle for a new line of cards allowed the time to market to be reduced from an average of two to three years to less than a year. Over half the line hit the stores within eight months. The breakthrough was achieved by prototyping a system whereby the development process broke the boundaries between traditional departments and functions by using integrated teams that could communicate and act creatively in a more direct way.

Hallmark provides an exemplar of the reengineering process and of how it is possible to achieve quantum change. But the change is not achieved at a stroke. It unfolds in what we are calling a 15% way, taking a course that could never have been clearly anticipated at the start.

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