The Re-engineering

Diagnostic Cookbook
Authors: Dave Fleisch
Peter Bowen
Contributor: Sri Rajan
October 2002
Copyright© 2001 Bain & Company, Inc.

This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Re-engineering Diagnostic – Case Example

Situation:  Client is a global, multi-billion dollar company in the low-tech computer and
process equipment industry
- 3 Product BU’s
- 1 Service BU (break-fix for Product BU’s plus value-added services)
- Large corporate structure

Issue:  Client faces two key issues:

- Earnings are under significant pressure
- Consensus internally that processes are not working well and are hindering
the client’s business in all aspects (customer responsiveness, sales
productivity, offers, market share)

Two-phase  Phase I: Diagnostic designed to prioritize opportunities for re-engineering

approach: - Identify costs by function through “processizing” of P&L – taking line-items
such as salaries, outside contractors, telecom, etc. and mapping them to
identified processes (offer development, sales, logistics, etc.
- Size cost reduction opportunity by function through external benchmarks
- Measure “effectiveness” of processes through internal interviews and
understanding of performance against metrics

 Phase II: Re-engineering of processes prioritized in Phase I

ReengineeringCook
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Contents

 Detailed “How-to” based on

disguised case example

 Top 10 Watch-outs

 Sample Workplan

 Back-up
-Function to Activity Maps

ReengineeringCook
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GXC
 Phase I roadmap (Note: Numbers on this
page used throughout preez as reference
points) 1 2 3 4
Map activities
Processizing by function Slot costs and Ensure all Ensure all
Obtain P&L of Map functions to
the P&L: (to ensure headcount by corporate numbers tie to
record (by BU) processes consistency function allocations tie out P&L of record
across BUs)
5
Distribute
infrastructure Obtain
costs to organizational
processes (where maps
relevant)

Functional and process view of costs and

headcount with clear “line of sight”

6 7 8
Benchmarking: Compare BUs with
Agree on set of Obtain cost data benchmarks;
targets by function highlight significant
variations
11
 Direct competitors  Ensure apples to Define the cost opportunity Opportunity
 Analogous industries apples comparison
prioritization
Obtain data on
metrics and high-
level processes
9
Assessing Identify Conduct Compare 10
effectiveness: functional heads,
interviews to performance with
owners and
customers of assess internal targets and
processes effectiveness benchmarks
ReengineeringCook
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GXC
Assess the effectiveness
Phase I was geared to produce three
analytic outputs
“Identify”:
Functional cost allocation
We will allocate functional costs to core
processes in order to determine true process
costs and identify areas of opportunity
ILLUSTRATIVE

Functional cost center Total $

Service
Product Offer
Dev’t Dev’t C D E F
Processes
G H I J K L M N O
“Size”:
Internal and
• Product BU#1 R&D • % % %
• Service BU Marketing • %

• Product BU #2 • %

external benchmarks
Manufacturing
•
• Total Co. Finance • % % % % % % % % %

• ___ •
• ___ •
• ___ •
• ___ •
• ___
• ___
•
•
For each prioritized sub process, we will
• ___
• ___
•
•
determine target performance metrics – this
• ___
• ___
•
•
will size the opportunity.
“Measure”:
• ___ •
• ___ • ILLUSTRATIVE

Total

Customer and
Key Performance Internal External Financial
Focus on refining definition of large opportunity processes Sub-process Metrics Best Practice Benchmarking Target Opportunity

• Product • Time to market • X days • Y days • Y days • $XM

Internal feedback
BOS RFG reengineering proposal July 22 14
development • Total cost •X % •Y % • Y%
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent. • Customer?

• Credit approval • Credit decision time • X days • Y days • Y days • $XM

• Default rate •X % •Y % • x%
Metrics Comments
Daystocomplete
processX

BOS RFG reengineering proposal July 22 15

“O ur pricing
process
This information is confidential and was prepared by Bain & Comp any solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.

Custom er significantly
expectation
slow sdow nour
abilitytorespond
tocustom ers.”

BOS NZR_TRASH 4

Thisinformationisconfidential andwaspreparedbyBain&Companysolelyfor theuseof our client; it isnot tobereliedonbyany3rdpartywithout Bain'sprior writtenconsent.

ReengineeringCook
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GXC
These outputs would then be used to
prioritize functions for Phase II
= Prioritize for Phase II

High
Major impact on other
processes and/or
customer satisfaction
increase Effectiveness

Clear Priorities
Opportunity to

High
Cost
Areas

Low
Low High
Cost Reduction Opportunity

ReengineeringCook
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GXC
 1First, Bain worked with the client to
map major functions to processes
Core Processes

Order Entry/ Invoicing,

Product/ Offer Order
Sales Collections and
Development Order Mgmt Fulfillment
Payment

 R&D  Sales  Order  Manufacturing  Customer

- Demand management financial mgmt
 Product planning - Order  Distribution & - Credit
Management - Account acceptance Logistics approval
planning - Order entry - Billing
- Warehousing
- Relationship - Order - Collections
 Offer - Staging
mgmt release (A/R)
development - External - Config. and
- Order consolid.
- Service offer communic. tracking
Sub-processes

development - Shipping /
receiving
- Partnering/  Sales Support - Install/
alliance
mgmt - Proposal de-install
creation - Management
- Deal- of returns
specific
pricing  Service
- Contracts /
negotiation
delivery
Corporate

Support Processes
(Law, HR, Other F&A, etc.)

ReengineeringCook
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 Then the BU’s agreed to use consistent
2
methodology to map activities to functions
(see backup for full-sized pages)
Function - Activity Mapping (1 of 6)
Offer Development
• Creation of service and solution
bundles
• Setting warranty offers
• Support Service BU offer
development
Product Management
• Product/program management
• Life cycle support/mgmt
• Pricing strategy
• Creation of list prices
• Development of discount schedules
• Partner management
• Metrics/process management-
monitor and improve solution
effectiveness and profitability
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Function - Activity Mapping (4 of 6)
Pricing
• Deal-specific pricing
This information is confidential and was prepared by Bain & Comp any solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Function - Activity Mapping (2 of 6) Function - Activity Mapping (3 of 6)
R&D (incl. Engineering) Procurement Manufacturing Sales Sales Support Distribution & Logistics Order Entry/Order Mgmt Service Delivery
• Opp/requirements definition • Procurement processes • New Product Introduction • Account planning • Demand planning/revenue • Spare parts forecasting, • Order acceptance • Break/fix services
• Compile functional specs • Vendor qualification - Customer needs analysis outlook provisioning and rework
- Product Engineering • Order entry • Project planning
• Concept planning • Supplier sourcing and selection
- Design for Manufacturing - Oppty planning
• Dedicated order generation/ • 3rd party warehouse • Order consolidation - Establish project baseline
- Lead generation management - Manage project to contract
• Manufacturing Engineering submission employees (if it’s a • Order release
• Design & development • Supplier negotiation - Interest creation
- Test task by salespeople, it stays in • Source customer order to • Order tracking • Project management
• Unit & Integration • Resolve sourcing problems - Assembly Planning • Relationship management sales) supplier - Consolidation & staging
tests/Acceptance test • Materials procurement (including - Layout • Delivery coordination - Schedule install
• Oppty management • Program development (sales
• Conduct field trials/early in plant) - Production Support - Warehouse consolidation - Incident mgmt/escalation
- Qualification effectiveness and efficiency)
deployment programs • Global Manufacturing Engineering - Solution/proposal development - Staging • Site assessment and preparation
• Third party product requests • Sales process/tool management - Order release (shipment) • Deployment and integration
• Quality assurance • Global Mfg Processes • Contract/order mgmt
• Funnel management - Order tracking (incl. Staging)
• Assessments, security and services • Global Mfg Planning - Config/submit orders
• Dedicated proposal center (if it’s a • Transportation management • Move/Add/Change
- Track orders
• Certification dev & lab services • Production Master Scheduling - Implementation/install project task by salespeople, it stays in - Scheduling/routing/bookings
• Software migration
planning sales) - RMA (reverse logistics)
• Business operations • Plant Order Management - Claims management
• Internal capability assessment • Prod Assembly • Order/unit/revenue forecasting • Solution Centers
• Import/export compliance
• Advanced development and • Deliver tracking/invoice resolution • Sales administration
• In-plant Staging / Customiz. • Inventory management (finished
architecture • Services support issue resolution • Customer advocates goods)
• Product Test, Packing & Ship
• Model making/prototyping • Mgmt reporting/reviews
• Kit Assy, Packing & Shipping
• Global Parts Distribution • Channel management (channel
strategy is included in marketing)
- Inter-factory Parts
- Spares • Channel sales (quota people)
• Product Quality • Sales management
BOS Re-engineering for the GXC.V2 26 BOS Re-engineering for the GXC.V2 27 BOS Re-engineering for the GXC.V2 28
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent. This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
Function - Activity Mapping (5 of 6) Function - Activity Mapping (6 of 6)
Strategy Plan/Special
BU Marketing Corporate Real Estate IT F&A Human Resources Law Department Quality Mgmt/Six Sigma
Initiatives
• Channel strategy • Strategic and corporate planning • RE Planning • Applications • Ledger/Accounting (including • Performance management • Transactional support • Six sigma services
- Selection/development • Business development • Facilities management • Networking cost/plant accounting) • Rewards and recognition • Business consulting and - MBBs
- Program development/ • Treasury management - Program development /promotion
• M&A • Engineering, design & • Processing • Staffing (including recruiting)
deployment - Green belt training
• Alliances construction • Security • Payroll • Talent management (including • Intellectual property
• Demand creation - Certifications
• Intellectual property business • RE transactions • Workgroup computing (including • A/P career planning and learning) • Labor and employment
- Customer events/roadshows • Scorecard reporting/metric
- Tradeshows development • Workplace strategies help desk) • Credit approval • Pension & benefits • Litigation and disputes analysis
- Program development • Special initiatives • BU-specific projects • Billing • Employee and labor relations • Corporate allocation • Assessments (intra and inter BU)
- Industry/internal seminars, • Collections
workshops
• Planning (including forecasting)
- Direct marketing campaigns
- Demo equipment support • Project accounting
• External communications
- Collateral development
- Brand identity devel
- Product naming
- Online portal devel/maint
- Newsletters, web seminars
- Field PR
- Advertising
• Internal communications
- Exec pres devel, newsletter
• Business discovery
- Evaluation of new opps
• Market/business intelligence
- Customer research
- Competitor research/intelligence
BOS Re-engineering for the GXC.V2 29 BOS Re-engineering for the GXC.V2 30 BOS Re-engineering for the GXC.V2 31
This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent. This information is confidential and was prepared by Bain & Company solely for the use of our client; it is not to be relied on by any 3rd party without Bain's prior written consent.
ReengineeringCook
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2 Project success hinges on this step
What didn’t work

 At the outset, each BU tried to define what it would include in each function
- BUs claimed “we’re all different”
- We asked that they simply keep track of what was being placed where
- Result: Financials created under this method could not be confidently compared across BUs or rolled up
into “corporate-level” processes
 In addition, resources within a function were spread based on time allocation
- E.g., 10% of Person A’s time spent on this activity is sales, 30% on this activity, which is marketing, etc.
- Result: Lose line-of-sight into where costs and headcount are when moving to Phase II
 Can’t eliminate 15% of a person

Key learnings (what worked)

 Hold “all-hands meeting” almost immediately after kickoff to develop function-activity map
- Have each BU come with a list of activities they’d include in each function
- Go through function-by-function and gain agreement on treatment of activity for this project
- For example, it doesn’t matter where M&A ends up, it only matters that every BU puts M&A resources in
the same function, and that the re-engineering team knows where to find them
 “Slot” resources (whole body and related expenses) rather than spreading
- May not be 100% accurate, but passes the “80% accurate, 100% actionable” test
- Rule of thumb that if individual/ department spent more that 80% of their time in a specific activity or
processes, that is where the headcount and costs would reside.
 Have client create book of org charts that will allow teams to identify specific resources when
re-engineering during Phase II (clear “line-of-sight”)
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 3 Each BU then broke down its P&L and
headcount using the agreed upon function-
activity maps to create “processized” P&L’s
ILLUSTRATIVE
% of Total
P&L Line Items Total Cost Allocated R&D Manufacturing Sales
Salaries and Wages 20,000,000 100.0% 2,000,000 5,000,000 5,000,000
Bonus 5,000,000 100.0% 2,000,000 3,000,000
Benefits and Pension 3,000,000 100.0% 500,000 500,000 1,000,000
Taxes 3,000,000 100.0% 500,000 500,000 1,000,000
Travel and Entertainment 5,000,000 100.0% 5,000,000
Telephone BU-specified 1,000,000 100.0% 1,000,000
Postage and Supplies line items. 500,000 100.0%
Marketing 3,000,000 100.0%
Depreciation Need not 5,000,000 100.0% 4,000,000
Leased Vehicle match across 1,000,000 100.0% 1,000,000
Licensing BU’s 1,000,000 100.0% 1,000,000
Miscellaneous 8,000,000 100.0% 1,000,000
Other Cost 10,000,000 100.0%
Product Cost (Excluding Labor) 130,000,000 100.0% 110,000,000
OCOR 20,000,000 100.0% 10,000,000 5,000,000
Total BU Costs $ 215,500,000 100.0% 6,000,000 130,000,000 23,000,000
blank
Corporate Expenses (allocated) 12,500,000 100.0%
Cross-BU expenses (allocated to avoid double counting) Enter P&L Cost 17 Here blank
TOTAL $ 228,000,000 100.0% 6,000,000 130,000,000 23,000,000

Please enter your total divisional headcount and allocate them to the functional areas listed

% of Total
Total HC Allocated R&D Manufacturing Sales
TOTAL BU HEADCOUNT 2,000 100.0% 50 1,000 500
ReengineeringCook
Note: Template currently resides on GXC book 10
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4 Processized P&L’s were tied back to
records of reference
Product BU#3 - P&L Record of Reference Product BU #3 – “Processized” P&L
Revenue $250,000 Revenue $250,000

Product Cost/ OCOR 150,000 60.0%

Standard Gross Margin 75,000 30.0% Margin before Processes 100,000 40.0%

OMC/OCOR 10,000 4.0% Offer Development - 0.0%

Corporate Allocation Cost 5,000 2.0% Product Management 500 0.2%

BU Gross Margin 60,000 24.0% R&D 1,500 0.6%

Mfg 30,000 12.0%

Selling 20,000 8.0% Sales 15,000 6.0%

G&A 5,000 2.0% Sales support 2,000 0.8%

R&D 2,500 1.0% D&L 21,500 8.6%

Total BU Managed Expenses 27,500 11.0% OE/OM - 0.0%

Service delivery - 0.0%

Corporate Expense 12,500 5.0% Pricing 500 0.2%

Total Expenses 40,000 16.0% Strat plan/ SI 250 0.1%

Marketing 1,500 0.6%

F&A 1,500 0.6%

HR 500 0.2%

IT - 0.0%

Quality mgmt/ 6 Sigma 250 0.1%

Procurement 2,500 1.0%

Real Estate - 0.0%

Law - 0.0%

Other G&A 500 0.2%

Process Costs 65,500 27.0%

Corp allocation 12,500 5.0%

Operating Margin 22,000 8.8% Operating Margin 22,000 8.8%

Total Costs and Expenses 228,000 91.2% Total Costs and Expenses 228,000 91.2%
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4 …as were headcount numbers
Product BU#3 – Product BU#3 –
Record of reference By Function

Full-time 1,900 Offer development -

Part-time 100 Product mgmt 25

R&D 25
Total 2,000
Mfg 1,000
Sales 500
Sales support 125
D&L 150
OE/OM
Service delivery -
Pricing 10
Strat plan/ SI 5
Marketing 25
F&A 75
HR 15
IT -
Quality mgmt/ Six Sigma 15
Procurement 25
Law -
Other G&A 5
Total 2,000
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 5 Corporate and overall costs were tied
out… Product BU Product BU Product BU
Service BU
Corporate
Overall
#1 #2 #3 expenses
Product Cost/OCOR $300.0 $200.0 $150.0 - $650.0

Offer Development 5.0 - - 2.0 - 7.0

Product Mgmt 5.0 0.5 0.5 8.0 - 14.0

R&D 50.0 30.0 1.5 - - 81.5

Mfg 90.0 80.0 30.0 - - 200.0

Sales 87.0 75.0 15.0 87.5 - 264.5

Sales support 20.0 1.0 2.0 20.0 - 43.0

D&L 30.0 5.0 20.0 75.0 - 130.0

OE/OM - - - - 15.0 15.0

Service Delivery 75.0 20.0 - 100.0 - 195.0

Pricing 1.0 - 0.5 1.0 5.0 7.5

Strat plan/ SI 3.0 1.0 0.3 2.0 - 6.3

Marketing 20.0 2.0 1.5 10.0 5.0 38.5

F&A 5.0 3.0 1.5 12.0 29.0 50.5

HR 1.5 0.5 2.0 12.0 20.0 36.0

IT - - - - 80.0 80.0

Quality mgmt/ 6 Sigma 2.5 - 0.3 3.0 1.0 6.8

Procurement 5.0 1.0 2.5 3.0 5.0 16.5

Real Estate - - - - 100.0 100.0

Law - - - - 15.0 15.0

Other G&A 2.0 3.0 0.5 5.0 10.0 20.5

Total Process Costs 402.0 222.0 65.5 340.5 330.0 1,360.0

All/ch. from(to) BU's 25.0 15.0 - - - 40.0

Eliminations (50.0) (50.0)

Cost/Expenses before Corp Alloc’s 727.0 437.0 215.5 340.5 280.0 2,000.0

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 5 …and costs (and HC) were mapped to
processes
Key Order Mgt. Invoicing
Product/ Offer Order
Business Sales Order &
Development($ Fulfillment
Processes ($307.5M) Acceptance Collections
92.5M) ($525.0M)
($15.0M) ($5.0M)

1 Offer devel 3 Sales 5 Order Entry / 7 D&L Invoicing, A/R

(7.0) (264.5) Order Mgmt (130.0) (from Corp F&A)
4 (15.0) 8 (5.0)
2a Prod Mgmt Sales Support Manufacturing
(14.0) (43.0) (200.0)
2b R&D 6 Service Delivery
(81.5) (195.0)

9 Procurement ($16.5M)
10 Marketing ($38.5M)
11 Real Estate ($100.0M)

Supporting 12 IT ($80.0M)
Processes 13 Human Resources ($36.0M)
14 F&A ($45.5M)
15 Pricing ($7.5M)
16 Strategic Planning & Business Development ($6.3M)
17 Quality/Six Sigma ($6.8M)
18 Law ($15.0M)
19 Other (Management) ($20.5M)
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6 For benchmarking, non-direct
competitors were passed through a series
of criteria screens ILLUSTRATIVE
10,000 U.S. companies

2,000
Greater than $2B Revenue

R&D > 2% of Revenue 950

ABC 225

Candidates
for
Benchmarking

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 7 General industry benchmarks were
found by function using secondary research
R&D as a percent of sales Product R&D as a percent of sales Service
BU #1 BU
5.0%
5.0% 1.3%
1.1%
4.2%
1.0%
4.0 1.0

3.0 0.8

2.1%
2.0 0.5

1.0 0.3

0.0 0.0
Product BU #1 Industry median Top quartile Industry median Service BU
(SIC code) (IT services)

R&D as a percent of sales R&D as a percent of sales

Product Product
10.0% BU #2 BU #3
10.0% 1.5%
1.3%
8.3%
8.0 7.5%
1.0%
1.0
6.0

4.0
0.5

2.0

0.0 0.0
Product BU #2 Industry median Top quartile Industry median Product BU #3
(Competitor (Competitor benchmarks)
benchmarks) ReengineeringCook
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7 Direct competitor benchmarks
developed through ex-employee interviews,
cold-calls and research
R&D as a percent of sales R&D as a percent of sales
Product Service
10.0% BU #1 2.0% BU
Prod. mgmt 1.7%
8.0 7.6%
1.5

6.0 1.1%
5.0% Prod. mgmt 1.0%
Prod. mgmt 4.5% 1.0
4.3%
4.0
R&D

R&D
0.5
2.0 R&D

0.0 0.0
Competitor 1 Product BU #1 Competitor 2 Similar industry Competitor 2 Competitor 1 Service BU
non-competitor
R&D as a percent of sales R&D as a percent of sales
Product Product
12.5%
BU #2 BU #3
11.8% 2.0% 2.0%

10.0%
10.0
Prod. 9.2%
Mgmt 1.5
7.5% 1.3%
7.5

1.0%
1.0
5.0 4.3% 0.9%
Prod Mgmt
R&D

2.5
0.5
R&D
0.0
Competitor 1 Product BU #2 Competitor 2 Competitor 3 Similar
Industry 0.0
non-competitor Competitor 2 Competitor 1 Product ReengineeringCook
BU #3 Competitor 3
book 17
GXC
8 Each function’s cost opportunity was
then determined based on processized P&L
figures and benchmarks
Benchmark
Client R&D spend Opportunity
(spend as % of sales)
 Product BU #1  5.0%  ~6% (Average of  $A-BM
Competitor 1 and
Competitor 2 R&D
spend as % of sales)
 Product BU #2  10.0%  ~8.3% (industry  ~$C-DM
median of 4
competitors)

 Service BU  1.0%  1.1% (industry median  $0M

of IT service
companies)

 Product BU #3  1.0%  1.3% (industry median  $0M

of 3 competitors)

 Total Company  4.5%  ~3.2%  ~$E-FM

ReengineeringCook
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9 Interviews with function “managers” in
each BU were done to determine
effectiveness
Large opportunity
Process works well
Product BU #1 Product BU #2 Service BU

Overall  Not enough influence

improvement on product BU’s
opportunity:

Gathering  Requirements not  Approach to gathering  Largely reliant on

gathered in systematic requirements works Product BU’s
customer
manner for features, but not - Need to be more
requirements: for major opportunities proactive in getting
customer input

Other product  Developing/  Field deployment  Lifecycle management

management/ articulating value  Tailor solution to local for service offers
proposition market needs to be improved
deployment: 
 Developing/ Integration of value
articulating value proposition for
proposition products and services
  needs to be improved
Design quality Some compatibility Design quality
given issues between assurance integrated
solutions and current earlier in development
requirements: store systems process

Development time/  R&D standards not  R&D standards have

meeting being met large room for
 Engineering-specific improvement
development 
milestones being met Poor collaborative CAD
commitments: on time tools ReengineeringCook
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10 Metrics were gathered to benchmark
versus targets, relying heavily on existing
data Product BU #1
development cycle metrics
Product BU#1 Customer
happiness w/development cycle
Program "given go"-to-release Percent of customers satisfied
100 100%

80 weeks
80 75 weeks 80 75.0%

60 56 weeks 60

40 40

20 20

0 0
Internal benchmark 2002 YTD Target Product BU #1

Product BU #2 release schedule metrics Internal perspectives (from interviews)

Percent of meeting plan (2002)
“In the requirements phase, we could save months
100%
of time in terms of decision making. It takes too
long.”
80.0%
80 75.0% - Product BU #1

60
“We take forever to launch products.”
- Product BU #1
40

“Our development cycle times are longer than the

20
competitors.”
- Product BU #2
0 ReengineeringCook
Product 1 Product 2 book 20
GXC
11 Finally, all three outputs were used to
plot each function on a 2x2…
Large opportunity
Process works well
Total Cost

High  R&D $XM

R&D/  Product management $XM

Opportunity to increase effectiveness

Product
Mgmt

 Cost reduction $X-YM

opportunity

Opportunities to
Increase Effectiveness:
 Develop rigorous -
customer requirements
/ market intelligence
capability
 Shorten development
cycle time
 Design for total cost
- Product cost
Low
- Serviceability
Low High
 Improving schedule
Cost reduction opportunity fidelity

ReengineeringCook
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GXC
11 …rolling into the overall matrix used to
determine Phase 2 prioritization
High
Major impact on other
processes and/or
customer satisfaction

increase Effectiveness
Clear Priorities

Opportunity to
High
Cost
Areas

Low
Low High
Cost Reduction Opportunity

High
R&D/
Prod.
Sales
Mgmt and Sales
Opportunity to increase effectiveness

Support

Manufacturing
Service
Marketing
Delivery

Order Real
HR IT
Law Mgmt Estate
F&A
Quality
Procurement Pricing

Low
Low High

Cost reduction opportunity

ReengineeringCook
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Contents

 Detailed “How-to” based on

disguised case example

 Top 10 Watch-outs

 Sample Workplan

 Back-up
-Function to Activity Maps

ReengineeringCook
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GXC
Top 10 Watch-outs when doing a re-
engineering diagnostic (1 of 2)
A Re-engineering diagnostic requires the team to cast a broad net across business processes, while capturing
enough data to make the prioritization credible. Such a case can be difficult for a team both from a time and
logistics standpoint. Our team learned some key lessons that would have allowed us to better leverage our work
and minimize yield loss on a difficult case:

Pre-Kickoff
1. Seek to staff the team with 100% resources (if possible)
-This type of case does not fit as well with the 50-50 staffing model
-Client face-time can be vital to building trust and developing relationships
-Interview intensity can be high depending on client expectations for breadth and depth of analysis
2. Set clear expectations on the depth of analysis
-If you are doing a diagnostic to prioritize, explain 80/20 approach and scope
-Client may expect root cause analysis on prioritized process unless otherwise clarified
3. Secure “BU leads,” client contacts responsible for each business unit
-One from each relevant business unit
-They should own deliverables and participate in data gathering and interviews for assigned BU
4. Secure a dedicated (50-100%) F&A contact from client
-Contact should have working knowledge of financials across business units
-Contact should be senior enough to have credibility with project sponsor
5. Expect variability in client’s data -- limit pre-kickoff model work
-Client’s data will invariably be organized in ways you do not anticipate
-Develop skeleton input sheets in Excel to give to client immediately after kick-off (or use ones we posted
on GXC)
-Postpone intensive model-building until you understand the nature of the client’s data

ReengineeringCook
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GXC
 Top 10 Watch-outs when doing a re-
engineering diagnostic (2 of 2)
Immediately Post-Kickoff (request in kickoff document)

6. Gather Client competitive intelligence, process maps and metrics

-Be relentless in pursuing data request to ensure client gives you everything they have (including any
benchmarking data they may have)
-Work with BU leads to identify employees who most likely have prior analysis/benchmarks
-Build into workplan time for individual team members to digest information client provides. This will greatly
improve the productivity of interviews on process effectiveness and benchmarks
7. Start benchmarking as early as possible – agree on targets and depth
-Lay out who will conduct interviews and how benchmarking results will impact prioritization

During the case

8. Share and compare data across different BU’s early and often
-Use Cross-BU workstream meetings to pool knowledge on process effectiveness and benchmarks
9. Get client involved in determining and owning external benchmarks
-Network into internal (client, ex-employees) and external (GXC, research, cold calls) sources
-Ensuring apples-to-apples comparison is key when comparing processized P&L numbers to competitors
-Benchmarks are sensitive issues and will provoke arguments without extensive pre-wires
10. Prewire, Prewire, Prewire
-Build in time for extensive pre-wires, especially on sensitive issues such as benchmarking

ReengineeringCook
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GXC
Contents

 Detailed “How-to” based on

disguised case example

 Top 10 Watch-outs

 Sample Workplan

 Back-up
-Function to Activity Maps

ReengineeringCook
book 26
GXC
 Phase I workplan
I(a) I(b)

Activities/ sub-activities Week 1 Week 2 Week 3 Week 4 Week 5 Week 6 Week 7 Week 8

 Map and describe processes

 Identify areas of value
- “Processize” the P&L
 Collect financial and HR data
 Allocate costs
- Benchmark Client performance vs. competitors
- Collect performance metrics
- Review customer feedback
- Conduct management interviews
 Size opportunities
- Determine performance metrics
- Set targets for each process
 Create prioritization
- Access opportunity vs. ease of implementation
and long vs. short term nature
- Create list of opportunities to pursue
 Build support throughout organization
- Gain consensus
- Publicize effort
 Set phase II track for each opportunity
- Define roles and responsibilities
- Set timing
 Set-up program office

Steering Committee Updates

Kick-off 1st update Final prioritizations Phase II Kick-off

27
GXC
 The team mapped out five key activities to
be done in weeks 1-4
Phase I(a): Phase I(b):
Diagnose and prioritize “Buy-in” and mobilize

CREATE BUILD SET

IDENTIFY SIZE PRIORITIZE
ACCOUNTABILITY SUPPORT PHASE 2
1 Define key  Quantify size of  Determine which sub-  Define who  Gain  Identify
processes and the processes represent should consensus next
sub-processes improvement greatest opportunity pursue from steps for
opportunity for - Cost, revenue each relevant each
2 Conduct
each process opportunity cross- option
- Short vs. long term
management
interviews - Detailed - Likelihood of success  function,
Identify
benchmarking
 cross-BU
 “Processize” the on Identify the “right” metrics to
managers
performance process for prioritized be tracked
3 P&L to determine that
cost/value
metrics processes  Determine
- Cross-BU
opportunity
- Customer needs
potential by benchmarking
appropriate exists
- Benchmarks
process teams to
 Assess ability to   Publicize
- Quick hits Assess ease of design
centralize efforts
implementation specific
4 Benchmark (high-
initiatives
level) Client  Define clear  Divide between intra-
performance vs. financial and BU and cross BU  Set-up
competitors performance efforts program
targets office
5 Review customer  Create prioritized list of
feedback opportunities to pursue
Weeks 1-4 Weeks 4-6 Weeks 6-8

ReengineeringCook
book 28
GXC
 And agreed on a detailed work list for each
week
Week 1
1 Define key  Ensure list of processes
processes and capture all costs
sub-processes:  Group sub-processes
into final set to be used
in Phase I analysis
2 Conduct  Identify by BU key interview
Management contacts for each function
Interviews  Draft interview guide
 Review data to prepare for
interviews
3 “Processize”  Develop and distribute
P&Ls: templates
 Identify contact for each 
cost center
 Collect baseline data by
cost center
 Breakdown cost center
P&Ls into information line
items, and identify where
costs are controlled
4 Benchmarking:  Agree on processes,  Begin primary
companies to be
benchmarked
 Agree on methodology
 Combine with Bain database
and begin secondary work
5 Review  Collect existing data on
customer customer feedback
feedback:  Identify Client user
group contacts
Schedule
Week 2 Week 3 Week 4
 Map linkages between
processes
 Identify key “customers”
of each process
 Develop contact list
- Set up interviews
 Conduct Interviews
 Synthesize to prioritizations real-time
 Follow-up as needed
 Identify major activities  Develop cost allocation  Reconcile data
by cost center methodology for each inconsistencies
Track allocated costs to line item  Roll-up costs across cost
source to include all  Allocate costs (and centers to determine
costs, and prevent headcount) based on overall process cost (and
double-counting methodology headcount)
 Map each activity to a
process
 Identify internal best  Complete primary research
benchmarking practices on functional benchmarks
 Complete primary research
on process benchmarks
 Interview user group  Identify target  Conduct interviews
contacts customers for  Highlight key themes
 Synthesize customer interviews and provide
feedback and identify contact information
key gaps  Provide feedback on
 Develop customer questionnaire
questionnaire  Begin interviews ReengineeringCook
(internal and external) book 29
GXC
 A team structure was agreed upon with the
client to map key contacts to Bain
personnel Steering Committee
 Head Client Contact  Partner (Bain)
 Head Project Contact  Partner (Bain)
 CFO/COO

 Head Project Contact

Project Leadership  Partner (Bain)
 Manager (Bain)

Product BU Product BU Product BU External

Service BU Infrastructure
#1 #2 #3 benchmarking
 BU lead  BU lead  BU lead • BU lead  HR • Bain Consultant
 Bain Contact  Bain Contact  Bain Contact • Bain Contact (AC  IT • Bain AC
(AC or (AC or (AC or or Consultant)  Marketing/Sales • Bain AC
Consultant) Consultant) Consultant)
 Real Estate
 Other
 Bain contact (AC
or Consultant)

 CTL or equivalent
F&A  F&A contact (CFO
or designated lead)
ReengineeringCook
book 30
GXC
A detailed data request was also compiled
for handover to the client at the kickoff
meeting
 Financial data (Actuals rather than forecasts)
- BU Data
 Cost by function (I.e. Sales, Order Fulfillment, etc.)
 Cost by cost center (I.e. Salary, Travel, Product, etc.)
- Allocated costs
 At corporate level (facilities, common services)
 Allocation basis between BU’s
 Personnel data (Current, Forecast)
- By function (work in tandem with F&A to map out)
- By designation (full-time or part-time)
 Proposed mapping of activities to functions (by BU)
 Customer surveys conducted by/ for Client
- Data on key customer satisfaction metrics (order processing, order acknowledgement, order
fulfillment etc.)
 Benchmarking analysis conducted by/ for Client
- Cost data on specific competitors
 Bu-by-BU operating metrics
- Data which enables analysis for each function’s performance (vs. benchmarks, vs. competitors,
vs. targets wherever possible)

ReengineeringCook
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GXC
Contents

 Detailed “How-to” based on

disguised case example

 Top 10 Watch-outs

 Sample Workplan

 Back-up
-Function to Activity Maps

ReengineeringCook
book 32
GXC
Function - Activity Mapping (1 of 6)
Offer Development R&D (incl. Engineering) Procurement
 Creation of service and solution  Opp/requirements definition  Procurement processes
bundles  
Compile functional specs Vendor qualification
 Setting warranty offers  Concept planning  Supplier sourcing and selection
 Support Service BU offer  Design & development  Supplier negotiation
development
 Unit & Integration  Resolve sourcing problems
tests/Acceptance test  Materials procurement (including
 Conduct field trials/early in plant)
deployment programs  Third party product requests
 Quality assurance
Product Management  Assessments, security and


Product/program management
Life cycle support/mgmt
services
 Pricing strategy


Creation of list prices
Development of discount schedules
 Certification dev & lab services
 Partner management
 Metrics/process management-monitor and improve solution effectiveness and profitability
 Business operations
 Internal capability assessment
 Advanced development and
architecture
 Model making/prototyping

ReengineeringCook
book 33
GXC
Function - Activity Mapping (2 of 6)
Manufacturing
 New Product Introduction
- Product Engineering
- Design for Manufacturing
 -
Manufacturing Engineering
- Test
- Assembly Planning
- Layout
- Production Support
 Global Manufacturing
Engineering
 Global Mfg Processes
 Global Mfg Planning
 Production Master Scheduling
 Plant Order Management
 Prod Assembly
 resolution
In-plant Staging / Customiz.
 Product Test, Packing & Ship
 Kit Assy, Packing & Shipping
 Global Parts Distribution
- Inter-factory Parts
- Spares
 Product Quality
Sales
 Account planning
- Customer needs analysis
- Oppty planning
Lead generation
- Interest creation
 Relationship management
 
Oppty management
- Qualification
- Solution/proposal development
 Contract/order mgmt
- Config/submit orders
- Track orders
- Implementation/install project
planning
 Order/unit/revenue forecasting
 Deliver tracking/invoice
 Services support issue
resolution
 Mgmt reporting/reviews
 Channel management (channel
strategy is included in
marketing)
 Channel sales (quota people)
 Sales management
Sales Support
 Demand planning/revenue
outlook
 Dedicated order generation/
submission employees (if it’s a
task by salespeople, it stays in
sales)
Program development (sales
effectiveness and efficiency)
 Sales process/tool management
 Funnel management
 Dedicated proposal center (if
it’s a task by salespeople, it
stays in sales)
 Solution Centers
 Sales administration
 Customer advocates
ReengineeringCook
book 34
GXC
Function - Activity Mapping (3 of 6)
Distribution & Logistics
 Spare parts forecasting,
provisioning and rework
 3rd party warehouse
management
 Source customer order to
supplier
 - Schedule install
Delivery coordination
- Warehouse consolidation
- Staging
- Order release (shipment)
- Order tracking
 Transportation management
- Scheduling/routing/bookings
- Claims management
 Import/export compliance
 Inventory management
(finished goods)
Order Entry/Order Mgmt Service Delivery
 Order acceptance  Break/fix services
  Project planning
Order entry
- Establish project baseline
 Order consolidation
- Manage project to contract
 Order release
 Project management
 Order tracking - Consolidation & staging
- Incident mgmt/escalation
 Site assessment and
preparation
 Deployment and integration
(incl. Staging)
 Move/Add/Change
 Software migration
ReengineeringCook
book 35
GXC
Function - Activity Mapping (4 of 6)
Pricing BU Marketing Strategy Plan/Special Initiatives

 Deal-specific pricing  Channel strategy  Strategic and corporate

- Selection/development planning
- Program development/  Business development
deployment
  M&A
Demand creation
- Customer events/roadshows  Alliances
- Tradeshows  Intellectual property business
- Program development
development
- Industry/internal seminars,
workshops  Special initiatives
- Direct marketing campaigns
- Demo equipment support
 External communications
- Collateral development
- Brand identity devel
- Product naming
- Online portal devel/maint
- Newsletters, web seminars
- Field PR
- Advertising
 Internal communications
- Exec pres devel, newsletter
 Business discovery
- Evaluation of new opps
 Market/business intelligence
- Customer research
- Competitor research/intelligence
ReengineeringCook
book 36
GXC
Function - Activity Mapping (5 of 6)
Corporate Real Estate IT F&A

 RE Planning  Applications  Ledger/Accounting (including

  cost/plant accounting)
Facilities management Networking
 Treasury
 Engineering, design &  Processing
construction  Payroll
 Security
 RE transactions  A/P
 Workgroup computing (including
 Workplace strategies help desk)  Credit approval
 BU-specific projects  Billing
 Collections
 Planning (including forecasting)
 Project accounting

ReengineeringCook
book 37
GXC
Function - Activity Mapping (6 of 6)
Human Resources Law Department Quality Mgmt/Six Sigma

 Performance management  Transactional support  Six sigma services

  - MBBs
Rewards and recognition Business consulting and
- Program development /promotion
 management
Staffing (including recruiting) - Green belt training
 Intellectual property
 Talent management (including - Certifications
career planning and learning)  Labor and employment  Scorecard reporting/metric
 Pension & benefits  Litigation and disputes analysis
 Employee and labor relations  Corporate allocation  Assessments (intra and inter
BU)

ReengineeringCook
book 38
GXC