In this episode, we cast a broad net that considers the ways in which organizational and leadership thinking has changed over the past several decades.
Jim Champy, is one of the world’s leading thinkers on these topics. His distinguished career has included one of the best-selling business books of all time, key roles in some of the most prestigious universities, building several world class strategy consulting organizations, and advisor to some of the largest private, public, and government institutions. jimchampy.com
"TK: Welcome to Foresight Radio. I’m your host Tom Koulopoulos. On each episode, we explore the many trends that are shaping the way we will work, live and play in the future. Our focus is on the disruptive and transformational trends that are changing the way the world works in ways that are often invisible. Our objective is simple. Give you the knowledge and the insights that you need to better manage the future. Foresight Radio is sponsored by our good friends at Wasabi. You can learn more about them at the wasabi.com.
In this episode, we’re going to be talking with Jim Champy, co-author of one of the bestselling business books of all time, “Reengineering the Corporation,” which this year celebrates its 25th anniversary. I sat down with Jim in his summer home on the New Hampshire coast to talk about the changes he has seen since the original publishing of “Reengineering the Corporation.” Our conversation meandered through a broad set of topics from leadership and iconic figures such as Steve Jobs and Peter Drucker to the challenge of change, the critical importance of cultural differences, the changing role of women in business, healthcare, one of Jim’s favorite topics lately, the future of AI, globalization, and the threat of China, all the way to the role of higher education. As is always the case in talking to Jim, it was a fascinating and enlightening conversation.
Here’s my interview with Jim Champy.
Jim, as amazing as it sounds, “Reengineering the Corporation,” the book that you and Michael Hammer wrote is now 25 years old. If you had to rewrite that book today, what would you do differently?
Champy: Tom, I often think about that question, and I’m a bit two-headed about it. I think a lot of the principles in that book are still very sound that businesses are still constructed on the basis of processes. All businesses have processes. No matter how digitized they’ve become, there will be operational and business processes in every venture, in every business and every enterprise. The idea and the importance of process I think remain. I know that has been challenged over the 25 years, but I still think it’s important that a company or a venture have a focus on process excellence. That’s the basis of operations, if you will.
When we wrote that book, we purposely did not direct it towards technologies, towards chief information officers because we saw the need of companies to change. We saw that need to be driven by the executives who ran the company, not the IT organization. We said they were the ones who had to be sensitized. They’re the managers who had to be sensitized about process excellence. We didn’t focus it around technology. If I were to write that book today, it would have a major focus around technology and the way technology in fact is driving operational change or enables the changes, dramatic changes that were not possible when we wrote the book.
For example, this whole issue of the freight industry coming to a point not so far from now where we won’t have drivers driving trucks anymore. That’s enabled by technology and that would dramatically change the way a freight company operates. There was going to be a physical aspect to that work, but the nature of the operations would have changed. One of the questions that I think that every company will have to face going forward as technology becomes more available and actually as it becomes more focused on processes is whether it will change its processes to adapt to that technology or whether it would buy technologies and try to change the technology to fit its current processes. I think over time it will become the former that people will recognize that embedded in technologies today are ways of doing business in fundamentally better ways. Companies will buy chunks of technology and just use that as the basis for their operations. That’s fundamentally different than what we argued in the Reengineering book.
TK: When I think back about the context in which you wrote that book, technologies that today are very common were barely incipient. The internet by way of example was 1993.
TK: Well before most of us were using the internet or the worldwide web. Your co-author, Michael Hammer, actually in one presentation I saw him give he said about digitization of images that the paperless office was as likely as a paperless bathroom, and we got quite a chuckle out of that when he said that. To some degree, he was almost dismissal of technology. He was going back to the core issues that businesses had to deal with. Part of what I hear today from a lot of businesses is, “We have to change our business model. We can’t keep doing business the same old way. Process improvement is not enough,” and they use Uber as the example and the cab industry. The cab industry couldn’t simply drive up inefficiencies. They have to change fundamentally the way they do business which was Uber did. The existential threat is not just the technology threat. It’s the threat to the core business model. Does reengineering help in that case or is that a very limited case of situations where that sort of drastic measure has to be taken to reconstruct the entire business model?
Champy: Look, I think reengineering in some industries does not go far enough without question. That’s not true of all industries. There would still be hotels. There would still be lodging offerings that aren’t Airbnb-type lodging offerings. In those kinds of operations, reengineering will be helpful in order to create a better check-in model or check-out model of a hotel, a better reservation, easier reservation model. The same is true of the airline industry. The business model of the airline industry I don’t think will change dramatically, but its operations will change dramatically. We should have reservation systems that are a hell of a lot easier than what we have today. The combination of reengineering and new technologies will enable that, if you will. Not everybody will be an Uber. Not every business needs to be an Uber or maybe Airbnb, if you will. There will still be a lot of physical, just physical capability required of operations. It’s not simply a change in business model for every business and every enterprise.
TK: Let’s talk about that a little bit. One of the things, if I recall correctly, that you mentioned in the first book was that many business processes were mired in administrative paperwork and red tape and process and procedure, and that in many cases – I believe you used an example, insurance industry. 90% of the process in writing a new claim or processing a claim was administrative. It wasn’t the actual claim within mortgage.
TK: It certainly applies to a mortgage.
TK: Why does that still persist to this day? We have all this technology. We’ve learned so much in the last two decades and yet still when you look at many processes, especially in large organizations, the majority of the process is administrative?
Champy: Part of that, Tom, has to do with the slowness with which organizations still change even in companies that are threatened, if you will. There is still a resistance to the degree of change that’s possible with technology today. I think the most dramatic place where that occurs is in the delivery of care, in healthcare, where a tremendous amount of the cost of the delivery of care is in the administrative process. Now, in that case, it’s not just a matter of the insurance company or a hospital becoming more efficient in eliminating paper. By the way, I think that’s an area where paper will be eliminated, if you will. It’s just not individual. It’s the whole structure of the industry. There’s a huge issue, let’s say, in the United States, in this country to the industry changing. That’s both a social and political issue. If you really wanted to make healthcare dramatically more efficient in this country is to have a single payer system.
TK: The single payer model that Jim talks about had been widely discussed in the United States and debated for some time now. Many other countries such as Canada, the UK, and Denmark have single payer systems that eliminate the need for private insurance and also provide universal healthcare to all citizens. The criticism of these systems often focuses on controls that ration or limit access and create wait times for specialized treatment. While the US is the only highly-developed country out of the top 50 that does not provide some form of universal healthcare, it has moved in that direction with the ACA, the Affordable Care Act also known as Obamacare. It is however not the only country without a single payer system which means government pays for all healthcare cost while healthcare can still be privatized. There are examples of other countries such as Germany and Japan which also do not have single payer systems; although they do have universal healthcare. Opponents of a single payer system raised concerns about quality of care and the availability of choice for the patient. It’s a complex topic, and one of the areas, which Jim and his co-author, Harry Greenspun, explored in their book, “Reengineering Healthcare.”
Now, back to my interview with Jim.
Champy: So much money and so much time is spent in the negotiation between setting fees and collecting fees and approving procedures that goes on now between all of the different, fragmented pieces of the healthcare system. That could be dramatically eliminated with a single payer system but there are political and social issues that prevent that from happening. By the way, I think we’ll get there. I think we’ll eventually get there, that we’ll see that that’s the only way to make the healthcare system dramatically more efficient.
TK: Some of that, Jim, is a function of leadership, both within the industry, the political leadership. I know you spent a lot of time studying leadership. We had great connections through Peter Drucker for many years who you introduced me to some time ago, and Peter was obviously an incredible student of leadership and...
TK: ...felt it was one of the most important callings that one can have. Can you give me a little bit of your insight from leaders specifically because we talked about this...
TK: ...and part of what you said and what Drucker used to say to me all the time is about framing the right question as a leader? Talk to me about leadership and what you’ve learned about it.
Champy: That perspective about framing the right question comes from the fact that I believe leadership is very contextual. I’ve seen leaders or people who claimed to be leaders or described as leaders be very successful in one business move to another business and they absolutely failed because they were unable to adapt to the context of the business. The behavioral condition and the business, the market condition in their new business that they were unable to learn and adapt. I think leadership is very contextual and that requires I think a sensing capability, to understand the condition that you’re in. What is the condition around your markets? What is the condition around the culture and behavior of the enterprise? What is the condition around the skills of the people that you have and what your sensibilities tell you about where to focus your efforts as a leader? Highly, highly contextual. By the way, I think if you lack sensing capabilities, you won’t be a very good leader. You will not be a very good leader. I don’t think it’s about having platform skills to inspire people as much having as having sensing capabilities of knowing what’s going on and then being able to determine and decide what to do. I’ve been thinking hard about the GE condition. A once great industrial company, if you will and what it has gone through.
TK: As Jim was talking about GE, I couldn’t help but be reminded of how after 110 years, they had just been delisted from the Dow Jones Industrial Average on June 26th of 2018. This jingle from a 1986 GE commercial then came to mind.
TK: For those of us that grew up with GE and their iconic leader, Jack Welch, their decline has been nothing short of spectacular. Jim had some interesting insights on GE’s fall from the pinnacle of its success and the role that leadership may have played in it.
Champy: By the way, GE was renowned for their development of leaders and executives. It had its own campus, Crotonville, with splendid teachers who tried to teach leadership and did teach leadership as best as they could. Then I look at the decline of a company like GE and think about the errors that it made along the way and whether some leader might have been able to prevent that and redirect the company. I knew that company pretty well. What I was first amazed at was, and I understand why, when they basically spun off and closed down GE Capital. For many, many years, the primary resource of profits for GE wasn’t locomotives or light bulbs or generators. It was its banking business, GE Capital, made most of the profits of that company. Those profits [Laughter] carried the rest of the company, but I think some executive along the way realized that the finance business was going to be challenged by regulation and by issues particularly around 2008, 2009, and determined they should get out of that business. I’m not sure I would have made the same decision by the way, but someone made that decision. Where were its sensing capabilities around that?
Then there was a decision to digitize the company and invest in digitization, but their industrial business may not have been subject to the same kind of digitization that an Uber might be or Airbnb might have been. There was no way to carry digitization to an extent that GE needed it to become something fundamentally different and develop a new business model. There are times, Tom, when I actually sit back and say, “Well, no executive may have ever been able to solve this problem.” I know this sounds just too casual if you will, it’s time to sell the business, consolidate it with another business and hope and hope that scale will solve a problem that you have over time.
Back to your question about leadership. It’s very contextual, just understanding what’s going on. By the way, taking your time to understand that and to listen and to hear is absolutely, absolutely critical.
TK: It’s interesting because when I think about great leaders, the iconic ones that we talk about most today, Steve Jobs, Jack Welch, developed almost religious followings. They had enormous license that they were given by their board, by their employees, by the markets.
TK: You have to ask, to what degree do you need that to be truly innovative, to build an organization that can survive those sorts of market challenges? As part of GE’s problem, it doesn’t have that kind of leadership today. I know it’s a difficult question to answer in general terms, but how important do you think that license is? Because sometimes innovation can be very, risky, risky business as we saw with Steve Jobs. He was given incredible license to create an entirely new industry as perhaps no other leader would have been given the same sort of latitude.
Champy: I think the answer to that varies by industry. There are some industries that will be subject to considerable innovation. How much innovation for GE can there be in the locomotive? How much innovation can there be in the generator? That might be limited, but for Jobs and for Apple, there was the opportunity for extraordinary innovation. Whether it’d be luck or timing, there was Jobs who had, again, great sensibilities about technology and about the design of the devices. I think that was his greatness, his sensibilities around the design of the devices that delivered this technology.
By the way, as you know, he was flawed in so many other respects as a leader. I think he was able to inspire frankly and hold on to that leadership position because he was able to continue to astound people and his own people around the success of the innovation, the technology that he led and that he designed. I think on the other hand, his dismissiveness of people where a leadership capability that can get someone in trouble even if they’re innovative on the technology side. That was an industry that was subject through innovation and, fortunately, there was a great innovator. That’s not possible for all industries. If you’re a leader in sort of an incumbent older industry, they may only be able to take it so far in terms innovation that may be [Unintelligible].
TK: When you think of leaders who you would hold out as the role models for what a great leader is, who comes to mind? Who are the ones that you’d think of? It could be historically. It could be current.
Champy: I have a hard time [Laughter] just simply coming up with names. I think of examples which I always saw as examples of good leaderships. I remember in my experiences in consulting, there were leaders who had great people sensibilities, who knew that it was important for people to take time off simply to gain perspective, and they would demand that their executives that they be away from the workplace for a while to gather perspective. I recall a leader who ran a utilities company that was going through great change from whom I learned, and he said to me, “Look, I won’t get change to happen in this company until every individual understands how that change will affect their work.” I said, “Wow. That’s a very powerful perspective.”
My experience of leadership and people who are great leaders came from those [Unintelligible] basically of people who might have the insights that I hadn’t seen before, just not had seen before, and have the courage to institute those. I’m looking at leaders now of educational institutions, who are standing up to a lot of the political forces, dangerous political forces right now from the perspective of education, and saying, “These are great leaders.” That they’re great leaders because they see the important values and purpose that their institutions bring, and they’re being strong. They’re being strong, if you will. I mean it comes back again to this issue of the contextual nature of leadership. It’s what’s required in a given situation. I wrote a whole book called “The Arc of Ambition.” That was all about these leaders and the importance and the nature of their ambition. Michael Dell was in that book. I admire Dell for what he’s done. I admire him for particular reasons because he saw the importance of bringing his company private to make the changes he needed to make. I admire him for that. I wrote about a number of people, who did exceptional things, but, again, they were all contextual.
TK: Let me, if I can, move to a topic that I think is the ultimate contextual issue which is globalization. I remember vividly you and I were in India some time ago. We were doing a panel discussion in front of a bunch of new employees for a company that we were involved at that time. It was an onboarding process.
TK: One of the questions that someone asked in the audience was, what’s the difference between a manager and a leader. Do you recall that?
Champy: Yes, I do.
TK: I think you gave an answer. There were a few answers and I offered a Peter Drucker’s answer to that, and Peter Drucker’s answer was that, “A manager you have to follow. A leader you choose to follow.” Suddenly when I said that, the entire room broke out in applause.
TK: I couldn’t understand why, but we had given them license to do something that contextually within that culture they didn’t really have the license to do, to choose, to follow.
Champy: Absolutely. By the way, when I’m asked by a lot of younger managers or people coming out of school, out of college, university and entering the workforce what they should do, I advise them to travel. [Laughter]
Champy: To get out of the United States, get out of this country and go to other cultures and experience other cultures by the way particularly China. Go to places and countries that are going to be very important in the world of business, and experience what’s different about those countries. It’s so important. I mean we all grow up. We’ve been typically a very limited culture and very limited environment. My first piece of advice is that, if you can, leave this country to work somewhere else, and experience where there’s life that is so dramatically different. I mean I also remember from a personal perspective all the business failures that I have trying to operate in different countries where I didn’t understand what was fundamentally different. I remember in my consulting business trying to open an office in Japan, and what that took in dealing with Japanese business executives, and realizing when they shook their head it didn’t mean yes. They were just acknowledging that they heard what you had to say. There are cultural differences that are significant, and it’s important to learn those and to respect them, actually to respect them, and to see how management styles in other countries and other environments might be really important.
By the way, the other advice that I give in some way more cautiously is to have children. We all learn so much from raising a child...
Champy: ...and the behaviors we see of our children [Laughter] because we see the same behaviors at times from people within our organizations, and you learn to deal with that. You learn how to address that by being a bit current. Have children and leave the country. [Laughter] I mean those are the two pieces of advice I give to any aspiring young professional today.
TK: That’s great. I think our children also are our best 360-degree evaluators. They see us from every angle.
TK: They call us on our BS when we needed to be called on as well.
Champy: By the way, I have seen dramatic change of executives. There’s this very important issue of the role and the importance of women in business today. I am a strong believer in the value and the contribution, I have been for many, many years, that women make and how some companies limit their capability because women are not put in important and common enough positions of management and power and control, if you will. They bring a set of sensibilities particularly in numbers that men do not always bring. I think that’s important. I have found it difficult at times to convince managers and executives of that, very difficult. I can tell you that has changed where I’ve seen a manager, who has a daughter, and starts to experience what a daughter is going through. The value a daughter brings and how in fact at times their contributions in whatever environment they’re in can be limited by this very limited view of the role of women in enterprise and the perspective of that management changes actually.
By the way, I have worked in other countries. I’ve never lived in one, and I regret that.
TK: You’re listening to Foresight Radio, and we’re taking a quick break to thank our sponsor of this episode, Wasabi Technologies, the leader in the next generation of cloud storage. Find out more about Wasabi at wasabi.com.
TK: Now, back to Foresight Radio and my interview with Jim Champy. I often thought that, especially in the formative years 16, 17, 18, it is a wonderful time to experience a different culture.
TK: You can truly understand and attain a degree of tolerance and understanding of differences because cultures do look at things very, very differently and having that as dividend is critical in today’s global marketplace, right? Let’s talk a bit about technology. Right now, so much of the conversation that you hear is focused on AI and the threat it poses to joblessness, a new era of technology in positions where humans otherwise would be employed. Do you have an opinion on the role of AI or where that trajectory is going and the things that we should at least keep in mind to be vigilant and to help shape the future?
Champy: I by no means have all the answers. I’m not sure anybody does, right? I haven’t heard a clear perspective yet on how the workforce will in fact over time be reshaped, but I do have a few thoughts. I think from a managerial and executive perspective, leadership perspective, AI can help our sensibility. Social networking helps our sensibilities. I still think on the ground sensing is important. Actually, being in a physical place to see what’s going on actually remains important. There’s so much more information that’s made available to us and will be made available to us through AI that will help tune our sensibilities. I do think it will be valuable to us. I still think the analytics part of AI will help us solve a lot of problems and will increase the effectiveness of many of our processes.
I’ve no question about that, again, particularly in healthcare and the delivery of care. What we’re able to do now by looking at large amounts of information about patients and treatments is that it’s already happening. It helps determine the effectiveness of the right treatment for the right patient. That will have dramatic effect I think. There’s still a long way to go with AI. We should always remind ourselves that [Laughter] the A is for artificial. It is in fact artificial. I think AI – I may be wrong in my assessment here, it’s still mostly around the analytics and management of very, very large amounts of data, and what that analytics can tell us. We still do not understand how intelligence really works. Until we are able to understand how the mind works, how intelligence works, and how to link that to these processes around data in some way, it will remain artificial intelligence. It will not be real intelligence.
What I find a bit troubling when I listen to these so called AI experts is so much of it is around data and thinking about data. It isn’t the way the scientist thinks about the mind and how the mind works. I think the future, the excitement I have around it is the future in which we have scientists and engineers working together to think about how AI, know it’s artificial, but gets closer and closer to real intelligence. That’s where we will make a significant difference. My suspicion is we’re many years away from that. There are those people who believe we are closer, but I think we’re many years away.
TK: Here’s the thing that I often think to myself, Jim, is that there are so many areas where we can achieve improvements in basic efficiencies that we overlook in the hopes that AI will somehow forgive all of those errors of management, errors of process, errors of procedure and the reality is we have a long way to go just to shore up the existing business models, processes and procedures.
Champy: Absolutely. Absolutely without question. You can still go into any company, any enterprise and find incredibly inefficient administration. Most of the administrative processes, again, the misfortune of having to visit a hospital just the experience of a check-in process is like, and it should simply be by the way showing your insurance card or showing some form or some number that allows you to enter the system immediately, but it never does.
TK: It’s easier for me to check-in to my car dealership. When I drive into the bay, my key fob tells them who I am and by the time I sit down at the desk and me checking in, she has them even filled out. She knows everything about me. I tell her nothing. She says, “Have a seat. Have an espresso, and we’ll be ready for you in about an hour.” Compare that and contrast that to what it’s like to admit yourself to an ER that you’ve been to maybe two, three, four or five times before.
Champy: That’s right. By the way, things are getting a little better, but by no means - not dramatically better. I had an experience, while I was travelling a couple of years ago, of going to an urgent care department of a major hospital system on the West Coast. I’m East-Coast-based. You’re almost always asked what medications you’re taking. The nurse assistant started to ask that question, and then she started to answer it. I said, “Where are you getting that?” She said, “Well, we share the same information system, the same technology that your doctors have on the East Coast.” So, she had access to all of my information. That was so refreshing, but it hardly ever happens still. By the way, I did experience also a single-payer system in Europe, in which no one asked for any information, other than my name, when I checked in to a health care facility, and you can see the benefits of a single-payer system, where paperwork doesn’t have to move and the information doesn’t have to move between enterprises. There’s a tremendous amount of work in just basic administrative systems.
TK: Further to that point, it may very well be that the competency in being able to better understand and create those efficiencies within processes is only amplified because of the amount of data that we’ll have to deal with, and it’s being amplified extraordinarily, and that data will have to go through the same administrative processes and create huge chokepoints and bottlenecks.
Champy: Yes, absolutely. Absolutely. As you’re speaking, what I’m reminded of is the fact that although technology provides a tremendous opportunity to bring about dramatic efficiencies in processes, work, to a great degree, still remains a human enterprise, [Laughter] and as long as we have people involved in the mix, process change and even operational change will still be challenging, and we’ll still have to consider what the nature of behavior is in our organizations, in order to bring about real change. I hardly know an enterprise that doesn’t struggle with that, the nature of behavioral change as work change. It’s still a challenge for most enterprises, and I keep having to remind myself that the nature of work is still, to a great degree, a human enterprise and will be so through most of our lifetime.
TK: In many ways, technology is making it more human. I would like to think that AI is actually creating bonds that are more intimate between buyer and seller, between customer and retailer, whatever the example might be, that AI is actually allowing us to increase that level of humanity in the process over what it was before. We used to be anonymous entities. No one really knew me. Now, suddenly I have the ability to do that, to know me at a very deep level. The question is will they respect that, and will they use it in a way that’s meaningful?
Champy: What comes to mind, as you raised that question, is that in any system that is based on AI and is based on technology, I think it will remain important to give the customer or the client or the buyer a choice. I can see systems being designed that use AI to try to make a decision for you. That will work in some instances, but not in all instances, and it will work for some people, but not for all people. It depends on what you consider to be important in your life, if you will. I wouldn’t want a food delivery system to decide for me what I’m going to have for dinner every evening.
[“Mr. Champy, tonight’s menu has been decided based on an evaluation of your genome, activity levels, and current metabolic requirements. It will be delivered by 5:00 PM. Enjoy.”]
I would enjoy a technology when it delivers food to me, but gives me the choice in fact to do that. So, I think you can take AI too far for some, if you will, for some customers or for some clients, but if you keep in mind that there are areas in which people will still want choice, you can still develop the intimacy that’s required. The question that you raised brings about the question of whether intimacy with customers will always be important, and how you maintain that intimacy. Inter"